Thank you for standing by, and welcome to the IREN Second Quarter Fiscal Year 2025 Results Conference Call. At this time, all participants are in listen-only-mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Lincoln Tan, Director of Investor Relations. Please go ahead, sir.

Good afternoon to those joining us from North America, and good morning to our listeners in Australia. Welcome to IREN's second quarter FY '25 results presentation. My name is Lincoln Tan, Director of Investor Relations, and I'm pleased to be joined today by Daniel Roberts, Co-Founder and Co-CEO; Belinda Nucifora, CFO; and Kent Draper, Chief Commercial Officer. Before we begin, please note that this call is being webcast live accompanied by a presentation. I'd also like to remind you that some statements made during this call may constitute forward-looking statements. These are based on certain assumptions and subject to risks that could cause actual results to differ materially from our expectations. Listeners should not place undue reliance on these statements. Please refer to the disclaimer on Slide 2 of the accompanying presentation for further details. With that, let's get started. Over to you, Dan.

Thanks, Lincoln. Good afternoon, everyone, and thank you for dialing in to our Q2 FY '25 results presentation. So straight into the highlights, a record result in Q2, underpinned by some pretty rapid growth over the last 6 months, 12 months and low-cost Bitcoin production. So the investments we've made in scale and efficiency over the past 12 months, as you can see, are starting to flow through to our earnings, $18.9 million of NPAT recorded last quarter. We expect this continued earnings momentum in tandem with that growth profile, noting that the 31 exahash of energized capacity was only achieved at the end of the second quarter, and you can see that the average operating hashate for the prior quarter was substantially lower than that. So as we continue into ramping up to 50 exahash by the middle of this year, we expect to see those numbers to continue to grow in parallel. Final point on this is to note that, yes, Everi's [ph] miners strategy and financials are slightly different, but these financials are not impacted by any Bitcoin revaluations. We don't hold Bitcoin on our balance sheet. There's no fluctuations in the value of those up or down sideways. And consequently, our results reflect the pure profitability of our underlying operations. On the growth front, three key initiatives, which we'd like to highlight today. So firstly, we're excited to announce Horizon 1. Horizon 1 is our new 75-megawatt liquid cooled AI data center to be delivered at Childress this year. 75 megawatts of capacity translates to around about 50 megawatts of IT load. And what we've seen, particularly coming into the start of this year, it's increasingly clear that there is a strong market opportunity for us to capitalize on the shortage of liquid cooled data center…

Thank you, Dan. So good afternoon to those in Sydney - sorry, actually, it's morning here. So good morning to those in Sydney. It's actually a beautiful day, and good afternoon to those in North America. Thank you for joining us for our Q2 FY '25 earnings update. As Dan earlier mentioned, this was a record result. We delivered Bitcoin mining revenue of $113.5 million and operating cash flows of $53.7 million, and overall net profit after tax of $18.9 million. Adjusted EBITDA for the quarter increased by $60 million to $62.6 million. With the average operating hashrate increasing from 12.2 exahash to 22.6 exahash, and we mined 1,347 Bitcoin at an average realized price of $84.3 k. So I just noticed my camera may be out, so I'll try and adjust that if possible. Okay. I think that may be back on. Okay. Net electricity costs remained relatively flat for the quarter at $28.9 million with the increased megawatt usage at Childress offset by lower cost per megawatt due to the transition to a spot pricing strategy in August 2024. As such, the average net electricity cost per Bitcoin mined decreased from $35.4 k versus $21.4 k. Other costs of $25.1 million increased by $3.7 million, primarily due to additional purchase of renewable energy certificates at Childress for the increased megawatt usage as well as construction insurance costs at this site. The cost base reflects a business today that is delivering significant growth and projecting continued expansion over the coming years. So moving on to cash flows. Closing cash at bank at 31st of December 2024 was $427.3 million with receipts from Bitcoin mining activities of $113.6 million and AI cloud services of $3.5 million. Increase in electricity payments of negative $3.5 million, reflecting continued expansion at Childress with…

And we'll go with our first question. Our first question comes from the line of Joseph Vafi from Canaccord. Your question please.

Hey, guys. Good afternoon, to us in the US. And good morning to you. Really great update, a lot of exciting things. Maybe we just start here on the update on Horizon 1. It sounds like a pretty exciting project, energizing or being ready later this year. I was wondering if you could kind of talk about CapEx and where that stands at Horizon 1 and kind of what you've learned, especially with this rack density that you're building there? And then I have a quick follow-up.

Kent, would you like to take this one?

Yeah. Happy to jump in there. So we had some guidance that Dan mentioned within the presentation itself around the CapEx levels that we're seeing. Importantly, on our side, we are able to utilize a lot of the existing data center architecture, which means that we believe we're able to deliver this liquid cooled capacity at very effective cost per megawatt, but still with all of the key redundancy and other features that ultimate end users of that capacity would expect to see. We've also - it's worth noting, and we've discussed it in prior calls as well, already been ordering many of the long lead items associated with that build-out as well. So as we do with all of our build-out, whether it's on the Bitcoin mining side or on the AI data center side, making sure that we are well ahead of the curve in terms of ordering those long lead items.

Great. That's great color, and thanks for that update, Ken. Maybe we talk a little bit on Sweetwater. Clearly, a very ambitious project with the update that we heard here about adding Sweetwater 2 to Sweetwater 1 and the fiber loop interconnect. And I know, Dan, you also mentioned that the agreement you had with Morgan Stanley or the - is now kind of moving to the next phase where you're in different kinds of discussions. 2 gigawatts, quite of an ambitious big data center, which would probably be used for AI. And just - I know you've had probably a lot of discussions with a lot of players in the space. At a high level, this would be like massive. And so just trying to get a feel for demand out there amongst hyperscalers or other players around 2 gigawatts and what you're hearing kind of at a high level. Thanks a lot.

Yeah. No, thanks, Joe. Look, we were called far less polite terms than ambitious 6 years ago when we first suggested that the future of data centers may not all be in metropolitan areas because maybe there wouldn't be enough power there. So I think you fast forward to today, suggesting that a 2 gigawatt data center hub may be viable in the context of the market backdrop, all the announcements that's been made, including people with objectives far greater than 2 gigawatts. I don't think it's ambitious. I think it's entirely realistic and reflective of where the market is today. We have been surprised coming into 2025, just over that kind of Christmas holiday period, just the step-up in intensity in this sector. And I think I can't think of many, if any, hyperscalers that we're not talking to that aren't interested in 1 gigawatt plus campuses that can be delivered in the next few years. The market absolutely seems to be there. We're in a lot of active conversations. But again, I'm going to temper all of this because ones and zeros. You either do a deal or you don't. And we've got the ultimate backstop of building out bootstrapping with Bitcoin mining and preserving that single site opportunity where the value of having clusters all contained geographically on one campus seems to be quite powerful from these hyperscaler perspectives. So it's interesting. I wouldn't call it ambitious. I can call it entirely realistic. Yes, there's risk around Sweetwater 2 and getting the final signatures and executing that and turning it into a real project rather than hypothetical, but we're working hard on that. And yeah, I'm excited.

That's great. That's a great update. It's a great path forward. And thanks for the update.

Thank you. And our next question comes from the line of Greg Lewis from BTIG. Your question please.

Yeah. Hey, thank you. And good afternoon or good morning. And thanks for taking my questions. I guess my first one, Daniel, was around the update at Sweetwater with the incremental 600 megawatts. I guess a couple of questions around that. And I guess the first one is you're looking to potentially reenergize in 2028 - or energize in 2028. When did we have to get start getting in the queue to even be able to try to get on that track to 2020, realizing we don't have the approvals yet and there's still work to do. But I'm just kind of curious as you see that to even be able to kind of talk to the 600 megawatts? And then kind of has that changed, i.e., if we were to kind of get in the queue today, what would that look like?

1,000%. It's actually extraordinary how hard this is. To give you some context, we received a draft connection agreement for that site following completion of the studies in July last year. So where are we? February? How many months is that trying to get signatures on the document. It is so different to how it was 12, 18 months ago. I don't know how all these megawatts are going to be developed going forward. We've obviously got our multi-gigawatt development pipeline, including sites in Texas as well as globally and broader in North America. The congestion, the difficulty in actually getting these projects over the line and crossing that zero and 1 barrier to having a project that you can actually build out on, it's actually extraordinary the way we're seeing it at the moment. So we'll continue to push. We almost didn't disclose Sweetwater 2 today, but we are getting close. We feel like we're getting close and it is material to how we think about Sweetwater 1 in the context of the broader market dynamic we're seeing in West Texas. But absolutely, there's risk around any megawatts that aren't contracted, and we are living and breathing that every single day. I don't know, Kent, if you've got anything you'd like to add to that?

Yeah. The only other thing I would add, as Dan mentioned, the process has taken a long time for that project, and that was connection requests that we submitted over a year ago now. For projects that have been submitted in more recent months, we know that there has been a massive increase in the number of applications to utilities and to ERCOT. And those utilities in ERCOT haven't substantially expanded their teams and the number of people that are looking at those connection requests. So anything that has been submitted in the very recent number of months is going to take incrementally longer than what we saw for that Sweetwater 2 site. So it is becoming increasingly difficult.

Okay. Great. Thank you for that. And my other one was around just kind of looking for color and it's realized things are evolving on a daily basis. But you mentioned that $6 million to $7 million per megawatt. It's our understanding that a lot of the grid and the power equipment that's going to be - need to be sourced, maybe comes from Mexico or definitely inside NAFTA. And so as we think about that $6 million to $7 million in the event that there are tariffs, I don't know how we can - I don't know if you want to talk about maybe when we think about that $6 million to $7 million, is there any way to kind of frame out how much of it's imported without getting into specific price numbers, maybe how much of it is imported? And yeah, I guess that's kind of curious how that could be changing at least over the next few quarters.

Yeah, I'm happy to jump in there, Dan. So yeah, it is obviously a very dynamic environment at the moment, changing on an almost daily basis. And yes, it's something that we continue to monitor going forward. There is the potential for higher construction costs. We do have a very diversified supply base. So not everything today is coming in from the countries that have been announced as potential targets for increased tariffs. So we do feel like we're in a good position to handle it. And of course, anything that does get implemented is likely to hit all other providers as well. So I think it would be felt across the industry rather than something that is very specific to us. But yeah, we have been working on diversification of our supply base for a long time to make sure that we always have alternate providers in place. And while we didn't obviously envisage these specific tariffs and things like that, it was very much with multiple different scenarios in mind.

Okay. Thank you very much for the time. Have a great day.

Thank you. And our next question comes from the line of Darren Aftahi from ROTH. Your question please.

Yeah. Hey guys. Thanks for taking my questions. And nice job on the progress. Just two, if I may. I know in the past, you guys have always talked about looking at ROIs from the lens of the cost to build an exahash with Bitcoin and kind of the ascribed value the market gives you. I'm just sort of curious what calculus you kind of went through with Horizon 1 in terms of kind of reducing the 5 exahash and deciding to build the 75-megawatt HPC endeavor. Was that more of just always planned and now you're kind of formally announcing it? Or did something kind of change in what you're seeing?

Yeah. Hi, Darren, I appreciate all your support. Look, we deliberately didn't put numbers in the presentation because none of us know. This is unique, like liquid cooled data center capacity just doesn't really exist at scale, and there's no real market for it. What we do know and can see is traditional colocation rates and colocation rates for capacity that isn't necessarily liquid cooled for 75 megawatts. And I think when you run those numbers against the backdrop of CapEx of $6 million to $7 the numbers potentially look quite compelling. But we're not here to estimate where we'll get to. We're in a series of very different customer conversations around utilizing that capacity. And I think the decision goes more broadly, and it's more strategic. It's saying if you step back, you've got Bitcoin, we know where that's at. It's a great business, but we are so uniquely positioned from a strategic perspective to capitalize on this AI thematic and build out something that is relatively unique this year. Obviously, if AI fizzles out and becomes nothing, then the facility, we might have to repurpose it for Bitcoin mining or another use case. But I think the conviction we're seeing in AI at a macro level and the lack of ability of the current market and I guess those mini micro data centers in metropolitan areas to service these types of capacities, it just seems a really obvious opportunity for us where I would expect we will generate strong returns, not just from the 75 megawatts, but what it then unlocks strategically for our platform and how it helps us in the conversations that we're having around Sweetwater and the potential monetization pathway there. Because all of a sudden, we've now got a liquid cooled AI data center design signed up by global engineering firms that we're building, it creates - it's real. It's happening. So I think the strategic value to the platform beyond the discrete economics from 75 megawatts of Horizon 1 is incredibly powerful.

And I think in addition to that, Darren, what we've really seen is the demand side of things crystallizing over recent times. Historically, obviously, Blackwells were announced and everybody had an eye towards liquid cooled data centers. But what we are seeing now is demand from a number of different customer segments and in particular, customers that have already placed orders. And so they absolutely need liquid cooled capacity in order to house those GPUs. And we're seeing, as I said, that range coming from a range of different customer types, whether it's large hyperscalers, the Neo clouds, enterprise customers as well. And that for us has really helped crystallize our decision-making that the time is right to make that investment in this capacity.

That's helpful. Just one more, if I may. I know you mentioned there's some risk to getting it across the goal line. But like what's the strategic benefit of you guys announcing Sweetwater 2? Is this more customer focus? Or is there something else you keep in mind indulging us? Thanks.

Yeah. Look, it is very close, but I also think it's material for our investors to be aware that this project exists because, a, it provides context to our strategy with Sweetwater 1 and the single site opportunity that we're seeing. But b, it's material in the context of the broader market thematic and what's happening with this chase for multi-gigawatt data center campuses, particularly in West Texas to build out these AI clusters. So yes, ordinarily, we don't disclose development details because there is risk. But given it is late stage, given its materiality connected to the rest of our business, we thought it appropriate to bring investors into the fold and share a little bit more about this specific site.

Thanks, guys. Best of luck.

Thanks, Darren.

Thank you. And our next question comes from the line of Brett Knoblauch from Cantor Fitzgerald. Your question please.

Hi, guys. Thanks for taking my question. And congrats on the print. I guess the whole sector kind of sold off following DeepSeek. I think in your prepared remarks, you talked about maybe interest or demand picking up post that. Does that factor into maybe why you guys are announcing Horizon 1 after maybe just only recently kind of upping your hash guidance from 52 to 57 by end of the year?

Yeah. I think as Dan mentioned earlier, that's right. And we've seen it both on the cloud and the colocation side. So it's not just one area that it's limited to. But yes, it absolutely does factor into the thinking. And as I mentioned, we have seen a large uptick in demand for liquid cooled capacity and the time lines that people are wanting that demand on are something that we feel very well prepared to deliver upon and that we have a competitive advantage in because we don't think there are many others that are going to be able to deliver liquid cooled capacity on that same time line. So particularly 2025, but even into the early parts of 2026, still seeing a shortage of supply going out that far.

Perfect. That's helpful. And then is one way you think of Horizon as it's almost like a model home showcasing who would be the big tenant at Sweetwater, like what you can build and design and kind of giving them confidence for doing that same thing, but on a much larger scale.

Yes. I think that's certainly part of the benefit of it. If you look at our executive management team and Board, we've got a very long delivery of success - history, sorry, of successful delivery of large infrastructure projects, so in the many billions of dollars. So we certainly have the expertise and capability internally. I think we've proven that out to a large extent with the build-out of the Bitcoin mining side of the business. And as I've discussed in previous calls, the fact that we're building out 50 megawatts of data centers a month is to many people that we talk to in the industry, a massive surprise. But we've been doing that for many months now and continue to deliver at that clip, albeit acknowledging that, that is a different type of infrastructure to liquid cooled. So I think the fact that we're able to build out Horizon 1 at the Childress site is just a further demonstration of our internal capabilities. So yeah, I think it absolutely assists with all of those conversations. And many of those are, as Dan alluded to earlier, sort of taking more of the path of us having an ongoing ownership interest in the infrastructure itself. And so further demonstration of our capabilities is certainly useful.

Perfect. Really appreciate it, guys. Congrats.

Thank you. And our next question comes from the line of Stephen Glagola from Jones Trading. Your question please.

Hi, Dan. Belinda Kent. My question relates to investor concerns around potential HPC monetization of Sweetwater 1. I think there are two large ones, one, the site's suitability for inference compute; and two, single tenants like hyperscalers willingness to do a deal with a Bitcoin miner given sort of this perception that there is more balance sheet risk. Could you address sort of the validity of these concerns in your view? And has your desire to retain ownership of the land potentially adversely impacted conversations with hyperscalers for a deal at the site? Thank you.

Hi, Stephen, good to see you. Frankly, I think the world has moved past both of those two issues, and I'm surprised that we're still talking about it. The suitability of West Texas for AI training and inference. Yeah, I get it. People asked questions 6, 12 months ago, and we continue to put forward the fundamentals and actually break down the narrative that was being promoted. But I think we fast forward to today and you're seeing the announcements in the market, the intentions of all these trillion-dollar companies and people spending hundreds of billions of dollars. The question as to whether you can run inference for AI out of West Texas. Yeah, I don't think it's really worth addressing to be frank. The question around whether people will engage a Bitcoin miner to build out AI data center capacity. Again, I feel like we're going over old ground, and let's go back 5 years ago. We're not a Bitcoin mining company. We've never done [indiscernible] shipping containers, stitching together projects in the middle of the desert to mine Bitcoin and not think about what's tomorrow. Our data centers have been purpose built since day 1 for multi-tenancy different applications. Like we are operating, again, like I feel like a broken record. We have been operating for 12 months now NVIDIA GPUs right next to Bitcoin miners in the same data centers we have ever built and owned at all of our facilities. So honestly, I don't hear these investor concerns. I feel like we've addressed them pretty comprehensively, and we'll just focus on the next steps, which is monetizing the portfolio.

All right. Thanks, Dan.

Thank you. And our next question comes from the line of Joe Flynn from Compass Point Research. Your question please.

Hi, guys. Thanks for the question. I guess since the last business update 3 weeks ago, like what would you say is the biggest factor that led to the decision to build out the remaining capacity at Childress for AI HPC? Would you characterize that more as a spec build? Or do you have any like maybe soft commitments or interest to ultimately sign that capacity to customers?

Yeah. Kent, would you like to talk to this one?

Yeah, sure. So I touched on earlier, we're seeing this dynamic where the demand side is really starting to coalesce in terms of the requirement for liquid cooled data centers. So that is a part of it. As Dan mentioned earlier as well, the return side of it looks very attractive given where we're able to deliver that capacity in terms of a CapEx basis. In terms of the conversations that we're having, we are having multiple conversations around the capacity. I think a lot of what you see with these customer conversations is there are people talking about liquid cool capacity and having the ability to deliver it, but they don't have long lead items on order. They haven't - they're not advanced with their designs. They haven't started making any plans for construction. And so we think by actually catalyzing the construction and announcing this to the market and demonstrating the tangible path towards delivering this capacity, that will help with a lot of the customer conversations that we're having. So it's certainly not just an on-spec build. But again, we don't want to get people overexcited that there's a customer contract about to land a week or 2 away, but there are a lot of good conversations that we're having and seeing interest from a lot of different customer segments for this type of capacity.

Does that answer your question?

Yes, sorry. And on the financing component, you originally we're going to use the ATM to build out the remaining capacity at Childress. Do you think there's opportunities to finance this at the project level? And yeah. Thanks.

Yes. So at a more general level, as Dan mentioned earlier, we are looking to multiple different sources of financing. We do have the ATM in place. There are other avenues available to us at a corporate level that we continue to explore. We are very conscious of making sure that we are having the right mix of debt and equity at a corporate level overall. But one of the things we do like about the potential colocation side of the business is the ability to project finance it and attract different forms of financing. So once you catalyze a customer contract, they generally take the nature of 5, 10, 15-year. So very long-term contracts that lend themselves very well to project debt financing. So that absolutely is a possibility going forward in terms of the way that we finance this sort of build-out.

Sorry. And one more. What would you guys estimate the remaining CapEx to complete the 1.4 gigawatt substation by April? And ultimately - and I guess, longer term, I mean, in regards to your conversations, like are you considering maybe like partnering with a financing provider or doing a JV or anything like that? Thanks.

Yeah. In terms of the specific CapEx for the substation, we haven't disclosed, but substations are generally in the tens of millions, so well and truly covered by existing sources of capital, operating cash flow as we've discussed. In terms of financing partners, look, ultimately, these deals come down to the customer side, the revenue line. Get that, the financing will fall into place. Will and I are pretty skeptical of JVs and partnerships, et cetera, because my view, and it's been a long-term held view across a variety of businesses is that all you're doing is kicking the can on difficult decisions because a JV partnership, a co-owned vehicle, all you're doing is saying we don't know how to make decisions today. So therefore, we're going to have a governance arrangement to make those decisions down the track. And as you'd see throughout our business history, it's all about controlling our own destiny and being able to move quickly and nimbling to take advantage of the opportunity. So do we ever bring in an equity investor into a project company? Well, never say never, but our bias is always going to be to control the financing structures and governance of the underlying projects.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Dan Roberts, CEO, for any further remarks.

Thank you. Maybe just to spend 2 minutes addressing a couple of questions on Twitter or now X as we've got a bit of a community there that I'd like to give a shout out to and the level of analysis there is pretty healthy. So just to run through a couple of their questions. Agria Investments, could you provide more detail on the financing strategy for Horizon 1 ATM versus debt? As Kent mentioned, the financing strategy is flexible. The $1 billion ATM obviously underwrites certainty in our ability to deliver these, but the opportunity to layer in debt and project finance into AI data centers against customer contracts is real. Equally, we continue to look at the convertible note market. We continue to look at other forms of capital. So the expectation should absolutely not be that, that ATM is the sole source and our focus of financing going forward, but it does provide something that we can count on to underwrite these growth ambitions. Could you please clarify the unrealized gain loss on financial instrument in the P&L, the $12.9 million? That's just changing fair value of the convertible notes? A couple more. Why not Hodl [ph] some of the mined Bitcoin from Hodl 15 capital. We've outlined this before. We don't believe in diluting shareholders to put Bitcoin on our balance sheet. You guys can buy it yourselves. Will we convert to a REIT as suggested by Wolfe and someone else? Not at this stage. We see value creation more in the data center development and operations rather than being a landlord. How long is the sale process from start to onboarding a client into a data center? It's a bit. How long is a piece of string? Sorry, James. It depends on the client and the situation. Why did Morgan Stanley step out of the sale process? They didn't step out. They were terminated. We believe our opportunity is best served by dealing elsewhere. What's the best place to get food near Childress? The plaza has fantastic Mexican. So anyway, let's wrap that up. Thanks for all the support on Twitter. To wrap up our Q2 2025 earnings call. Thank you for listening in. We're really excited. The three key initiatives. One, continuing to expand our Bitcoin mining, which we're seeing flow through to robust earnings and operating cash flow to the development of our Sweetwater data center project and hopefully be projects informing a potential 2 gigawatt data center hub in West Texas. The opportunity to pursue a single site, single site tenant for that facility, but ultimately underwrite through Bitcoin mining in the meantime. And then finally, our expansion into liquid cooled AI data center capacity with the announcement of Horizon 1, which we're really excited to deliver on this year. So thank you everyone for dialing in. Have a good evening.+