Cipher Mining Inc. (CIFR) on Q1 2022 Results - Earnings Call Transcript
Presentation:
Operator: Hello, and welcome to the CIFR Mining First-Quarter 2022 Business Update Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. It is now my pleasure to introduce Lori Barker, Investor Relations.
Lori Barker: Good morning ladies and gentlemen. Thank you for joining us on this conference call to discuss Cipher Mining's First Quarter 2022 business update. Joining me on the call today are Tyler Page, Chief Executive Officer, Ed Farrell, Chief Financial Officer. Please note that you may also review our press release in presentation, which may be found on the Investor Relations section at the website at investors@ciphermining.com. Please note that this call will be simultaneously webcast on the Investor Relations section of the company's corporate website. The conference call is the property of Cipher Mining and imitating or other reproduction is expressed prohibited without prior written 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 including but not limited to Cipher's financial outlet, 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. The forward-looking statements and risks in this conference call include responses to your questions are based on current expectations as of today, and Cipher assumes no obligation to update or revise them, whether it's shows of new developments or otherwise, except as required by law. Additionally, the following discussion may contain non-GAAP financial metrics. We may use non-GAAP measures to describe the way in which we manage an operator business. We reconcile non-GAAP measures to the most directly comparable GAAP measure and you are encouraged to examine these reconciliations which are found at the Cipher earnings release issued earlier this morning. I will turn the call over to Tyler. Tyler?
Tyler Page: Thank you Lori. Hello. This is Tyler Page, the CEO of Cipher Mining. Thank you for joining our first quarter earnings call and I look forward to providing a business update. Let's start with an overview of Cipher Mining. We are a U.S. based large-scale Bitcoin miner with key competitive advantages in equipment, power, and operations. We brought our first Bitcoin mining operations online in February. And we have significant build-out plans for 2022 and 2023. Notably, we have a business position to withstand [Indiscernible] and Bitcoin mining profitability. We do this by focusing on the main cost drivers of both CapEx and OpEx in the business. In Bitcoin mining, CapEx is dominated by the cost of your fleet of mining rigs and OpEx is largely the cost of power. We've stayed very focused on maintaining cost discipline at Cipher, despite the inflationary environment the entire world has faced recently. That focus positioned Cipher very well for potentially lower Bitcoin prices because with comparatively lower costs, we should be able to keep our machines running profitably when competitors with higher costs face challenges. We're expecting to bring approximately 7.5 exahash per second of hash rate online by early 2023. This is an increase in forecasted hash rate from our last business update due to an improved mix of machines under contract with MicroBT. With this improved mix of machines, we also now have a more efficient fleet of mining rigs on order with an average machine efficiency of about 32.1 jewels per terahash. Our average price paid for our rigs is now forecast to be $45.01 TH/s. We have a portfolio of long-term power purchase agreements with a compelling weighted average price of $2.07 per kilowatt hour. We believe this price is extremely competitive versus our peers. Our operations team is now readying the power and infrastructure at four separate data centers and we expect to have 275 megawatts available to accept our mining rigs by year-end. We anticipate the CapEx costs for these sites outside of the cost of the mining rigs to be about $450,000 per megawatt. Let's discuss some milestones Cipher has achieved since our last call. First, our first quarter shipments of rigs from Bitmain have been installed on time at our Alborz data center and are now hashing. Our hash rate build will accelerate throughout the year as shipments get larger and we anticipate that growth and hash rate will pick up meaningfully in the coming quarters, as I will discuss in greater detail later in our deck. Next, we have now increased our hash rate forecast to 7.5 exit hash per second as we recently upgraded our machine purchase contract with MicroBT to include a more efficient mix of higher-performing rigs. This new mix of machines in our fleet will add an additional 400 teta -hash per second to our previous forecast. Lastly, we recently closed our first equipment financing at our Alborz data center joint venture with BlockFi, for about $47 million. The proceeds from this financing will go towards previously incurred costs for the Bitmain machines on a order for the Alborz site. We are excited to partner with BlockFi on the first of what we anticipate will be multiple debt deals for the company in the near future. Now let's turn to our implementation plan and strategy. On Slide six, we show an updated forecast for power and infrastructure readiness by site. Our operations team is currently hard at work deploying our first for datacenters with an expected this to begin later this year. You will notice that our updated forecast reflects the fact that we have pushed out the anticipated start date for bear Phase II and Chief Phase II to 2023. Our updated end of your forecast for power and infrastructure availability is for a total build of 345 megawatts with 275 of those megawatts belonging to Cipher, and the remainder belonging to our JB partners. This is more than enough power to accommodate installation of all the rigs we have on order. On Slide 7, we overlay our data center readiness schedule with our quarterly mining rigs shipment schedule. You can see that we forecast to have sites ready to accept machines as they arrive throughout the year and plan to have excess site capacity as well, should we find opportunities to purchase additional machines at attractive prices. Across the bottom of the slide, you can see the hash rate associated with the mining rigs being shipped, billed by quarter. We forecast having roughly 7.5 exahash per second up and running in early 2023. Here are some updated pictures at our Alborz data center, which is nearing completion. The data center is currently operating the rigs we received in the first quarter and we'll continue to add machines as they arrive in the second quarter until the full 40 megawatts is operational. As you can see from the turbines in the distance, Alborz is 100% powered by wind. Slide 9 features pictures of progress at Bear and Chief. Once all the machines have been installed in Alborz, the next mining rig shift will be headed to Bear and Chief, where the sites will be ready to install them. You can see the early infrastructure deployment and our container foundations being set in these pictures from a few weeks ago. Slide 10 shows construction progress in our largest data center in Odessa. The upper left-hand corner has a picture of this site being initially cleared, which I showed off a few months ago. It is a huge 54 acre site. The other pictures show the substation, as well as foundations being placed along with trenching and electrical work being done. We're thrilled with the progress here already, thanks to our best-in-class construction and operations teams. and look forward to more exciting and fast pace construction at Odessa over the coming months. Slide 11 showed some up-close pictures of conduit being put down at Odessa, as well as the the local piles we use as foundations for our containers. Lastly, let me reiterate some key build-out statistics to note about Cipher as we continue to scale. We hadn't anticipated weighted average cost for mining rigs of roughly $45.01 per terahash per second. Our average rig efficiency is anticipated to be about 32.1 jewels per terahash. We have an anticipated average weighted power price across our portfolio of about $2.07 per kilowatt hour, and we anticipate our non minor infrastructure CapEx cost per megawatt to be roughly $450,000. As the pictures I've shown suggest, we've been extremely busy here at Cipher, building out our foresight in Texas. We've made significant progress in the past few months, executing to schedule during a time where many are finding it challenging to lineup power and equipment. We're happy to have our first machines installed and hashing, and we're excited to get our next machine deliveries soon and ramp up our production, particularly in the second half of this year. Now I will pass it off to Cipher's CFO, Ed Farrell.
Ed Farrell: Thank you, Tyler, and hello to everyone on the call. As evidenced in the photos that Tyler presented, you can see that we've made significant progress in building out our data centers in the first quarter of 2022. This resulted in fulfilling the commitments we previously announced relating to purchasing mining rigs, electrical infrastructure, security deposits for our power purchase agreements, and corporate-related expenses to support our business. During the quarter, we made scheduled payments relating to mining rigs of approximately $97 million, bringing our total deposits to $207 million, which is recorded as deposits on equipment on the balance sheet. In addition, we made progress payments for property and equipment, which includes transformers and switch gears of $6.5 million. On March 31st, 2022, we had cash of approximately $99.5 million and since then have continued investing capital as a plan progressive. If we look at our GAAP operating results for the quarter ending March 31st, 2022, we had a net loss of approximately $17.5 million, resulting in a net loss per share of $0.07. The primary drivers of this loss include stock-based compensation of $9.5 million, corporate-related expenses approximately $8 million, which include insurance, professional fees, employee compensation benefits and other public company expenses. I'd like to highlight that although we did mine Bitcoin this quarter, please note that this occurred within our JV Alborz, which Cipher owns 49% and as such, our economic interest will be accounted for under the equity method, which geographically on our income statement is a component of other income. The Bitcoin reward we received is disclosed as a current asset on the balance sheet. We believe non-GAAP financial measures are also helpful to investors in comparing our performance across reporting periods on a consistent basis. Our non-GAAP P&L and non-GAAP diluted earnings per share exclude the impact of certain non-cash recurring items, which include depreciation of fixed assets, change in fair value of warrant liability, and stock compensation expense. These measures are not a substitute for our GAAP results, but management will use these non-GAAP financial measures internally to help understand, manage, and evaluate business performance, and help us make operating decisions. So for the three months ended March 31, our non-GAAP loss is approximately $7.9 million resulting in a non-GAAP loss per share of $0.03. We have provided a reconciliation on our GAAP versus non-GAAP results. Finally, we achieved several key milestones in the first quarter, and we look forward to reporting our progress in future periods as we continue to scale Cipher;s operations. I'll stop there and Tyler and I are happy to take your questions.
Operator: Thank you. [Operator Instructions]. Your first question comes from the line of Kevin Dede with H.C. Wainwright.
Operator: Thank you. And as a reminder, ladies and gentlemen, [Operator Instructions] Our next question comes from the line of Chris Brendler with D.A. Davidson.
Operator: Thank you. [Operator Instructions] And I'm showing no further questions. So with that, I'll turn the call back over to Chief Executive Officer of Cipher Mining, Tyler Page, for any closing remarks.
Tyler Page: Thanks again for joining us this morning. We are making tremendous progress at Cipher. We're very busy every day executing our plan and despite the day-to-day ups and downs of the market, we remain very positive about our long-term outlook. We have built a business with long-term advantages. Our relentless focus on that cost discipline, as well as maintaining discipline in our execution and hitting milestones and deadlines is serving us very well in a tough environment and we will continue to do that and look forward to giving you more continued positive updates on progress in execution in the future. Thank you again for your time.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.
