Cipher Mining Stock

Good morning, and thank you for joining us on this conference call to address Cipher Digital's business update for the third 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, 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 third quarter 2026 business update call.

The past few months have tested our industry, but I want to be clear from the outset that Cipher was built for this market. Recent regulatory developments and market volatility have generated headlines questioning the industry's trajectory. But the underlying fundamentals, such as demand for compute are only improving.

Today, tenant demand across our pipeline has never been stronger and our strategy, which can be easy to overlook in calmer markets, will continue to prove its value. The decisions we made early on about who we partner with, how we structure our projects, how we navigate a dynamic regulatory environment and how we engage with our communities were made with exactly these conditions in mind.

Against the shifting landscape of more discerning financing markets and rising building costs, we have evolved our approach to match. I will walk through each of these points in more detail today. But first, I want to take a moment at the top to remind everyone who we are and what we do.

At its core, Cipher identifies underappreciated powered land sites and applies capital, expertise and execution to unlock their value through leasing and development. Put simply, Cipher creates value by turning scarce power into long-term contracted infrastructure. Our model is built on six pillars.

We originate sites by identifying and acquiring land and power contracts creatively and cheaply. We lease those sites by signing long-term contracted cash flow agreements with the highest credit quality HPC tenants with whom we have continued to strengthen our relationships.

We finance the deals, which Greg will discuss in more depth by pioneering capital market solutions that support sustainable growth. We have successfully completed three project-level financings, achieving cheaper funding with each successive project. We then use that capital to develop and deliver mission-critical infrastructure, building campuses designed around dynamic tenant requirements with expert in-house teams across engineering, procurement and construction.

We own and operate the sites while generating recurring long-duration cash flow. And finally, our financing structures allow us to unlock project equity from stabilized sites, pull that capital back to the parent and reinvest in future development. Greg has described that flywheel on prior calls, and it is central to how we compound value over time.

On our first HPC data centers, we have proven the model. We were among the first in our sector to secure leases, and we worked closely with each tenant to refine their basis of design, which deepened our construction expertise and strengthened our customer relationships. Those efforts have translated into three data center campuses totaling 700 gross megawatts, all nearing completion and leased to some of the most sophisticated technology companies in the world.

Together, they now represent $16.6 billion of contracted revenue over the next two decades, equating to approximately $864 million of projected average annualized NOI. All three projects are in construction phases with first capacity already delivered at Black Pearl and additional capacity across all three sites expected to come online in phases over the coming months.

As our first HPC data centers near construction completion, we are building on the decisions that have served us well and are refining our approach going forward. I want to walk through a few of those points now.

First and foremost, we have always focused on partnering with the most creditworthy customers whose strength supports our ability to finance each project. We continue to deepen those relationships as well as engage in conversations with every leading hyperscaler and AI lab regarding our robust pipeline of sites.

Second, we remain disciplined about pursuing leases that make sense on a risk-adjusted return basis. This means staying firmly focused on our long-term colocation model. We are not a Neo cloud. Neo cloud providers offer customers access to chips directly. That model can generate a larger headline revenue opportunity but comes with meaningful increase in risk and financing obligations.

Revenue visibility is lower, risk exposure is higher and margins are highly sensitive to changes in the cost of capital and spot pricing for compute. As a long-term colocation provider, we deliver turnkey data center capacity that our tenants fit out themselves. Our capital is focused on the data center, not the chips inside it.

In return, we signed long-term contracts with creditworthy counterparties that give us strong revenue visibility and a more limited risk profile. In a market where capital may become harder to come by, that distinction matters. Lenders and investors are placing a premium on predictable contracted cash flows, and that is exactly what our model is designed to produce.

We believe this positions Cipher to deliver among the most attractive risk-adjusted returns in the sector, and we intend to stay focused on that strategy. Now where have we evolved? The first change is in how we think about pricing new leases. We evaluate every project on a yield on cost basis, the stabilized annual income a site generates relative to the total cost to build it.

As the market-wide cost of capital has risen, we are focused on ensuring our returns on new leases keep pace, and we believe that is achievable given sustained demand growth and the scarcity of available power in the coming years. The spread between our yield on cost and our cost of capital is one of the ways we create value for shareholders, and we are focused on protecting that spread.

In addition, we are now investing more development capital at the earliest stages of each project. In the beginning of our transition to HPC data center development, both we and our tenants were willing to sign leases before a basis of design was fully defined in order to prioritize speed.

Today, we are taking a more deliberate approach, aligning with tenants on design requirements in advance of signing a lease to reduce the risk of significant change orders and schedule impacts as construction progresses. Across our near-term pipeline, we have been working diligently to advance design sets to between 30% and 60% complete ahead of lease execution.

This advanced engineering and design work gives us clearer visibility into supply chain and construction costs before we commit to lease economics. We are pairing that work with a selective, proactive approach to procurement, securing critical equipment early to protect our development schedules and insulate Cipher from supply chain availability challenges and cost inflation. In addition, we are evaluating a variety of new structures for future leases, including executing construction reimbursement agreements with tenants ahead of final lease execution.

In summary, the fundamentals of our business have not changed. We remain focused on creditworthy tenants, long-term colocation leases and returns that justify the capital we deploy. What has evolved is the rigor we bring to every new project from how we price leases to how early we lock in design and procurement. We believe that evolving approach positions Cipher to grow with confidence as we execute on a pipeline of approximately 5.9 gigawatts of near-term opportunities.

Now let's turn to our three contracted campuses. Across these leases, we have partnered with leading tenants on lease agreements with a weighted average term of 17.3 years, representing approximately $16.6 billion of contracted revenue and approximately $28.4 billion of contracted revenue, assuming all extension options are exercised.

These cash flows are long term, highly visible and backed by investment-grade credit. With capacity already online at Black Pearl and initial data halls coming online at Barber Lake, those projected cash flows are increasingly becoming realized revenue.

Let's now zoom out and look at the full scope of what we've built. Across our operating contracted and future pipeline developments, including both grid-connected as well as on-site generation opportunities, the portfolio now totals approximately 6.8 gigawatts of capacity.

A portion of that capacity reflects our already contracted HPC capacity as well as our legacy Bitcoin mining capacity at Odessa. But the overwhelming majority of it sits in our pipeline, representing substantial growth beyond existing contracts. We are positioned exceptionally well for multiple levers of future growth via continued site acquisition and existing site expansion as well as the addition of on-site generation for which our sites are particularly well suited.

Turning to Slide 7. I want to highlight several key developments from the quarter. First and most importantly, we amended and expanded our lease at Barber Lake. The new lease brings an additional 10-year term and total contracted revenue at the site to $9.1 billion. We also established a phased delivery schedule with individual data halls coming online from the fourth quarter of 2026 through the first quarter of 2027.

Second, we are pleased to report that we recognized our first HPC lease revenue at Black Pearl in Q3, driven in part by the capacity we delivered ahead of schedule at our tenants request. Revenue will continue to scale as we deliver additional capacity at Black Pearl, Barber Lake and Stingray over the coming months.

Third, we made meaningful progress on our Texas pipeline, receiving bat zero classifications across several pipeline sites, including a conditional baseload classification for 1 gigawatt at Colchis. We expect final classifications in December after the data center audit is complete.

Fourth, we commenced development of lateral pipelines capable of supporting up to 2.5 gigawatts of on-site generation. These pipelines will connect multiple sites to natural gas supplies, which could make power available as early as late 2027. This on-site generation strategy gives us another path to power in addition to the grid and allows us to expand the capacity available at existing sites.

Finally, we are proud to support the communities where we operate. Together with FluidStack and Anthropic, we committed a combined $10 million to repair and upgrade Colorado City's water infrastructure. These funds will go toward municipal infrastructure upgrades identified by the city to improve water availability for residents following last summer's shortages.

Turning to Slide 8. I'd like to spend some time on our recent lease expansion at Barber Lake, why we pursued it and why it was a great development for Cipher and our shareholders. First, the numbers. The amendment doubles the base lease from 10 to 20 years and increases contracted revenue to approximately $9.1 billion, adding $5.2 billion of incremental rent.

Importantly, every key project metric at Barber Lake, including IRR, MOIC and net present value improved materially even after accounting for the incremental capital investment it required. As meaningful as those improved economics are, our budding direct relationship with one of the world's leading AI labs is the most valuable part of the transaction.

We expect this tenant to be the most significant colocation tenant in the world in the years ahead, and our goal is to develop many data centers for them over time. The changing nature of the lease also demonstrates that AI Labs long-term commitment to this particular site, which we see as a strong candidate for future expansion.

Positioning Barber Lake to grow alongside this tenant is central to our long-term ambitions for the site. Importantly, the amendment also establishes a phased delivery framework aligned with our tenants compute deployment, and we remain on track against that schedule. Data halls will be delivered in the fourth quarter of 2026 through the first quarter of 2027, and our tenant is actively deploying compute right now.

Before I walk through our portfolio and pipeline, I'd like to hand it over to our CFO, Greg Mumford, to provide more perspective on our expanding opportunity at Barber Lake.

Thanks, Tyler. This transaction was a significant commercial success at Barber Lake. We increased revenue by $5.2 billion, extended the lease term by 10 years directly facing a leading AI lab and implemented a cost-sharing mechanism resulting in approximately $500 million of incremental revenue over the 20-year term.

In exchange for those improved economics, Cipher elected to invest additional capital in the project. There were two principal components to that investment. The first component was change orders. Our tenants requirements evolved in real time during construction, resulting in approximately $409 million in change orders.

Under the lease, those costs would have been the tenant's responsibility and reimbursable to Cipher. As part of the amendment, the tenant will reimburse approximately $50 million, while Cipher agreed to invest the remaining $359 million in exchange for the 10-year lease extension and the significant incremental revenue that comes with it. We view that as an attractive exchange of near-term reimbursement for substantially greater long-term asset value.

The second component was higher construction costs driven by scope evolution, inflation and rising labor costs. Under the amendment, we are sharing these costs equally with our tenant and recovering our tenant share through rentalization at a contracted rate of return over the life of the lease.

The right side of the slide shows why we believe this was the right capital allocation decision. When Barber Lake was originally underwritten, our guidance was $9 million to $11 million per IT megawatt. We ultimately financed the project at $10.4 million per IT megawatt, supporting an average yield on cost of roughly 15%.

Without the amendment, the combination of reimbursed tenant-directed change orders paired with general scope evolution and inflationary pressures would have resulted in cost to Cipher of $12.3 million per IT megawatt and reduced our average yield on cost to approximately 13%.

Instead, we made the decision to invest additional capital to cover a portion of the reimbursable change orders and the additional cost to complete in exchange for improved lease economics and a stronger relationship with the end user compute at our site. With the transaction, the cost to Cipher increased to approximately $13 million per IT megawatt, but the additional rent restored the project's average yield on cost to approximately 15%.

At the same time, we added 10 years with an improved credit, approximately $5.2 billion of contracted revenue and improved the project's NPV and MOIC. This was not simply additional capital required to complete the project. It was an incremental investment made in exchange for a materially more valuable contract. We believe the additional long-term value we secured at Barber Lake significantly exceeds the incremental equity we invested to obtain it.

With that, I'll turn it back to Tyler to walk through our current portfolio and pipeline.

Thanks, Greg. Let's turn to our current portfolio.

Starting with Barber Lake. Construction remains on schedule, and our tenant has begun deploying compute throughout the facility. We look forward to sharing further progress as we deliver the initial data halls in the coming months with the final data hall at the grid-connected facility expected to be delivered in the first quarter of 2027. Over the past several months, we have acquired 685 acres of adjacent land to support expansion opportunities at the campus.

Moving to Black Pearl and Stingray. At Black Pearl, we delivered first capacity in August ahead of schedule at our tenant's request and recognized our first HPC lease revenue. To date, we have delivered 18 megawatts of critical IT capacity and the remaining Phase 1 data halls are progressing through MEP fit-out.

On Phase 2, foundations and building steel are completed and electrical work is underway. In close coordination with our tenant, we are aligning on a phased delivery schedule that matches their compute deployment plans and construction is progressing in line with those dates. In addition, we acquired 256 acres of adjacent land to support future growth at the campus.

We next turn to Stingray, where earthwork, grading and pad preparation are nearing completion and steel erection is progressing with shell construction expected to be complete in the fourth quarter. We are also continuing site grading that could support future site expansion project phases and look forward to providing updates on Stingray's progress as construction ramps over the coming quarters.

Odessa, our last operating Bitcoin mining site, performed well in the third quarter, producing approximately 296 Bitcoin. We continue to evaluate monetizing Odessa's speed to power value as an HPC development site, which comes from two sources: our long lead time equipment and on-site infrastructure and the remaining term of our PPA. Together, these offer a significant time to power advantage to any future developer. We look forward to sharing updates as those conversations progress.

Let's now shift to an update on our development pipeline. Reveley and Ulysses are both fully approved for interconnection and outside of ERCOT's batch process. Demand for sites available in 2027 is exceptionally strong, but we are focused on securing the right leases for Cipher, not simply the first ones available.

As I mentioned earlier, we are working with prospective tenants to progress design elements upfront, which will reduce the risk of cost and schedule impacts from change orders once construction begins. We believe this deliberate approach is the right one in a market facing inflation and supply chain challenges and that taking more time on design and tenant alignment pre-lease execution will create more value for shareholders over the long run.

Looking to 2028, we received a conditional baseload designation for our 1 gigawatt site Colchis. We have fully complied with the data center audit and expect final classification in December. Given its scale and interconnection status, we view Colchis as a cornerstone of our future portfolio and interest in the site has been exceptionally strong.

We are in discussions with multiple top quality counterparties and consistent with our approach across the pipeline, we are investing in engineering and design upfront. We have expanded the site to 622 acres so that Colchis is well positioned for a lease once final classification is received.

Several other sites in our portfolio received valuable PCLR designations within the study blood category, and we expect updates on those next year. But I want to spend a moment on on-site generation, which we see as the next major value driver for Cipher over the near term.

In Q3, we began developing lateral pipelines capable of supporting up to 2.5 gigawatts of generation with the potential to bring first power online as early as 2027. That time line makes this capacity highly sought after across both our contracted and pipeline sites, and we are currently in early but active commercial discussions for approximately 1 gigawatt of data center leases powered by on-site generation.

Slide 16 shows the full picture of our portfolio today, including new additions from the quarter. I won't walk through every element, but I want to highlight a few. During the quarter, we acquired Horizon, a 70-megawatt site in Texas. Horizon has an executed interconnection agreement with the utility and is expected to energize in 2029. Our site acquisition team is continually building out our pipeline, and Horizon is a good example of the opportunities they uncover. A site we acquired at an attractive price where we believe our expertise can unlock significant value as an HPC campus.

I also want to call out the PCLR designations at Mikeska, Apollo and the Stingray expansion. These were three of only 11 initial sites to receive this designation out of roughly 150 conditional studied load sites. PCLR status allows these sites to draw full power ahead of local transmission upgrades, meaning we expect to receive the full megawatts we requested on our submitted time lines with a portion subject to curtailment.

We expect more clarity on the curtailment terms next year, but we see multiple ways to engineer backup generation for that portion, which would allow us to commercialize these sites even before local transmission upgrades firm up full power. Including the potential 2.5 gigawatts of on-site generation capacity from our investments in lateral pipelines, our full portfolio today stands at 6.8 gigawatts.

We believe there will be strong hyperscaler and AI lab demand for our pipeline sites, and we will be disciplined in how we bring each one to market, prioritizing creditworthy tenants, long-term contracts on attractive terms and returns that create lasting value for our shareholders.

With that, I'll turn the call over to Greg, who will walk you through our financing activities, capital structure and financial results for the third quarter.

Thanks, Tyler. As Tyler outlined, demand for our capacity remains robust, and we believe Cipher is well positioned for this market. One place that shows up clearly is in how our project level financings have performed. While access to capital has tightened across the industry, our project bonds have meaningfully outperformed peers, a direct result of the creditworthy tenants and financeable lease terms we have prioritized from the start. Central to our strategy is financing each project efficiently with flexible structures that allow us to recycle capital into new development over time.

We also recognize that how we fund our next phase of growth matters deeply to our shareholders, and we are approaching every financing decision with that in mind. Today, I'll walk through where our capital structure stands, the details of our recent convertible offering and how we are thinking about funding growth going forward.

I'll then review our third quarter financial results. First, let's take a look at our current capital structure and liquidity position. As discussed on previous earnings calls, each of our three contracted campuses is financed at the project level through a dedicated senior secured bond with the parent providing equity alongside.

That structure keeps project debt ring-fenced, serviced by long-term contracted rent from investment-grade counterparties and amortized over the base lease terms. Our pricing has steadily improved over time from 7.8% on Barber Lake to 6.8% on Black Pearl and 6% on Stingray.

I'd like to briefly highlight how these project bonds have performed in what has been a more challenging credit market. The broader AI infrastructure credit market has repriced materially over the last several months, while Cipher project bonds have held up considerably better. We think that relative performance is important because it validates decisions we made well before the market became more challenging.

From the outset, we have deliberately prioritized the most creditworthy tenants and lease terms that are built to be financed. In a stable market, those choices can be easy to overlook. In an environment like this one, they become a clear differentiator. We believe the relative outperformance of our bonds reflects the strength of our contracted cash flows, the quality of our counterparties and our growing track record of execution. That credit profile directly impacts both the availability and the cost of capital for our future projects.

Subsequent to quarter end, when we finalized the Barber Lake transaction and quantified the cost with a high degree of certainty, we issued $850 million of 0% convertible senior notes due 2032 with a conversion price of $15.31 and used a portion of the proceeds to fund our investment in the Barber Lake lease amendment.

We chose the convertible market because it allowed us to lock in six-year corporate capital at a 0% coupon and a 35% conversion premium. To further protect shareholders and in line with our growth expectations, we also invested approximately $90 million into a capped call, economically offsetting dilution up to $28.35 per share or 150% above the reference share price.

We simultaneously equitized approximately $166 million of our 1.75% convertible notes due in 2030 with common stock, retiring more than 90% of those notes and eliminating substantially all of the cash interest expense associated with that issuance. Altogether, total debt stands at approximately $6.7 billion. That includes $4.5 billion of nonrecourse project level secured notes and $2.2 billion of convertible notes at the parent, nearly all of which carry a 0% coupon.

Net of cash and cash equivalents, net debt is approximately $3 billion. Pro forma for the October offering and the Barber Lake funding, we have approximately $724 million of unrestricted cash and cash equivalents. Importantly, our contracted projects are funded through completion.

At Barber Lake, a portion of the convertible proceeds funded the incremental investment associated with the lease amendment, while the cost protections embedded in the Black Pearl and Stingray leases limit Cipher's exposure above agreed CapEx thresholds. We have sufficient working capital to navigate a challenging market backdrop while continuing to make proactive investments in our development pipeline. In summary, we have a capital structure that is well matched to our contracted cash flows, fully funded projects and a parent balance sheet with the flexibility to support our pipeline.

Now let's turn to a review of our financial results for the third quarter of 2026. Revenue for the third quarter was $27 million, up from $25 million in Q2. As Tyler discussed, this quarter includes our first HPC lease revenue and introduces segmented reporting. For the quarter, we reported GAAP net income of $32 million compared to a GAAP net loss of $268 million last quarter.

The swing was primarily driven by $127 million noncash gain on our warrant liability compared with a $151 million noncash loss in the prior quarter. Adjusted EBITDA also improved to a loss of $10 million from a loss of $30 million in Q2. Compensation and benefits decreased to $39 million, primarily reflecting lower stock-based comp.

General and administrative expense increased this quarter, driven by transaction-related consulting fees and the $3 million charitable contribution to Colorado City. In Q3, we sold 632 Bitcoin for cash proceeds of $45.5 million, resulting in a realized gain of $0.5 million compared with a $24 million realized loss in Q2 as this quarter's sales drew on lower cost 2026 production in a recovering market.

Moving below the operating line. Interest income was $33 million, down from $36 million as restricted cash was deployed into construction. Interest expense declined to $59 million from $67 million. Capitalized interest rose to $37 million from $16 million as construction spend accelerated across Barber Lake, Black Pearl and Stingray, which more than offset the first full quarter of interest on the Stingray notes.

Now let's turn to our balance sheet as of September 30, 2026. We closed the third quarter with total assets of $7.7 billion, up $3.4 billion from December 31 and roughly flat from June 30. In the third quarter, we put significant capital to work for our three projects. Restricted cash declined by $1.5 billion during the quarter to $2.2 billion.

Over the same period, property and equipment increased $1.8 billion to $3.9 billion, driven by ongoing construction at our sites. We also continue to invest in our pipeline. Intangible assets increased $48 million, driven by site acquisition activity and security deposits with utilities rose $62 million.

On the liability side, accounts payable, accrued expenses and other current liabilities continue to reflect normal construction billing and payment timing. Deferred revenue grew to $46 million, reflecting tenant prepayments and change orders billed ahead of recognition.

Before we open the call for questions, I want to leave you with a few key takeaways. The Barber Lake amendment more than doubles contracted revenue at the site and improves the project's returns across every key measure. We raised long-dated capital at a 0% coupon, paired it with a cap call to protect shareholders from dilution. And today, our contracted projects are funded through completion with additional liquidity remaining at the parent.

And finally, the steps we're taking on design and procurement position us to bring greater cost and schedule certainty to every future lease. The market environment is more demanding today, and we think that plays to Cipher's strengths. We have a large pipeline of scarce power opportunities, deepening relationships with leading hyperscalers and AI labs and the capital flexibility to be selective about which opportunities we pursue. Our objective is not growth for growth's sake. It is to convert those opportunities into long-duration contracted cash flows and create durable value per share.

Thank you for your continued support. Tyler and I would be pleased to take your questions.

[Operator Instructions] Our first question is going to come from the line of Ryan Gravett with UBS.

Just given the update at Barber Lake and the broader inflation on build costs that the industry is seeing, I guess how should we think about future CapEx requirements and spending per megawatt going forward? And do you expect to be able to raise rental rates in line with the inflation in build costs on future projects and maintain development yields going forward?

Thanks for the question. Let me take a stab at that first. And then, Greg, you can add some further color because you're probably more in the market day-to-day about where financing costs are.

I would say, in general, look, we've seen a supply chain challenged environment and an inflationary environment for labor. And I think we think 2027 will continue that trend. It's hard to answer your question with specificity because so much depends on the design requirements.

I think the color I would give is that tenants absolutely recognize that costs are going up. And they know that if they're working with someone like Cipher, we are going to turn around and finance the build on their behalf. So I'd say, thus far, what we've seen is a willingness to increase rent in line with increased financing costs. I think what we're also seeing is an evolution of structure.

And what I mean by that is tenants being increasingly willing to entertain things like CapEx reimbursement agreements ahead of time so that they are preserving schedule by putting forward dollars upfront to secure our long lead equipment with the ability to then finance it down the line.

So I also think tenants are looking at ways to perhaps strip costs out of their designs as really just everything evolves in the thinking around these data centers. So I would say what we're seeing right now is a willingness to react to that.

Greg, I don't know if you want to give further color on just what we're seeing in the financing markets.

Yes, sure. Thanks for the question, Ryan. Look, so we did hit on this a little bit in the actual prepared remarks of the call, but I think it's important to highlight again, there's about 20 to 25 high-yield issuances in the market that are financing construction for a whole variety of different tenants and various backstop arrangements and kind of across the whole spectrum.

Three of the four of the tightest trading bonds by spread in that group are our bonds. I think that is important because it speaks to what we've done historically, which is target the best quality counterparties. But it also is a focus on making sure that we have ongoing access to capital markets at an efficient rate.

So we are very focused on making sure that we have access to those capital markets. We believe that where our bonds are trading, we'll be able to go out and continue to finance our projects, assuming that we stick to our knitting and focus on really high-quality tenants.

Our next question will come from the line of Eric Luebchow with Wells Fargo.

I wanted to touch on the Odessa project. I know that -- the Odessa site. I know New Era Energy had signed a PPA with Luminant for a separate project. And I wanted to see how, if at all, that changes the monetization opportunity at that site.

Sure. So I think our opportunity at that site remains very strong to monetize it for HPC. I say that because we are familiar with that PPA that they signed. I mean that is a structure as a developer, we would not sign. We are looking to do behind-the-meter setups where our $1 trillion market cap tenants would be responsible for the very onerous requirements of any PPA. So they are taking that on.

However, any tenant interested in that site needs access to the site as quickly as possible and has a desire in general for hard to obtain long lead equipment. which we have. So we maintain -- we are in ongoing discussions. I think we are holding an extraordinarily valuable piece of unlocking that puzzle. I do not see us injecting any equity into that site if things continue the way that I expect them to. We will just earn a return from our ability to unlock tenant interest at that site. But those are in ongoing discussions, and we remain very confident.

Great. And just one follow-up for me, Tyler, given your exposure to Texas and some of the associated regulatory complexities with ERCOT, how do you think longer term about geographic concentration versus looking at sites outside of Texas? I know you do have one site or one pipeline site in Ohio, but how do you think about that longer term? How concentrated do you want to be?

Yes, sure. It's a great question. I think we've spent a ton of time thinking about this. I think the truth is that Texas and the evolving regulatory environment is pretty much in line with just about every other location for data centers in the United States in that there's just an evolving environment and whether that's around regulatory approvals, taxation, community engagement, et cetera.

I think it's drawing the most attention, obviously, because there is so much build-out scoped there. And obviously, we have a lot of exposure there. I think in the long run, the way we view this is that the building of data centers is key to the future of the United States economy. Right now, we're in an election cycle. There's a lot of noise.

In the long run, it doesn't matter who's in office. This is a key piece of the success of the country and the state of Texas. And so I think we don't view Texas, even though it's drawing a lot of scrutiny right now for -- from investors for what does this mean -- we don't really think it's materially different from a risk standpoint on those factors than other locations are. We'll have to see. We have been operating in ERCOT for a long time.

Generally, we think it's a really, really well-run system. We're excited to be building in Ohio. We're looking at sites in other locations. But I'd also highlight that across the board in other locations, you're seeing things like really long time lines to power availability as well as more onerous deposit requirements.

And so while we always like diversification in theory, if you're looking at a site where in order to get access to it, you've got to post hundreds of millions of dollars of deposit for five years to get an interconnect in the 2030s. That's just not quite as attractive. So look, on the one hand, we're always looking. We evaluate sites constantly. But we are still very confident in Texas, no matter sort of how that process evolves, frankly.

And -- our next question will come from the line of Greg Lewis with BTIG.

Tyler, I was hoping you could talk a little bit more about the lateral NAT gas pipelines you guys are developing. I mean, clearly, speed to market for power looks like it's going to continue to be something that companies that have access to power can take advantage of over the next couple of years. As we think about that pipeline, like how do we have to also address the need of the equipment to convert that natural gas coming in on the pipelines to power?

Thanks, Greg. It's a great question. I would say at a high level, what drives tenant interest in on-site generation opportunity is the time to power story. So in other words, grid power is easier in a whole bunch of ways operationally, but it is so valuable to get a data center up and running faster that if there are regulatory or other hurdles on the potential time line for grid-connected assets, tenants are willing to be creative.

I think what we have experienced is that tenants have a preference for a site where they can do their own generation, but also has a path to grid connection. And so our sites are very valuable. The way we are thinking about our laterals is that we have sites that are located near large pipelines. We have sites that are grid connected or will be grid connected in the short future.

And then that expansion capacity is potentially very enticing to a tenant to do very large build-outs. Now as it pertains to the equipment, that is one of the really hard things to secure. There just aren't enough turbines and reciprocating engines in the world. The way we are setting it up in our envisioned deals are that we would have an IPP, a very well-known, reputable creditworthy IPP work directly with our tenant to arrange for the equipment to be provided and operated and then the IPP would face the tenant on a power purchase agreement.

And so that at the end of the day, Cipher's role will be to finance and build a data center. We will have to scope out how we will build and operate that differently because the source of power is different than the grid. But the challenges around equipment and operating it are all related or are all between rather the tenant and the IPP.

That is one of the hard things about pulling that together. We are already in advanced discussions on about 1 gigawatt of deals. So we feel very well positioned there. We've got multiple interested tenants at multiple sites, and we are thinking about the long-term viability of just how big our sites can be over time.

Okay. Super helpful. And then one for me on Horizon. The 70 megawatts site, I guess, one is, at that size, it's below 75, so I'm assuming that's outside of batch 0. And then does that also change how you think about potentially scaling that site longer term?

Yes. So I think it does. I mean, look, what I'd say is I think the ERCOT regulations may evolve. It is currently not in that framework because you're right, it is smaller than the minimum threshold, but it wouldn't surprise me if those regulatory review elements evolve over time. So that does make it attractive today. We hope it stays attractive from that timing kind of maintaining that time line perspective. I think that sites like that, let me zoom way out.

I think what's very different about how Cipher operates and creates value compared to like a traditional data center developer is that so much equity value we ultimately will create comes from the valuation uplift in what we do to a site. So we have found sites that were in nontraditional areas. We got on extraordinarily cheap arrangements. And then there is a massive value uptick when we bring the site to market.

What's happened broadly to the market everywhere, sites -- now there is such a dearth of sites available that I think the valuation on tracks of dirt with an interconnect has just gone up massively everywhere. Furthermore, the regulatory requirements around deposits have made them very, very expensive.

So we are always looking for pockets where we might be able to create that outsized value creation. And I think it's fair to say that looking at sites like 70 megawatts in size have the potential to have a lot of value, and we can still acquire them on the cheap. The ROI analysis on those sites is extraordinarily attractive to us.

Our next question is going to come from the line of Brett Knoblauch with Cantor Fitzgerald.

I just want to dig in a bit to the additional cost for Barber Lake. I understand the change orders, but maybe on some of the supply inflation. When does a lot of that cost get locked in? I know you guys have been saying that the equipment has been secured. I guess it's my view that the labor cost is kind of locked in when you sign a GC. So maybe I'm just misunderstanding when all of the cost is kind of locked in on your end? And if you can elaborate on that and what drove that increase?

Let me give a little color first, and then I'll pass it to Greg to speak to a few of the specifics. But I think at a very high level, the nature of the cost structure at all of our initial sites are related to the fact that we had tenants that were in a real rush, a real hurry to secure these sites. And look, we were in a real hurry to sign those leases because this is a complete recharacterization of cyber, right?

So I say that because the implication of moving very quickly was that we had design sets that were not very far advanced. And what that has meant and the tenants were willing to work with is that there have been more change orders, I think, over the last year than we would have expected. Now my priority is, I think we work with the very best long-term leasing tenants in the world.

And so we are trying to accommodate what the tenants want. But if they are making very substantial change orders, that has knock-on effects to cost and schedule. And when you are repricing those changes in an environment that's evolving, that's where the sort of thematically that exposure comes from.

So you may need to hire additional crews to deal with an adjusted schedule to accommodate something that changed in the tenant's design around the cooling infrastructure or something. And then that has cascading effects throughout the building process.

I highlight that before I pass it to Greg, just because now as we look to our next leases, we talked about this earlier on the call, now we're very confident that demand is there. This is a very different environment as we go through the sort of vertical ascent of transforming the company. And we can afford to be more deliberate with our next-generation leases.

On these next-generation leases, we will not -- we have held off on executing them until we have agreed 30% to 60% design set, that vastly narrows the scope of the variability of those costs. So structurally, that's where it came from. And look, the sites are evolving. I mean, I'll mention before I hand it to Greg, I found out this morning, we just delivered the RFS notice to Barber Lake for the first 51 megawatts of critical IT.

So we're now working with those tenants in a way that makes them happy and collecting rent from multiple sites, multiple tenants. But this first environment has just been dynamic as we've had to work with lots of change orders on one site, we were retrofitting a Bitcoin mining site. So it's just been a very dynamic operating environment in these first builds.

Greg, I don't know if you want to add any further color just or not but.

Yes. Yes. And thanks, Brett, for the question. I think it's important that you distinguish the two specific groups, one being change orders, which we were eligible for reimbursement for and the second being kind of cost inflation across a bunch of different verticals. So one of them we talk about is scope evolution. That is a kind of large catch-all basket.

But generally, it refers to there are things going on, on these sites, these massive infrastructure projects that can lead to less productivity than you were probably expecting before. And some of that can be due to the fact that tenant may show up with their racks and ships early and you want to accommodate them as best as you can and you find storage and then you set them up and you're still doing construction around that, so you lose some productivity.

Generally, inflation in OFE equipment was not one of the major drivers, though we did see some inflation and some longer lead times, which resulted in some crews kind of standing around waiting for the equipment to be delivered. But certainly, it's been a tight labor market. I mean I don't think we're the first people that you're going to hear that from or the last. It's something that we are well aware of and thinking about on the next build.

But 1.5 years ago, when we signed these deals, it was a very different market than it is now. So one of the things that we've talked about a lot is focusing more early on engineering, design and tenant alignment and making sure that we can go out and get risk transference on those labor costs with GC or subcontractors earlier. And just to come back to that. So without the deal that we did, if we were to be reimbursed for the change orders and if we were to pay for that additional, call it, $350 million to $400 million of general cost evolution, our costs would have been about $12.3 million per critical megawatt.

That's just outside of our range of $9 million to $11 million. And that doesn't take into account the fact that of that $350 million to $400 million, we probably could have spent more time trying to carve that up and allocate that. And that is -- that's the explanation for why there's a cost-sharing mechanism where 50% of that is being reimbursed to us plus a return of capital.

Awesome. Very helpful. And maybe just as one follow-up. December audits are expected to kind of be done. Are potential tenants or customers you're speaking to waiting for maybe the audit process to complete? Or if you do have conditional base load and you're kind of front of the queue and all things go on those sites, are those leasable even ahead of that audit? Or how should we think about the different classifications that you guys have received?

I mean, I would say that Colchis really is a crown jewel because a 1 gigawatt front of the meter site is just an extraordinarily rare thing. We have several of the world's sort of most highly regarded tenants very interested in that site, and I anticipate it's going to be a real catalyst for an uplift in our valuation. I think that that site is so attractive.

People are advancing their diligence, looking at lease frameworks. They're getting 30% to 60% design sets, trying to figure out exactly what they want to do. I don't anticipate we will have a final signed lease in advance of getting an interconnect or if we did, it would certainly have a conditionality on receiving that interconnect.

So I kind of view it as you're getting the same result either way. If someone wants to move forward and we decide that we've got the right dance partner and the right structure set up, theoretically, we could move forward with a condition precedent. But my gut is that one way or another, you're going to need the interconnect in hand.

Our next question will come from the line of Michael Donovan with Compass Point.

Congrats on the progress. You mentioned PCLR sites and using on-site generation and support workloads during grid curtailments. Are you also considering batteries and do potential tenants have a preference?

Yes. So we are looking at that as one idea. I think the PCLR designation is not fully appreciated by the market. I mean if I had to summarize the market right now, it's just everything is way too short term. And so that is a potential solution. But the point is that when we look at the focus on time to availability of power, I don't think that demand characteristic is going to change very much in the next few months. But hopefully, we are going to make progress through the ERCOT process.

And pretty soon, we're going to be talking about the studied load designation sites. And it may be into next spring. And then I think that PCLR designation is going to be a really big deal. So we'll see. It's our sense that as we watch tenant sort of building requirements evolve, uptime requirements evolve, cost considerations evolve, the idea that you could have a firm time line to power but might have to engineer around the ability to curtail or switch to on-site generation or whatever is something that is very interesting.

I don't think the market is fully appreciating just what a big deal those designations are. And then at a high level, how do you expect yields on cost for projects powered by on-site generation compared with grid-connected projects?

Greg, do you want to take that one?

Yes, I'll take a stab at it. So from our discussions and what we've been seeing to date, I don't expect it to be priced materially different. I think if the tenant has designated that site or that opportunity as something that's a high priority for them. We're seeing lease on cost -- or sorry, yield on cost discussions in these lease negotiations be relatively in line with our front-of-the-meter connected sites.

I think more of those lease discussions will be focused on the SLA and just trying to match what each site is willing to accept just given the different generation source.

I'd like to hand the conference back over to Tyler Page for his closing remarks.

Well, thank you, everyone, for dialing in. I just want to remind everyone that we are truly in the most vertical part of the Ascent here transforming the company. I know there's a lot of short-term pressure on the market given everything that's going on. But I want to encourage all of our investors to take the view that we are building expressways for AI to come to market, and we are charging a long-term toll.

So as we navigate the day-to-day headlines, everyone should keep in mind we are building massive sites that we are going to collect tolls on for multiple decades and then be left with a very valuable expressway. So all the most important fundamentals are there as we transform the company, we mentioned the headline that we are now collecting rent also at Barber Lake, a meaningful part of the site has now been delivered. And we are really excited about where we're going to go here in the coming months.

So thank you for your continued support. Cheers.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.

Ladies and gentlemen, thank you for standing by. Welcome to Cipher Digital's Second Quarter 2026 Business Update Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would like now to turn the conference 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 second 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, 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 second quarter 2026 business update call.

Execution has been exceptional across the business this quarter, and we continue to build in line with our transformational strategy. What has become increasingly clear over the past few months is how each step forward in the progress of our flywheel is now reinforcing the next. The leases we've signed are giving prospective tenants more confidence to come to the table. The financings we've completed are strengthening our standing with capital markets and validating the colocation strategy we've laid out.

And the construction milestones we continue to hit on schedule or ahead of schedule are reinforcing the trust hyperscalers place in us as a partner for their next data center campuses. Put simply, this business is building on itself in a way that compounds and the results are starting to show up, giving us an even clearer path to scale much larger.

For those newer to our story, let me frame quickly what Cipher Digital is today. We control the full value chain of developing and delivering turnkey data centers to hyperscalers, from land and power origination to engineering, construction and operations, which is what allows us to move at the speed and precision hyperscalers require. Those capabilities have translated into a stable and reliable business with longevity.

Three data center campuses leased to some of the most sophisticated technology companies in the world, representing billions of dollars of contracted revenue locked in over the next decade plus. And beyond those initial campuses, our pipeline keeps expanding with approximately 4.4 gigawatts of expected future developments, giving us years of visibility into growth well beyond what's already under contract.

Let's zoom out and look at the full scope of what we've built. Across our operating contracted and future pipeline developments, the portfolio now totals approximately 5.3 gigawatts of capacity spread across 11 sites. The overwhelming majority of that sits in our pipeline, representing substantial growth beyond existing contracts. The remainder reflects our already contracted HPC capacity as well as our legacy bitcoin mining capacity at Odessa.

Texas remains the center of gravity for this portfolio, and that is deliberate. Early on, we made the call that Texas would become one of the most sought-after regions in the country for large-scale AI infrastructure, and that conviction has been proven out. This quarter, we added up to 1.1 gigawatts of potential new future capacity in Texas with a new 900-megawatt site called Apollo and a planned 200-megawatt expansion at our current Stingray site. We are positioned exceptionally well for multiple levers of future growth via continued site acquisition and existing site expansion, as well as the addition of behind-the-meter generation, which is particularly well suited to our sites and not yet included in this pipeline.

Now let's turn to the cash flow profile behind the contracted leases on Slide 5. Our 3 executed data center campus leases are expected to generate approximately $793 million of average annualized net operating income from October 2026 through September 2036. This slide shows the future of our revenue model. Stable, visible and contracted net operating income from long-term agreements with investment-grade counterparties. As we move into the second half of 2026, we are turning these projected cash flows into reality as our first rental payments begin at Barber Lake and Black Pearl. And I'm pleased to say that reality is arriving even sooner than we planned at our Black Pearl site.

Slide 6 highlights the key developments from the second quarter, which have built momentum and position Cipher well for the second half of 2026 and beyond. First and most significantly, I'm proud to announce the early delivery of data center capacity at Black Pearl, 2 months ahead of schedule. At the request of our tenant, we executed an amendment to the lease that accelerated the development time line of initial capacity. I'm pleased to report that we delivered that capacity and rent has commenced at the site.

I want to spend a moment on why this matters beyond the headline. Any developer can sign a lease. Far fewer can deliver ahead of schedule when a tenant asks for a faster time line without cutting corners or sacrificing quality. What we have now proven is that Cipher has the operational depth across all of our teams to compress a delivery time line on demand and without compromise. We believe this early delivery will pay dividends in two ways.

First, this strengthens our credibility with existing and prospective tenants, giving them even more confidence to work with us at other sites in our 4.4 gigawatt pipeline. Second, it's an early proof point on construction execution that will serve us well in future financings since we can now point to a demonstrated track record of timely delivery. We will continue to prove our differentiation in construction and execution as we deliver on the rest of our current projects and sign new leases in the future, each step forward, reinforcing the next.

The second highlight is our landmark financing of the Stingray data center. We priced an $810 million bond offering at a 6% coupon, fully funding Stingray through substantial completion. Greg will provide more information on the financing in his remarks, but it is notable that this third project-level bond issuance priced tighter than our previous bonds despite spreads widening in the credit markets, reflecting continued confidence in our story.

Next, I'm pleased to announce that we've acquired an option on a new site we're calling Apollo. As our 11th site, the name is a fitting nod to Apollo 11 and to the same reach-for-the-impossible spirit that put footprints on the moon. This site provides up to 900 megawatts by 2031 and is located within 25 miles of San Antonio, Texas. The site has been submitted as a studied load in Batch Zero under ERCOT's updated interconnection process and its flat buildable terrain and proximity to San Antonio make it well suited for large-scale data center development.

Finally, we continue to invest in our team. This quarter, we welcomed Bill Blevins as our Head of Grid Strategies, who previously served as Director of Grid Coordination at ERCOT, overseeing large load interconnections, experience directly relevant to how we navigate interconnection across our pipeline. We also welcomed Mohammed Abouelella, who joins us from Google, where he was responsible for technical due diligence, design and delivery across more than 5 gigawatts of data center capacity globally. He spent 11 years designing Google's build-to-suit and colocation data center campuses, and we're thrilled to have his expertise as we continue to build and sign new leases.

These are just 2 of many additions we've made to the team this quarter, and they reflect how we are building the organization needed to execute on gigawatts of HPC development in the years ahead. These milestones, an accelerated delivery, a tightly priced financing, a new site secured on attractive terms and a strengthening team is what compounding momentum looks like in practice. Now let's take a closer look at our current development portfolio.

Starting with Black Pearl. As mentioned, we executed an amendment to our lease with the tenant to accelerate the development time line of initial capacity at the tenant's request. I'm proud to say our team delivered on that commitment. The first data center capacity at Black Pearl was delivered in August, 2 full months ahead of the original schedule and rent has commenced at the site.

Beyond the first delivery, the rest of the site continues to progress well towards the same previously agreed deadlines and milestones. The remaining data halls in Phase 1 are moving through mechanical, electrical and plumbing fit-out, while Phase 2 is advancing in parallel with concrete foundations, structural steel and underground electrical work all underway. On the procurement side, we've secured approximately 96% of the equipment required across both Phase 1 and Phase 2, giving us strong visibility into completing the remainder of the site.

Now moving to Barber Lake. We're pleased to share that Phase 1, comprising approximately 168 critical IT megawatts remains on track with rental payments expected to commence in October. Our tenant has commenced beneficial use of the facility, including partial occupancy of the building and deployment of network racks. We've also now secured 100% of the equipment required to complete the project, giving us strong visibility of our path to completion. What was steel in open ground a few months ago is now a data center campus advancing toward completion. We look forward to providing further updates on Barber Lake's progress over the coming months as we work to deliver the first phase of data center capacity in September.

We next turn to Stingray, which continues to move through its early construction phases. Earthwork, grading and pad preparation are progressing on schedule and underground electrical work has commenced at the site. We expect to begin concrete foundations and steel erection in the third quarter. With the project now fully financed through substantial completion and approximately 75% of the equipment secured, we're well positioned to keep the construction progress moving efficiently toward our expected delivery in the first half of 2027. We look forward to providing updates on Stingray's progress as construction ramps over the coming quarters.

Odessa, our last operating bitcoin mining site, performed well in the second quarter. 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 second quarter, we mined approximately 346 bitcoin at Odessa.

Importantly, we don't anticipate additional capital investment in this part of the business as we continue prioritizing HPC, and we are encouraged by the level of interest we're seeing in conversion of Odessa to an HPC site. We are having early-stage discussions with multiple prospective tenants. And while it's too early to share specifics, we look forward to providing updates as these conversations progress.

Let's now shift to an update on our development pipeline. Starting with Odessa. This 207-megawatt site is already energized and currently operating under a fixed price power purchase agreement with Vistra Luminant. We're encouraged by the HPC tenant interest here and are in early-stage discussions with multiple prospective tenants. The appeal is straightforward as the site is already energized and converting it into an HPC data center represents a meaningfully shorter time line to power than a typical greenfield development.

Reveille and Ulysses are both fully interconnection approved and not part of ERCOT's batch process. We are engaged in HPC hosting lease discussions with a broad range of tenants at these sites, and we remain focused on securing the right deal for Cipher, not just the first deal available.

Looking further out, Colchis, Mikeska and McLennan, totaling potentially 2 gigawatts of gross capacity remain on track through ERCOT's interconnection process. Given that ERCOT is expected to finalize the batch process decision soon, we are sharing updates based on information we know as of today. All 3 sites have necessary deposits funded, land secured and their requisite studies and executed FEAs were submitted to ERCOT on time. We have strong conviction that all 3 sites will be included in Batch Zero, and we look forward to updating the market.

Let's now look at the full picture of what this portfolio represents today as well as the new additions from last quarter. On the operating and contracted side, we remain at 907 megawatts. We expect Reveille and Ulysses to add 270 gross megawatts in 2027. We expect Colchis, Mikeska and McLennan to add another 2 gigawatts in 2028 and 2029. And looking to 2030 and beyond, we expect energization at Milsing and our new site Apollo as well as expansions at our Barber Lake and Stingray sites to add up to an additional 2.1 gigawatts.

Both Apollo and the Stingray expansion have been submitted as studied loads in Batch Zero. The 500-megawatt Barber Lake expansion is expected to be in Batch Zero and Milsing is expected to be in Batch 1 as studies are still being finalized.

Cipher's total portfolio now spans approximately 5.3 gigawatts across 11 sites. We are one of the largest developers of hyperscale infrastructure in the country with a contracted revenue base measured in the billions, a pipeline measured in gigawatts and a team that has now proven quarter after quarter the ability to turn opportunity into reality. That's the platform we've built, and we believe it's a platform that will define the next chapter of AI infrastructure development in this country.

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

Thank you, Tyler, and good morning, everyone. Tyler outlined the exciting momentum across our development platform. I want to highlight the disciplined capital model supporting that growth and the progress we've made this quarter. As mentioned on prior calls, our strategy is to finance contracted projects at the project level, preserve flexibility at the parent and optimize the capital structure as assets stabilize.

Barber Lake established that the projects could be financed. Black Pearl demonstrated its repeatability. Stingray, our third successful project financing and our lowest coupon to date demonstrated scalability and improving capital efficiency. That progression gives us increased confidence in our ability to finance contracted growth and fund investment in our development assets.

Let's take a look at our current capital structure and liquidity position. In June, we successfully completed an $810 million project level senior secured notes offering, funding the development through substantial completion. The transaction funded approximately 98% of project costs and reimbursed Cipher for $56.7 million of previously funded project expenditures. Like our prior transactions, the 5-non-call-2 structure preserves flexibility to optimize the capital structure as the asset stabilizes.

The financing was approximately 8x oversubscribed and priced at a 6% coupon, our lowest to date. We now have completed 3 project level financings that fully fund our contracted obligations through completion. Our notes are structured to amortize during the base lease terms, aligning debt service with the cash flow generated by the leases. At the corporate level, we have a 4-year committed revolving credit facility for $200 million with a $50 million accordion feature supporting working capital and LC issuance. We also have 2 unsecured convertible notes totaling $1.47 billion. As of June 30, 2026, aggregate principal amount of corporate and project debt outstanding was just over $6 billion with no cash borrowings on our revolver.

Let's now turn to a review of our financial results for the second quarter of 2026. Revenue for the second quarter was $25 million, down from $35 million in Q1, reflecting the decommissioning of bitcoin mining at Black Pearl, in line with our transition toward contracted data center revenue.

For the quarter, we reported a GAAP net loss of $268 million or $0.65 per diluted share compared to a GAAP net loss of $114 million or $0.28 per diluted share last quarter. The quarter-over-quarter increase in net loss was primarily driven by a $150.5 million noncash warrant remeasurement loss compared with a $43.6 million noncash gain in the prior quarter.

Compensation and benefits rose $7.4 million sequentially, primarily reflecting higher stock-based compensation, associated employer payroll taxes triggered by equity vesting and continued investment in the team required to execute on our contracted portfolio and development assets. As Tyler mentioned, these hires were critical additions, bringing in expertise that will be instrumental as we continue to execute and scale as a best-in-class HPC developer.

General and administrative expense increased primarily due to higher legal, insurance and other costs associated with the continued build-out of the platform. Moving below the operating line, we generated $36 million of interest income in the quarter, reflecting higher average cash balances following the Black Pearl and Stingray financings. Interest expense was $67 million, up from $59 million last quarter, reflecting a full quarter of interest on Black Pearl compute notes.

Now let's turn to our balance sheet as of June 30, 2026. We closed the second quarter with total assets of $7.5 billion, up $3.2 billion or roughly 75% from $4.3 billion as of December 31. The increase is almost entirely a story of capital raised and capital deployed.

First, let's focus on the financing proceeds. In February, we closed the Black Pearl senior secured notes and in June, we closed Stingray. Together, those transactions drove restricted cash up to a total increase of $1.7 billion. Net of cash deployed during the year, that is $1.4 billion in current restricted cash and $264 million in noncurrent debt service reserve funding. At quarter end, restricted project cash totaled approximately $3.7 billion, including approximately $3.2 billion reserved for construction and approximately $526 million for DSRA and interest during construction funding.

Unrestricted cash was up an additional $204 million to $832 million, helped by $289 million of CapEx reimbursements embedded in the Black Pearl and Stingray financings. Our total unrestricted liquidity position stood at $870 million, comprised of $832 million of unrestricted cash and cash equivalents and $38 million of bitcoin. This excludes undrawn revolver availability. We remain well capitalized to execute on our near-term commitments and based on current forecast, we do not expect to require additional equity.

Second, let's look at the build, where we are firmly in execution mode. Property and equipment rose $1.5 billion to $2.13 billion. Construction in progress grew $1.4 billion to $1.68 billion, reflecting the simultaneous construction ramp at Barber Lake, Black Pearl and Stingray. On the liability side, accounts payable grew to $289 million at quarter end from $40 million at year-end and accrued expenses and other current liabilities grew similarly to $357 million from $90 million. Both moves reflect the same story. The simultaneous construction ramp across Barber Lake, Black Pearl and Stingray, along with the timing of project billings, accruals and vendor payments.

Put simply, these are the balance sheet dynamics you'd expect from a company in active construction mode. The company continues to make strong progress across the development platform, and we remain well positioned from a liquidity perspective to continue to execute and invest in future growth.

Before we open the call for questions, I want to reiterate our commitment to disciplined execution, capital allocation and delivering long-term value for our shareholders. Putting the quarter in context, we now have a 4.4 gigawatt pipeline, a financing model that has proven itself 3x over and the liquidity to remain agile. We look forward to keeping you updated on our progress in the quarters ahead.

Thank you for your continued support. Tyler and I would be pleased to take your questions.

[Operator Instructions] And our first question will come from Solomon Thompson with Morgan Stanley.

It's Stephen Byrd, actually. Congrats on a really constructive update. I wanted to -- can you hear me okay?

Yes, I hear you, Stephen.

Okay. Perfect. I wanted to first get your initial reaction. I know none of us have had that much time to absorb the letter that Governor Abbott issued yesterday. But I wondered if I could just get your initial reactions and implications for Cipher. Obviously, you have a bunch of assets kind of across the range from those that have no impact and therefore, might go up in value to those that are right in the middle of the process. I'm just curious any initial reactions you might have.

Yes, sure. So listen, like a lot of folks, we were a little bit surprised to get the Governor's letter yesterday. But I think we weren't surprised in the sense that the theme is very consistent with the batch process, and all the challenges that Texas is dealing with right now.

So specifically, Texas is the most sought-after place for data centers right now because it's the best environment. It's got the best setup. And they have been a bit of a victim of their own success as they try to whittle down the queue and just sheer volume of development that is sought there. And so what I'd say is this is a sort of further reinforcement of the theme behind the batch process, which is the people of Texas, the legislature in Texas, the Governor of Texas, the citizens of Texas, need a way to determine who is serious and who is going to be a welcome addition to the grid, to the neighborhood, et cetera, and who is less serious and not going to be sort of fulfilling their obligations as a good neighbor and good grid citizen.

And so the batch process is already underway. And so I think one thing that is unfortunate is that we're not going to get the answers this Friday that we were hoping for. But I think the governor's themes are really important ones, which highlighting things like auditing the attestations that have been submitted by everyone to make sure they're legit and ensuring people are behaving the right way by participating in things like the water surveys that he highlighted. I'll highlight for Cipher, we've done all those things. We've already submitted water surveys, and we stand behind every attestation we made in the process.

So I think it's too early to tell the exact impact other than to say -- I think there's 3 takeaways that I think about and how it might impact Cipher. The first and most important one is whatever the finalized process and time line looks like here, Cipher is going to be at the front of it, okay? We have excellent people on our team monitoring these developments. We try to be very good neighbors, and we try to be in front of exactly the kind of issues the governor is highlighting. And we generally support any actions that will help separate the serious from the less serious because Cipher is serious. And so however the process gets finalized, our sites that we think are at the front of the line will remain there over time. We will do everything to ensure that happens.

I think the other thing I'd highlight is that we already have client interest at the sites where we haven't even finished the Batch Zero process. And the demand environment is very strong and extending. So while we're not going to get the answer on Friday we wanted, whenever it comes, the demand curve is going out further at better terms, and our sites are going to be at the front of that process. So in that sense, disappointed, we won't have an answer Friday. Beyond that, I think we're still really well positioned in the process.

I think the second takeaway is that the letter and the time line now implies that the value of any near-term megawatts outside of that process just went up. I have never seen a better environment for us in terms of how lease terms are evolving with higher rents, longer time periods, triple net structures, et cetera. And keep in mind, Cipher has 477 megawatts potentially available in 2027 outside of this process. And we are pretty involved in discussions with multiple tenants, potential tenants, I should say, at those sites and the terms logically should improve if there's an unknown time line to go through the batch process. So that's fantastic for our portfolio, to your point, Stephen.

And then lastly, I'd say sites where we're going to bring our own generation, some people, you'd refer to it as behind the meter, but any sites where we're producing our own generation, anything we can do on that front is also now more valuable. And I'll highlight what I've said before that all of our sites have potential ingredients for that to be a massive success. We have some of our best people at Cipher working every day on the bring-your-own generation solutions. We have access to natural gas and very excited potential tenants for that. So stay tuned because I think that is also more valuable.

And most of those structures envision setups where eventually, some of that generation is exportable to the grid. So I think it's in line with the challenges that Texas is trying to address and certainly what the governor's letter is trying to address. So long answer is it actually doesn't change anything about how bullish I am for Cipher. Short-term frustration is we're not going to hear on Friday.

That's super clear. Well thought out. Maybe just one follow-up on the last point you mentioned, Tyler, just on behind-the-meter generation. I did want to just get your sort of a temperature check on how important is that to customers in the sense of providing a site that's just much bigger than grid access alone. It has other advantages as well. So basically, how excited are you as a tool that your customers want you to use? And how meaningful could that be as we think about your growth?

I mean, it's potentially extraordinarily meaningful. And I say that because the raw ingredients are there. And what do I mean by the raw ingredients. We have the world's most highly rated companies very interested in getting -- I don't want to say as much as possible, but very large data center capacity. We have sites with, let's say, readily available access to extraordinarily large quantities of natural gas. And we are working very hard at solving all of the engineering challenges, supply chain challenges, financing challenges that come by pulling together sort of generation creation and data center creation.

I think the potential is larger than the rest of our portfolio. But how that actually comes into being will be determined by a lot of things like supply chain and financing and engineering. And it's too early for me to give exact forecasts on size, but it's potentially enormous.

And our next question will come from Paul Golding with Macquarie.

Tyler and Greg, congrats on all the progress and fantastic execution. I wanted to start off with a question on Reveille and Ulysses. So 2027 target energization is still on track. How are conversations going with prospective tenants for those sites? We heard the detail you gave on Odessa as a potential conversion site. But given the near-term energization targets for the other 2 sites that are not yet interconnect -- energized, let's say, since they are interconnect approved, wondering how those conversations are going and the extent to which you might be able to get ahead of energization for construction if you were to do a deal? And then I have a follow-up on Apollo.

Sure. So I'd say the demand environment has never been stronger. We have multiple interested parties in both sites. We mentioned that given this increasing level of demand and the backdrop of, frankly, a new scarcity element from some of the developments with the approval process in Texas, we want to make sure we strike the best possible deal. Best possible deal includes both great structures, great terms, long-term leases, triple net structures, high rental rates.

Also, we're monitoring what's going on in the credit markets and the read-through to the credit quality of the counterparties. So thoughtful structuring around how to get the best lowest risk returns for Cipher is sort of top of mind there, but the demand is robust. So it's just a matter of getting to a place with picking our dance partner. I expect all those available megawatts will end up leased.

Great. And then on Apollo, it's great to see that it's been included in Batch Zero. Could you give us some context on how that option came about and how you were able to execute on seemingly the inclusion in the Batch Zero process while also negotiating that option?

Sure. I think this is a real testament to the strength of our deal team. We -- they have been extraordinarily busy as things have progressed in Texas because we have seen, as we mentioned, I think, on a previous call, all kinds of opportunities get created by the batch process. So again, zooming out, the thinking behind the process is determining who is a serious developer. And one of the proxies being used for that is the ability to post necessary collateral deposits and do them in a timely fashion.

And so the team has been extraordinarily busy. We passed on a ton of deals that we did a lot of diligence on. This particular deal met our diligence criteria and sort of fit a scenario that was very unique that only Cipher could execute on. This is a development site where there was a need for a pretty large deposit to be posted in a very short time frame. Our team was able to do quick due diligence, assess the likelihood of the site to end up in Batch Zero, and we're able to then structure a very, very, very cheap price on the site because we had to come up with a decent chunk of money to post the deposit on a short time frame.

So we structured it as an option. What's interesting about the developments with the letter yesterday and so forth is that we do not have money at risk. If for some reason, there was an odd twist and turn in the process in Texas, we get all our money back, the deposit we posted, et cetera. We don't have to exercise the option. On the other hand, if things progress like we hope they will reasonably quickly, we think this is an absolutely fabulous site at a fantastic price.

So I'll highlight that it depends a little bit on what shakes out in the overall progress of the process in Texas. But I think the bigger point, and this is a point I try to make to our stockholders a lot, we are not like a closed-end fund with a handful of development sites. We have a true growth equity story. Our team will continue to originate best-in-class deals where we control downside risk and produce an extraordinary ROI. And this deal is indicative of that.

I'm excited about this site. I'm hoping that we get clear direction in Texas in the near term. If for some reason we don't, a big takeaway for shareholders should be that Cipher can structure very favorable deals in any environment. And this validates our standing in the industry as a partner that people want to work with, someone that can move quickly, be sophisticated, has access to capital, et cetera. So excited about Apollo, looking forward to the direction things take.

And the next question is going to come from Bill Papanastasiou with Chardan Capital Markets.

Congrats on the strong execution at Black Pearl and being able to adapt at your tenant's request. Also great to be back on the call. Tyler, I was just hoping to get an overview of the demand environment that you're seeing given you have boots on the ground and how that demand funnel is shaping up recently. How is the team weighing who to select as the next tenant to partner with? Do you see yourselves as a launch pad for one key tenant? Or is diversification top of mind? How are you navigating that?

Let me give my answer, Bill, and then maybe I'll call on Greg to give some color on sort of financing markets because those are dynamic and moving around and a key part of the answer to how we think about it.

But first of all, what I'd say is to highlight something I mentioned in the prepared remarks on the call that there is an element of a flywheel taking shape to our business, where success begets more success, which begets better financing, which begets more deals, et cetera. And so on the one hand, we are working with the very best tenants in the world at our sites. We are in a world awash in stories about delays, we are delivering early. We stand out. I can't highlight that enough that I think there's been questions around our time lines, how aggressive they are, et cetera. And even against those aggressive time lines, we've now delivered early for one of the most demanding tenants in the world.

Obviously, that requires a lot of close work with that tenant over time, their engineering team, our engineering team. And it's very natural that if we have a lot of success and a great working relationship, it is our hope and goal to do more repeat business with those tenants. And I think that's likely to happen in the future.

That said, we are known in the industry. Everyone chatters. We have seen an extraordinary amount of increased demand going forward. You've seen the read-throughs on the increasing CapEx budgets for the hyperscalers. That is absolutely consistent with what we are seeing behind the scenes. So let me be unequivocal. This is the best demand environment we've ever seen. Terms continue to improve for developers. We have to juxtapose those improving terms against how our model works, which is financing needs at the project level.

I would say the demand environment we're seeing now very much validates our choice to focus on colocation and building full turnkey data centers for the very best tenants in the world because those terms are getting even better than we were already getting. And as there are questions around financing as more and more debt comes to market around this sector, the colocation model is very, very solid.

I mean, Greg, maybe I'll call on you to add a little bit of color just from what you're seeing coming ahead in the financing markets and maybe how we're thinking about positioning ourselves.

Yes, for sure. Thanks, Tyler. And Bill, great to have you back on the call. It's good to hear from you.

So what I would add to that is certainly, we are watching what's happening in the credit markets. It is a fundamental part of our business, being able to go out and finance these transactions. So we're seeing the treasuries moving up. We're seeing widening spreads. And certainly, there's a lot of supply as it relates to AI infrastructure debt coming to market. And as you have more supply, you expect eventually to have a more discerning investor thinking about where they're putting their capital. So I mean, I think this really plays to our strengths and plays to our model.

First, I would highlight that our committed funding that we already have in place for our existing projects is fixed rate, and it's kind of medium term, it's 5-year fixed rate debt. So the current rates and current market doesn't affect that. As we think about the future, the way that we really sit down and look at a deal and you talked about do we want to be a launch platform for one tenant or do we want to think about some diversification, we evaluate each deal in the context of that deal and in the context of the market that we're in at the time. So what I mean by that is we'll look at, first and foremost, the quality of the counterparty, that's critical.

But then it also comes down to things like the development parameters. So what's the design complexity that they want for us to go out and build and how does that affect the supply chain? Does our team think that we can execute on the schedule that we put forward. And then there's the risk profile of the actual contract. So we look at each contract and not every contract is the same. There's different outs, there's different milestones, things of that nature. So we want each project to stand on its own when we finance it. That's why to date, we have done every project level financing on a nonrecourse basis, and all of them are structured to amortize during the base term of the lease. We need each project to stand on its own, and it needs to generate attractive risk-adjusted returns. And so we will continue to review tenants under that context when we look at a deal.

Appreciate that color, Tyler and Greg. And then just high level, what's the strategy today on looking at out-of-state opportunities? You picked up that Ulysses site fairly recently. Is the power team seeing anything meaningful in Ohio or any other states outside of Texas?

I think some of the challenges are the evolving requirements in different locations. And so Ulysses was a structure that is in PJM, but is grandfathered in before their new deposit requirements around collateral. So we look at everything that comes across the transom. I think there's no question that most of the team's time has been focused on Texas over the last quarter as people get ready for the batch process and there's folks that may have had a great site, but not access to capital to post the necessary deposits.

We look at sites all over. I'd say the huge focus, though, remains Texas. And I'd say the other sites we look at generally are evenly distributed across a handful of locations across the South and the West.

And the next question will come from Richard Choe with JPMorgan.

I just wanted to get a little bit more detail on how you were able to deliver 2 months early. And is that something that can be done if the customer really wants it and seems like to do that sort of quick delivery is pretty hard to do in general. But just wanted to get more detail there. And then if you can talk a little bit about the -- any changes to the equipment procurement process.

Yes. So I mean, I think high level, let me give kudos to our excellent in-house construction, engineering, procurement, operations team. They are largely ex-hyperscaler. They have worked at those shops. They work very well with the types of tenants we've got. And so I'd say the real secret here, there's kind of 2 things. One, you've got to have a team that can see around corners and work well with those types of tenants. We certainly have that.

I'll also highlight that at that particular site, we have a setup where we have a cap on expenses. So there is an element of saying like could we have more burst labor here to do some things faster? And obviously, we've got a willingness to do that if we find a way to pay for it, typically, that doesn't fall on us.

So beyond that, there's things like leveraging supply chain partnerships, the fact that we do in-house procurement and then have that team to refine the design every day really allows us to work together with tenants. So is it repeatable? Yes, in the sense that the ingredients are there with a team and a willing tenant that wants to work towards accelerated schedules, but there is a cost to that. So we'd have to negotiate that.

So -- and I think the other thing is, too, there's an element where I don't think you're necessarily pulling forward an entire data center build. But all of these builds become somewhat iterative as you go through the process. You may have change orders. People want to change the scheduling of when things are delivered. It may not be the entire data center. So I do think opportunistically, in general, it's just a testament to the team here that we were able to do that against the backdrop of delays.

The next question is going to come from Jon Petersen with Jefferies.

Maybe continuing on there. So if you are ahead of schedule at Black Pearl, I guess, Phase 1, does that put Phase 2 ahead of schedule too? How should we think about that?

No, I think it's fair to generalize that the rest of the delivery deadlines are currently -- they currently remain the same at Black Pearl. This was getting a piece of it ready early to get the tenant on site and working on elements of it. But the rest of the delivery schedule, we expect will be online with the same time line.

Okay. And then on the ERCOT batch approval process, I know a lot of it is kind of up in the air, but can you maybe frame a base case expectation? What's kind of a best case scenario for the news that we might get, I guess, pending delays from the governor's letter. But -- and yes, I guess, like kind of like what's the base case and what's the upside for you guys?

So look, that's really hard to predict because over time, that process is important enough to all the interested constituents in Texas that it has generally gotten extended. And so look, we were expecting this Friday to be the deadline when we would get the results, and that would open a path to progress more quickly at the sites that we think have the great positioning to be in baseload in Batch Zero.

It's very hard to say it's pretty fresh, right? The letter came out yesterday afternoon. We've certainly spoken to all of our contacts in Texas to try to get a read other than it's very serious, clearly, because of the attention it's getting. It's hard to make exact predictions on the timing of what that means. Again, I kind of repeat myself, but I think no matter what that timing is, I expect Cipher to be very buttoned up on top of it and standing at the front of the line. But at this point, it's just a little too fresh to have a serious prediction of the timing.

I just don't know if it's like the governor has requested an audit of those waiting in the interconnection queue. Depending on how long that audit takes or if we get more color on how significant and substantial that will be, that may give an indication of timing, but it's too hard for us to predict the exact timing.

I do think what will happen though is that, that audit logically would decrease the amount of load in Batch Zero, certainly the baseload piece. And so I think it's going to make it even more important that you are a development team that is very buttoned up and has dotted your I's and crossed your T's and paid your deposits. And so again, that should strengthen our relative position. I just can't predict the exact timing because it's all still pretty fresh.

Okay. And if I could sneak in one on the balance sheet. You guys said in your prepared remarks that your business plan didn't call for new equity. Was that kind of a shorter-term time line? Or are you generating enough revenue now that you have revenue coming online from these projects where you can organically generate that revenue from recurring cash flow to finance future deals?

Yes. It's Greg. I'll jump in and take that one. So I think that's really a function of a point in time and a function of what happens in our development platform. So if I look back at the last quarter, in Q2, we spent about $400 million in CapEx, about $50 million of that was on the development pipeline. So whether that's acquiring land, building out electrical infrastructure, certain grade sites, basically just getting things ready to a point where it would be equally as attractive to any tenant.

Those CapEx expenditures can scale up and down, but that's not including the equity downstroke you would actually need if you were to go out and sign a very large deal, whether that's multiple hundreds of megawatts up to a gigawatt. Depending on what happens on the development pipeline and how leases materialize, there may be a situation down the road where we do need equity. But looking at where we're at today, $870 million of liquidity on the balance sheet. We have a revolver that we're not drawing, we have no cash draws on the revolver to date.

We feel very good about where we're at. We feel like we could handle the sites that are right in front of us without needing to tap the equity market.

And the next question will come from Mike Colonnese with H.C. Wainwright.

Congrats on all the progress here. First one for me is on the development pipeline. You guys have obviously built out a very robust one. And just curious, based on your conversations with current prospective tenants for this future capacity, what would you say are some of the key development milestones that need to be realized before they're comfortable with executing a lease at a given campus. And it would be helpful to know what portion of the sites in your pipeline has reached a stage where you think they would be lease execution-ready in current form.

So yes, thanks, Mike. So I'd say, listen, generally, historically, the dividing line has been whether or not you have that final interconnection approval because otherwise, you are waiting for that key input. So if you look at what we've got available today, again, it's Odessa, Reveille, Ulysses, 477 megawatts. All of those are past whatever milestones they would need to get a lease. So the milestones remaining are, do we like the terms and the tenant and we work through the legal documents. I expect that they will all be signed.

Beyond that, there's a sort of a newer development, and I think it speaks to the demand environment. Historically, again, tenants had not been interested pre-interconnection approval in talking about a site. We have had tenants interested in the sites awaiting Batch Zero. I think particularly Colchis is pretty juicy as a 1 gigawatt site. We've already had lease discussions on that site with interested parties. We'll have to see how things develop around the batch process. It's not inconceivable we come up with some sort of condition precedent structure or something that would allow us to move forward given that that's a 1 gigawatt site.

That said, that's all new territory and speaks to just how serious the demand environment is. It kind of remains to be seen. But so the short punchy answer is the 3 sites with 477 megawatts available are all very leasable. It just depends on when we get to a deal we like. And then beyond that, there's some upside as we await the process in Texas. And that's outside of any bring-your-own generation sites, which, again, has some deal complexity. But in general, the driving desire for the tenant behind those structures is to get a more accelerated time line.

So if we pull that together, the types of discussions we're having are, are there ways to get my first megawatts online in calendar year 2027. In order to do that, we would have to make quick progress on a lease, just given building time lines. But again, it kind of remains to be seen the overall scope of that opportunity, but it's very, very real.

Very helpful color, Tyler. I appreciate that. And just a follow-up for me. It sounds like you're getting some really strong interest in Odessa. Just curious what the potential data center delivery time line look like if you were to sign a lease and convert Odessa over to an HPC campus for bitcoin mining.

Yes. So much of that is going to depend on when exactly we would come to a full agreement. But I think, obviously, we have a site that's already constructed there that is a containerized data center for bitcoin mining. So should be relatively easy to decommission that site. And if we were to come to terms soon, certainly, we would be hoping to get our first megawatts online in calendar year 2027.

But that will depend on getting a lease done in the coming couple of months so that we don't get too far, or I should say, too close in terms of building time line to having something ready. So very end of 2027 would be kind of the target there.

And the next question comes from Chris Brendler with Rosenblatt Securities.

Congrats on all the progress here, amazing execution. I wanted to ask on the equipment procurement details you're giving us by site. These percentages are pretty impressive and also pretty impressive disclosure. Can you just give us more of a qualitative update on that process? I imagine it's getting more and more difficult given all the construction demand out there for data centers. How -- can you give us some qualitative comments on the equipment procurement side?

Yes. Let me start by saying that a big focus in some of our hiring over the last quarter has been deepening our bench focused on the procurement activities here in-house. It is something different with our setup versus most of our competitors. Most of our competitors outsource procurement. We still manage that supply chain in-house.

So Chris, one of the reasons you get more transparency from us is that we actually know where we stand with procurement at the sites. We're not sort of subject to the vagaries of the market and hoping to hear something positive from our outsourced provider. We've added a lot of depth to that team because that's such a key activity for us to manage. And I have to give general color that I think there's a high level of demand for everything. There is no question that from time to time, we'll see something harder to acquire, and we'll see decent amounts of inflation and cost.

But in general, when we build a construction time line, we work backwards from the longest lead time items, and those are generally established, and we know where we stand before we agree to a time line with a tenant. Again, as a broad generalization then, as we're going through a building process, if a particular piece of equipment becomes highly in demand, harder to procure, we can kind of manage around those challenges.

Makes sense. And just a follow-up there would be, as we progress here and hopefully sign additional HPC contracts for these additional sites, do you expect material increase in your power CapEx per critical IT? Are we still around $10 million a megawatt? Or is that heading north from here?

No, it's really going to depend on the tenant's build specs. So I've highlighted this sometimes in some conversations with investors that we iterate so much on the demands of the particular tenant and their understanding of a particular site that that's really what drives that. We are also awesome at procurement and managing our relationships, but it's not like we're necessarily so much better at getting a cheap price on transformers. It's that we are able to have a discussion with tenants about like, hey, given the historical reliability at this site, do you really need backup gens in the quantity that your standard basis of design would call for? And maybe the answer is no, and then maybe that drives a lower price.

I mean -- but what I can generalize about is that we definitely see inflation on labor and equipment across the board. And so as we build budgets for the next build, I would expect our budgeting to go up, and that probably translates into a higher cost per megawatt, at least to compensate for inflation. But any particular site may be at the lower end or higher end of the cost curve. And that's of course contemplated when we put together a proposal for a lease.

Right. You usually get those costs back.

And the last question is going to come from John Todaro with Needham.

Michael Chen on for John Todaro. Yes, going off of that procurement, historically, we've seen you guys quote CapEx in the $9 million to $11 million per megawatt range. And I know a lot of the equipment has already been secured, but we've seen pricing pressure and supply constraints increase across the sector. So curious, as you guys are looking at future leases and seeing where equipment still needs to be procured, are you seeing that cost creep higher? And how kind of confident are you in still hitting that band going forward?

Yes. I mean, look, I think as it regards to our current builds, we put together a budget that has contingencies for stuff like that. And I would say we're running at the contingency level given that inflation. Going forward, we're building in even more because, as I just said, we are seeing inflation across the board for labor and for equipment. So I do expect that those numbers will creep higher. But again, at any particular build spec, I think it's hard to generalize because it's driven by the demands of the tenant.

The other thing I'd mention, too, is keep in mind that some of our sites, we address this by putting a cap on the CapEx that we have exposure to. So sort of this is not really -- of course, we want to manage things as efficiently as possible, but we pass this risk to the tenant in some structures as well.

Got it. Understood. And on Odessa, if I'm not mistaken, the PPA there was set to expire. So is there a time line that you guys need to get a lease done in? Or was the PPA resigned there?

No. I mean that PPA runs through the end of July of next year, so 2027. Look, the attractiveness of that site is the ability to reconfigure it as an HPC site before the end of calendar year 2027. But any lease of that site for HPC will require a renegotiated PPA with Vistra Luminant, which is co-located with the site and providing power to the site. So that will all be hand-in-hand with the necessary lease discussions there.

And I will now turn the call back over to Tyler for closing remarks.

Thank you, everyone, for dialing in to our business update call. The future is extremely bright at Cipher, and we look forward to talking to you soon.

Cheers.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

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.

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