Cipher Mining Aktie

Good day, and thank you for standing by. Welcome to Cipher Digital's business update for the first quarter of 2026. [Operator Instructions] Please be advised, today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Drew Armstrong. Please go ahead.

Good morning, and thank you for joining us on this conference call to address Cipher Digital's business update for the first quarter of 2026. Joining me on the call today are Tyler Page, Chief Executive Officer; and Greg Mumford, Chief Financial Officer.

Please note that our press release and presentation can be found on the Investor Relations section of the company's website where this conference call will also be simultaneously webcast. Please also note that this conference call is the property of Cipher Digital, and any taping or other reproduction is expressly prohibited without prior consent.

Before we start, I'd like to remind you that the following discussion as well as our press release and presentation contain forward-looking statements. These statements include, but are not limited to, Cipher's financial outlook, business plans and objectives, and other future events and developments, including statements about the market potential of our business operations, potential competition, and our goals and strategies.

Forward-looking statements and risks in this conference call, including responses to your questions, are based on current expectations as of today, and Cipher assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law.

Additionally, the following discussion may contain non-GAAP financial measures. We may use non-GAAP measures to describe the way in which we manage and operate our business. We reconcile non-GAAP measures to the most directly comparable GAAP measures, and you are encouraged to examine those reconciliations, which are filed at the end of our earnings release issued earlier this morning.

I will now turn the call over to our CEO, Tyler Page. Tyler?

Thanks, Drew. Good morning, everyone, and thank you for joining us today. I'm Tyler Page, CEO of Cipher Digital, and I'm pleased to welcome you to our first quarter 2026 business update call.

2026 is the year of execution for Cipher, and we kicked the year off with a strong first quarter. We signed our third data center campus lease with an investment-grade hyperscale tenant, completed a $2 billion high-yield bond offering for Black Pearl, fully funding the project through completion, closed a $200 million revolving credit facility from a syndicate of leading global financial institutions and made substantial progress on the construction of our Barber Lake and Black Pearl HPC data centers. Execution, that is what defines this quarter and what will continue to define the rest of this year.

When we rebranded to Cipher Digital, we did so with a declaration, "We are Built for Hyperscale." That phrase carries real meaning for us, and I want to spend a moment on what it means in the context of this quarter's results.

Built for Hyperscale is not a marketing tagline. It is a description of the foundation of this company and the best-in-class team we have built, in-house power origination, engineering, construction management, and operations, all purpose-built to deliver bleeding-edge data center infrastructure at the speed and precision hyperscalers require.

Each quarter, we add another point of proof. Our first lease at Barber Lake was proof of concept. Our second at Black Pearl was the proof of repeatability. Our third lease this quarter is proof that Cipher Digital itself is a leading development platform Built for Hyperscale. As we move through 2026 with 2 data centers under construction, a third preparing for mobilization and an extensive pipeline behind it, our differentiation will become increasingly visible to the market.

Slide 4 provides a snapshot of Cipher Digital as it stands today. We are a vertically integrated developer and operator of industrial scale data centers built to serve the world's leading companies. Our in-house capabilities support the delivery of power dense, large-scale facilities to exact hyperscalers specifications at speed.

As of today, we have 907 megawatts of operating and contracted capacity, anchored by 3 signed data center campus leases with world-class hyperscalers. That portfolio carries approximately $11.4 billion in contracted revenue across base lease terms of 10 to 15 years, providing Cipher with durable, high-quality, and long-term cash flows. Beyond that, we have an approximately 3.3 gigawatt pipeline of grid capacity, providing an extensive runway for future growth.

The quality and scale of our pipeline is a competitive advantage that is difficult to replicate, representing years of disciplined power origination work. We are no longer an aspirational HPC developer. We are a company with signed contracts, billions of capital raised, and multiple data center construction projects progressing toward completion.

Zooming out, Slide 5 shows the full geographic reach and scale of our development platform. Our portfolio consists of approximately 4.2 gigawatts of grid power across operating, contracted, and pipeline sites. Roughly 78% of that capacity represents pipeline HPC opportunities with the remaining balance split between our existing contracted capacity, our newly contracted capacity from this quarter's third lease, and our operating Bitcoin mining site at Odessa.

The geographic concentration in West Texas is intentional. For years, the conventional wisdom in the traditional data center industry was that hyperscalers would not venture outside major metropolitan areas and that our sites were, as I described once before, at the edge of the known world. We disagreed and the market has proven us correct. West Texas has become one of the most sought-after regions in the country for large-scale AI infrastructure development, and Cipher is well positioned to execute on this unique opportunity.

The addition of our Ohio site at Ulysses reflects our intentional geographic diversification. Major hyperscalers require data center capacity across multiple markets and power grids. Our ability to offer sites in both ERCOT and PJM strengthens our value proposition as a development partner for tenants with multi-market capacity requirements.

This portfolio, the scale of it, the quality of the sites, and the geographic reach is the product of years of on-the-ground sourcing work. It cannot be assembled overnight, and it will continue to be a source of competitive advantage as demand for large-scale data center capacity continues to intensify.

Let's now turn to the future trajectory of Cipher's contracted cash flow profile. Our 3 executed data center campus leases are expected to generate approximately $787 million of average annualized net operating income from October 2026 to September 2036. In 2035, we expect to have approximately $892 million of contracted net operating income.

The addition of our third lease this quarter further strengthens this profile of contracted cash flows and adds meaningful net operating income to our projections. As a reminder, this is contracted net operating income, not a projection based on assumed future leases, not a model dependent on speculative outcomes. These are signed long-term agreements with investment-grade counterparties that create visible, stable contractual growth over the next decade.

This slide shows the fundamental change in the financial character of this company. We are a business defined by stable long-term cash flows. The leases are signed, the financing is in place, and the construction is underway. The cash flows on this chart are not aspirational. They are contracted.

Let me now walk through the specific highlights that defined our first quarter. On the corporate side, we accomplished 3 significant execution milestones that speak directly to the strength and maturation of this platform.

First, we signed our third data center campus lease, a 15-year initial term agreement with an investment-grade hyperscale tenant. This is now 3 consecutive long-term leases with world-class counterparties in the span of approximately 8 months. We also completed a successful bond offering for $2 billion at a 6.125% coupon, fully funding the build-out of Black Pearl through delivery. The offering was significantly oversubscribed, and it included a reimbursement of approximately $233 million to Cipher for our prior equity contributions to the site.

And finally, we closed our inaugural $200 million revolving credit facility, supported by a syndicate of leading global financial institutions. This was a landmark moment for Cipher. For the first time in our history, we now have a corporate level committed credit facility, a reflection of the maturation of our platform, the quality of our contracts, and the confidence of the world's strongest institutional lenders in Cipher.

On the physical execution side, our results are equally impressive. At Barber Lake, we had over 1,100 daily active workers on site in April with more than 1,400 expected in May. More importantly, we have exceeded 1 million cumulative labor hours on site with 0 lost time incidents. That is an extraordinary safety record for a project of this scale and complexity, and it reflects the culture of operational discipline we have built within our construction team.

At Black Pearl, we completed the demolition of the existing Bitcoin mining infrastructure for the Phase I retrofit within 1 month of kickoff. Phase II broke ground just 3 months after design kickoff. With both sites tracking, we have entered the second quarter with significant momentum.

Now let's take a more detailed look at our current development portfolio. At Barber Lake, construction is well advanced, and the focus is entirely on delivery. I am pleased to report that Barber Lake is tracking well. In April, the building officially topped out, marking the completion of the primary structural steel. From the first column to the last structural beam, it took 127 days to stand up a roughly 800,000 square foot structure.

This achievement is a testament to the quality of our construction management team and the depth of our supply chain relationships. Mechanical, electrical, and networking work fronts are now progressing in parallel, and the project continues to track toward meeting all contractual early access and substantial completion milestone dates.

From a procurement standpoint, we have secured approximately 99% of the equipment required to complete this project. Equipment delivery schedules are aligned to support our construction completion targets, which means the risk of supply chain disruption to our timeline is minimal. Our design is 100% complete. All design milestones have been achieved on schedule, which eliminates another meaningful source of construction risk at this stage of the project.

The next slide gives investors a visual representation of what has been accomplished at this site, and I encourage you to take a moment to look at it closely.

Slide 10 shows an aerial photograph of the Barber Lake campus taken last week. Look at this image carefully because I think it captures something that numbers and bullet points cannot fully convey. Eight months ago, this was an open field in West Texas. Today, it is one of the largest data center structures under active construction in the United States.

The scale of what this photograph shows is immense, a facility built to deliver 207 megawatts of critical IT load for some of the world's most sophisticated technology companies rising from the ground with a speed and precision that we believe is unmatched in this industry.

When I think about how we got here, the years of site sourcing, lease negotiations, the financing work, the design and engineering, the procurement, the construction management, and I look at what stands on this site today, I am genuinely proud of every member of this team. This is what Built for Hyperscale looks like in practice. We look forward to welcoming our tenants to the campus later this year.

Similar to Barber Lake, Black Pearl is progressing with the same level of discipline and velocity. The decommissioning of Bitcoin mining infrastructure is complete. The site has fully transitioned to data center development mode. Phase I of the retrofit is progressing well with mechanical, electrical, and networking work fronts in full swing. Crews are actively working to install the cooling and electrical infrastructure to enable the legacy building to accommodate the new HPC equipment.

On the procurement front, approximately 93% of Phase I equipment is secured and delivery schedules are aligned to support our completion targets. On Phase II, site layout and earthwork began in April, just 3 months after design kickoff. We have also secured approximately 80% of Phase 2 equipment and delivery schedules are aligned to support our completion targets. The project is tracking to meet contractual early access and rack ready dates across both phases, and we remain confident in our ability to deliver this campus on schedule.

Slide 12 provides a first look at construction progress at our Stingray site in Andrews County, Texas. As a reminder, this site has 100 megawatts of gross capacity fully approved with a target energization date in the fourth quarter of 2026.

Development activity at Stingray began during the first quarter. Earthwork and pad preparation are currently in progress. Electrical work for the substation has commenced, consistent with our Q4 2026 energization timeline. We look forward to providing further updates on this site as construction mobilization progresses.

Odessa continues to mine Bitcoin and the site performed well in the first quarter. As a reminder, Odessa's fixed price power purchase agreement at approximately $0.028 per kilowatt hour continues to position Cipher among the lowest cost Bitcoin producers in the industry.

Today, we are operating 207 megawatts of capacity, generating approximately 11.6 exahash per second of total hash rate at a fleet efficiency of approximately 17.2 joules per terahash. In the first quarter, we mined approximately 346 Bitcoin at Odessa.

Our mining operations remain fully self-funded. We do not anticipate additional capital investment in this part of the business as we continue prioritizing our platform towards HPC. Odessa continues to generate healthy cash flow as our data center leases ramp towards revenue commencement later this year.

Let's now shift to an update on our development pipeline.

Turning to Slide 15. I want to walk through the specific sites in our near-term pipeline and give investors a sense of where each stands today. Reveille and Ulysses represent our most advanced precontracting opportunities and are both fully interconnection approved.

Reveille, located in Cotulla, Texas, has received ERCOT interconnection approval for 70 gross megawatts, and substation development has been initiated. We are in active and advanced discussions with multiple potential tenants for an HPC hosting lease at this site.

Given Reveille's capacity falls below the threshold that would trigger ERCOT's batch process and given that its interconnection is already approved, the site's energization timeline of Q3 2027 is not subject to batch process uncertainty. The load is firm, the approvals are in hand, and we are actively converting this site into a contracted asset.

Ulysses, our 200-megawatt site in Southeastern Ohio, has all necessary approvals to participate in the PJM market, and we are similarly in advanced discussions with prospective tenants for an HPC hosting lease here. This site is Cipher's first in PJM, and it is well suited for HPC data centers. We are targeting energization in Q4 2027 and remain highly confident in that timeline.

Looking beyond these near-term sites, we have McLennan, Mikeska and Colchis. Each is advancing through the ERCOT interconnection process and tracking well. We continue to push all required workflows forward, fund all deposits on schedule, and ensure these energization timelines are preserved.

All 3 sites are expected to energize in 2028, and all 3 sites are expected to be in batch 0 of the new ERCOT batch process. We have strong conviction in the quality of our pipeline positioning and continue to engage proactively with prospective tenants at each of these sites.

Slide 16 brings the entire portfolio together in one view and illustrates the depth of the platform we have built. On the left, our current operating and contracted capacity, 207 megawatts of Bitcoin mining at Odessa, 300 megawatts contracted at Barber Lake with FluidStack and Google, 300 megawatts contracted at Black Pearl with Amazon Web Services, and 100 megawatts contracted under our newly signed third lease. Together, that totals 907 megawatts of operating and contracted gross capacity today.

On the right, the pipeline capacity timeline tells the story of what comes next. In the 2027 window, Reveille and Ulysses together represent 270 megawatts of near-term pipeline capacity. In 2028 to 2029, Mikeska, McLennan, Milsing, and Colchis add up to 2.5 gigawatts of additional pipeline capacity. And looking to 2030 and beyond, an additional 500 megawatts at Barber Lake represents a further upsized opportunity at an already contracted and operating site. Altogether, this represents up to 4.2 gigawatts of total portfolio capacity from the grid.

Our conviction has only strengthened over the past quarter. We believe Cipher is among the best positioned companies in the world to continue converting this pipeline into contracted long-term cash flows, and we look forward to demonstrating that over the quarters ahead.

I'll now turn the call over to our CFO, Greg Mumford, who will walk through our financing activities, capital structure, and financial results for the first quarter. Greg?

Thanks, Tyler, and good morning, everyone. Over the past year, Cipher has taken significant steps to reshape the financial profile of the company, transitioning from a start-up Bitcoin miner to an institutionally backed digital infrastructure platform with long-term contracted cash flows and a purpose-built capital structure.

In the first quarter, we continued to strengthen that financial foundation in ways that meaningfully derisk execution and improve forward visibility. We entered 2026 focused on strategic capital allocation, isolating construction risk via nonrecourse financing, and improving our corporate liquidity.

In Q1, we successfully completed 2 additional financings, the $2 billion Black Pearl project level financing that fully fund our second data center campus through completion and a $200 million revolving credit facility. This revolver marks the first of its kind amongst our peer group, securing multi-year committed liquidity from leading financial institutions, including Morgan Stanley, Goldman Sachs, JPMorgan, Wells Fargo, Santander, and SMBC. Each of these transactions highlights the continued maturation of Cipher's platform.

The Black Pearl financing represents our third successful project-level bond issuance, demonstrating repeat access to the capital markets and a growing diversified institutional investor base following our story. We achieved highly competitive pricing while maintaining structural flexibility through a callable format, which we believe positions us to actively manage and optimize our capital structure over time.

The revolving credit facility supported by a broad syndicate of leading global banks further underscores the increasing confidence of institutional lenders in Cipher as a scaled and creditworthy counterparty and provides the liquidity foundation to support our continued growth.

Turning to Slide 18. I want to walk investors through our full capital structure and liquidity position as at March 31, 2026. At the corporate level, we have a 4-year committed revolver for $200 million and 2 unsecured convertible notes.

Revolving facility bears interest at SOFR plus 125 to 175 basis points, subject to the company's total debt-to-market capitalization ratio. This facility was undrawn at quarter end, but provides us the flexibility to support working capital, issue LCs, and fund growth initiatives.

At the project level, we continue to pursue nonrecourse financing through construction, reflecting our disciplined approach to capital allocation. Cipher Compute LLC, the entity that holds the Barber Lake lease, carries approximately $1.7 billion of 7.125 senior secured notes due November 2030.

These notes amortize aligning debt service with the cash flows generated by the lease. Black Pearl Compute LLC carries $2 billion of 6.125 senior secured notes due February 2031. Both bonds are currently trading at a premium to par, reflecting investor confidence in our ability to execute on both projects. In aggregate, total principal outstanding on our debt was approximately $5.2 billion.

Unrestricted cash and cash equivalents stand at $715 million, providing substantial corporate liquidity in addition to Bitcoin totaling $76 million and our undrawn revolver availability.

Restricted cash of approximately $3.5 billion includes approximately $1.8 billion at Cipher Compute or approximately $1.5 billion net of DSRA and interest-bearing construction accounts and approximately $1.8 billion at Black Pearl Compute or approximately $1.5 billion net of DSRA and interest-earning construction accounts. Both projects remain sufficiently capitalized through construction based on our current estimate to complete.

This capital structure is purpose-built and our liquidity position is sufficient to fund our near-term development pipeline without requiring additional equity, providing clear visibility into execution. Importantly, the majority of our debt is nonrecourse and tied to contracted assets, isolating risk through construction and aligning debt with cash flow.

Let's now turn to review of our financial results for the first quarter of 2026. Revenue for the first quarter was $35 million, down from $60 million in Q4, reflecting the planned wind down of mining operations at Black Pearl and our transition toward contracted data center revenue. Mining at Black Pearl was fully decommissioned in February.

For the quarter, we reported a GAAP net loss of $114 million or $0.28 per diluted share compared to a GAAP net loss of $734 million or $1.85 per diluted share last quarter.

The Q1 loss was primarily driven by a decrease in revenue from the planned wind down of mining operations at Black Pearl, the decrease in the fair value of our PPA, and the increase in interest expense from our new debt facilities.

The Q4 loss was primarily driven by noncash and onetime items, including the embedded derivative revaluation on the 2031 convertible notes and mining asset write-downs.

Cost of revenue for the first quarter was $18 million, down from $24 million in Q4, reflecting the transition to Odessa as our sole operating site.

Compensation and benefits were $35 million in the quarter, in line with last quarter. Year-over-year compensation increased from $14 million, primarily reflecting headcount growth and equity-based compensation associated with scaling the platform. We increased headcount from 50 people in Q4 to 70 in Q1, and we're starting to normalize and slow hiring around 85 full-time employees.

General and administrative expenses were $12 million, up from $10 million last quarter, primarily reflecting increased legal and professional fees associated with our lease negotiations and financing transactions.

Depreciation and amortization decreased to $19 million from $52 million last quarter, primarily due to mining asset sales and decommissioning associated with the Black Pearl retrofit.

The change in fair value of our power purchase agreement was a $28 million decrease this quarter compared to a $12 million decrease last quarter. As we've consistently noted, this is a noncash item. The value of the Luminant contract lies in its long-term fixed price power, supporting industry-leading power costs of approximately $0.028 per kilowatt hour, among the lowest in the industry.

Moving below to the operating line. We generated $32 million of interest income in the quarter, up from $19 million last quarter, reflecting higher average cash balances following the Black Pearl financing. Interest expense was $59 million, up from $33 million last quarter, reflecting our project level financings.

The change in fair value of our warrant liability was $44 million noncash gain this quarter compared to a $13 million loss last quarter, reflecting the changes in the value of the Google warrants associated with the Barber Lake lease.

Turning to our balance sheet as of March 31, 2026. Total assets grew to $6.4 billion at quarter end, up from $4.3 billion last quarter, primarily driven by the Black Pearl project financing reflected in growth in both property and equipment as well as restricted cash.

Cash and cash equivalents were $715 million. Restricted cash ring-fenced at the project entities and dedicated to construction spending totaled approximately $3.5 billion across current and noncurrent portions, including proceeds from the Black Pearl financing.

Property and equipment net of depreciation grew to $1.3 billion from $633 million at year-end as a result of ongoing construction across multiple projects.

On the liability side, borrowings totaled approximately $4.7 billion. Accounts payable grew to $198 million at quarter end from $40 million at year-end, consistent with the ramp-up of construction activity and normal timing of vendor payments.

Balance sheet reflects the company in an active investment phase, deploying capital across multiple large-scale construction projects with associated contracted revenues ramping as assets come online. We are executing in line with plan, and we remain well positioned from a liquidity and capital allocation perspective to execute on our commitments and scale the platform.

Before we open the call to questions, I want to take a moment to reflect on the full picture of where Cipher Digital stands as we close out the first quarter of 2026.

We have executed 3 long-term data center campus leases, generating approximately $11.4 billion of contracted revenue over the base lease terms. We have 2 data centers under active construction, both tracking well. We have a third site where we will begin mobilizing construction in Q2.

We have a strong balance sheet and have demonstrated a repeatable ability to finance construction projects competitively. We have retained flexibility in our financings and our capital structure will continue to evolve over time.

Finally, we have approximately 3.3 gigawatts of additional capacity in our pipeline that positions us for continued growth well into the back half of this decade. We remain firmly committed to disciplined execution, capital efficiency, and delivering long-term value to our shareholders.

The next 12 months will be defined by construction milestones, revenue commencement, and the continued conversion of our pipeline into contracted assets. We look forward to updating you on each of those fronts throughout the year. Thank you for your continued support. Tyler and I would be pleased to take your questions.

[Operator Instructions] Our first question comes from Paul Golding with Macquarie.

Congrats on all the progress on the sites. I just wanted to ask, first off, around pricing. It seems just doing the back of the envelope math that the incremental Stingray lease, the NOI seems to be per megawatt at least, an improvement on the other 2 on average. Just wanted to ask as you're engaged in these incremental conversations with prospective tenants, how pricing is trending? Is it continuing to trend in a positive direction relative to your existing deals?

And then as a follow-up, I just wanted to ask, in general, given the strength of these leases and lease negotiations, how you're thinking about compute? Is that sort of a business that you're considering at all? Has your thinking changed there? Or is the leasing environment for colo just so strong that you're sticking with that for now?

Thanks, Paul. Let's start with pricing. So I think it's hard to give a one-size-fits-all answer for leasing because it's a dynamic question that's really linked to speed to market, speed to availability. I think when you've got a site that is already energized or energized in the very near future, there's no question it trades at a premium as far as what it can get for a lease. I think as you continue to demonstrate the ability to build things at an accelerated pace like we are capable of doing, that also makes those timelines more realistic and gives you more pricing power. So yes, fair to say we continue to see premium pricing in our negotiations. But that's also because we have had sites that are available in the near term. So we still have 2 sites that we are currently marketing in Reveille and Ulysses that I would consider near-term availability that have a fair amount of interest. And I expect our pricing power to maintain there. Based on the conversations we're having, I do not see lease rates going down for premium sites with good timelines.

And then I guess related to that, on the compute question, it's interesting. I think we have said historically, we -- if you are getting those premium lease rates for colocation, it's just a better business than owning the GPUs or TPUs or whatever chips you're running. I'd say we are looking at an interesting test case at Reveille. Given that Reveille is still a big data center at 70 megawatts, but maybe below the targets of the kind of massive colocation tenants, we are looking at a variety of business models at Reveille, including ones where we may participate in the ownership of the computers. There are some interesting trends going on right now with credit support for Neoclouds. There's a variety of larger, more creditworthy supporters of Neoclouds that will provide credit support to try to ensure their success. And so at Reveille, we are looking at, given its scale, it is an attractive site for Neoclouds. Those Neoclouds can now get investment-grade support or other forms, whether it's a guarantee or in the form of prepayment, et cetera. And so we are considering potential structures where we would also participate in owning and operating the compute at that site. I think on a risk-adjusted basis, the returns there could be very favorable because we could get some support participating in that side of the business. And at that scale, the returns can become pretty interesting. So I think that's our test kitchen site.

We have had inquiries also at Ulysses on that. I think our appetite may be more the scale of Reveille if we were going to participate in the compute side of the business. But in general, we favor -- when you can get very elevated lease rates, we favor the colocation business.

That's really interesting. Do you see that decision being more prospective counterparty led or internal business model driven?

I mean it's a little bit both. If you're speaking to Neocloud, in general, they're trying to leverage the credit support that they can get because these are expensive data centers as they try to ramp up. And they're not the really big Neoclouds that have access to broader capital markets that are kind of in the on-deck circle to become large or go public in the future or whatever. They may live in the ecosystem of an NVIDIA or an AMD or someone like that.

And our understanding from those conversations is they have plenty of compute offtake ready to go. Like, they've got their 5-year contracts for compute offtake lined up if they can find a good site within a good time window.

So as far as it goes for our discussions, it's kind of -- it's a whole mix of factors as we look at it because we're talking about things like what kind of credit support makes a smaller Neocloud attractive as a tenant. Obviously, full backstop from an investment-grade supporter is kind of a gold standard. Prepayment of fees, if you stretch it out, we've seen and heard anecdotally some larger prepayments coming through, which significantly derisked the project.

And then it really comes down to math. I mean when you look at enough prepayment or a strong enough credit support, that can influence our willingness to participate in the compute side. I mean, I think high level -- that business has not been as attractive because while you can get a compute offtake agreement that will pay back the computers in 5 years, typically, there is a debt overhang on the data center after 5 years. And so you're taking this either extended life risk on how long is the useful life of today's machines. Obviously, those numbers have been really favorable recently. But as we know from our past lives with ASICs, that doesn't necessarily hold consistent forever.

And then the other question is sort of how much debt overhang are you comfortable with if in 5 years, you're done with your compute tenant and you have a not fully paid for data center, which is why I often say like the risk-adjusted returns are just extremely compelling in colo, when you get higher lease rates and longer contracts, you have a fully paid for asset at really attractive returns.

And then frankly, it ties into our broader thesis about places like West Texas, having a ton of terminal value in those sites that the market does not fully appreciate yet. So it's a complex mix. I guess, it's a long-winded way of saying we want to get the best risk-adjusted returns for shareholders. And so as credit support developments have evolved in that space, it has become more interesting for us to potentially participate in owning the computers at a site like Reveille.

Our next question comes from Joseph Vafi with Canaccord Genuity.

Congrats on all the great progress, really great to see. Maybe, Tyler, any update on the Odessa PPA? Obviously, the market is really strong, and I'm sure that this is a top-of-mind issue. And then I have a quick follow-up.

I mean, look, I'll tell you this, Joe, it's lovely to have the cheapest cost of electricity in the Bitcoin mining space because we make nice margins there every day as we mine Bitcoin, and that's locked in at a really low rate for the next 14 months or so.

We do have a lot of interest in Odessa. We have a hyperscaler interest in that site. I think I've mentioned before, we would be interested in potentially evolving that site much like we did Black Pearl from a Bitcoin mining site to an HPC campus. That will involve several counterparties because, of course, we have to renegotiate that PPA, and we'll be working with the counterparty there. So the PPA continues to be one of our very strong points that we negotiated a long time ago. And look, it certainly gives us a very strong bargaining chip as we think about what the future of that site may be.

By the way, the future of that site could be that we decide to mine Bitcoin there for the next 14 months and make lots of money in Bitcoin mining there. We don't have to be in a rush because we're very favorably situated because of the low price.

Sure. That make sense. And then just sticking to the behind-the-meter theme. I know, Tyler, in previous calls, you've mentioned exploring behind-the-meter options. I mean, clearly, you got a big power portfolio, but an update on your strategy and what you're thinking on behind-the-meter opportunities.

Yes. So this has been a spot where we've had some of our best people spending most of their time in recent months. I think the potential for behind-the-meter on-site generation is extraordinary for us and our sites given where they are. We have access to a tremendous amount of cheap natural gas at our sites in West Texas.

Pulling together all the pieces that need to be pulled together for a successful behind-the-meter generation data center is challenging. You've got to sort of solve some of the engineering challenges given the nature of the load profile for an HPC data center. Bringing your own generation will not have the same characteristics and consistency as grid-connected power. So you've got to solve some engineering challenges. You've got to solve sort of the gas infrastructure piece. You typically are going to have IPPs involved where you're going to have to pick a source of generation, potentially get air permits, finance the whole thing, guarantee power purchase agreements for billions of dollars. And so, it's complicated.

I think the good news is we are in the kitchen with the best shifts, and we have all the ingredients to make a Michelin 3-star meal. It's just pulling all those pieces together has pretty much not been done. I mean, Elon has done it, and I'll put him in his own special category of having sort of dictatorial powers over the entire ecosystem, whereas the rest of us mere mortals have to deal with real-world humans from these different disparate parts of the ecosystem. And so it is an engineering challenge, a financing challenge, an emotional intelligence challenge, et cetera.

I think we are extraordinarily well positioned for that opportunity. And it may be the most upside convexity potential in our stock, frankly, because, again, theoretically, there is gas that could power gigawatts of generation that we're not even talking about in our presentations because it's just early. But the potential is exciting enough and the tenants are interested enough that we're spending a lot of time on it. So stay tuned.

Our next question comes from Brian Dobson with Clear Street.

So congratulations on the new contract. Can you give us any color, are there any potential options to expand on the initial 100 megawatts?

So it's just 100 to start. But as I mentioned, we've got -- all the sites certainly are located above an entire ocean of natural gas. And we own lots of land, and we're in favorable locations. So stay tuned to see if there's a continuing behind-the-meter story there. But as per the contract, no, it covers the 100 megawatts.

Okay. Excellent. And then as you're looking out over the next few years, do you see a point where you could exit Bitcoin mining entirely? And what do you think the business looks like, call it, by 2030? You spent some time talking about the long-term goals of Cipher.

Yes. I mean -- so look, it's a great question that keeps me up at night because I'm so excited about the potential. So first of all, I see Bitcoin winding down. As I mentioned, we do not plan to deploy further CapEx into Bitcoin mining. We have an operational site that could run until the end of July 2027 with really favorable economics. So we're not in a rush to turn it off. It brings in positive cash flow every month, several million dollars. So we're happy to have that.

That said, that is kind of an outside date for that, either we may repurpose that site or alternatively have it run down in the next 14 months and say thank you. Probably, we are also liquidated of our Bitcoin position, I would imagine, this year. We're not in any rush. We continue to sort of manage the inventory down. We have not been aggressive sellers at low levels because, frankly, we're reasonably bullish on Bitcoin here. We collected a fair amount of premium by selling some calls above the market price of Bitcoin at different times in the first quarter because we'd be happy to sell at higher prices, and if not, we collect a premium. So we're prudently managing that down. I think Bitcoin will not be a part of our story by 2030, like you said, I mean, I would say by 2020 -- end of '27 at the latest, if not sooner. And it's already sort of dwindling as you look at the NOI that will be coming in from the leases, it will become immaterial as far as our financials go before it is completely wound down.

Now by 2030, I mean, this is where you get really exciting about the upside. We are anxiously awaiting the results of ERCOT's batch process. I think we tried to be very clear that we feel we are in a very strong position with our sites to be in batch 0 there. And again, I view the HPC business as a bit of a flywheel where you're signing leases, demonstrating excellence in the execution of the quality of what we're building, the quality of our relationship management, the timeline on which we are delivering, the ability to finance at the best rates in the space. I checked our debt for the 2 projects this morning, and I think the yields were about 6.2% and 5.7%, both trading above par. So clearly, the debt investors of the world believe in our ability to construct and deliver on time. That positivity and access to finance then begets the ability to do more big data centers, and we've got that pipeline and those tenant relationships continue to flourish. I don't think any of our competitors has the tenant relationships we have. And so by 2030, to answer your question, I expect to have high-quality long-term leases with the best tenants in the world at all of the sites in our portfolio. And I would hope that we'll be operating 4 gigawatts plus of HPC at really attractive colocation rates. A lot of work to do between now and then. That's aspirational, but I'm very positive this team can do it.

Our next question comes from Michael Donovan with Compass Point.

Congrats on the progress. Can you discuss what equipment remains outstanding for Black Pearl's Phase I and II?

Sure. So for most of the equipment that is outstanding, it's -- that has not been acquired. It is all sort of on the expected procurement timeline that we laid out at the front end, and it tends to be commodity-like items. So I think we said in the presentation, we've got 93% of the Phase I equipment secured and 80% of the Phase II equipment secured. What remains outstanding are not the, like, long lead time items that tends to be stuff like, again, cable, office furniture. I think there are some like miscellaneous mechanical equipment, et cetera.

Great. That's helpful, Tyler. And then a follow-up. As your contracted backlog has expanded, has your view changed on how far in advance of expected site energization you would sign a new lease?

Yes. So that's a good question. I think having the interconnect in hand is an important piece of that. So we're watching the batch process in ERCOT very carefully. If we end up where we think we're going to end up and have interconnects at a couple of large sites that we expect to energize in 2028, I think we'll proceed with lease negotiations reasonably quickly. Frankly, a gigawatt site is just so attractive that -- and you need enough time to build it. That -- I think that would be well within the window to begin fast-paced lease construction. So -- but I still think having the interconnect has tended to be a proof point that tenants need to see because I think there's like 1,000 people that are suddenly data center developers and have a site somewhere. And when you kind of diligence just how far along and reliable the grid connection is, it often falls through. We see this as we look at corporate development opportunities, when we look at site acquisitions, fair to say to go through the rigors of a lease negotiation with a hyperscaler, you're going to have to have a really buttoned-up timeframe on your interconnect. So I still think that factor is probably what drives it.

And then look, it's construction timelines. I think for us, a huge advantage we've got is our ability to deliver quickly. We have a little bit of a different setup here than a lot of folks. I mean, we handle procurement in-house. We have a team of experts, ex-hyperscalers or the construction firms that serve them. And I think that's one of our biggest advantages to manage supply chain move quickly and control our own destiny. I think that's why we're in such a good position at our sites. I mean, at this point, I think we are more likely to deliver a site ahead of schedule than behind schedule. That's how strong our timeline management is. So hopefully, we'll have some upside surprises before too long. But at any rate, I think managing that is one of our greatest strengths. And I see that playing into the flywheel, as I described earlier.

Our next question is from Ben Sommers with BTIG.

So you mentioned earlier on the inquiries you've gotten to potentially own your own compute at Ohio at Ulysses. I guess kind of just zooming out here, curious on the broader demand you are seeing for the site. And is there anything to call out here given that it is in a different power market than the rest of the portfolio?

Yes, sure. I mean I think we have had inquiries, but we've also had inquiries and live discussions with multiple hyperscalers for that site. So I think fair to say if we're going to dip our toe in the compute ownership business, it's probably more likely to happen at Reveille just given the size and the risk exposure there. That said, never say never. If credit support continues to evolve among amazing counterparties for Neoclouds and that touches owning the computers, and we can make a better return for shareholders, we'll do it. But given that Ulysses has also interest from really great names just for traditional colocation, that's -- I mean, at this point, that's probably more likely. Stay tuned.

As far as being a different power market, like PJM is a market we have targeted for a long time. So we're excited to have a site there. I visited the site 2 weeks ago. It looks great. We're very excited about the potential. So I think a high degree of interest in the site, a little bit closer to a traditional location given that it's in the Greater Columbus area, sort of extended, which is a popular traditional data center market.

So I think there's also a pretty big demand in PJM because you asked about the nature of the markets. As a broad generalization, there are higher deposit requirements there than ERCOT. So I'd say it's a little more demanding. So it's sort of harder, I'd say, to get an attractive site in PJM. So that's another thing that puts a bit of a premium on that site. There's not as many opportunities.

Awesome. Super helpful. Then on to the financing side, just kind of curious if there's anything to call out on potentially project level financing for the new 100-megawatt contract. And I guess just anything you're seeing kind of the project level financing for colocation contracts that you want to call out?

Greg, do you want to handle that one?

Yes, happy to jump in. And thanks for the question. So look, we've raised 3 successful project level bonds now. I think we've really demonstrated the ability to access capital markets. We have a diversified institutional investor base that's now following the name. I'm very confident that if we were to go out and doing another bond that looks similar to what we've done today, we would be very successful and price at similar, if not better terms. We're comfortable with that, and we're happy with how we finance to date.

At our stage of growth, I really want to emphasize the fact that maintaining flexibility in our capital structure is so critical to us right now. I think the way that this whole industry evolves over time still remains to be seen. So noncallable long-duration financings can look great from a headline number, but I think you could trap cash and limit your ability to optimize assets over time.

So I think what we're focused on is flexibility in the capital structure kind of up and down. We're focused on nonrecourse financing to really isolate construction risk through construction. And then we're focused on optimizing the capital structure as we grow and we add more assets to the portfolio and more stabilized assets that provide collateral. So every time we look at financing, we'll kind of put everything on the table, and we'll evaluate it, and we'll pick what the best option is. But we're confident that we'll be pursuing something with similar or better terms than what we've seen to date.

Judging from the pace of calls from investment bankers to Greg eager to do more debt financing for us, I'm confident there is an extraordinary appetite for our paper out there.

Our next question comes from Mike Grondahl with Northland.

See, I'm going to assume Reveille and Ulysses are pretty baked here. And I kind of want to look at McLennan, Mikeska, and Colchis. Tyler, what are the major hurdles or challenges to get those 3 energized? And then what does demand look like today for that 2028 power? How is those conversations going?

Sure. Thanks, Mike. So the challenge here is that ERCOT is going through this batch process where they're doing constant meetings, considering all the final tweaks to how they want to implement it. There was a meeting yesterday that was several hours that we participated in. So we are -- what we have done at those 3 sites and the reason why we highlight them is that we have done everything that has been laid out to us to have those sites qualify for what will be in this batch 0 approval as it winds its way through ERCOT, which should be done next month. Given that, we believe -- and again, this has been like an evolving process, right? ERCOT has changed requirements and they've delayed the batch process as we've gone along. So we're trying to be as transparent as possible. We believe we have done everything, but until we have the final okay, we won't have the interconnect. As I mentioned earlier, having that interconnect is probably the gateway to rapidly advancing tenant discussions. So again, we have a great team that is following this and participating, and I feel like we have our ear to the ground very well with what's going on with the evolution of the batch process. We are confident that these 3 sites have done what is necessary, and they have been done for a while. So from a sort of chronological ordering perspective, they are in a good spot. We are hoping for a good outcome from the finalization of that batch process in June.

And then I think we then flip to the next question, which is, okay, so if you've got about 1.5 years, you're going out to 2028, what's the level of interest. Historically -- well, by historically, I mean the last year or so, as you get into that kind of 1.5 years out window, there has been the greatest level of interest from tenants. That starts to be squarely in their wheelhouse where they can match up demand forecasts for what they need. I have every reason to believe that there will be significant demand. And when you're talking about sites that have a gigawatt at the site or 500 megawatts, those are really big attractive sites. They're in Texas, which is data center friendly. We've got kind of really NIMBY issues across the country. We're managing those very well in Texas at our existing sites. Texas is set up for a favorable outcome on those kinds of issues. So I am just very, very, very bullish on the level of appetite for those sites once we get through the final unknown of the ERCOT process. And then hopefully, there's lots of upside stories to report in the coming months.

Got it. Yes, a month isn't that far away. And then maybe just a follow-up. How should we handicap the odds that on your pipeline slide at, say, year-end 2026, there's new sites that you've acquired on there. Would you say that's low, medium, high?

That one is really hard to say. I'd say we have seen quite an amount of inbound opportunities, I think, as we've gotten better known and people do channel checks on our tenants and the success of our construction projects and see our financings. That said, most of the opportunities we've seen that are coming in are way far out, and they haven't made as much sense for us. So an opportunity in 2030 or something like that.

What I would say will be interesting, is that with the advance and finalization of the ERCOT process, a big part of that will be putting down large deposits. Historically, we've acquired a lot of our sites from less well-capitalized speculators that find a good spot, but they're not prepared to really develop it or pay double-digit millions of dollars in deposits to show how real they are, which is part of the test in ERCOT. So it's hard to answer your question, but I'm actually cautiously optimistic that the finalization of this process may produce some opportunities where we have inbounds from people we know and follow in that ecosystem of kind of smaller developers that may be looking for a partner. So I can't give you an exact forecast. All I can say is we're looking at site opportunities all the time. I think we may have a wave of them coming in an area where we have historically had a lot of success. So it's another stay tuned.

That said, working on building the 4-plus gigawatts we've got will definitely keep us busy in the meantime.

Ladies and gentlemen, this does conclude the Q&A portion of today's program. I'd like to turn the call back over to Tyler for any further remarks.

Just to say thanks again for everyone for dialing in and your continued support. We are really excited about what's going on, and look forward to talking to you again soon. Cheers.

Thank you. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect. And have a wonderful day.

Okay. I think we're going to go ahead and get started. It's an exciting time to be speaking with Tyler from Cipher Digital. Just a quick background, Stephen Byrd. I lead our sustainability and thematic research at Morgan Stanley. I spend a lot of time on this theme. It's been a very exciting one over the last couple of years. One, just brief disclaimer I have to read. For important disclosures, please see morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley representative. So I'm done with my public service duty. Tyler, thank you for being with us.

Thank you.

We've talked quite a bit over the last several years about the opportunity to serve as really the infrastructure for, perhaps, the most important industry we'll ever see. Cipher is now Cipher Digital, really fitting where you guys are headed. Let's start at a high level. Would you mind just kind of giving us an overview of the company, your assets, your strategy, and then we're going to dig in from there.

Sure. So we are a developer of HPC data center campuses. The rise in the demand for large interconnects at single sites to drive AI workloads has driven a change evolution in our business. We began life as a developer of bitcoin mining sites, and that's really put us in a very strong position to be ahead of everyone in terms of building up a land bank of very attractive sites because that business requires a lot of power and the power has to be cheap.

And so the power interconnects needed to be located in nontraditional locations because by very definition, if you've got to pay the minimum amount in electricity costs, you have to go to places where there's oversupply of power, which is off in places like West Texas. In the course of developing a lot of expertise for originating and developing those sites and interconnects, we watched what has been happening in the last several years with the growth of LLMs and the sort of attached growth overall and desire for large campuses or single tenants.

And I think we had this advantage of being a different kind of data center developer looking for opportunities for large campuses in nontraditional places and we saw this future, and in fact, Stephen, I was thinking about it, I think it was 1 year ago at this conference, I said something that I'm sure very few people agreed with at the time was that we believe the future data center capital of the world would be West Texas. Not as many people disagree with that.

Now I don't know that I've got everyone agreeing with me necessarily, but there is so much desire now for these large interconnects at a single campus. And we had the foresight to acquire a lot of them. And so that's led to this transition in the business where we are transitioning out of bitcoin mining, and we will solely be dedicated to originating and then developing these campuses for hyperscaler or potentially other tenants.

Good. That's a good start. I mean you've made a lot of good commercial decisions, and that's shown up in contracts, in the stock price. And I think if anyone saw our initiation, I think people see where we are -- we share the bullishness. We see the upside opportunity that's quite evident. I wanted to really get your view on not just the hyperscalers, but customers more broadly, the nature of your dialogue, the sense of urgency to get power. I wish I could be a fly on the wall in the room when you're talking with these folks. But would you mind just giving us a broad sense for that sense of urgency, where we see that going from here?

Sure. So I think it's best described as it's kind of a multivariable calculation on their part. So there is certainly extremely elevated demand from tenants tied to time line to availability of power. So I think we've gotten questions, we've signed some very favorable lease terms. We have one very large project we're working on for fluid stack and Google. It's a 300-megawatt gross campus we are building.

We are building a separate 300-megawatt gross campus for AWS. We have some extremely favorable and certainly elevated to what those counterparties would traditionally pay in a lease for those sites. And I think that was largely driven by the fact that there is so much going on in the space where there is a race for power. That's driven by their own strategic initiatives, maybe they're working with an anthropic or an open AI and trying to bring gigawatts of availability to the table when they're making equity investments or whatever might be going on drive that frenzy and the speed.

But if you can deliver a time line that is near term, and let's call it, I think they start to get very interested if it's sort of sub 18 months and it starts to get urgent, if it's 15 months. And if you have campuses like we had that were already energized with fully built substations, so you're really just talking about a construction time line for a core and shell and putting all the equipment in it.

I don't want to say it was name your price, but you're closer to that than the traditional sort of framework for what might a tenant might be willing to pay. And I think that environment persists today with that same caveat that I think, if you've got 2026 power or early 2027 power, that window of 18 and sort of 15 months and 1 year just keeps rolling forward.

So when we see the comments that we've seen from folks like Satya Nadella that seem to be indicative of -- I'm paraphrasing, but effectively endless demand right now. That gives us great confidence that this desire to sort of pay whatever is necessary to secure a lease continues to roll forward with this moving time line. So what it doesn't mean is like we could just name any price we want for a site that's available 2.5 years from now. But we're working pretty hard on some pretty big interconnects.

So in addition to the 600 megawatts, we're constructing right now, we are marketing 370 megawatts of sites where we have firm interconnections already. That's across three sites. We are pretty far along. I mentioned on our earnings call, we've identified a preferred tenant for a 100-megawatt site that we're working on. So it's not finalized, but progressing. And we've got multiple potential tenants looking at the other 270 megawatts that I'm including there that are across two other sites.

So fair to say those are entering this window of near-term power, where I think I'm optimistic we will get very favorable terms again when we come to leases for those sites. And then we've got a lot of power that is scheduled, some very large campuses we are currently anticipating available in '28. And I'm hoping that what I have heard from the -- about the demand environment from folks continues to roll forward. And hopefully, later this year, we're moving forward on more favorable leases for them.

Yes. I mean it's fascinating. A few things I wanted to kind of pull on there. I mean, first, just on the returns for investors, it is wild to go back a few years and then chart where we were. So before AI was a thing, when hyperscalers have come into the power world, let's say they wanted a renewable PPA we would see terms that would suggest unlevered yields of 7% to 8% would be sort of where the hyperscalers. And you're lucky if you don't have to get them warrants, it was very difficult.

Then last summer, really, the dam kind of burst last summer as it were, and we started to see deals happen starting at unlevered yields of 12%-ish, going into the fall into the 15% level. Then we saw a deal in December that was above 18%, which is mind-blowing. And technically, I guess the deal we saw in January is 27%, though I don't expect to see that again. That was fairly unique for lots of reasons. But nonetheless, the trend is phenomenal. I share your view. It does feel like we're going to progress and that urgency is going to be there. If anything, the math we're doing suggests that the shortage of compute is going to get worse, not better.

So many examples of that, but let me give you one. In December, a Google exec laid out their 5-year demand for compute. And we looked at that growth rate of compute implied compared to what our semiconductor analyst numbers are, the Google number is about 3x higher than our semiconductor numbers. And we can't even find enough power for our semiconductor analyst numbers, which is where you come into the equation. Given that though, I do want to dive in a little bit into securing additional power. I do -- would you mind just kind of also talking us through ERCOT and the situation there, where you all stand? I think we're going to have a good outcome there for you, but it's caused a lot of agita.

Yes. I think this is one that -- I think in general, the folks in the audience know this, it feels like the stock markets and equity investors are just nervous around this whole space right now. It's a nervous macro backdrop.And I think people are quick to jump to negative conclusions around this space pretty quick, and we just have a volatile market.

And so I think this feels like one of those situations where we've been meeting with a lot of investors this week and I've explained to them that we think what's going on in ERCOT is very good for our business and very supportive. So for those that don't know, ERCOT is inundated with interconnection requests, largely driven by data centers. I don't know that I have the exact up-to-the-minute numbers, but I believe there's about 240 gigawatts in the load interconnection queue in ERCOT.

And historically, the way they've decided on granting interconnects is to do a series of studies around the stability of the grid and allowing that particular point of interconnection to have those megawatts and assuming the operator feels comfortable granting that and moving forward, and they've sort of done it on a one-off basis. The other thing is that there has not historically been a requirement that folks requesting an interconnect have to put a lot of skin in the game. So you've ended up with a lot of sort of grid speculators on -- as they see this growth of power that they can have duplicative requests, and they may just be someone that's undercapitalized, speculating.

And so it's kind of anyone's guess how much of that 240 number is real. We have a little bit of an in-house sort of wager going on it. I think with the requirements they're bringing, you may see 2/3 of that disappear. That's still a crazy amount of request. I mean, like the entire, I think, peak operation of the grid in Texas is like 85. So you're just going to add a whole another peak grid from the real request.

So it's still a lot. So that gets back to kind of what's evolving in ERCOT. So as a way to deal with several issues around this, not the least of which have some better clarity and think about running a more stable grid as they interconnect these massive loads, they are putting in a series of requirements where they are going to approve interconnect requests in batches and look at what the sort of batch effect will be on the grid. And the requirements they've laid out to try to get the serious players to come forward and remain in the grid and get that interconnect is there a requirement that you demonstrate site control, so you own the land related to the point of interconnection.

You have paid all the relevant deposits that you need to pay for the transmission distribution service providers. So you are a well-capitalized person that is serious and going to actually move. It's a good proxy for that because you're talking about millions of dollars that you'd have to pay. And then third, that you've submitted all those relevant studies, and they've been approved that yes, this is not going to crash the grid by adding this load in this particular location.

As it relates to our sites, we highlighted on our earnings call, we have 3 sites in particular, where by the time they get to this batch process in June, we will have satisfied all the requirements they have laid out at this point. That's specifically for our sites. We have a site we call McLennan, one we call Mikeska, and one we call Colchis. We have requested 500 megawatts, 500 megawatts and 1 gigawatt at those sites. So it's not finalized yet.

But given where things are tracking, we have done all the things we understand to get in that first batch, which has changed names. It's been batch [ 00A ] and batch alpha. And I'm just calling it the first batch. So our expected time line for interconnects at those site remains, our best forecast is 2028. And I think this will accelerate the finalization of those interconnections, which then puts us in a position to get a lease at those sites. People are not going to want to sign a lease if you don't have a clear interconnection for a particular site. So that's what's going on at ERCOT.

There's also an element of even more deposits about socializing some of the costs around data centers coming online and avoiding your transmission upgrades being socialized by the rate payers. This is also a good thing. I mean, I think there's still some work on finalizing what that number exactly will be. Potentially, they're talking about a pretty big number. I think I've seen $100,000 per megawatt discussed. If that's the case, again, that's great for Cipher. We'll pay that. Happy to do it, get the interconnect and then get a lease and that will be recouped anyway as part of the budget to get the site ready.

So investors, I think, should be looking at what's going on in ERCOT is a very thoughtful forward-looking way of dealing with this crush of data center interconnection, and it benefits particularly well-capitalized serious developers that have a demonstrated track record. Don't forget, we've built from scratch 5 greenfield data centers in Texas, all delivered on time. So like we are known as someone that is serious and connects our data centers and pays what they need to pay and delivers on time line.

That's a fantastic overview of the situation. And let that sink in for a minute what Tyler said. Even if we eliminated in the state of Texas, 2/3 of the proposed interconnect projects, the new demand would be equal to the state of Texas, which that's just how big this dynamic is. I did want to build on what you mentioned about sort of being a good citizen to the grid, managing that well.

Obviously, we were talking beforehand that I think AI needs a new PR firm out there. It's just day-to-day, week-to-week, it's not great. One of the things I'm thinking about is being a good citizen, which -- and you come from a background as a bitcoin miner where you were used to being a good citizen to the grid. How will that evolve for data center design and operation? How do you see that?

Yes. I mean, look, it's an evolving story in the PR around AI. I mean, I think for is overwhelmingly impressed as I am from the raw intelligence of the innovators in that space, I'm not overwhelmingly impressed with the raw emotional intelligence quotient of the people in that space. And sometimes wish they would take a hiatus from podcasts for a few months because it may put us in a better spot.

I mean, I think, yes, you highlighted something that working in bitcoin mining is a great training ground for the challenges that are coming for AI data centers. And so that's an easy political target that is misunderstood and is actually -- and thank you for highlighting Stephen, traditionally. Bitcoin miners are great assets to a grid because they're a very flexible load, and they can effectively shut down their data center in 1 minute. So at times where the grid is feeling stressed, that power gets returned and bring stability to the entire grid.

Now I can tell you from experience, no one wants to have a nuance to understanding of that, and it's very easy if you're a politician to score points by picking on bitcoin miners as something that's bad. And if you have to get into a very technical discussion about how grids work and how you're actually good, it's very hard to win that argument. I think we see a similar backdrop with AI data centers that -- you've seen not -- in our case, I mean, again, this is yet another strength of areas like West Texas.

We're building data centers that are in somewhat remote locations. It's not like we're putting a data center down in the middle of a neighborhood or something. We generally have sites that have hundreds of acres of space and that are surrounded by not much. Furthermore, from this kind of PR good citizen perspective, Texas has a setup where the tax system is related to public school payments. And so like, for example, on the PR side of just being a good corporate citizen, not just a good grid citizen, like our Barber Lake site, from our contract there with Fluidstack and Google, we will be the largest taxpayer in that county.

Just from that contract, we will pay over $100 million to the Texas Public School system. So like we have a lot of -- in addition to having job fairs and getting to meet the locals and doing all the things about being a good neighbor, there are some very good objective facts about the growth of this industry, particularly in Texas.

As far as being grid citizens, there will be elements that probably evolve in AI. A lot of the lessons we've learned about -- we are having discussions with some of our tenants around peak shaving and thinking about ways to be more flexible customers going forward. That all has a long way to develop. But suffice it to say, there will be a lot of scrutiny on the industry. It will be an easy punching bag for politicians. Unfortunately, we're used to that from a bitcoin miner.

The good news is here is in a similar fashion, we have a very good story to tell about being good citizens. So nuanced understanding certainly defends our position and hopefully, AI in general gets a little bit better PR.

Yes. It is a good point about the school systems. In states like Texas and Louisiana, this can be life-changing to a school system that has very little money, the amount of money you're talking about. In my home state of Virginia in Loudoun, the schools went from very poor to very good over a period of years. I do want to talk about execution risk, which comes up a lot. It is interesting to me. So I talked to lots of investors from tech, generalists, industrial. I come from power.

So I'm kind of used to delays to be very honest, like in the world of power, if you're delayed a month or 2, not a big deal, but there was a neocloud, I won't mention the name where the earnings call had one positive data point, one negative. The positive was they released some old ships at 95% of original pricing, which I thought was amazing, but they were a month or 2 behind on a project and the market went to that and the stock performed very poorly, and I was totally wrong.

Can you speak to measures to minimize risk of overruns? And also maybe we can talk about just contractual approaches just kind of allocating the risk, if you don't mind?

Absolutely. So we get this question a lot, and I will put this back in the bucket of what we discussed earlier that it feels like investors are looking for something to get scared about. And so again, we have such an excited environment right now for new data centers. It's funny to watch even if something goes wrong and it gets delayed a month. I don't really have concerns that like desire for AI data centers will be gone in the extra month or something. But that's neither here nor there.

Let's talk about our sites and how -- just how well I sleep at night because I'm not worried about this. So the things that would make me worried about delivering on an aggressive time line, I think we have reasonably aggressive time lines for our data center builds. I'll work backwards from the things that would really scare me. The long lead time items are things like substation transformers, right?

Again, in the case of the two sites we are building right now on aggressive time lines, not only are the substations completely built already, they are already energized. So there would be this extra risk about the transmission distribution service provider have to do work on their side of the wires and what if they're late because they're busy on other things, and I can't control that. And gosh, that's scary. Completely derisked at our sites.

So now we're working backwards to like, okay, what's the next pragmatic risk from our seat, I would be worried about would be what if war breaks out and something goes wrong and no one wants to finance anything and we don't have the money. In the case of the two sites we're building, we are completely funded. We have done two project-related bond offerings. They are incidentally both trading up in the market. So that does tell you that bond investors who are very focused on things like delay risks, think not only do we deserve money at a lower rate than pretty much all of our competitors, they think even the rate that we're paying is generous and our bonds are trading up in the aftermarket.

So we're completely derisked from a sort of we don't have the money or someone's not releasing our next draw because we missed some milestone or something. So now you're talking about like okay, what I usually term like more garden variety type supply chain risks. And these happen on every single construction project. If you've ever remodeled the bathroom, I say this always happens, the tiles aren't ready on time or something. So like the kinds of things I'm talking about are, let's say we need a key piece of equipment that's supposed to arrive at the first week of April, and it gets delayed to the fourth week of April.

And then we have a work crew that's coming in the second week of April that needed to work on the piece that was going to be there. Now they're not available the fourth week of April and they're pushed back. And so you suddenly have to rearrange this puzzle of work streams that you need to do to make sure the data centers delivered on time.

Again, I expect things like that actually have not happened touch wood on either Barber Lake or Black Pearl thus far. I fully expect they will because they always happen. We have an expert team that has built many Tier 3 hyperscaler data centers, as well as the five data centers we have built for bitcoin mining. Incidentally, all five of those data centers were built in Texas. They were all delivered on budget and on time. And that was actually in a much tougher supply chain world. That was like post-COVID. There's no copper cabling in the United States, oops, what are we going to do? How do we solve this?

So my point being back to your original question. we are derisked on the major things that would cause bad delays that would scare me. Things can happen. Could we have a pile up of those garden variety rigs that pushes it and it ends up a couple of weeks. It's possible to never happen with our team before. Possible. the penalties and the setup for late delivery under our contracts are, I think, pretty market standard. They run out 5 or 6 months, and there's typically increasing penalties. If you look at them, the penalties are none for the early day -- first couple of weeks or months. They might ratchet up to like 10% of a day's rent for another period.

They might ratchet up then at the end of like a 5- or 6-month period might be a full day or 2 days rent. But basically, if you think about a 6-month delay, that's 50% extension to the time line we're talking about for a site that's already energized with a substation. -- that we already are fully funded. So like I'm not saying it's impossible, but it rounds to that. These are not concerning for our sites.

Very helpful. I mean even in the context of the value creation, like we -- the simple math, when we look at these projects, we calculate value creation depends on the project, call it, $10 to $18 a watt of value creation in a really nasty outcome where you're 10% over budget and you're eating all of that, that's $1 a watt off the base of $10 to $18 for a stock to trade way below that value creation. So I don't want to say it's 0, but that's helpful.

I'm going to pause -- I have a couple more questions, but I'm going to pause to see if anyone here has a question that they'd like to ask. I'm going to keep going.

Looks like none. Very good. The financing, I've been really impressed by the thoughtfulness in terms of the approach you've taken. This is not your first rodeo, but I'm really interested in what you see in terms of the evolution of financing approaches.

One concept in particular, I'm thinking a lot about is the degree of credit support from some highly creditworthy entity. I see a potential trend in that direction where the market wants to see that and also where those parties are increasingly willing to do that to get projects financed and done. But I could be wrong in that. What do you see in terms of trends there?

I would agree. I think -- look, we were a part of being at the forefront of that and that we're doing a deal with Fluidstack that has credit support from Google. They've done several of those deals, not just with us, but with others, that has certainly put a marker down that is on many large investment-grade players in the space. It's within their head space about what they might have to do to get things done in the space.

So we have had a broad range of discussions around credit support from investment-grade entities to noninvestment-grade entities, neoclouds, folks that might be a test for us where they know cost of financing is a huge part of our success and frankly, the money we're going to make. And also, that's going to translate into the lease rates that they're going to pay.

The good news for people in our seat is that, given that there are several interested parties in the success of these various channels, they might be distribution channels for their chips, there may be other strategic investments or rationales for success, it's sort of squarely obvious that they need to do things to enhance credit if they want these limited assets, which are soon to power interconnect availabilities. I think we've seen it move in a couple of different ways.

Obviously, there's the explicit credit wrapper I think over time, we'll see how much appetite there is for that because at some point, ratings agencies may start to apply that to the company doing the wrapping and that may not be as attractive. We have seen given the desire for compute, and we've seen -- and I know I was watching a neocloud speak the other day talking about they were getting some fully prepaid contracts for compute.

That obviously creates a situation where if you're in our seat, a fully prepaid contract provides availability to fully or partially prepay us to now make us not have to do as much debt financing. That's the own flavor of credit support. So I think you will see creative solutions like that. As it pertains to our portfolio, we are very much focused on the largest, highest quality credit counterparty hyperscalers doing leases at our sites.

That said, we have some places in the portfolio where it might make sense. We have a 70-megawatt site, a little bit small for the typical hyperscaler. It's exactly rightsized for a lot of neocloud. So we'll be working on opportunities like that, that are, for us, a little bit smaller, but still a very big data. I mean you're still talking about many, many hundreds of millions of dollars to build that and lots of rent coming our way. But I do think you'll continue to see an evolution in those space.

It's a great overview. I mean your last point, I mean, you are in a negotiating position as well where you can, to some extent, sort of dictate or push in the direction that you want just as an equity investor, as a shareholder, the highest quality counterparty as well, right? So you can do that.

Yes. I mean, look, that's our goal -- I think there's an opportunity for us to create really a very unique company that doesn't have a comp we're aiming at. And what I mean by that, and I know you've done some already on this, Stephen, about the potential for like conversion or treatment of a company like ours, if you flash forward to a future state where we've got several cash flowing leases.

I think the interesting thing that we're still trying to get our head wrapped around is traditional REIT investor and a traditional REIT structure probably has a leverage ratio that's closer to like 25% or something like that. If we have the types of leases we have right now, so really bulletproof counterparties on long-term leases at single campuses, it would be hard for me to not think you'd want to run the leverage a lot higher on that. If we have a stream of cash flows backed by AWS for 15 years, I would feel very comfortably heavily levering that up. And so we may fall in a slightly unique bucket where I would argue we should trade at a premium.

If you say -- imagine a future state where we have a half dozen of those types of leases, I think we would sort of try to maximally lever that and then trade at a much larger premium. But it remains to be seen. Like you had talked about overall scope of financing earlier. In my mind, if we do all the things and we've got gigawatts in the pipeline we referred to, we have a very big land bank coming to power in the next couple of years.

We have great tenant relationships. We're working on behind the meter solutions that people are very interested in. So if everything goes our way, I mean, we may need to raise $50 billion of capital over the next 4 years to build that out. So we're very cognizant of all the different pools of capital we can raise that from and starting with really high-quality tenants or wrapped tenants is really key to advancing that scenario.

No, that's well said. I mean the -- I don't know what structure will be, whether REIT or otherwise, but there's this universe of investors that are the logical habitat. And I just see you moving in that direction over time. I'm not sure exactly how we get there, but that feels...

Well, and there's no question, again, if you imagine that state of the world, we look so different than our profile like our equity trades today. We are a stream of massive cash flows coming from the most trustworthy counterparties in the world. There are going to be 1 million interesting ways to do financial engineering around those reams of payments to create the most valuable equity we can.

Yes. I don't worry about whether we can find investors who will want to own that stream of cash flow. So I think that's a good place to end it. Tyler, thank you so much. That was great discussion.

Thank you very much, Stephen. I appreciate it.

Thank you.

Good day, and welcome to the Fourth Quarter and Full Year 2025 Business Update Conference Call. [Operator Instructions] As a reminder, this call may be recorded.

I would now like to turn the call over to Courtney Knight, Head of Investor Relations. Please go ahead.

Good morning, and thank you for joining us on this conference call to address Cipher Digital's business update for the fourth quarter and full year 2025. Joining me on the call today are Tyler Page, Chief Executive Officer; and Greg Mumford, Chief Financial Officer. Please note that our press release and presentation can be found on the Investor Relations section of the company's website, where this conference call will also be simultaneously webcast. Please also note that this conference call is the property of Cipher Digital and any [ taping ] or other reproduction is expressly prohibited without prior consent.

Before we start, I'd like to remind you that the following discussion as well as our press release and presentation contain forward-looking statements. These statements include, but are not limited to, Cipher's financial outlook, business plans and objectives and other future events and developments, including statements about the market potential of our business operations, potential competition and our goals and strategies. Forward-looking statements and risks in this conference call, including responses to your questions, are based on current expectations as of today, and Cipher assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law.

Additionally, the following discussion may contain non-GAAP financial measures. We may use non-GAAP measures to describe the way in which we manage and operate our business. We reconcile non-GAAP measures to the most directly comparable GAAP measures, and you are encouraged to examine those reconciliations, which are filed at the end of our earnings release issued earlier this morning.

I will now turn the call over to our CEO, Tyler Page. Tyler?

Thanks, Courtney. Good morning, everyone, and thank you for joining us today. I'm Tyler Page, CEO of Cipher Digital, and I'm pleased to welcome you to our fourth quarter and full year 2025 business update call.

2025 was a defining year for Cipher. Over the past 12 months, we completed a deliberate and disciplined transformation of the company. From a bitcoin miner with sourcing and development expertise into a digital infrastructure company purpose built to deliver hyperscale compute. During the year, we secured long-term leases with world-class hyperscalers, executed large-scale project financings, and advance the development and construction of multiple data center projects. We also took decisive steps to simplify the business and focus our capital, our team and our future squarely on high-performance computing. Today's call reflects that evolution.

We're proud to announce today that we are formally rebranding the company as Cipher Digital. This rebrand reflects what the business has become. This is not an aspirational shift, but a recognition of the work already done, and the work we will continue to do. This rebrand represents far more than a new name or visual identity. It marks a complete transition to a business centered on stable, long-duration cash flows and long-term leases with best-in-class hyperscalers.

Today's Cipher is a developer of next-generation digital infrastructure, purpose built to deliver power dense large-scale facilities to exacting hyperscaler specifications. While Bitcoin mining played a foundational role in building our power expertise and development capabilities, our identity today is centered on powering next-generation compute at scale. Therefore, we are taking steps to simplify the company and reallocate capital away from noncore activities, which I will discuss in further depth later on the call. In addition, we are deepening our bench across construction, engineering, operations and corporate leadership to ensure our organization is fully aligned with this next chapter.

The Cipher Digital brand captures who we are today, a company focused on disciplined execution, precision at pace and performance proven through delivery. Importantly, this evolution is not a reinvention. It is a natural extension of what we already do exceptionally well. Large-scale energy-intensive infrastructure delivered with speed to market, disciplined capital allocation and operational rig work. The same capabilities that build our platform are precisely what hyperscalers required today. So when we say we are built for hyperscale, we mean more than just building for hyperscalers. We mean that looking forward, Cipher Digital itself is built for hyperscale. We have built a spectacular foundation for growth at speed in our evolving world.

This strategic evolution is the direct result of our team's disciplined execution over the past 6 months. Slide 5 shows just how [ manic ] the pace of leasing and financing has been over the last 6 months. Each sequential step on our path has strengthened our relationships, enhanced our credibility and positioned us for what comes next.

We believe, and have now proven, that our first lease at Barber Lake was just the beginning and have since signed a second lease at Black Pearl and Barber Lake lease [ upsize ]. As important as our success on the leasing side has been equally valuable has been our transformational capital raising. Most recently, we completed a pioneering and highly successful bond offering for $2 billion. This offering was met with exceptional investor demand, which allowed us to price it at a yield of 1 full percent lower than our previous bond offering at 6.125%. A clear validation of our strategy and a vote of confidence from conservative bond investors in our ability to execute. This issuance secured all the remaining CapEx needed for the build-out of Black Pearl, and it included a reimbursement of approximately $233 million to Cipher for our prior equity contributions to the site. Greg will elaborate on all of our financings in his remarks and provide more detail on how we think about financing our growth going forward.

While we build data centers, sign new leases and complete financing, our outstanding origination team still keeps coming to work every day. In addition to all of our other activity this quarter, we acquired [indiscernible] a 200-megawatt slate in Ohio with all necessary interconnection approvals to participate in the PJM market. The site is expected to energize in 2027 marks Cipher's first acquisition in PJM, and is well suited for HPC applications. The [ Ulises ] campus takes its name from Ohio native [indiscernible] brand, a leader defined by operational discipline, moving the right resources to the right place on time through any conditions. That's the mindset behind our hopes for the future of this site and others in our pipeline. Power Forward data center campuses engineered for reliability today and adaptability tomorrow, with modular design that can absorb multiple upgrade cycles as compute technology evolves.

As I discussed earlier, and as demonstrated by our incredible quarter of momentum, cipher's rebrand reflects more than a change in name. It marks a fundamental evolution in our business model. We are now squarely focused on securing durable long-term cash flows through contracted leases with the world's leading hyperscalers. This model prioritizes visibility, stability and scale. To date, we've executed 2 data center campus leases representing 600 megawatts of gross capacity, and approximately $9.3 billion in contracted revenue. These agreements carry initial terms of 10 to 15 years with multiple extension options, and translate to approximately $669 million of average annualized NOI over the next 10 years. Our 3.4 gigawatt pipeline, combined with a best-in-class team, positions us to continue to execute on this new business model by securing additional leases across sites.

Cipher's future trajectory on Slide 7 speaks for itself. Beginning this year, our initial leases commenced with rent payments and from there, you can see a clear and steady ramp in cash flow as additional capacity comes online. Our leases create visible, nonvolatile contractual growth over the balance of the decade. Based solely on the contracts currently executed, we expect our leases to generate $669 million of average annualized net operating income from October 2026 to September 2036. By 2035, we project approximately $754 million in annual net operating income.

What's important here is not just the magnitude of growth but the predictability. These are contracted revenues, tied to mission-critical infrastructure with multiyear lease terms and extension options. That level of visibility fundamentally changes the entire profile of this company. Demand for power dense hyperscale infrastructure continues to outpace supply, and we are confident in our ability to execute additional leases for our pipeline sites, positioning us to extend this trajectory much further.

We are proud of the foundation we built in bitcoin mining, which shaped our capabilities. But as we look ahead, our direction is clear. We are building a business defined by durable, stable, long-term contracted cash flows. Therefore, we are taking steps to reposition the company away from bitcoin mining as we continue to transition towards a pure-play digital infrastructure platform.

With that focus in mind, last week, we sold our 340-megawatt joint venture sites, Alborz, Bear and Chief, where we held 49% interest. Our interest in the sites were acquired in an all-stock transaction by [ Canon ], a highly reputable manufacturer of industry-leading Bitcoin miners. Given our desire for no further capital investment in the bitcoin mining, and given [ Canon's ] role as the supplier of mining rigs to the JV sites, Canon is the most natural buyer to acquire our equity interest.

In Bitcoin mining, vertical integration of rig manufacturer and site operator is the way of the future. We believe Canon's unmatched machine quality, vertical integration, technology leadership and expanding energy platform makes them the right steward for the next phase of growth at the Alborz, Bear and Chief sites. By receiving Canon equity in this transaction, we retain exposure to the potential upside of bitcoin mining through a fully vertically integrated platform. We see significant opportunity ahead for [ Kanan ] who has consistently delivered the best-performing rigs in our fleet. We also know the team well and have strong conviction in their ability to execute scale the platform and drive sustained growth and improved valuation over time. This transaction allows us to simplify our structure, accelerate our strategic transition and maintain optimized exposure to the industry in a capital-light way.

Given our pivot away from bitcoin mining going forward, it makes less sense to manage a Bitcoin inventory as part of our corporate strategy. In the fourth quarter, with higher Bitcoin prices, we liquidated a substantial portion of our treasury to reinvest in the growth of the HPC hosting business. Due to recent Bitcoin price action, we have been much less aggressive than our selling but we'll continue to manage the sale of the remaining Bitcoin in inventory over the course of the next year.

As of February 20, we held approximately 1,166 Bitcoin. We plan to opportunistically reduce that position over time and reinvest the proceeds into the HPC hosting business, likely exiting entirely by the end of 2026 as we redeploy capital into contracted infrastructure opportunities. All bitcoin mining rigs from Black Pearl have been sold, marked for sale or redeployed to our last remaining bitcoin mining site at Odessa. Following the sale of our JVs and the retrofitted Black Pearl, our hash rate will be approximately 11.6% in the hash per second going forward, driven by our Odessa site.

At Odessa, we continue to benefit from our unique fixed price PPA which has positioned us among the lowest cost producers of Bitcoin in the industry. We are proud of the site's performance and expect it to continue generating meaningful cash flow as our data center leases ramp. We maintain the flexibility to continue mining at Odessa through the expiration of the PPA in July 2027, while continuing to evaluate a potential conversion of the site to support HPC workloads.

Let's now turn to a review of our current portfolio. Slide 10 provides a high-level transaction overview of our lease at Barber Lake, highlighting contracted megawatts and the key economic terms across our first lease. Now that a lease is signed and we secured financing for the project, the next phase of value creation at Barber Lake is driven by disciplined construction, on-time delivery and converting contracted capacity into cash flows. Construction at the site is well underway. Concrete foundations have been poured, structural steel is going vertical, interior mechanical, electrical and plumbing work has commenced and utility work continues to progress. All current design milestones have been achieved, and we have received consistently positive tenant feedback, an important validation as we continue toward full build-out.

We have secured approximately 95% of long-lead equipment with delivery schedules aligned to support our completion targets. Additionally, we have secured 100% of the necessary workforce across all critical construction work streams through the duration of the project. On any given Workday, there are over 400 personnel on-site driving progress safely and efficiently. Importantly, the project remains on schedule and is tracking to meet both early access and substantial completion milestones under our contractual time lines. This is where our execution culture truly differentiates us, translating signed leases into delivered infrastructure on time and on budget. We will continue to update the market as we hit key milestones, but we are very pleased with the progress to date.

Slide 12 provides a high-level transaction overview of the key economic terms of our triple net lease with AWS at Black Pearl. Similar to Barber Lake, now that the lease is signed and financing is completed, we are squarely focused on delivery. At Black Pearl, data center development is on track with engineering, procurement and construction activities underway. The transition of the site is progressing as planned, with Bitcoin mining decommissioning being completed this week. Importantly, approximately 85% of the infrastructure currently deployed at Black Pearl is expected to be repurposed for the AWS lease. This reuse of existing infrastructure meaningfully reduces execution risk, improves capital efficiency, and accelerates our path to delivery. Overall, Black Pearl reflects the same disciplined execution framework we are applying across the portfolio. Locking in supply chain visibility early and advancing toward on-time, on-budget delivery.

Turning to Slide 14. Odessa is our last operating bitcoin mining site. As a reminder, Odessa's fixed price power purchase agreement at approximately $0.028 per kilowatt hour continues to position Cipher among the lowest [indiscernible] in the industry. This structural cost advantage, combined with disciplined operations, enabled us to generate meaningful cash flow moving forward, should we elect to continue mining through the expiration of the PPA in July 2027. Today, we are operating 207 megawatts of capacity, supporting approximately 11.6 exahash per second of hash rate. Fleet efficiency remains strong at approximately 17.2 [ joules ] per terahash.

Let's now shift to an update on our development portfolio. Given the recent headlines surrounding ERCOT, we want to take a moment to provide our perspective and address any implications for our development pipeline. We'll also highlight several sites where we have the highest degree of confidence in securing interconnection approvals based on our ongoing dialogue with ERCOT, and the relevant transmission and distribution service providers.

This past quarter, we strengthened our regulatory expertise by hiring [ Lee Bracher ] as Head of Policy and Government Affairs. Lee brings to Cipher extensive industry experience, a deep understanding of the Texas and federal energy regulatory landscape, and strong relationships across ERCOT and the TDSPs. With his extensive understanding of ERCOT's processes and evolving rule-making we have a great degree of confidence in our ability to navigate this environment effectively.

As a reminder, Cipher welcomes all legislative efforts to clean up the lengthening interconnect queue, and we have been consistent that any new rules requiring posting of deposits and acceleration of serious developers is a good thing for us. The recent developments represent a positive step forward for the data center industry in Texas.

Earlier this month, ERCOT discussed the potential implementation of a batch study process and that the existing development and stakeholder process is expected to last until June 2026. While the final batch process remains to be determined, we believe we have made enough significant progress at certain development sites to be included in early batches with firm loads. We expect these sites to remain on track for the energization we have previously communicated.

Specifically, the sites on Slide 16 are either already [indiscernible] or in the final stages of the current approval process. At the top of the slide is Stingray, our 250-acre campus in Andrews, Texas. The site is fully interconnection approved for 100 megawatts and remains on track to energize in the fourth quarter of this year. Substation development is already underway, and with interconnection secured, the load is firm. Given the site's approval status, time line of power and quality of location, we are increasingly confident in securing a lease in the near term. This confidence stems from having engaged with a broad range of interest in tenants and having now identified a preferred partner with whom we are in advanced lease negotiations.

As lease pricing continues to move in our favor alongside growing demand, we expect lease economics here to be among the most favorable we've achieved to date. And while the site has 100 megawatts of gross capacity today, we are actively exploring behind-the-meter solutions to expand capacity over time, not only at this location, but across our broader portfolio and pipeline.

Reveille [indiscernible], Texas is also fully approved for 70 megawatts and remains on track to energize in the third quarter of 2027. We have already initiated substation development. The project falls below the megawatt threshold that would trigger the batch process and its interconnection is already approved. [indiscernible], our recently acquired 200-megawatt site in Ohio has all necessary approvals to participate in the PJM market, not ERCOT, and is expected to energize in 2027. We are in advanced discussions with potential tenants regarding an HPC lease at that location.

Looking to the rest of the pipeline ERCOT. The McLennan site has all studies approved, deposits have been funded with the TDSP, and the land is secured. The site is undergoing the final interconnection approval processes. Based on this information, we expect the energization time line and capacity of this site to be unaffected by any new batch processes. For each of Mikeska and Colchis, studies have been submitted, all requested deposits have been funded and the land has been secured. This makes them likely candidates for an early batch as well. We continue to push all remaining workflows forward and fund all deposits as soon as possible to ensure that the energization time lines are preserved and the loads are firm.

This slide provides an overview of our current operating and energized capacity, as well as outline our full future pipeline. We are very pleased with the composition of the portfolio today. We also remain confident in both our regulatory positioning and the strength of our roughly 3.4 gigawatt development pipeline, all being prioritized for HPC. Our development pipeline is the result of years of sourcing, permitting and infrastructure work, and it positions us well to serve the increasing demand we are seeing. We believe the value of this pipeline lies not only in megawatts, but in the credibility Cipher brings to those megawatts, both in our ability to sign leases with the best tenants in the world and in our ability to construct and operate data centers.

Our conviction has only strengthened since last quarter. We believe that Cipher is among the best positioned companies in the world to see the near-term opportunities emerging from the growing power shortfall. While we've made significant progress to date, we are still in the early innings. We expect our pipeline to expand, additional leases to be executed and Cipher Digital to further solidify its position as a global leader in data center development and operations.

I'll now turn the call over to our CFO, Greg Mumford, who will walk through our financing activities, capital strategy and the financial results in more detail.

Thank you, Tyler, and good morning, everyone. Over the past years, Cipher took significant steps to reshape the financial profile of the company. We materially strengthened the financial foundation of the business by securing long-duration, contracted cash flows in HPC hosting by expanding relationships with investment-grade counterparties and by broadening our access to capital. Today, we are building a platform designed to support scalable growth while minimizing dilution and maintaining balance sheet discipline.

During the fourth quarter, we upsized our lease of [indiscernible] supported by Google. We executed a long-term lease agreement with AWS, and we completed two high-yield bond offering that fully funded Barber Lake through substantial completion. Subsequent to quarter end, we successfully financed the development at [ Black Pearl ]. Importantly, the successive transaction was completed on improved economic terms, reflecting a strengthening credit profile and increasing investor confidence in our long-term strategy.

Before turning to our financial results, I'd like to highlight our project level financing, which were sent to derisking execution across Barber Lake and Black Pearl. Collectively, these transactions secured long-term fixed rate nonrecourse financing that fully funds each project through substantial completion. As a result, we have eliminated construction financing uncertainty, isolated project-specific risks, and reduce reliance on near-term capital markets access. This disciplined financing model creates a repeatable framework for scaling development while protecting corporate liquidity.

In our first issuance in November, we raised $1.4 billion by selling 5 years senior secured notes of 7.125% to fund the development of Barber Lake. The transaction was met with strong institutional demand, resulting in a multiple times oversubscribed order book and broad participation from high-quality credit investors. Following the Barber Lake lease upsizing an improved economic terms, we executed a $333 million tack on at the same rate, bringing the total debt financing to $1.73 billion. Together with our previously invested equity and $477 million of additional equity contributed in connection with the financing, Barber Lake is now fully funded through substantial completion.

Earlier this month, we completed another project level financing, raising $2 billion by selling 5-year senior secured notes at 6.125%. The transaction was significantly oversubscribed by 6.5x, with approximately $13 billion in orders and broad institutional participation. We allocated the bonds to over 200 accounts, roughly double the average high-yield transaction. Cipher now has a significant group of institutional credit investors following our story. More importantly, the financing fully funds Black Pearl through substantial completion, and included a $233 million CapEx reimbursement of prior equity contributions, further strengthening corporate liquidity.

Since issuance, our bonds have traded at yields below original pricing levels, reflecting improved risk perception and continued investor confidence. Across both projects, we have now secured funding certainty through substantial completion using long-term, fixed rate, non-recourse debt aligned with contracted lease revenue. As our capital strategy continues to evolve along with our corporate development efforts, we will remain grounded in core principles.

Cipher's approach is built around maintaining a flexible and conservative capital structure, matching contracted cash flows with long-term financing and protecting the corporate balance sheet. We are currently prioritizing a disciplined approach to consolidated leverage, a preference for nonrecourse project level financing through construction, and staggered debt maturities as we scale. As additional leases are executed, we expect to continue utilizing project level, nonrecourse financing structures through construction. Our HPC lease structures provide long-term, highly predictable cash flows supported by strong counterparties, which we believe support attractive financing terms and a decline in cost of capital as the business matures, as evidenced by the sequential improvement in pricing across our recent issuances. Over time, as projects stabilize, we expect opportunities to refinance and recycle capital into future developments supporting a self-funding growth model.

At the corporate level, we ended the quarter with $754 million of cash, cash equivalents and Bitcoin, providing significant flexibility to fund equity contributions for future projects. We remain disciplined and prioritized capital sources that limit shareholder dilution. This includes opportunistically monetizing our Bitcoin inventory as we transition the business, as well as exploring short- and long-term financing arrangements. As the business continues to mature, we may evaluate additional sources of nondilutive capital to bolster corporate liquidity.

Let's now turn to a review of our financials for the period ended December 31, 2025. Our financial results reflect the strategic evolution Tyler described, a deliberate repositioning of the company as a leading developer and operator of data centers purpose built for AI workloads. In the fourth quarter, we earned revenue of $60 million, down from Q3, driven by the difficult bitcoin mining environment and Bitcoin [ price line ]. We expect revenue from Bitcoin mining to further decrease as we finish decommissioning miners at Black Pearl this month. For the quarter, we reported a GAAP net loss of $734 million. Importantly, the majority of this reported loss was driven by the change in fair value of certain noncash items and transition-related impacts rather than core operating cash performance.

The largest component was the $450 million noncash mark-to-market associated with the embedded derivative liability of the 2031 convertible notes we issued in September. As the price of our convertible notes increased following issuance, the liability was revalued, resulting in a noncash loss. Shortly after issuing the notes, we increased the authorized shares available to the company for issuance, which changed the accounting treatment. The conversion feature now qualifies for equity classification and will no longer be subject to fair value accounting going forward.

In addition, we impaired various parts of our legacy Bitcoin mining business as we focus on transitioning the company. As we decommissioned mining at Black Pearl, recognized a $96 million write-down that reflects the fair value adjustment on the miners moved from PP&E to assets held for sale. We also recognized the $45 million impairment on the PP&E at the Odessa facility caused by the recent depressed cash price. We recognized an unrealized loss of $39 million on our Bitcoin holdings, and a smaller realized loss on our Bitcoin sales. We will continue to opportunistically monetize our remaining bitcoin, likely exiting the position entirely by the end of 2026.

As we reposition towards contracted HPC infrastructure revenue, we expect volatility from bitcoin-related items to diminish over time. On the balance sheet, the most notable changes this quarter were increases in restricted cash and long-term debt following the successful finance at Barber Lake. Proceeds are classified as restricted cash as they are dedicated to project construction. As of December 31, 2025, we had $754 million of unrestricted liquidity, including $628 million in cash and $125 million in Bitcoin. Pro forma for our financings, we maintained substantial liquidity, fully funded construction across both projects and long-term fixed rate project debt. Cipher is well positioned with the financial flexibility needed to execute on our next phase of growth.

Before we conclude, let me briefly summarize the strength of our overall financial position. Barber Lake and Black Pearl are both fully funded through substantial completion. We've successfully secured long-term fixed rate, nonrecourse project level debt, reinforcing the durability of our capital structure. At the corporate level, we ended the year with substantial liquidity, which has further improved following the completion of our Black Pearl financing, including the $233 million CapEx reimbursement. And importantly, we do not anticipate the need for additional equity to fund our currently contracted developments. As we transition to long duration contracted infrastructure cash flows, we believe this disciplined capital structure supports sustainable growth and long-term value creation.

Thank you for your continued support. Tyler and I would be happy to take your questions at this time.

[Operator Instructions] Our first question comes from Mike Grondahl with Northland.

Tyler, it seems like Stingray rate and Reveille are pretty much baked for leases. But is there anything else to call out there just in terms of demand? And then secondly, could you talk a little bit about the other 4 in just the demand environment you're seeing for a lease, [ Ulises ], McLennan, Mikeska and Colchis, which have some power coming on in late '27 or '28?

Sure. Thanks, Mike, for the question. Yes, I think it's fair to say, as I mentioned on the call, we are pretty far along with Stingray, and we have a preferred tenant there. We just need to sort of tick and tie the final [indiscernible] I'll remind everyone because I get lots of questions around the timing of leases. And as we showed in the deck, the pace of what we've been doing around here has been pretty frantic. I would say that level of demand continues, but I remind everyone, if you're talking about a hyperscaler, a company that has hundreds of thousands, even over 1 million employees, even though they are very large when you're signing contracts for billions of dollars of payments, the approval of those contracts takes a long time.

It goes through a lot of groups. They get signed off on, sometimes they go all the way to the Board to get signed off on it. And that process just takes some time. So what I'd say is on Stingray, we are well along in that process. You're never done until you're done, but we do have an anticipated tenant there, and I think that will be done reasonably soon if everything stays on track.

Reveille, I would say, is a little bit different bucket actually. There's a lot of interest in Reveille, given that it is only 70 megawatts as opposed to some of our like several hundred megawatt campuses, that's a different range of discussion. I'd say for most hyperscalers that would want to use that site directly, that's a little small for them. What's interesting about -- Reveille as the site continues to advance, there is a lot of desire for [ Neo clouds ] to be successful, both from the equipment providers, the hyperscalers themselves. There's a lot of benefit to using a [ neo cloud ]. They can often move more quickly, more nimbly. And that 70 megawatts, that's a more interesting site for a different crowd. So I'd say there's a lot of interest in that site. We're in process on many discussions of levels of interest.

And I think what has slowed us down previously was we've had a relentless focus on the credit quality of our tenants. As the industry continues to move really quickly, there are many interested investment-grade participants in this ecosystem that are willing to think about things like credit wrappers, sort of prepayments, et cetera. And I think some combination of that gives us a different opportunity set at Reveille, but still very active, I'd say that's a little further along in terms of finalizing -- that is -- it will take a little bit longer to finalize something there, but very busy discussions.

I'd say [ Ulisses ] is the other one I would call out. [indiscernible] 200 megawatts in Ohio, PJM. We have significant interest from multiple hyperscalers in that site. We are in the diligence process on the site with data rooms and so forth in advanced discussions with people that we know well, new people, et cetera. So I think very good prospects for that site. But moving quickly, but things take time. The general backdrop for demand still remains high.

I think there was a frantic increase in the pace in the fourth quarter, and I'd say that pace continues. I think it's still a very favorable environment to negotiate economics from our side of the table. So I'm very bullish about all these sites eventually having tenants.

When you move beyond Stingray, Reveille [indiscernible] that's the 370 megawatts that are currently being marketed for leases. We are in earlier discussions on McLennan, Mikeska and Colchis. As we discussed on the call, we're very confident about the prospects of those receiving their final interconnects, given where they are in the approval process. But we are awaiting that final approval. Given the shifting sands in ERCOT, we're confident we will either get those approvals, or they will be in a very early first batch -- when the batch process is finalized, if that's the case. And that keeps the energization time lines we had expected previously on track.

I think we need to get a final interconnect to advance those discussions beyond the early discussions. But fair to say, on an early basis, given the size and location, there is hyperscaler interest in all 3 of those sites.

Our next question comes from Chris Brendler with Rosenblatt Securities.

Congratulations on the progress here. Yes, we're shifting to -- away from mining and towards HPC. I think there's tremendous progress, obviously, in the fourth quarter. And I guess we've now sort of focused on execution. Can you talk about some of the new hires you've made as you sort of build out the team and shift the bench more towards HPC and data centers away from bitcoin mining? You mentioned some [indiscernible] I just wanted to get a little more detail there.

Sure. Thanks for the question, Chris. Yes, I'd say we philosophically still take the same approach to hiring, which we always have, which is if you look at versus most of our competitors, I think we operate a [indiscernible]. We are trying to hire the very best people in the world at what they do, and have fewer of them because generally, we find those people to be much more productive and have a much deeper impact on the success of the company.

What we've really been trying to add is depth. There are some spots where we plugged some gaps. For example, we highlighted hiring [ Lee Bracher ]. I think having someone who is probably more plugged in to the scene in Texas as far as ERCOT, the TDSPs and the regulatory landscape, that's just been an incredibly helpful hire as we navigate the ongoing, sort of, the interconnect debate in Texas. So that is something where, rare thought, where we've added something we didn't have before.

Beyond that, what we've really been adding is depth of excellence to the team. So we have always had a very, very strong construction, engineering and operations team. But I think as we evolve towards this new model that we want Cipher Digital to become, we want to be a company where basically, in addition to the very steady cash flows coming in from our already signed leases, we are finding a couple of new sites a year. Signing a couple of new leases a year and building a couple of new data centers per year, to continue to stack up on those recurring cash flows.

What we're trying to build the workforce for is to accommodate that world really well. So I have 100% faith in confidence in the team we had to execute and build, for example, Barber Lake and Black Pearl [indiscernible] time. What we're trying to build towards is more depth so that we could build 4 data centers at once. Let's say we sign a Stingray lease and a [ Ulises ] lease, and we're managing all 4 of those projects at the same time because [indiscernible] them in the next 2 months. We needed to add depth.

I think the other aspect is we have excellent people, and we get a lot of leverage out of them. But if you look at a counterparty like AWS, they may have 50 engineers engaged on their project. And it's helpful if we have more than sort of 1 or 2 people across the table dealing with all 50. So what we've added is a whole bunch of depth to the construction engineering operations bench. Typically, ex hyperscaler, we've continued to tap the very rich vein. We have always had from Google. That is by far our biggest alumni network we've got at the company. Several new hires from Google. We've hired senior talent from Apple and others. So it's really depth at the senior level across those functions.

That's great. Just one quick follow-up, and you mentioned -- congratulations on that [ hiring ]. It sounds like -- it seems like even though the ERCOT process, the new process, [indiscernible] hasn't really been [indiscernible] finalized yet, but it really should increase visibility and potentially reduce some of the headaches that we've had recently with the overwhelming request they've had at ERCOT over the past year or 2. Is that a fair position that you probably feel a little more confident in your ability to get approval for the interconnections that you have in the Q? Or are we still in a period of great uncertainty there?

Yes. It's a great question. I think this advancing seen in Texas is a good thing for us. It's a good thing for serious operators and developers. Because at a high level, what they are trying to put in place and finalize is how to navigate this interconnect queue that has stretched out for hundreds of gigawatts of requests, where everyone in the world knows some of those are duplicative or less serious, et cetera.

I think also just from a technical standpoint, they've got to figure out evolving to a new world where if so much is coming online, their whole process of conducting studies to understand impact on the grid needs to understand other large interconnects happening simultaneously. And so bringing order to that is a fantastic thing for us, and that's because we have a great track record of developing things, being serious [indiscernible], putting down deposits, delivering when we say we're going to deliver, et cetera, we are exactly the type of company they are trying to optimize the process for.

So finalizing the optimization, they had talked about a few weeks ago, that's going to -- this batch process will take until the summer to line up and get finalized. But given where we are, what we have submitted, what the anticipated requirements are to be, to have a firm load in that early batch. We're very confident in the sites we mentioned on the call. So overall, this is a good thing.

Like I mentioned, we're ready to send a deposit as soon as people are ready to accept it to prove that we are serious, and we've got tenants interested to build big data centers. So it's a good thing going on in Texas. It just takes a while to sort of finalize what it's going to exactly look like.

Our next question comes from John Todaro with Needham & Company.

Congrats on the progress here. Going to the 207 megawatts at Odessa that's still currently bitcoin mining. I guess, just what would the next steps be in determining suitability for HPC? And then, I guess, just more color on the kind of the end plans for Odessa?

Sure. Thanks for the question. So Odessa is a little bit different than Black Pearl. As we mentioned at Black Pearl, that is a site that was half built for bitcoin mining, but we always built it with an eye towards being able to sort of upgrade or evolve that data center to HPC. And so we're able to reuse 85% plus of what's already there. It happened a little bit quicker than we were anticipating, but all a wonderful thing.

I'll contrast that with Odessa, which is a site we built like 5 years ago, with an eye towards having a 5-year PPA at the site. And so it's a [indiscernible] data center that it works fantastically well for bitcoin mining. We have an amazing low fixed price there, roughly a little bit less than [ $0.028 ] a kilowatt hour. And so bitcoin mining economics are excellent there. That PPA runs out in July of 2027. So our options are restrike the relationship we have with our counterparty Luminant on a PPA, and the site there. We also own additional land around that site. So we do have a lot of optionality there on what we can do. We're very well positioned, been anticipating this for a while.

And so if we come to an agreement with an interested tenant, there are multiple tenants that are interested in putting an HPC site there. And we come to an agreement with Luminant about how we would recut the PPA and sort of ground lease there, and how that would be set up. We'll shift it to HPC as soon as there was a lucrative deal on the table. What I'd say is there's not a ton of time pressure for us to do that because the bitcoin economics there are still really, really strong, giving the low power price. So if we can [ hurt all those cats ] and make it happen sooner rather than later, that's great. That also gives us an opportunity to really be picky and choosy about the economics we can get there because we're making great cash flow there with bitcoin mining. However, as I mentioned, we don't have a desire to put more CapEx into bitcoin mining. That is not going to happen. And so the kind of outside date for us to do something there would be July 2027, really.

Got it. Understood. That's very helpful. And then just as we look about some of the additional HPC customers coming in. Is there still interest in maybe diversification and the opportunity to get, maybe even, sometimes better lease economics with [indiscernible] in some of the [indiscernible] as you talked about at Reveille. I guess just how are you thinking about different customers? And if you can say or would we be expecting kind of the same customers you signed before as kind of the front runners for some of these sites, or are the newer customers?

So I mean I'd say the customers we have now are the best customers in the world, and I would take as many leases from possible as possible from them. So I hope we will do more business with them in the future. They are interested in more sites. And so I hope we can connect the dots on that.

That said, we are talking to all the other hyperscalers and pretty much all the [ neo clouds ] in some way, shape or form as well as equipment manufacturers that are interested in the success of those neo clouds. So I do think we have a lot of options. As I mentioned in the past, in our first sites, we really prioritize the quality of the counterparties because we wanted to debt finance the build costs. Obviously, that has been an overwhelming success.

If you look at where we raised our debt to build those [indiscernible] and frankly, where it's traded, both of those bonds have traded up [indiscernible] every time I see nervousness around execution and the equity markets swinging around, I [indiscernible] because I assure you bond investors are much more focused on execution risks and our bonds are trading well above par.

I think that as we evolve now that we've got those sites fully financed and we've got the bedrock foundation of our HPC business set, we can afford to think about diversification. I think we would love to work with the other hyper stealers. As I mentioned, we're in discussion with them. I do think a site like Reveille really lends itself to a different category of tenant, again, thinking about how we control whatever risks and exposures we have there. And so overall, I think that opportunity is there, John.

But listen, our tenants are awesome. And if we end up doing all our leases with them, that's fine. The other thing is there are some efficiencies working with the same tenants because they tend to have similar design philosophies. And a lot of the hard work that goes into execution is the upfront work that has to be done on the engineering side. Having a kind of consistency and sort of having at bats with a particular tenant, puts us in a good spot to be efficient on the next build as well.

Our next question comes from Brett Knoblauch with Cantor Fitzgerald.

Tyler, just on the ERCOT kind of noise, if you will, over the past few weeks. Is that causing maybe the big hyperscaler tenants to shift their focus from maybe Texas outside of Texas? Or are they still very much demanding Texas assets? And has it caused any increase or more hesitation to committing to a specific site if energization date might be in flux? Or just broadly, how would you characterize the impact of what ERCOT is doing on hyperscaler demand in Texas?

So I mean it's hard for me to say on a relative basis within the hyperscalers like, were you now like Texas Less versus Ohio, or Pennsylvania, or Virginia, or something like that. What I'd say is I have not seen any decrease in interest. There is a ton of interest.

I think the thing to keep in mind that we've been very active on, we mentioned briefly on the call, is that all of the hyper stealers are also looking at behind-the-meter solutions now as a way to faster power. I've been saying consistently on these calls that West Texas is going to be the [ data center capital ] of the world for over a year now. I read a recent [ JLL ] report that came out that they think that might happen. And it might just -- from Northern Virginia. So I'm excited to see one incumbent [ bend the knee ]. I'm sure the rest are going to as well over time.

And a lot of that has to do with the fact that if you look at sites like ours at Stingray and Barber Lake, there's a whole ocean of natural gas under our feet there, and we're the ones that can get to it. So I think high level, hyperscalers understand the complexity of the interconnection process. They are focusing very much on behind the meter where Texas is uniquely suited to that. And I have not seen any change in how they have interacted in their interest in Texas.

Perfect. And maybe just a follow up to that. On the co-locating generation with the data center, to what extent have you guys looked into or expecting to do that in the foreseeable future?

We have some of our best resources dedicated to investigating it now. We are speaking about it with our counterparties who are also very interested in it.

As I mentioned, we have access that is somewhat unique to natural gas pipeline capacity, et cetera. So there's still a lot of work to do. I think everyone is interested in the time line potential of that. It is very topical. There are main questions around engineering, financing, et cetera. But we have all the ingredients and our best people working on it. So I am personally very bullish that, that will be a major part of our portfolio over time. It just may take time. It's hard for me to give an exact time estimate, but keep in mind the desire for that springs from a desire to get to market faster with large quantities. So I'm very optimistic on it.

Our next question comes from Reggie Smith with JPM.

Congrats on all the progress. Tyler, I think you categorize -- Stingray has been in advanced discussions, and I think [indiscernible] same time. I believe you had a [indiscernible] discussions. And this I'm somewhat surprised given it you just acquired [indiscernible] in December, maybe talk about, one, do I have that right? And how do you [indiscernible] and as it relates to [indiscernible], are you seeing discussions progress faster than what you have historically seen with new sites that you've acquired? So maybe thinking back to how Barber Lake discussion started post deal close, and compare that to [indiscernible] is today.

Sure. So fair to say we're furthest along with Stingray. Like I mentioned, we have a counterparty we've identified as our preferred counterparty there. I'm optimistic we'll get it finalized. As I have caveated in the past, you're never done until you have a signed lease. But I wouldn't be speaking so confidently about that if I weren't so confident in that being done soon. So I feel very good about Stingray, and I think that will be forthcoming before too long.

[ Ulisses ] is not as advanced as that because given your point, Reggie, we just acquired it recently. That is a site that some hyperscalers were familiar with. I think I mentioned on our -- in the past, that was a site that originally, I think, in their databases, had some issues around the land plot. We solved that land plot and found a different spot. I think the fact that it's got near-term energization and it is near Columbus, Ohio, which is a sought after data center market, as well as the fact that we have ample land there. And it's also one of the last legacy interconnection agreements in PJM without a large deposit. There's reforms coming to that market as well, all make it very attractive.

So we are in discussions, but they're not as advanced to Stingray. We have multiple hyperscalers in data rooms, doing their diligence, beginning, thinking about engineering discussions that we will have to iterate that they can get translated into lease terms. So I'm very happy with where it is, and it is further along than other things, not named Stingray in the pipeline, but that's where it is right now.

Got it. And if I could sneak one last follow-up in. Just thinking about the ERCOT proposals, and I'm thinking about there's been, I guess, historically, a pretty [ stellar ] market, people buying land in Texas and then trying to flip it for larger companies like yourself. I guess how do you think this would change that dynamic? Does it slow the pace of deals? Might it make people who are well capitalized more [indiscernible] to do a deal with you guys like obviously down the road? But like how do you think this plays out in the market for sites in Texas?

It's going to be really good for us. I don't know how it will impact other players in the space. I mean, I think if you look at the history of the sites we have acquired, we've often acquired sites from earlier-stage folks that were, kind of, making a bet and couldn't do things like put down big deposits to demonstrate how serious they were. And sometimes those time lines got away from them and we managed to get really attractive deals.

Again, increasing the hurdles to demonstrate how serious and non-duplicative and well capitalized you are, those are all fantastic things for us. Because that means the people that would speculate in the past can't do that as easily and they're going to have to make those sites available for us. So like I said, these kinds of advances that they're talking about in Texas are very good for Cipher. Probably less good for the wildcatter speculator grid cowboy. But those guys are also pretty resourceful. I'm sure they'll find ways to adapt.

And that's all the time we have for questions today. I'd like to turn it back over to Tyler Page, CEO, for closing remarks.

Okay. Thank you very much to everyone for joining our call. The progress is just getting started, and we can't wait to tell you what's next for Cipher Digital. Thank you for your time today. Cheers.

Thank you for your participation. You may now disconnect. Everyone, have a great day.

Good day, and welcome to the Cipher Mining Third Quarter 2025 Business Update Conference Call. [Operator Instructions] As a reminder, this call may be recorded.

I would now like to turn the call over to Courtney Knight, Head of Investor Relations. Please go ahead.

Good morning, and thank you for joining us on this conference call to address Cipher Mining's business update for the third quarter of 2025.

Joining me on the call today are Tyler Page, Chief Executive Officer; Greg Mumford, Chief Financial Officer; and Edward Farrell, Senior Advisor and former Chief Financial Officer. Please note that our press release and presentation can be found on the Investor Relations section of the company's website, where this conference call will also be simultaneously webcast. Please also note that this conference call is the property of Cipher Mining and any taping or other reproduction is expressly prohibited without prior consent.

Before we start, I'd like to remind you that the following discussion as well as our press release and presentation contain forward-looking statements. These statements include, but are not limited to, Cipher's financial outlook, business plans and objectives and other future events and developments, including statements about the market potential of our business operations, potential competition and our goals and strategies.

Forward-looking statements and risks in this conference call, including responses to your questions, are based on current expectations as of today, and Cipher assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law.

Additionally, the following discussion may contain non-GAAP financial measures. We may use non-GAAP measures to describe the way in which we manage and operate our business. We reconcile non-GAAP measures to the most directly comparable GAAP measures and you are encouraged to examine those reconciliations, which are filed at the end of our earnings release issued earlier this morning.

I will now turn the call over to our CEO, Tyler Page. Tyler?

Thanks, Courtney. Good morning, everyone, and thank you for joining us today. I'm Tyler Page, CEO of Cipher Mining, and I'm pleased to welcome you to our third quarter 2025 business update call.

The third quarter was truly transformative for Cipher as we made huge strides on our strategic pivot into the high-performance computing space and set the stage for what is, without question, the most exciting earnings update in our company's history. This quarter, we executed a pivotal transaction with Fluidstack and Google, which firmly established our credibility in the HPC space. Following that groundbreaking transaction and leveraging that success, we've now taken another major step forward.

I'm thrilled to announce today that we've executed a second landmark HPC transaction, this time with Amazon Web Services, partnering directly with one of the largest and most innovative companies in the world underscores Cipher's emergence as a trusted leader in next-generation compute infrastructure and confirms our full-scale transformation into an HPC data center developer.

Our first HPC deal with Fluidstack and Google established not only Cipher's credibility as a data center developer for the world's most demanding tenants, but also the desirability of more remote areas of Texas for next-generation data centers. We have been talking to investors for over a year about this thesis and saying that we thought the market would evolve in our direction.

Our second long-term lease, this time with Amazon proves that neither we nor West Texas are one-hit wonders. Our second lease pace is the world's largest hyperscaler directly on a 15-year lease at very attractive terms. This is not a fluke and will not be our last HPC deal.

Under the agreement, we contracted 300 megawatts of gross capacity, and the project carries approximately $5.5 billion in contract revenue over the initial 15-year term. The capacity will be delivered in 2 phases beginning in July 2026 and completing in Q4 2026, with rents commencing in August of 2026.

Given the strength of the lease we have secured, we believe that we will utilize debt financing to fund the majority of construction costs at the site and any remaining construction obligations will be funded from cash on hand, with no need for further equity fundraising. With these milestones, Cipher has officially arrived as a leader in the HPC revolution, harnessing our sourcing expertise, energy assets, best-in-class team and operational excellence to power the world's most advanced computing workloads.

Continuing with that momentum, we're proud to announce today that we've secured ownership in a joint venture to develop a 1-gigawatt site in West Texas. We expect to own approximately 95% of the JV once a turnkey HPC lease is executed, assuming standard lease and development terms. We are calling the site [indiscernible], which refers to the mythical home of the Golden Fleece and was a land of legendary wells located at the edge of the known world.

For the past 1.5 years, conventional knowledge in the traditional data center industry has been that hyperscalers would not venture outside of major metropolitan areas and that our sites were at the edge of the world. But we have now conclusively proven those incumbents wrong. We will continue to do so at Colchis. This is the most significant addition to our development pipeline to date. This site features a fully executed 1-gigawatt Direct Connect agreement with American Electric Power providing dual interconnection capability and targeted power availability in 2028.

The transaction also includes options to purchase up to 620 acres of land adjacent to the existing substation. The Colchis site checks every box for a premier HPC development opportunity, ample acreage, large-scale power capacity, availability of diverse fiber routes and dual interconnection capability. We have already begun to have early-stage discussions with potential tenants for the site.

The execution of this transaction once again demonstrates our team's sourcing expertise and ability to secure some of the most attractive large-scale sites in the world. Cipher is one of the few companies in the world that can combine boots on the ground expertise working directly with land owners to source best-in-class sites with a deep technical sophistication needed to serve hyperscealers. This unique and powerful combination makes Cipher exceptionally well positioned to bridge the growing gap between the limited supply of suitable sites and surging large-scale tenant demand.

The announcements we shared today are the results of years of hard work and the strong execution and momentum built over the past quarter. I'd like to take a moment to reflect on some of our third quarter successes.

At the forefront of these highlights is our recent transaction with Fluidstack and Google, a transformative 10-year 168 critical IT megawatt AI hosting agreement that first positioned Cipher as a major developer in the HPC space. Under this agreement, Cipher will deliver 168 megawatts of critical IT load at our Barbara Lake site in Colorado City, Texas, supported by up to 244 megawatts of total capacity. This project represents approximately $3 billion in contracted revenue over the initial 10-year term, with options that could extend total contract value to roughly $7 billion over 20 years.

Notably, construction is already underway at the site, and we are on track to deliver the full 168 megawatts of critical IT capacity by September 30, 2026. Importantly, Google is backstopping $1.4 billion of Fluidstack obligations to support project financing and will receive warrants representing roughly a 5.4% pro forma equity stake in Cipher. Cipher will retain full ownership of the site and is in the process of securing debt to fund construction. We will provide more details around that construction financing in the near future.

We believe and have now proven that Barbara Lake was just the beginning, the first of several projects to capitalize on our teams sourcing expertise, proven development capabilities, strong industry relationships and unmatched construction track record. We look forward to continuing to partner with leading technology companies to secure HPC leases at our growing pipeline of sites.

This expansion is well supported by our successful $1.3 billion convertible offering completed this quarter. This was the largest digital infrastructure convertible issuance to date and was roughly 7x oversubscribed, demonstrating investor confidence in our strategy and pipeline. The strong demand allowed us to take advantage of favorable market conditions, securing a 0% coupon and further strengthening our balance sheet. Greg will discuss the convertible offering and further depth later on the call.

The Amazon transaction, the Fluidstack and Google transaction at Barber Lake, the addition of significant new capacity at Colchis and our successful convertible offering, all represent major milestones in advancing our HPC strategy. Together, these achievements expand our business model, secure substantial future capacity and strengthen our balance sheet, all positioning Cipher to capture the tremendous demand we're seeing and play a critical role in building the next generation of AI infrastructure.

As we scale and expand our business model, our Bitcoin mining business continues to generate meaningful cash flow. The company surpassed expectations this quarter and is now operating approximately 23.6 exahash per second of self-mining capacity. The same disciplined foundation we established in the Bitcoin mining space, delivering 5 data centers on time and on budget will fuel our successful expansion into HPC.

I'd now like to provide a brief overview of our energy portfolio, which highlights our execution across business lines and the strength of our pipeline going forward. On the mining side of the business, this quarter, we brought Black Pearl fully online, which grew our operational mining capacity from 423 megawatts to 477 megawatts across Odessa, Abore, Bear, Chief and Black Pearl.

In doing so, we exceeded our previous cash rate projections and achieved a total self-mining cash rate of approximately 23.6 exahash per second. In addition, our fleet efficiency stands at an extremely impressive 16.8 jewels per terahash, making us among the most efficient miners in the industry.

Our proprietary software, which allows us to dynamically curtail our data centers has proven to be a critical advantage in optimizing for profitability, managing low power prices and of monetizing older rigs. This area of expertise is expected to remain a key competitive advantage in the future, and in fact, maybe an increasingly valuable aspect of the business as the HPC landscape continues to evolve.

Importantly, our current mining operations are fully funded, and we do not anticipate further investment in that side of the business as we prioritize our pipeline toward HPC. As discussed, this was a monumental quarter for Cipher in that we grew our contracted AI hosting capacity from 0 last quarter to 544 gross megawatts this quarter, across 2 transactions with world-class partners.

Behind that, we have a robust pipeline of 3.2 gigawatts of future capacity that spans from 2025 to 2029 and beyond. While we are extremely proud of our mining production, market dynamics, scarcity of energy capacity and frenzy demand from tenants has made it clear that the best use of our extensive pipeline of sites is for HPC workloads. We are in ongoing discussions on our pipeline with leading partners and look forward to prioritizing all of these sites for HPC development.

Let's now turn to a review of our current operations on both sides of the business. At Barbara Lake, we are constructing a data center for our industry-leading partners, Fluidstack and Google. Construction at the site is well underway, ground has been broken and both engineering and procurement are progressing smoothly. We've secured the necessary labor force and locked in most of the long lead time equipment, putting us in a strong position to meet all key construction milestones on schedule. We are firmly on track to deliver the full 168 megawatts of critical IT capacity by September 30, 2026. The lease is anticipated to commence the following month in October 2026.

Note that we still retain 56 megawatts of current capacity at Barbera Lake. These additional megawatts allow us to pursue an additional colocation agreement potentially prioritizing different deal elements, or to deploy our own compute at the site. Our team is carefully assessing the merits of all potential options to maximize the value of the remaining 56 megawatts in Phase I.

In addition, we maintained an MOU on an additional 500-megawatt upside at the site, which would come online in 2029 to 2030, given the site's ongoing development potential and live deal discussions, we look forward to providing further updates as things progress.

Turning to our current mining operations. Slide 9 has a production summary across our 5 operational mining sites. Odessa is still the most significant part of our portfolio, representing approximately 56% of our Bitcoin production in Q3. As of September, the current operating hash rate at the site is approximately 11.3 exahash per second using approximately 207 megawatts. Odessa's fleet efficiency stands at roughly 17.6 tools per terahash.

On this page, we also provide the observed all-in electricity cost per bitcoin at our 5 sites. Moving down the page, Black Pearl began contributing significant cash flow to the business in the third quarter. The first 150 megawatts at the 300-megawatt site are currently mining approximately 10.1 exahash per second, exceeding prior guidance and contributing approximately 36% of production in this quarter. Fleet efficiency at the site stands at an extremely impressive 13.9 jewels per terahash.

Lastly, we provided a combined overview of our joint venture data centers of Alborz, Bear and Chief. The 3 sites have a total power capacity of 120 megawatts and generate approximately 4.4 exahash per second. We own 49% of the JV sites and our portion recently generated roughly 9% of our overall Bitcoin production in the third quarter.

Let's now shift to an update on our development portfolio. Slide 11 provides an overview of our next to energized site in Andrews County, Texas called Stingray. The site features 100 megawatts in front of the meter capacity, all necessary regulatory approvals and 250 acres of land adjacent to the transmission assets. In the third quarter, we continued development of the substation for the site and secured long lead time items, including transformers and high voltage breakers. The site is on track to energize in the fourth quarter of 2026.

The Slide 12 outlines additional capacity spanning 2027 and beyond. Reveille located in Cotulla, Texas is on track to energize in Q2 2027. The site is fully approved for 70 megawatts, and we have initiated development of the substation.

Given both Stingray and Reveille have secured interconnect approvals and established energization time lines, we've engaged with multiple prospective tenants and are in ongoing discussions to secure the most attractive lease agreements for these locations.

Our 3M Mikeska, Milsing and McLennan are all currently undergoing final interconnection approval processes, and load studies have been completed at all 3 sites. The interim Oncore FEAs have been signed with Oncore for Mikeska and McLennan and the required deposits have been paid. We're targeting up to 500 megawatts of capacity at each of these sites.

In addition to interconnection rights, our purchase options also include significant land parcels at each location, all of which are well suited for HPC data center development. We are confident these sites will be in high demand as development progresses.

Last on this page is Colchis, which as mentioned is our latest site acquisition and the most substantial addition to our pipeline to date. The site features a fully executed 1-gigawatt Direct Connect agreement with American Electric Power, providing dual interconnection capability and targeted power availability in 2028. The site is roughly 80 miles southwest of Abilene and around 80 miles southeast of our Barbara Lake facility. As mentioned, the site is extremely well suited for HPC given its ample acreage, large-scale power capacity, availability of diverse fiber routes and dual interconnection capability.

Last quarter, we discussed our strategy to position Cipher ahead of the curve in anticipation of the evolving AI data center landscape. Since then, we have executed 2 landmark HPC transactions, as well as our most significant pipeline addition to date. With the industry moving even faster than we had anticipated, we are more confident than ever that Cipher is among the best positioned companies in the world to seize the near-term opportunities created by the growing power shortfall. Simply put, we are just getting started.

I will now turn it over to our new CFO, Greg Mumford, for a review of our third quarter financials.

Thanks, Tyler, and good morning to everyone on the call. I'm excited to join today's call as Cipher's new Chief Financial Officer. It's a privilege to be part of such an innovative company that's playing a key role in the evolution of digital infrastructure and high-performance computing.

I want to start by expressing my gratitude to Ed Farrell for his leadership and many contributions over the past 5 years. Ed has built a world-class finance organization and leaves behind a strong foundation that positions Cipher well for its next phase of growth. The company is fortunate to have his continued guidance as a senior adviser during this transition period.

As I step into this role, my focus will be on maintaining a disciplined approach to our financial strategy, broadening access to new funding sources and optimizing our overall cost of capital. We'll continue to take a thoughtful approach to capital allocation, ensuring we're maximizing sustainable long-term growth and driving value for our shareholders. I'm excited to work with Tyler, the leadership team and our talented finance organization to build on Cipher's strong momentum.

To begin, I'd like to remind everyone that today I will be discussing our performance for the third quarter of 2025, which ended on September 30. I'd like to highlight that this quarter was marked not only by strong execution as we officially expanded into our HPC hosting and grew our pipeline, but also by disciplined capital raising that positions us to sustain and accelerate that momentum moving forward.

During the quarter, we completed our second convertible offering and upsized private placement of $1.3 billion, a 0% convertible senior notes due 2031. This transaction reflected strong investor demand and confidence in Cipher's long-term strategy.

The notes were issued with an initial conversion premium of approximately $16.03 per share, representing a 37.5% premium to our stock price at issuance. We also entered past call transactions that increase the effect of conversion price to approximately $23.32 per share, substantially reducing potential dilution to our shareholders.

The net proceeds from the offering were used to fund the cost of entering into the cap call transactions and will be used for construction at our 2 currently contracted HPC sites. To advance our HPC strategy across our now 3.2 gigawatt development pipeline and for working capital and general corporate purposes.

Importantly, this financing bolsters our balance sheet and reflects our disciplined approach to growth. We're very pleased with the market reception and believe this transaction positions Cipher well to capture the significant opportunities ahead in HPC and digital infrastructure.

Let's now turn to a review of our financials, beginning with our sequential financial performance outlined on Slide 14. In the third quarter, our hash rate increased by 40%, driven by the energization and ramp-up of our Black Pearl facility, or Phase 1 of the 150-megawatt front of the meter site came online in June. Black Pearl began the quarter contributing approximately 3.4 exahash per second and ramped up to approximately 10.1 exahash per second during the quarter. This led to a 35% increase in production as well as an increase in our electricity cost per bitcoin given Black Pearl is a front of the meter site. The higher cost per bitcoin was also driven by an increase in network hash rate over the quarter.

Moving down the slide, we reported $72 million in revenue, up 65% from $44 million in the prior quarter. This growth was driven primarily by the increase in biking price and the increased production from Black Pearl.

For the quarter, we reported a GAAP net loss of $3 million or $0.01 per share compared to a net loss of $46 million or $0.12 per share in the prior quarter. We are proud of the substantial quarter-over-quarter improvement in our results, particularly given that bottom line performance was impacted by higher depreciation expense.

This depreciation expense reflects the assets placed into service at Black Pearl, including the deployment of latest generation rigs as well as the upgrade at Odessa completed in Q4 2024. Additionally, the bottom line continues to be influenced by changes in the fair value of our power purchase agreement at Odessa.

These expected fluctuations reflect movements in for power prices and the deciding time value of the remaining contract term, which extends through July 2027. As Ed has previously noted, the true benefit of this contract lies in its provision of long-term, low-cost fixed price power for our Odessa operations.

This quarter, as part of the execution of our HPC lease at Barbera Lake, we granted Google warrants as compensation for their commitment to backstop to lease payments from our tenant fluid stock. These warrants are recorded at fair value and as a result, this quarter, we recognized a $32 million gain in change in fair value of the warrant liability.

Excluding noncash expenses, such as the change in fair value of our power purchase agreement, share-based compensation, depreciation and amortization, deferred income taxes, the change in the fair value of the warrant liability and nonrecurring losses, we reported a third quarter adjusted earnings of $41 million or $0.10 per share, up roughly 34% from $30 million last quarter. Cash and cash equivalents increased significantly driven by the $1.2 billion of net proceeds from our most recent convertible financing.

Let's move on to Slide 15 and take a deeper look at the results of our operations. For the quarter, we mined 383 Bitcoin at Odessa and 246 at Black Pearl, bringing our total production to 629 Bitcoin mine in total across our wholly owned sites. This production generated $72 million in revenue at an average price of roughly $114,400 per bitcoin. This compares to the 434 bitcoin mined in Q2 2025 at an average price of $99,700 per bitcoin, resulting in $44 million in revenue.

G&A expenses, which include IT, corporate insurance, professional fees and other public company costs decreased slightly, both sequentially quarter-over-quarter and year-over-year. Depreciation and amortization expense totaled $60 million, up from prior periods, driven by the deployment of the new mining rigs over the last 12 months. Our oldest rigs in the fleet will be fully depreciated in Q4 -- depreciated in Q4, but those rigs can remain productive and continue to generate attractive returns when deployed strategically.

We recognized a small unrealized gain on our Bitcoin Holdings this quarter compared to a $17 million gain in Q2, reflecting a modest increase in the spot price at quarter end. We finished the quarter holding approximately 1,500 Bitcoin in Treasury.

On our non-GAAP reconciliation, we reported a GAAP net loss of $3 million. Adjusting for $44 million in noncash and onetime items results in adjusted earnings of $41 million for the quarter, up from $30 million in the previous quarter.

Now let's turn our attention to the balance sheet. On Slide 17, total current assets at quarter end were $1.4 billion, up from $220 million last quarter, driven primarily by the net proceeds of the $1.3 billion we received from our convertible offering. In addition, we held $170 million of Bitcoin.

As we have discussed in depth on our previous earning calls, we actively manage our treasury in either selling or holding every bitcoin mined and we remain disciplined in our approach to capital management. I'll quickly cover some additional balance sheet line items as of September 30.

CT&E totaled $650 million, up 37% from $474 million. This increase is primarily related to equipment deployed at Black Pearl. Deposits on equipment of $8 million, down from $183 million last quarter is primarily related to the reclassification of rigs at Black Pearl from deposits to end-use property and equipment. At the end of the third quarter, our equity interest in the Alborz, Bear and Chief JVs stood at $42 million.

Moving down the balance sheet. Derivative assets were up primarily due to the inclusion of $90 million of cap calls associated with the new convertible note, which raises the effective conversion price of the convertible debt and effectively minimizes potential dilution to shareholders. Current liabilities increased this quarter due to the short-term classification of the Google warrants associated with the fluid stock lease at Barbara Lake.

Lastly and importantly, I want to highlight that short-term borrowings remain at 0. We continue to manage the balance sheet conservatively, ensuring we're well positioned to meet any capital needs. Before we conclude, I'd like to thank everyone for joining today's call. We're proud of the tremendous progress we've made this quarter and the transformative growth we've achieved as we continue to expand our business lines, grow our pipeline and strengthen our balance sheet to support that growth. As always, we remain firmly committed to disciplined execution, capital efficiency and delivering long-term value for our shareholders. Thank you for your continued support, and we look forward to updating you on our progress on the next quarter.

At this time, I will pause and Tyler and I would be pleased to take any questions.

[Operator Instructions] Our first question comes from Paul Golding with Macquarie.

Congrats on the announcement and all the progress on HPC. I wanted to start off with a question around the deal itself. 300 gross megawatts, Stingray, you have on track for energization 100 megawatts in '26 and Barbara Lake, you have 56 megawatts after the Fluidstack deal. How should we think about the distribution of power to deliver the 300 megawatts as well as maybe pricing across liquid and air cooled since you're delivering both. It looks like averaging out the deal is about $1.7 million per critical megawatt on my back of the envelope math. If you could just talk through some of those deal points on pricing as well as how you plan to deliver that capacity across your fleet? And then I have a follow-up.

Sure. Thanks, Paul. Thanks for the questions. So let me start with the framework that the ink is still drying on the deal we signed with AWS. So there's some element of finalizing basis of design involved in giving you the exact numbers that will be represented. So they are taking 300 gross.

We are recutting an existing air-cooled 150 megawatts, so there will be a quick time to market with the first phase of that build. The second build we are still finalizing design and some of the debates that are happening are between speed to market, so speed to availability of the compute versus optimizing for highest critical IT load possible. That's not finalized yet.

So I'd say that in general, if the whole site ends up air cooled, the PUE will be in line with the design we've got at Barbara Lake, which shakes out at about 1.4, 1.45 depending on the balance of what might be used with more of a liquid cooled approach, we could improve that by having the second phase have a higher -- or sorry, a lower PUE, a more efficient PUE.

So still shaking out exactly where those numbers will be. As far as cost goes, which you referenced, it would be in line with, again, Barbara Lake, what we've done in the past, we would expect the cost per critical IT megawatt to be in line with that estimate.

Tyler, and you...

If not better, because we do have some infrastructure in place already that was bought in a cheaper market.

Got it. Appreciate that color. And then you also mentioned debt financing as a majority of CapEx sourcing and then cash on hand. Are you able to give any more detail around financing plans in terms of you're already developing the fluid stack capacity. So is this cash on hand from prepayment deposits? And is there any kind of backstop here to help support project financing and going to market for that?

Let me give some high-level framework for that, and then Greg can chime in if he wants to talk about any specifics.

So, 2 different structures. Obviously, the first deal is with Fluidstack and Google. That structure looks similar to one that's been out there in the market. Fair to say we'll be looking to pursue our debt financing options for that in the coming days and weeks and I would expect, depending on where the market is, those structures are not too dissimilar. So that's how we would envision probably how that shakes out.

On the AWS lease, that is a direct facing hyperscaler lease. I think it's the first of its kind among anyone that has converted from Bitcoin mining to do a long-term 15-year direct facing hyperscale lease. That should be very financeable.

As far as the sort of equity support for whatever shakes out in the final terms for that financing. Keep in mind, we upsized the convert we did recently quite a bit. The market was so favorable that it went up all the way up to $1.3 billion offering. So we already have a fair amount of excess cash on hand. And by all estimates, we've got that should support what we would anticipate to be the equity piece of the financing to build the structure related to the AWS lease.

Greg, would you give any other further color? Or is that enough, do you think?

Yes. I mean, Paul, I think you said it right earlier, is that we're not prepared to give specifics on the financing that we're looking at for the Google, Fluidstack deal, but we are exploring opportunities, and we'll be hopefully updating the market in short order.

As it relates to the AWS deal, we think that there's going to be a lot of opportunities in front of us to explore different types of projects or construction level financing, and we're going to work through those options and make sure that we're making the right decision.

Our next question comes from Greg Lewis with BTIG.

I guess the first question is around the additional sourcing of power. Congratulations on that. It seems pretty tough. Tyler, as we think about and you're talking about things accelerating and kind of what's possible. Could you kind of ballpark, how things are progressing and what you're seeing at ERCOT, you have the different [indiscernible] ends that you've referenced 500 megawatts. When did those get in the queue -- obviously, we have some power coming online in '26. Just kind of an overall update on how we should be thinking about availability of power from that growth pipeline that you have.

Sure. So let me give some color as it relates on the sites that are awaiting final ERCOT approval. So a lot of this shakes down to -- so first of all, they've been in the queue for a while in all load studies and everything have been submitted. A little bit on the timing expectation shakes out to the sort of business operating model of the particular transmission distribution service provider you're working with.

So in the case of Colchis, we're anticipating a 2028 energization. We have already paid a kayak, so construction and advancing construction payment to assist with the work that the TDSP has to do. That's with AEP and AEP is confident moving forward with that construction based on an expectation of having that site energized by 2028. So then that's where we are there. I mean, construction will be progressing on the AEP side, and we are in live discussions, while they await that final approval from ERCOT.

At Mikeska and McLennan, we have signed interim FDAs. So that's a requirement of the TDSP there, which is Oncore. So -- in those cases, again, the deposits paid, but the construction will likely begin on the Oncore side, once that final ERCOT approval is in hand, which we're anxiously awaiting. And then Milsing, we have not paid a deposit yet, again, working with a different TDSPthere. Their process works a little bit different. So that's kind of the overall picture.

And as far as ERCOT goes, it's hard to make any prediction with exact specificity. But given the progress in anticipation of where we think those sites will be available on the feedback from the TDSPs, we're confident in the time lines we've given.

Okay, super helpful. And then on the optionality of the 56 megawatts, I think you mentioned potentially maybe offering your own AI cloud services. Could you talk a little bit about how we're thinking about that in terms of just bringing on another customer, maybe there's an option that could be extended just how we should think about that 56 megawatts. And maybe around the timing, is this something we want to kind of have buttoned up in the next 12, 18, 24 months, or hey, it's out there and time is on our side?

So the answer is it depends. I think we've had a lot of questions and interest around the idea of owning and operating our own GPU, and then selling the compute to an off-taker. I think in general, we have been progressing slowly on that front because we want to make sure we're getting the best risk-adjusted returns for the megawatts we've got.

So obviously, you can produce numbers that are higher on the revenue side if you're selling compute, but you're taking on a whole bunch of risks, much larger financing risks GPU life cycle obsolescence risk, et cetera. I do think a key to making that business very attractive would be to lock up a long-term offtake with a highly credible counterparty for the compute.

So we've seen those deals. We're looking at them. Candidly, I think the numbers we signed on our lease with AWS are better. I think we will probably both make more in terms of profits and with much, much, much less risk. So it still remains to be seen from our perspective what the best use of a megawatt is to make the most money, but we're in very active discussions in exploring all available business models. And obviously, as we sign up new 1-gigawatt sites, we're going to have a lot of optionality as things progress.

As it relates to the specific 56 megawatts. I'm highly confident we will have some sort of deal there pretty soon. There is a lot of interest, both on using that capacity to operate our own GPUs and sell compute, as well as had at least on a colocation basis.

It's fair to say that this market is literally getting more frenzied by the -- certainly by the week, if not the day. So rental rates on leases are going up rapidly. The level of interest is overwhelming. And so from our perspective, we're spoiled for choice. We've put ourselves in a very advantageous position. And so depending on which deals we think will produce the best risk-adjusted returns that's how we'll proceed. But I do think the 56 megawatts there as well as the 100 megawatts at Stingray, the 70 at Milsing will all be taken up. If this market level of interest continues we will not have an available megawatt. We have multiple parties interested in all those sites and locking them up as soon as possible.

Okay. Congrats on the AWS announcement.

Our next question comes from Andrew Beale with Research.

Can I just ask what are you thinking about the design of cultures? And what do you think the likely CapEx of that as the greenfield will be per megawatt?

And just thinking about ERCOT approval, can you talk about what getting the Google, Fluidstack and AWS leases does in helping your approvals at the other sites, such as the 3 hands. And how much difference partnering with AEP makes on that approval front?

Yes. Thank you very much for the question. So predicting the budgetary cost at Colchis is a little bit challenging only because that's going to be, number one, again, that's another one. The ink is still drain on the acquisition. We're beginning to have exploratory conversations with folks that are interested in colocation there, just given the size of it.

But what we would do, I guess, I'd say in the interim would be we'll be deploying the CapEx for the minimum requirements at the site. So fiber, substation, land, water sourcing, et cetera. I would say I expect our build costs to be in line with what we've done at other sites if we are building the same colocation-type access, which has generally been, call it, $9 million to $11 million for critical IT megawatt.

Now that said, there could be inflation, prices could change, supply chains, et cetera. I don't have any reason to believe that the cost would be different per megawatt other than just the passage of time and those factors. So we will be able to give more details in the coming months and quarters. I think that candidly, with an expected availability of power in 2028, given the size of Colchis, we hope to find a partner before too long just because that's a tremendous construction time line and obligation, and so we'll have to get moving on it. But I have no reason to believe the cost would be any different.

And then sorry, remind me of your second question again. I got lost there.

Just about -- I mean, signing these leases with Google and AWS. I mean how does that help you...

Yes, there's huge benefits to these partnerships. I think, again, up until a few months ago, I can't tell you how many times we heard no one's ever going to sign at those sites. No one's ever going to sign with a former bitcoin miner at least not a traditional hyperscaler. That discussion is now over obviously, and it probably won't be for us. It will be for others as well as other deals get signed across the ecosystem.

I think every deal adds incremental credibility we deserve a lot of credibility. Anyone that got to know the quality of our team, their experience, the things they've built in the past. And just looking at Cipher's own track record, if you took the word Bitcoin out and just said, our team has delivered data centers on time and on budget in this exact geographical region. There would be no reason to doubt what we say. It's just the traditional bias from incumbent industries against the word and Bitcoin.

So I think every deal adds credibility with everyone, deals get -- deals -- and I talked about this a fair amount about striking our initial deals focusing on the quality of the counterparty and setting our business up as a franchise such that we can extract the most value from the entire pipeline we've got. And I'm happy to say that, that's exactly what we're seeing.

So every conversation gets a little bit easier and we have a lot more credibility on new leases with regulators, with transmission distribution service providers. And truthfully, that kayak I mentioned in the case of Colchis, which is actually scheduled to go out shortly, that's what matters to ERCOT, right?

So having more credibility and having money invested in the space and being a credible counterparty makes a transmission distribution service partner want to move forward on your project and spend their own money because they're more likely to get paid and the same on the ERCOT side. So all these things get more success, and that's probably the biggest reason for optimism around here these days.

Our next question comes from Michael Donovan with Compass Point.

Tyler, and congrats on the progress. I guess just in terms of supply chain, what are you seeing in terms of constraints for long-lead assets?

Yes. So I mean, listen, I think we've talked about this over the years that we often work backwards in terms of what the long lead time items look like when we try to come up with a time line. And as a high-level generalization, that keys off of getting your substation in place?

And then downstream from there on the HPC side, it matters a little bit in terms of basis of design for the particular site, which is driven by tenant requirements. But as a broad generalization, if they want backup gens to be there to provide the necessary uptime -- those tend to be the next gating item in terms of time line. I'd say we have a great track record.

Our team -- keep in mind, like our construction team comes from places like Vantage and Waiting Turner and Google and Meta and very experienced in dealing with procuring all the items necessary for these data centers and have relationships up and down the supply chain.

To give you a sense, I think back of the envelope in terms of Barbara Lake, over 85% of the equipment, I think, is secured, including all long lead time items. So this is a process in each build spec and will continue to be that way.

Generally, our risk now and anyone's risk now signing these deals is, of course, delivering the construction financing, whatever you're building, and then delivering the construction on time. Our team has an excellent track record of that. I have no reason to expect we won't have the best performance of anyone in the space in terms of on-time delivery. The supply chain is kind of a moving thing, but I think we're really well positioned. And on the builds we've got, we feel very confident on our time lines, which are aggressive.

That's helpful, Tyler. And then I guess Second question is a bit more esoteric. So I'm hearing discussions about sites being linked up to -- let's say, you have a 500-megawatt site here, 500-megawatt site there to link them up to deliver 1 gigawatt campus for a specific workload. Are you hearing more of these types of discussions? And could we theoretically think of the 3Ms coming together for one large 1.5-megawatt or gigawatt campus.

I think it depends on how the market evolves. So there's no doubt that a lot of the hyperscalers seek sort of redundancy of data centers in the same geographical areas close together. I would say, look, we have a concentration of data center sites now a dozen and basically in West Texas.

I think that -- I don't think of like the 3Ms as being geographically close enough, at least in today's construct to think about linking them. I think it's beneficial that they're not like way far away. But I don't know that, that's necessarily how folks would think of them that phenomenon definitely exists, but I'm not sure I would group our sites in that manner.

I think there's a lot of other efficiencies of scale of having workforce in that geographical area, et cetera, that it's great to have things concentrated, but we don't have sites that are necessarily 10 miles away or something like that. They tend to be a little bit further. Colchis, for example, is about I think, 80 miles away from Barber Lake?

I mean I'll say at a high level, we have -- those customers do like to have a conversation about potentially constructing their own availability zone, but we're not far enough along to say exactly like it would be these sites that would be like dedicated for that 1 tenant.

Okay. Appreciate that, Tyler. And then last one, I promise. So great progress at the edge of the earth. What should we think about outside of Texas?

So great question. We are always looking at opportunities. We just happen to love Texas, and it seems that we always find the best opportunities. I do think that part of it is that there's a -- there's a lot of things. Business is great in Texas. It's a great place to do business. It also has a history of risk takers and entrepreneurs that want to speculate on early-stage opportunities.

I think it echoes oil and gas somewhat and there are folks that will speculate on grid interconnections and take a risk on being able to get something. And maybe Cipher's secret sauce, to be honest with you, now that we've originated 12 sites down there is that we have a team that has demonstrated excellence at sourcing these sites from what I'll call kind of grid wildcatters or people that are early stage investors and an interconnection opportunity, but are not prepared to develop the site at a high level that would be ready for an end user like a hyperscaler.

I would argue that Cipher is basically the only firm. Maybe we have a handful of competitors, but I think we certainly do it best in that we can speak very credibly with that audience that originates these sites and at the same time, go have an all-day technical meeting with our entire construction and operations team with a hyperscaler and impress them as well.

And so bridging that gap between, let's call it, early-stage speculation on grid opportunities and then delivering that to the highest quality end user we have in-house. And honestly, that's why I believe we're a tremendous growth stock opportunity. We're not just a basket of assets. The point being, we're not going to stop developing these sites.

Now to answer your question more directly, however, because I was just saying how wonderful Texas is, yes, we are looking at sites, particularly in PJM. Historically, we've looked at sites all over the world. Often, the economics haven't gotten to a position we like to be in. We do have a relentless focus on risk-adjusted returns here.

And so often, things are either too risky to justify the investment or perhaps the price is too high. They're too mature. There's not enough risk that we feel like we can quantify better than others. So -- we are looking at PJM. That's a market we would like to expand into and stay tuned. I hope that we'll have announcements in the future.

Our next question comes from Mike Colonnese with H.C. Wainwright & Company.

Congrats on the 2 big HPC deals here. Really great to see. I can appreciate the expected delivery time lines you provided with regards to the 2 contracts. But how should we think about the revenues in over the course of 2026 and beyond from the 2 agreements?

Yes. So the full delivery of the Fluidstack Google deal is expected to be completed at the end of September next year, and so rent begins in October of '26. Amazon is, again, getting finalized, but it begins in August of next year. And then there'll be stages, though. The second stage would be closer to year-end of next year.

Got it. And then more of a high-level question, Tyler. In your view, what has changed for counterparties that has accelerated the pace of deal announcements we've seen in the space over the past month or so. It feels like the level of urgency from hyperscalers, Neo Cloud and some others has really picked up from where we were just a few months ago. So it would be great to get your thoughts there.

Yes. I mean, it's fair to say that in my 25-year professional career, I have never witnessed anything close to what is going on in the market right now. You asked why? I don't know I listened to the podcast like everyone else. And here, the CEOs of hyperscalers talking about a shortfall.

My sense is that if you are a big diversified cloud provider, it is easier to predict your capacity needs for the traditional cloud business out several years. I think the thing that has snuck up on everyone is the just meteoric rise in demand for AI. And what is happening now is not only is that demand off the charts, there's a scramble because those folks underestimated how much they need quickly. And of course, there's a little bit of a race between them.

So right now, discussions are beyond -- every discussion starts with we want megawatts that are available right now. It has now become -- we want anything in '26, and that's now become, we want anything in '27. Literally week-over-week, the tone changes and gets more excitable and in higher demand and look, lease rates are going up, as you would expect in a market like that.

I'm very happy with where we put our markers down to have the best possible anchor tenants in the world for our business. I think we have now some pricing strengths on our side to improve economics and improve deal terms.

Again, the first 15-year long-term lease directly with a hyperscaler in our space, not only a hyperscaler the biggest hyperscaler demonstrates just the balance of power coming to those with the scarce assets, which we very strategically arranged over the last few years.

So I don't know if that level of frenzy can continue forever. But we do feel a little bit like the tip of the spear here just with what we get insight into. And I've been saying it for a while now, but the demand is just off the charts and only seems to get more off the charts.

Really interesting color, Tyler. I appreciate your views.

Thanks.

Our next question comes from Joseph Vafi with Canaccord Genuity.

Congrats on all this great progress and welcome on board, Greg. And congrats, Ed, on your retirement.

Just a couple here. Just maybe just the most updated thoughts here, Tyler, on your behind-the-meter agreement and what comes next here for Black Pearl given that site and its unique power procurement and the expiration of that deal and then overlay on top of that, obviously, everything going on in the HPC environment. And how does that side evolve from here?

Joe, do you mean Odessa, you said Black Pearl [indiscernible] Odessa okay. Just wanted to make early.

Absolutely.

Sorry for the -- before the market call. So yes, at Odessa. So for those -- for just as a reminder, we have a PPA at an extraordinarily cheap price for electricity for 207 megawatts at our Odessa Bitcoin mining facility that runs through the end of July 2027. That contract is extremely valuable. It is way in the money we're carrying a -- at a decent value on our balance sheet, and that's because the price is fixed and so cheap for a while.

It's fair to say that in these conversations that are frenzied for more power available now, we get a lot of interest in saying, "Hey, would you ever think about converting that site." I think where we're sitting right now is that given our extraordinarily cheap cost of power there, mining Bitcoin is a fantastic business there.

HPC over time could be interesting there, but we're not in any rush given how strong our contract is and just what that implies for Bitcoin mining economics. I think it's fair to say it could be a really good site. It is co-located with a natural gas generation facility that is owned by Vistra, and as things evolve, again, in relation to a question I answered earlier, as our credibility grows in the space, I think it's fair to say that more big names across the spectrum will look to Cipher to provide their data centers.

So there is the possibility that something happens there, we would have to coordinate with our power provider Vistra and coordinate with a potential tenant. But we're not in any rush just given that the economics are locked in at very favorable levels there for another year and 3 quarters.

Sure. And then just really quickly, I may have missed it. But this deal with Microsoft? Is it going to be at 1 particular site or is it going to be distributed? I just don't know if I saw that in the press release.

So we haven't done a deal with Microsoft yet. I know it's confusing today because I think so...

[indiscernible] on us today -- there was 1 other Amazon, worry about that.

But no, that's fine. Amazon is at 1 large site that to convert from a Bitcoin mining facility to HPC.

Right. But you haven't said we decided it is yet, I guess.

Yes, it's at the Black Pearl site.

And our last question comes from John Todaro with Needham.

Congrats on the lease. The time line seems pretty quick on getting that Black Pearl site for AWS delivered. Just wondering kind of if I'm missing something or the confidence in being able to deliver that? And then I have a quick follow-up.

Yes. So confidence is very high. Again, a lease like this is the result of a lot of deep technical meetings with their team. Keep in mind at that site, we have built 150 megawatts to an extraordinarily high level of building quality that is not like our other sites where we had a more limited time line, and we may have used like a containerized solution. That it was always built with a long-term eye towards being convertible.

I'm happy to say that, again, most of that site is immediately reusable on Phase 1 for 150 megawatts. So that's what drives that aggressive time line on the Phase I and the Phase II, again, that's just relying on the conversations we've had talking going through a procurement exercise and scoping out a supply chain time line. So I think we can easily meet it. But that aggressive time line is largely based that we're reconfiguring a site that was just built to a very high standard.

Got it. That makes sense. And then my last one, just when you're procuring a site like Caucus, Who are you competing with? Like, obviously, you're signing the major hyperscalers. Are they looking to build out some of their own sites at this point, too? Or is it mostly, I guess, maybe other bitcoin miners you're competing with?

Yes. So that's a great question. And again, I sort of alluded to this earlier, but this is, I think, the underappreciated growth equity aspect of our company, which is doing deals like that requires real local knowledge and understanding.

Like this is like dealing directly with by analogy, a wildcatter, right, typically. The hyperscalers are much more used to -- first of all, they're big institutions that move -- they're not quite as nimble as we are. Second of all, they're used to Jones Lang LaSalle bringing them a pretty deal deck for a completed data center or a site that is very polished and ready to present to them.

They are not going local to understand the local requirements and dealing with whatever Harry situation there might be on some of these deals. We're I would argue certainly the best, if not the only company that has extremely high levels of credibility with that crowd for getting deals done, but also the ability to talk to hyperscalers. So there's this -- there's like layers of capital that come to a traditional commodities production business that just don't exist here. So we don't see as much competition from them at that level, and that's really part of our value.

Yes. Got it. Understood. Appreciate it. Congrats again.

Thank you.

That's all the time we have for today. I'd like to turn the call back over to CEO, Tyler Page for closing remarks.

Well, thank you, everyone, for joining today. I want to call out Ed Farrell. Ed Farrell has been my right-hand man since day 1 at Cipher. We've had many internal thank yous and congratulations on his retirement and transition to senior adviser from Chief Financial Officer.

But I wanted to take this opportunity to give a special investor thank you. As one of the largest shareholders of Cipher, I want to say thank you for all of us for the hard work he's done I can tell everyone that's a shareholder, we would not have made it here without him. He's been amazing, and it's very exciting to get the company to where it is today on the back of his hard work.

It's hard for me to believe that I'm not going to be able to walk around the office and have obscured godfather references anymore. I'm not going to be able to hear from him or I'm not going to be able to tell him rather that the Dawn needs to hear bad news right away. And I think every time I run into an obstacle that frustrates me, I'm not going to have Ed here to remind me that Tyler, this is the business we've chosen.

But we are in great hands with Greg Mumford, our new CFO. And when we think about all the capital raising and optimization we've got to do going forward, we are in excellent hands. So thank you to Ed on behalf of all shareholders, and we wish you a fantastic retirement.

Thanks, everyone. We'll talk to you soon.

Thank you for your participation. You may now disconnect. Everyone, have a great day.

Good morning, and thank you for joining us on this conference call to address Cipher Mining's business update for the second quarter of 2025. Joining me on this call today are Tyler Page, Chief Executive Officer; and Edward Farrell, Chief Financial Officer. Please note that our press release and presentation can be found on the Investor Relations section of the company's website, where this conference call will also be simultaneously webcast.

Please also note that this conference call is the property of Cipher Mining and any taping or other reproduction is expressly prohibited without prior consent. Before we start, I'd like to remind you that the following discussion as well as our press release and presentation contain forward-looking statements. These statements include, but are not limited to, Cipher's financial outlook, business plans and objectives and other future events and developments, including statements about the market potential of our business operations, potential competition and our goals and strategies. Forward-looking statements and risks in this conference call, including responses to your questions, are based on current expectations as of today, and Cipher assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law.

Additionally, the following discussion may contain non-GAAP financial measures. We may use non-GAAP measures to describe the way in which we manage and operate our business. We reconcile non-GAAP measures to the most directly comparable GAAP measures, and you are encouraged to examine those reconciliations, which are filed at the end of our earnings release issued earlier this morning.

I will now turn the call over to our CEO, Tyler Page. Tyler?

Thanks, Courtney. Good morning, everyone, and thank you for joining us today. I'm Tyler Page, CEO of Cipher Mining, and I'm pleased to welcome you to our second quarter 2025 business update call. In the second quarter, Cipher delivered on all previously outlined plans at Black Pearl Phase 1 and importantly, exceeded our prior growth guidance. Building on that momentum and now supported by even stronger cash flows, we've made several strategic decisions to continue to position the company for the evolution of the data center landscape.

I'll provide more details on those decisions later in the call. But first, I would like to highlight a few key metrics that speak to today's themes: consistent execution, thoughtful investment and purposeful growth. In the second quarter, we grew our Bitcoin holdings from 1,034 to 1,063 Bitcoin. In addition to growing our inventory, we paid off all short-term borrowings, which Ed will discuss later on the call. We are incredibly proud to have energized and commenced Bitcoin mining at our Black Pearl data center ahead of schedule this quarter.

As a reminder, we plugged in legacy rigs from our Odessa upgrade at our new site, while we await the latest generation rigs scheduled to arrive in batches before the end of the third quarter. Our initial projections targeted 16 exahash per second by the end of the second quarter and 23.1 exahash per second by the end of the third quarter. We exceeded that guidance, finishing the second quarter at 16.8 exahash per second.

Today, we are pleased to report that we are on track to once again outpace expectations from previous guidance and reach 23.5 exahash per second by the end of the third quarter. All of our fully funded latest generation Bitmain rigs are scheduled for delivery to the site in batches by the end of the third quarter. Also, in the second quarter, we executed an order with Kenan to purchase a small batch of miners. This new order, coupled with our Bitmain order, will allow us to achieve this growth while also improving efficiency.

At the end of the second quarter, with legacy rigs plugged in at Black Pearl, our fleet efficiency stood at 20.8 joules per terahash. Once our new fleet is fully deployed, we expect efficiency to improve to an impressive 16.8 joules per terahash, making us once again among the most efficient miners in the industry.

While our growth is impressive, I'd like to take a moment to briefly revisit a few of our core metrics and foundational strengths. Our projected all-in weighted average power cost remains highly competitive at just $0.031 per kilowatt hour. The slight increase can be attributed to Black Pearl Phase 1, a 150-megawatt front-of-the-meter site coming online. Given our deep power expertise and the ability to dynamically curtail our data centers, including during the summer 4CP months, we expect to be able to maintain this low cost of power even at our front-of-the-meter sites.

Our proprietary software has proven to be a critical advantage in optimizing for profitability, maintaining low power prices and monetizing older rigs. Across our sites that operated for the entire second quarter, including Odessa, Alborz, Bear and Chief, we paid an average all-in electricity cost of approximately $27,324 per Bitcoin produced at our data centers. This is a highly competitive figure as it reflects the total cost to deliver electricity to our mining rigs, including all taxes, transmission and other charges.

To summarize, we will soon be running some of the industry's lowest cost power through an even more efficient fleet, a powerful combination that will continue to drive exceptional unit economics. This strong operational foundation will remain a key advantage as we continue to grow and scale. With the addition of Black Pearl Phase 1, Cipher's current operating capacity stands at 477 megawatts with potential pipeline capacity expansion of up to 2.6 gigawatts in the coming years.

We'll discuss our impressive pipeline in further depth later on the call, so I'd like to shift focus to our second quarter growth highlights across key verticals and our outlook for the path ahead. During the second quarter, we delivered on Phase 1 of Black Pearl, the first 150 megawatts of our 300-megawatt data center, which is now mining at 6.9 exahash per second and on track to exceed prior guidance by the end of the third quarter. As previously discussed, we will fill Phase 1 of Black Pearl with a majority of Bitmain S21 XPs, supplemented by our new purchase of approximately 1.5 exahash per second of Canon A15 Pros.

Importantly, both of these orders were fully funded through a combination of balance sheet cash and proceeds from our first convertible senior notes offering. As we've discussed in the past, we are focused on thoughtfully evaluating funding options that support growth while minimizing dilution. Through this successful convertible offering in the second quarter, we raised approximately $168 million in net proceeds. With this convertible offering, we were able to take advantage of favorable market conditions, expand our institutional investor base and lower our cost of capital while completing Black Pearl Phase 1 in a capital-efficient manner.

We are also participating in ERCOT's ancillary services market at Black Pearl. This participation not only supports grid stability and reliability, but also creates an additional revenue stream for the site with minimal impact to uptime. Our participation is seamlessly integrated into our proprietary software, and we expect to scale our participation in the coming quarters.

As we have made thoughtful investments to position our Bitcoin mining operations for the future, we have also been extremely focused on investing strategically to ensure the company is well prepared for the broader evolution of our industry on the HPC side. Given Barber Lake's 300 megawatts of energized capacity and ideal site characteristics, we believe Barber Lake is one of the most compelling HPC development opportunities in the U.S. today.

Market dynamics and ongoing dialogue with potential tenants continue to confirm both a growing demand for power and a tightening supply. Against this backdrop, we're more confident than ever in the site's long-term value and are actively engaged in advanced discussions to secure the best possible deal for Cipher and our shareholders. We're encouraged by recent momentum and look forward to sharing further updates as progress continues.

Let's now turn to Black Pearl Phase 2, which presents another compelling HPC opportunity. As a reminder, Black Pearl is our 300-megawatt data center in Wink, Texas that energized this quarter. Phase 1, the first 150 megawatts is currently hashing. Phase 2 is the second 150 megawatts of powered land. Over the past few quarters, we've thoughtfully evaluated various paths for Phase 2 with a focus on driving the best possible outcome for our shareholders.

Today, we're excited to share a new strategic plan for the site, one that positions Cipher to capitalize on near-term Bitcoin economics if desired, while maintaining the flexibility to transition to HPC as demand for every available megawatt continues to rapidly accelerate. We're excited to announce today that we are moving forward with the construction of Black Pearl Phase 2, which envisions 150 megawatts of infrastructure that is designed to support both hydro Bitcoin mining and HPC compute applications simultaneously. This infrastructure will be built from inception to be able to seamlessly convert to Tier 1, 2 or 3 utilizations in response to tenant demand.

Before I dive into specifics, I want to first outline a few guiding principles that shaped our decision to move forward with a flexible build-out for Bitcoin mining or HPC workloads. We firmly believe that energy availability is rapidly becoming the defining constraint for the future of HPC compute. This view is increasingly echoed by industry leaders. During a Senate hearing in May, Sam Altman remarked, the cost of AI will converge to the cost of energy. The abundance of it will be limited by the abundance of energy.

In July, Anthropic released a policy report titled Build AI in America, highlighting the growing energy demands of advanced AI systems. The report stated, as AI systems grow more capable, the energy and computational requirements to train and deploy Frontier AI are surging and cited estimates suggesting that the U.S. AI sector is on track to require at least 50 gigawatts of electrical capacity by 2028. Notably, the report stated that training workloads alone are expected to account for 20 to 25 gigawatts of that demand.

These statements and many others like them highlight a rapidly emerging paradigm driven by larger models, larger data sets and exponentially increasing compute requirements, all of which are fundamentally dependent on an ever-growing need for energy. Beyond simply articulating the need for energy, hyperscalers are reinforcing it through their capital plans. Just 2 weeks ago, Alphabet shared that it now expects to invest approximately $85 billion in CapEx in 2025 with a further increase in CapEx in 2026 due to the demand it is seen from customers.

Similarly, Meta recently said it expects 2025 capital expenditures to land between $66 billion and $72 billion and anticipates another year of similarly significant CapEx dollar growth in 2026 as it aggressively pursues opportunities to bring additional capacity online to meet the needs of AI efforts. Against this backdrop, we reaffirm our thesis that near-term power is a scarce and strategic resource and that large-scale interconnections available in the next few years are exceedingly valuable assets.

For these reasons, we are aggressively positioning the company to take advantage of anticipated demand and ensure we're fully prepared to support tenants when inevitably every available megawatt is absorbed by HPC workloads. Black Pearl Phase 2 will be built around a proprietary basis of design that bridges the needs of both hydro Bitcoin mining and AI compute. This approach will align with current industry standards while maintaining the flexibility to support evolving hardware requirements such as higher density racks, variable inlet temperatures and diverse cooling preferences to ensure seamless integration as technology continues to advance.

Through upfront design and infrastructure prepositioning, we will be able to efficiently convert to Tier 1, 2 or 3 design specifications in response to tenant leasing preferences or Cipher's evolving proprietary compute applications. This conversion scope is designed to minimize disruption to multi-tenant operations, allowing us to convert easily in segments over time. It is also designed to maximize speed to market with current design and supply chain plans enabling a turnaround for conversions in less than 6 months.

While we expect the site to be fully leased by HPC tenants over time, this infrastructure plan preserves our flexibility to utilize the space for mining near term, if preferred. In short, Black Pearl Phase 2's infrastructure will enable us to monetize power immediately and maintain seamless and expeditious optionality to pivot as the HPC market continues to scale into every available megawatt. This innovative and industry-first build-out aims to position Cipher ahead of the curve, anticipating where the industry is heading and aligning our strategy accordingly.

Let's now turn to a review of current operations, which continue to serve as a strong foundation for our success. Slide 7 has a production summary for our Odessa facility. Odessa is still the most significant part of our portfolio, representing approximately 85% of our Bitcoin production in Q2, although this will likely decrease significantly as production at Black Pearl Phase 1 ramps up. As of June, the current operating hash rate at the site is approximately 11.3 exahash per second using approximately 207 megawatts. Odessa's fleet efficiency stands at approximately 17.6 joules per terahash.

On this page, we also provide the observed all-in electricity cost per bitcoin at the site over the quarter, which was roughly $24,686. As a reminder, Odessa is a wholly owned facility operating under a 5-year fixed price power purchase agreement, securing some of the most competitive electricity rates in the industry and reinforcing our cost advantage and operational strength.

On Slide 8, we provide a combined overview of our joint venture data centers of Alborz, Bear and Chief. The 3 sites have a total power capacity of 120 megawatts and can generate approximately 4.4 exahash per second. We own 49% of the JV sites, and our portion recently generated roughly 13% of our overall Bitcoin production in the second quarter. On this page, we also provide the combined all-in electricity cost per Bitcoin at the 3 sites in the second quarter, which was roughly $44,594.

As a reminder, both Bear and Chief operate as front of the meter sites, so there are expected seasonal fluctuations with their electricity costs. It is worth noting that Black Pearl Phase 1 is not included in this section as it was not operational for the full quarter and therefore, contributed only 2% of total production in the second quarter. However, the site has since ramped meaningfully, accounting for approximately 24% of production in July and is expected to continue growing its contribution going forward. We look forward to showcasing Black Pearl's full impact in future updates as the site scales.

Let's now shift to an update on our development portfolio. We've organized the pipeline into near-term growth opportunities at Black Pearl and Barber Lake and longer-term expansion in 2026 and beyond. At Black Pearl in Wink, Texas, the first 150-megawatt phase is now live and hashing and will continue to scale as new rigs are delivered and old rigs are swapped out. The second 150-megawatt development phase will soon be under construction and will be designed to offer future optionality for HPC hosting or Bitcoin mining.

The photos here highlight the best-in-class infrastructure at Phase 1, purpose-built for Bitcoin mining and showcase the team's outstanding execution in delivering the site safely and rapidly in just 16 months. We're confident that this same level of excellence, innovation and dedication will drive the successful build-out of Phase 2.

Slide 11 gives an overview of our Barber Lake site. With its immediately available capacity of 300 megawatts and 587 acres of surrounding land, along with the potential for future expansion, we are more confident than ever in the commercial potential at the site. Complex HPC lease deals take time to come together, but the team has been working diligently to evaluate the various proposals we have received and finalize the best possible deal for Cipher.

Slide 12 outlines our expected growth in 2026 and highlights our latest site acquisition in Andrews County, Texas called Stingray. The site features 100 megawatts of front-of-the-meter capacity, all necessary regulatory approvals and 250 acres of land adjacent to the transmission assets. This quarter, we initiated development of the substation for the site and secured long lead time items, including transformers and high-voltage breakers. The site is on track to energize in the third quarter of 2026.

Slide 13 outlines our expected future growth across 4 sites with 1.6 gigawatts of potential power capacity. Our Reveille site in Katula, Texas is on track to energize in Q2 2027. The site is fully approved for 70 megawatts, and we have initiated development of the substation. Our 3 Ms, Mikeska, Milsing and McLennan are currently undergoing final interconnection approval processes, including the completion of load studies at all 3 sites with decisions expected later this year. We are targeting up to 500 megawatts of capacity at each of these sites.

In addition to interconnection rights, our purchase options also include significant land parcels at each location, all of which are well suited for HPC data center development. These sites are located further east than our current portfolio and are positioned closer to major metropolitan areas. We've already seen early interest from potential tenants and believe these sites will be in high demand as development progresses. Backed by our 2.6 gigawatt pipeline, a strong track record of consistent execution and a focused strategy to position the company for the future, we are well equipped to become a leading developer of HPC data centers while continuing to set the standard in Bitcoin mining.

I will now turn it over to our CFO, Ed Farrell, for a review of our second quarter financials.

Thank you, Tyler, and hello to everyone on the call. I'd like to remind everyone that today, I will be discussing our performance for the second quarter of 2025, which ended on June 30. Before I dive into our financial results, I'd like to highlight this quarter was not only one of strong execution, but also a disciplined capital deployment to achieve that execution.

In the second quarter, we successfully leveraged our first-ever convertible offering to complete Black Pearl Phase 1 in a thoughtful manner. We strategically sized this transaction in parallel with commercial discussions with our rig provider to ensure we had a direct use of the proceeds that would be accretive to the company. Of the $172.5 million of gross proceeds from the offering, $108 million was used primarily to purchase the latest generation of miners to be installed at Black Pearl.

By paying upfront, we were able to negotiate for an expedited rig delivery schedule to avoid broader tariff impact. In addition, we received a 10% reduction in our outstanding obligation on the rigs as well as incremental value from Bitcoin linked call options. We now expect the full order to be delivered in hashing by the end of the third quarter. We look forward to seeing the full impact from these new rigs captured in production and revenue numbers next quarter, and we are proud to have achieved this growth in a capital-efficient manner.

Let's now turn to a review of our financials, beginning with our sequential and year-over-year financial performance outlined on Slides 15 and 16. In the second quarter, we reported $44 million in revenue, down 10% from $49 million in the first quarter of this year. While the late June energization of Black Pearl contributed positively to revenue, rising network hash rate and rising summer power prices in Texas, which increased curtailment led to a slight dip in top line. Increased curtailment allowed the company to avoid CP penalties and maintain its positions of having some of the lowest power costs in the industry. In addition, insights from earlier summer months will inform further refinements to the curtailment model for the remainder of the summer.

Moving down the slide. For the quarter, we reported a GAAP net loss of $46 million or a net loss of $0.12 per share. Bottom line results were largely impacted by a decrease in fair value of our power purchase agreement at Odessa. The expected but substantial fluctuations in fair value are influenced by prevailing forward power prices and the time value for the remaining term of the contract ending July 2027.

As I've discussed previously, the true value of the contract lies in its provision of low-cost fixed price power at our Odessa site. Excluding that and other noncash expenses, such as the impact of depreciation and amortization, deferred income tax expense, the change in fair value of the warrant liability, share-based compensation and nonrecurring losses, we reported second quarter adjusted earnings of $30 million or $0.08 per share, up roughly 400% from $6 million last quarter.

Moving to Slide 16. In the second quarter of 2025, we achieved $7 million increase in revenue compared to the second quarter of 2024. This result reflects the upgrade to our Odessa rigs in Q4 of last year as well as the production increase from bringing Black Pearl online at the end of the quarter, which partially offset the pre-halving portion of this quarter last year. We continue to take pride in our ability to navigate the post-halving environment driven by a low-cost power and operational efficiency.

As noted earlier, due to the expected fluctuations in the value of our power purchase agreement at Odessa, we saw a decrease in GAAP earnings year-over-year. This quarter, we reported a GAAP net loss of $46 million or a loss of $0.12 per share compared to a net loss of $15 million or $0.05 per share in the second quarter of the prior year. In addition to PPA fluctuations, we also changed our depreciation schedule for the useful lives of miners from 5 years to 3 years in Q2 of last year.

That, plus the increase in the number of miners we are now depreciating given the upgrade at Odessa meant this quarter's GAAP earnings are a significantly higher impact from depreciation than the same quarter of the prior year. Our adjusted earnings, which excludes these noncash expenses, increased significantly from a loss of $3 million or $0.01 per share to earnings of $30 million or $0.08 per share.

Let's move on to Slide 17 and take a deeper look at the results of our operations. For the quarter, we mined 434 Bitcoin at Odessa and 10 Bitcoin at Black Pearl, bringing our production to 444 Bitcoin mined in total across our wholly owned sites. This production generated $44 million in revenue at an average price of roughly $99,700 per Bitcoin. This compares to 524 Bitcoin mined in Q1 2025 at an average price of $93,500 per Bitcoin, resulting in $49 million in revenue.

While we began to see some contribution from Black Pearl this quarter, equivalent to about $1 million or 2% of quarterly revenue, it is important to note that the site came online near the end of the quarter. As a result, we expect significant greater impact next quarter when we'll benefit from a full quarter of production. Our consistent low-cost power remains a critical factor in maintaining attractive unit economics and our cost of revenue remained relatively flat quarter-over-quarter and year-over-year.

Now let's shift our focus to operating expenses. Compensation and benefits decreased year-over-year, reflecting the efficiencies gained through scale without the need for significant changes to staffing. The lack of significant staffing changes aligns with our continued confidence that we have the right team in place to support our ongoing growth.

General and administrative expenses, which include IT, corporate insurance, professional fees, occupancy and other public company costs remained flat quarter-over-quarter and year-over-year. For the quarter, depreciation and amortization expense totaled around $44 million, representing a 2% increase from the prior quarter and 120% increase year-over-year. Year-over-year increases are primarily driven by our Q4 upgrade at Odessa, which brought online over 36,000 new mining rigs.

As discussed previously, we also changed our accounting policy in Q2 of last year for mining rig depreciation, decreasing the estimated useful life of miners from 5 years to 3 years. This change, coupled with the increased number of mining rigs in operation explains the significant year-over-year increase. The oldest rigs in our fleet will cease depreciating in the fourth quarter of this year, but I'd like to note that even when these older rigs are fully depreciated, they can still generate strong returns when deployed strategically. This was demonstrated at Black Pearl Phase 1, where we profitably deployed old rigs while awaiting new miner deliveries.

Moving down the page, equity and losses of equity investees for the quarter was $2 million, down $5 million from the previous quarter. In Q2, we recognized a $17 million unrealized gain on the fair value of Bitcoin inventory compared to an unrealized loss of $20 million in Q1. Unrealized gains and losses on Bitcoin reflect the mark-to-market accounting of our holdings. The spot price of Bitcoin at quarter end increased compared to the end of Q1 as did our Bitcoin and treasury, which ended the second quarter at 1,046 Bitcoin held.

Now let's turn to our non-GAAP measure slide, where we reconcile our adjusted earnings. When adjusting our second quarter GAAP net loss of $46 million, we added back $76 million to the items listed, resulted in adjusted net earnings of $30 million for the quarter. This compares to an adjusted net gain of $6 million in the previous quarter and a loss of $3 million in the previous year.

Now let's turn our attention to the balance sheet. On Slide 19, our total current assets at quarter end were $220 million. A large portion of that balance was Bitcoin held totaling $112 million. In addition, our cash position increased from $23 million in March to $63 million in June, an increase of $40 million from the previous quarter. The increase in cash primarily reflects the remaining proceeds from our convertible offering, along with opportunistic Bitcoin sales. As we discussed in depth on our last earnings call, we actively manage our treasury, either selling or holding every Bitcoin mine and remain disciplined in our approach to capital management.

I'll quickly cover some additional balance sheet line items as of June 30. Our prepaid expenses and other current assets amounted to $7 million. This balance primarily reflects call options granted to us by our rig provider as part of the negotiated transaction to lower the cost of the latest generation miners being installed at Black Pearl Phase 1 and to mitigate tariff exposure.

As discussed, our Odessa power contract is reflected as a derivative asset on our balance sheet. Over the quarter, we had a mark-to-market loss of our PPA driven by decreases in time value of the contract as well as declines in the forward curve for power prices. The PPA ended the quarter valued at $78 million, down from $93 million prior quarter. While there are expected substantial fluctuations in the reported value quarter-over-quarter, the true value of this contract lies in its provision of low-cost fixed price power at our Odessa site.

Other significant assets include property and equipment totaling $474 million. Deposits on equipment of $183 million primarily consist of deposits for mining rig purchases. As a reminder, our Bitmain and Canaan rig orders are fully funded, and we expect to have all new machines delivered to hashing by the end of this quarter. We look forward to seeing the production benefit of this investment.

Additionally, we hold intangible assets totaling $10 million with $7 million attributable to ERCOT approval at Black Pearl and $3 million related to capitalized software. These balances are net of $1 million in accumulated amortization. At the end of the second quarter, our equity investee interest in Alborz, Bear and Chief JV stands at $46 million, and we had operating lease assets of $12 million. We had security deposits totaling $14 million, down from $20 million last quarter due to our receipt of the Barber Lake Encore deposits. The remaining balance primarily represents Encore deposits for construction of interconnects at various data centers in our pipeline.

Current liabilities declined significantly quarter-over-quarter, decreasing from $139 million in Q1 to $53 million at the end of Q2, a 62% reduction. This was primarily driven by lower construction-related liabilities following the completion of Black Pearl as well as decrease in accrued expenses tied to the final payment submission for our previous rig order. Our accounts payable decreased to $15 million from $30 million, and our accrued expenses decreased to $30 million from $66 million.

Lastly and importantly, I want to highlight this quarter, we reduced our short-term borrowings from $35 million to 0. We've always taken a disciplined approach to treasury management, ensuring we're well prepared for any capital needs. At times, that includes borrowing against our Bitcoin holdings to provide near-term liquidity while preserving inventory or selling production forward.

However, given the strength of our current cash position, we made the decision this quarter to fully pay down our short-term debt and fulfill our deliverable forward obligation fully. We're proud to have no remaining near-term obligations on the balance sheet, and we will continue to manage our treasury with discipline and flexibility.

Before we conclude, I'd like to thank everyone for joining today's call. We're proud of the progress we've made this quarter and the growth achieved, and we remain focused on disciplined execution and capital efficiency going forward. Thank you for your continued support, and we look forward to updating you on our progress next quarter.

At this time, I will pause and Tyler and I would be pleased to take your questions.[ id="-1" name="Operator" /> Our first question comes from Bill Papanastasiou with KBW.

I was hoping we could first chat on the Phase 2 strategic plan that was mentioned earlier in the call. Are you able to quantify the time to convert from hydro Bitcoin mining to AI HPC compute? And maybe just for comparative purposes, how would that compare if you were to start from ground zero today going from nothing to essentially AI HPC compute?

Sure. Thanks, Bill. So I think of Phase 2 at Black Pearl as almost being like a Tier 1 half data center. So a little bit, let's call it, upscale from a typical Bitcoin mining build, but not a fully kitted out ready to do HPC data center day 1. To get the whole 150 megawatts there, we expect that will be ready back half of next year. The idea being here that we'll be in a position to have Bitcoin mining, and there could be megawatts that are available, that would be completion of it, but there could be megawatts available in advance of that, but call it, back half of next year.

In our discussions with potential tenants, we have heard a few times that the challenge that some of them face, if I think of some of the neo clouds in particular, that they get a client that wants to deploy reasonably quickly. We're pretty confident that in the next 50 years, this data center will end up in HPC data center. The goal here is to have a flexible design that's ready to accommodate fast requests. And by fast, meaning in a couple of months, the ability to spin up HPC. We're also cognizant of the fact that we've got really good Bitcoin mining economics available to us there.

And so either way, we want the second half to not be dirt with a long building schedule, but to be ready to go in either direction. I think the timing for the breakdown between HPC and Bitcoin will really come down to the level of tenant interest and how quickly it aligns with the completion of the construction. Based on the discussions we've been having, we do have interested clients in smaller chunks of megawatts. There is a stratification of that HPC market we've seen where obviously, we are showing Black Pearl to the types of clients that can take down 300 megawatts on a gross basis.

There's a whole different segment of the market that's not prepared to take down that much, but is very interested in smaller chunks. And we are, let's say, very excited about the potential for Black Pearl. So the idea would be that we complete the construction of this flexible build in next year, and then it is ready to quickly jump to HPC from that Tier 1 half design. Now how quickly it goes will depend a little bit on whether or not the client wants to take it to Tier 1, Tier 2, Tier 3, how much redundancy do they need, et cetera. But the idea is to be ready to go quickly because as an overarching theme, we don't see demand going in the wrong direction, frankly, in the near term. And so we want to be able to capitalize on that quickly.

I appreciate that color. And then just digging deeper into your remarks about hyperscaler participation. Curious to hear what you think would trigger them to choose an operator in your peer set to be a dance partner. How far are we from seeing that happen? What are you seeing from boots on the ground perspective? And are you getting a sense that they're more open to dealing with players in the peer set following the recent deals by CoreWeave and COR42?

So yes, I do see them as more willing to take our peer set and us more seriously. I would say that interest waxes and wanes, and I know I'm not the only builder of data centers that thinks this. But if I had to generalize the market color, I'd say April, May, June was a little quieter than it had been earlier in the year. I'd say July, the level of interest across the industry really came back to life.

We had a lot of inbounds in July from hyperscalers that we have had previous discussions with that had kind of been quiet for a while, come to life with requests for emergency Friday evening meetings to get ready for a big review they had Monday afternoon. As it relates to our own discussions, as you've seen with everyone across the industry, and we understand well also, you don't have a signed deal until you have a fully signed deal. And given that, if the phone rings, we'll pick it up and line up interest for the site.

We are reasonably far along with someone we would like to be the tenant at the site. But until we have a deal, we don't have a deal. And I'd say just as general market color, the last month or so has been a very big step-up in the level of interest. So to answer your question directly, I do think that those hyperscaler names are coming to this sector for the people that can deliver what they need.

[ id="-1" name="Operator" /> Our next question comes from Justin Pan with Clear Street.

This is Justin from Brian Dobson. Exciting hybrid strategy for Black Pro Phase 2. I was wondering if you could talk about any potential differences in costs affiliated with the hybrid model compared to a pure mining or a pure Bitcoin site? And then -- and is it something you would consider for future sites in the development pipeline?

Thanks, Justin. Those are actually very good questions. So the way we've looked at it, it will be about $1.5 million per megawatt for this, again, kind of Tier 1 half style build that we envision that is very modular and ready to move quickly. So on 150 megawatts, that will take us up to $230 million or so in infrastructure costs.

From there, it will depend on the requirements of the tenant where if they're stepping all the way up to Tier 3, it will be in line with typical building costs for a Tier 3 data center. It might be another $8 million or so on top of that. It's going to depend on the levels of redundancy effectively that they're going to need. I think what we've heard, the reason for that thinking is that we've had some discussions with folks that, again, are looking for smaller chunks of megawatts than 300 megawatts at a single clip.

And one of the concerns they have, and this is really kind of on that neo cloud side is that the GPU upgrade cycle is moving so quickly and construction time lines take a while that there's this fear that they build a data center that is -- by the time it's completed, is sort of built for older GPU technology. What happens if we get crazy increases in rack density and you've got 1 megawatt racks in a few years, how are you going to make your site ready for that?

And so that's really informed the thinking behind what we're trying to do here, which is to say we will make this modular and very ready to accommodate upgrades that are industry-wide. I think we were sort of fascinated with Elon Musk building as the Colossus data center so quickly, and that really leveraged this modular concept. And so I think we're trying to echo that.

Then as far as future sites, your second question, yes, I think it will depend a little bit on how our tenant negotiations go at Black Pearl. But I would anticipate a similar approach at Stingray at this point, which, again, we'll get a premium because it's going to be megawatts available in 2026. We're doing the substation work there now. And so it would be our plan to continue forward with this build spec that has optionality built into it.

[ id="-1" name="Operator" /> Our next question comes from John Todaro with Needham.

Congrats on kind of the additional HPC pipeline. First question, when you think of a financing partner on board for the JV, could you just remind us of the split and expected economics? And also, would Phase 2 at Black Pearl include that same JV structure?

So John, I think you're referring to what we had previously announced our relationship with Fortress. We haven't come out with sort of every number in that because it's a little bit dependent on the terms of the lease we signed and how that flows through. The color I can give is that the structure envisions us owning 20% in the equity of the JV on day 1 within increasing levels of promote as the IRR increases on the total project.

And so we have the ability to buy more of that equity up to 49%. I think what I've given in the past is that if we assume, let's call it, a market typical lease and we assume progress and successful refinancing and potential exit in a few years at holding cap rates consistent, when you collapse those layers of the payout waterfall, we would end up owning about 40% of the total economics if we didn't contribute any further dollars. But I want to give the caveat that that's all going to depend on the actual terms of the lease and refinancing and where the market is, et cetera. but that's the color I can give.

As far as Phase 2, the discussions we have had and the backstop for the cost of the full build envisions just the Phase 1. That said, I would be very surprised if they didn't want to participate in a Phase 2 expansion down the line. And I would imagine there would -- if for some reason, they didn't, it would not be hard to find financing partners that would be very attractive for that Phase 2.

Got it. Okay. That's helpful. Yes, and that was what I was looking for. And then just going back to that question, the gentleman from Clear Street asked. So if I add it up, I'm still getting like $9.5 million per megawatt. If we just assume the same redundancy needs as, say, like CoreWeave needs with Applied Digital, are you kind of back into that $11 million to $13 million per megawatt for a greenfield build? Or is there cost savings on the flexible model?

I mean there should be some cost savings versus those numbers. I don't know if I call them savings, but keep in mind, we've already acquired the land, the interconnect, built the substation, right? So there's already some sunk costs if we were to spread them across all 300 megawatts. So I don't think that ballpark is off if you think about total cost to the same building spec and considered the sort of proportional cost of the shared infrastructure at the data center. It's in line.

[ id="-1" name="Operator" /> Our next question comes from Brett Knoblauch with Cantor Fitzgerald.

On the Bitcoin mining side, 23.5% by the end of the third quarter, should we be expecting anything else? Or would that really -- or anything else after that? Or will that be really dependent on what you guys initially decided to do with the second phase of Black Pearl? And it sounds like that is a 2026 timing?

Yes, it will be dependent, Brett. I mean to give you a sense, we're excited to get the Phase 1 fully installed because you really see the benefits of scale, considering that we haven't seen any meaningful increase in headcount and kind of overhead. So if I look at our point-in-time hash cost right now, it's about $27 per petahash per day. I expect kind of post Black Pearl's Phase 1, we'll be at about $24. I'm talking cash -- total cash cost. So that's electricity, ops and SG&A cash after the completion of Black Pearl. So that's a really strong positioning from my perspective.

I think beyond that, it's going to depend a little bit on the pace of tenant negotiations. Fair to say we're going to fill Black Pearl Phase 2 with HPC tenants if we can. I think the idea is depending on the pace of those negotiations and the attractiveness of mining, we'll be ready to -- hydro Bitcoin mining would fit in very easily at Phase 2, but we don't have any specific plans for that.

I think the other thing to keep in mind there is given the kind of tariff landscape and how quickly things seem to move on that front, the way I think about that is we'd probably be more likely to buy hydro machines in the spot market that maybe aren't the latest and greatest generation because we can manage to a cheap -- we can manage curtailment to a cheap power cost there. And I think -- I don't know how other companies are thinking about it, but let's just say, long-term futures purchase contracts of the latest and greatest machines where you wait 6 months for machines to get delivered from Asia are just not as appealing to us right now.

So I do think it'd be -- just trying to give some extra color, we'd probably look to do a cheaper build with hydro in Phase 2, depending on how those client negotiations go. And yes, that would be coming online back half of next year.

[ id="-1" name="Operator" /> Our next question comes from Mike Grondahl with Northland.

Just trying to understand what sites would you say are being actively marketed for HPC right now? Is it basically Barber Lake and maybe Phase 2 Pearl? How would you characterize what you're actively marketing today for HPC?

Sure. So great question. I'd say everywhere -- so you're right. I mean, Black Pearl -- pardon me, Barber Lake is our primary focus. But again, what we're envisioning there is a single tenant. So that's a small pool of potential tenants. The sort of separate part of the market then that we're actively marketing to is Black Pearl Phase 2, but also Stingray and Reveille. We have one discussion going on where we have a potential tenant that's looking at Black Pearl, but also has San Antonio as a target market. And they are the type of tenant where 70 megawatts would be about the right amount. And candidly, as the calendar rolls forward, you start to get within the construction time line that is logical for Reveille.

So I'd say that's where the primary marketing of like live tenant discussions are. I'll also say the hyperscalers ask questions about the 3 Ms. On Milsing, I do expect we'll be moving towards an interconnect this year. That has generated a fair amount of interest because it's close to the Houston market, and it's 500 megawatts. So we don't have the interconnect yet. I expect that we will this year. And I think at that point, some of those exploratory discussions with the larger end of the tenant spectrum will become more tangible.

Got it. And then maybe just as a follow-up, any specific comments on Stingray? How are you feeling there? What kind of color?

Yes. I mean I think, again, we've been encouraged by the discussions we've had with what I'll call this middle tier of the market, where there's a fair amount of interest from folks that may be at lower tier data center requirements with smaller megawatt interest. And so the truth is if you're a hyperscaler and you're making a massive investment, of course, you want the megawatts sooner, but you also want to be closer to a major metro because the use case for that data center then fits into all their different buckets. Is this cloud services? Is this training? Is this inference?

If you're a high-frequency trading firm that wants 10 megawatts to train your model, you'd be happy to ship it to somewhere more remote. And even though, I mean, listen, the inference stats aren't bad at Stingray, we think it's sub-10 milliseconds to Dallas. I think what we've found is that there is more interest in that segment than we had appreciated. And I think we're -- while I don't think we're looking to have like 1 megawatt tenants, we'd be happy to run a multi-tenant colocation facility. And that's what I think it will end up being, but we'll know more as our tenant discussions progress at Black Pearl Phase 2.

[ id="-1" name="Operator" /> Our next question comes from Chris Brendler with Rosenblatt Securities.

Tyler, I wanted to ask a question on another follow-up on Barber Lake and just sort of from a cadence standpoint and the time line here. It felt like last quarter with the Fortress announcement that things were making progress. And I know from other folks that I've talked to in the space that these things do ebb and flow. You've had -- I think certain companies have had serious discussions and then had them follow up had similar experiences where you've had made a lot of progress and think you're getting close and had folks walk away? Or has it been more of a steady progress towards a contract? And just maybe take your temperature on your optimism of getting something done before year-end for Barber Lake would be great.

Sure. I would say that, unfortunately, our experience has been very similar to others in the space that -- there's a lot of hurry up. We need to get a site visit next week. We're sending over terms because this is now a giant priority and then silence for a month. Without getting into the really gory details, we definitely have had some opportunities very close to being finished that have ebbed and flowed.

That said, I am very confident that we will have a deal done. I anticipate it will be this year. The progress is not a steady drumbeat progress. It's more like a crab walks across a beach. It's sort of a few steps forward, a few steps sideways, a few steps back, a few steps forward. But we are only more confident based on what we've seen, especially over the last month. Lots of inbound interest, which just reaffirms that this market is there and the current discussions we have going on will get to the finish line. It's really hard to call the timing.

I think the real message that I want to give to our shareholders is we're not necessarily going to do the fastest deal. There have been deals that we were uninterested in. We are trying to do the right deal that sets us on the path where we want the company to be. I know there's a lot of short-term trading mentality investors in this space that want any deal tomorrow. Just candidly, while I appreciate their support, that's not who we're managing the company for. We're going to build -- we're going to get the right deal. The right deal takes time. We're very confident in the pocket aces that we're holding, and we're going to play them appropriately.

Makes sense. I love the craft analogy, is there any time line on the Fortress agreement that you have to abide by and get something done by? Or is it pretty open-ended?

Yes. I mean there is a time line under which it's exclusive. I don't think of that as any kind of time line on which we need to get a deal done. I think they'd be happy to extend that, I'm assuming. And if not, we have other financiers that have been knocking on the door. So I don't think of that timing as necessarily anything that would impact our discussions. But yes, technically, we are exclusive with them as a financing partner for another month or so.

Okay. I'm going to ask a Bitcoin mining question.

We love both.

Yes, exactly. So this is a bit nuanced, but I know you mentioned it's clear in the slide deck that the average power cost ticked up this quarter. $0.07 to sort of $0.031-ish and it's also the impact of Black Pearl. But the cost of revenue only increased very slightly sequentially. So our model is like having trouble balancing that cost of power increase with the relatively stable sequential change in cost of revenue. So is there anything impacting those numbers that makes that math a little wonky.

No, let me explain that math. So the $0.031 headline number is an estimate over a large time sample of what we will pay. That's completely the impact of Black Pearl. So $0.027, which we have always had historically was really anchored by our PPA at Odessa, which is right around that level. And that's also when sites like Alborz, which has our cheapest power were a larger portion of our production.

Going forward, Black Pearl will be a huge part of our production. That's merely an estimate because it's a front-of-the-meter site. I think what we're using in there for large sample size is about $0.035 on average. I actually hope we'll do better than that. But -- so that's the reason for the change is that if you're looking at numbers on a backwards-looking basis, that hasn't had much impact yet. The $0.031 is expectation across a cycle with everything running.

[ id="-1" name="Operator" /> I would now like to turn the call back over to Tyler Page for any closing remarks.

Thanks again for joining our business update call, and we hope to have exciting updates for you in the not-too-distant future. Cheers.

[ id="-1" name="Operator" /> Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.