Good day, and thank you for standing by. Welcome to Riot Platforms Third Quarter 2024 Earnings Conference Call. Please note that all participants have been placed in listen-only mode until the question-and-answer session begins following the company's presentation of its prepared remarks. Please also be advised that today's call is being recorded. I would now like to hand the conference call over to Phil McPherson, Vice President of Capital Markets and Investor Relations at Riot Platforms. Please go ahead.

Thank you, Liz. Good afternoon, and welcome to Riot Platforms third quarter 2024 earnings conference call. My name is Phil McPherson, Vice President of Capital Markets and Investor Relations. And joining me on today's call from Riot are Jason Les, CEO; Colin Yee, CFO; and Jason Chung, Executive Vice President and Head of Corporate Development and Strategy. On the Riot Investor Relations website, you can find our third quarter 2024 earnings press release and accompanying earnings presentation, which are intended to supplement today's prepared remarks and which include a discussion of certain non-GAAP items. Non-GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP and are included as additional clarifying items to aid investors in further understanding the company's third quarter performance. During today's call, we will be making forward-looking statements regarding potential future events. These statements are based on management's current expectations and assumptions, and are subject to risks and uncertainties. Actual results could materially differ due to factors discussed in today's earnings press release, in comments and responses made during today's call and in the risk factors section of our form 10-K and Forms 10-Q, including for the quarter ended September 30, 2024, which will be filed later today, as well as other filings with the Securities and Exchange Commission. With that, I will turn the call over to Jason Les, CEO of Riot Platforms.

Thank you, Phil, and good afternoon, everyone. Riot's primary strategic focus has been on developing a leading vertically integrated Bitcoin mining company built on the three key pillars of: developing and owning operations of significant scale; being a low-cost producer of Bitcoin; and building a balance sheet of strength. During the third quarter of 2024, we continued to demonstrate success at all three of these pillars. Riot increased total deployed hash rate quarter-over-quarter by 27%, from 22 exahash to 28 exahash, meeting our quarter end target of 28 exahash and on track to reach 35 exahash by the end of the year. The third quarter of 2024 was the first full operational quarter of Bitcoin production following the halving event, which occurred in late April and which led to a reduction in the Bitcoin block subsidy from 6.25 to 3.125 Bitcoin per block. Additionally, global hash rate grew by 40% -- sorry, 4% quarter-over-quarter. Both of these events created bearish headwinds for Bitcoin miners in relation to the cost to mine. Despite these events, Riot's cost to mine in the third quarter aided by our unique power strategy [indiscernible] among the lowest cost miners in our industry and was significantly below the average price per Bitcoin during the quarter. We generated $12.4 million in power credits during the quarter, lowering our all-in cost of power to $3.1 cents per kilowatt hour during the third quarter, while also supporting the Texas grid during times of disruption in supply and demand. During the third quarter, Riot also continued to address challenges regarding our operational hash rate. While we are always focused on continued growth, our primary focus at this time is on improving this metric and reaching a standard of operational excellence. During the quarter, we completed the redeployment of a large…

Thank you, Jason. I'm excited to present Riot's financial results for the third quarter of 2024. For ease of reference, and something you can always refer back to, is Slide 5. This presents a snapshot of key financial and operating metrics for the third quarter of 2024. However, let's jump into the details on the following slides. Riot owns and operates the largest dedicated Bitcoin mining facility in the world, the Rockdale Facility, where we continue to deploy miners and expand our self-mining capacity during the third quarter. In addition, Riot continues to add hash rate at our Corsacana Facility, which, when fully developed, will supplant the Rockdale Facility as the largest dedicated Bitcoin mining facility in the world. As a result of the successful development of our Corsicana Facility and ongoing development at our Rockdale Facility, Riot ended the third quarter with an installed hash rate of 28 exahash, a 159% increase relative to the third quarter of 2023, and meeting our guidance for the quarter. During this quarter, Riot mined 1,104 Bitcoin, in line with the 1,106 Bitcoin we mined during the third quarter of 2023. These results came about in spite of the Bitcoin block subsidy halving event, which occurred in April 2024, and the significant increase in the Bitcoin network difficulty which increased by 59% from the third quarter of 2023. In spite of these events and driven by the significant growth in our hash rate capacity expected through the remainder of the year, we anticipate producing more Bitcoin per day by the end of 2024 than we did in the first quarter of 2024, having notwithstanding. Riot ended the third quarter of 2024 with 10,427 Bitcoin and increased 42% relative to the 7,327 Bitcoin that we held at the end of the third quarter 2023.…

Thank you, Colin. With Riot's recent expansion into Kentucky, we now have a direct pathway to two gigawatts of total power capacity and are well on our way to securing enough capacity to achieve our growth target of 100 exahash of self-mining hash rate. The pipeline that will ultimately enable this growth consists of 700 megawatts of capacity at our Rockdale Facility, 1 gigawatt of capacity at our Corsicana Facility, and more than 300 megawatts in Kentucky. Today we are pleased to announce we have initiated the full second phase development of the Corsicana Facility, which will add 600 megawatts of capacity when complete and take the site to 1 gigawatt of capacity. We have placed orders for the [indiscernible] substation equipment and expect the development to be fully completed in 2026. Riot has long strived to provide clear guidance on our growth plans, and just as importantly, where we anticipate this growth will come from. We believe that providing visibility on not just overall growth plans, but also on the specific path to achieve our growth plans is a vital element in demonstrating the credibility of any Bitcoin miners' growth forecast. Through our vertically integrated strategy, we have developed multiple pipelines of organic growth opportunities available for us to pursue. These expansion opportunities are at various stages of development and can be prioritized or pushed back based on our assessment of the optimal distribution of resources for our portfolio of infrastructure at any given time. Going forward, we intend to present our growth targets on a more conservative basis, based on a higher degree of confidence and internal prioritization level relative to our prior methodology. We believe that this approach will position us to more confidently meet and exceed expectations. Therefore, and with this revised approach in mind, we…

[Operator Instructions] Our first question comes from the line of Mike Colonnese with H.C. Wainwright.

Hi, good afternoon, guys and congratulations on all the hash rate expansion over the past couple of quarters, really good to see. First one for me, maybe, Jason, you pointed this out a bit on the call here, but just evaluating the numbers for September, obviously, there's been a pretty big delta between Riot's deployed hash rate and average operating hash rate in recent months. And I can appreciate that you're rapidly energizing new miners and actively curtailing over the summer months. But going forward, how should investors really think about Riot's utilization rate?

So as we talked about in the prepared remarks here, we are super focused on achieving operational excellence. To us, this means large-scale operations running in a safe and compliant manner at a high uptime. Currently, we're aiming to achieve greater than 95% average utilization of deployed hash rate, that is excluding periods of curtailment related to power strategy. Of course, as we touched on, Mike, this is not an overnight fix, but we have been very, very pleased with the rapid improvements that we've been seeing. So previously, Riot was reporting hash rate utilization in the month in the 60% to 70% range and now for the most recent month, we're over 80%. We believe with the continued growth at Rockdale -- I'm sorry, continued growth at Corsicana, where we're very pleased with the new systems and how they're operating there, combined with the ongoing work at Rockdale that we touched on, where we're installing new M60 miners there, that this utilization is going to continue to improve through the end of the year, and we're going to enter 2025 very strong. So not an overnight fix, but our goal is to get to greater than 95% average utilization up time.

That's great. That's great. And next one for me. Obviously, you guys have tremendous organic growth opportunities through Corsicana over the next couple of years here. But I'm just curious, your appetite for additional M&A here, maybe you could just speak to what you're seeing in the market right now for deals on both the private and public side?

Sure. Let me turn that question over to Jason Chung.

Hi, Mike. Thanks for the question. Just to address that point, I think we continue to see a very robust flow of deal opportunities both on the public and private side, but I would say, in particular, on the private side as it comes to private miners. I believe the challenging hash price conditions, both halving alongside a lack of access to capital and a general need to upgrade aging fleets, appears to be driving greater capitulation among some of the private miners in particular. So we're very active in exploring all the opportunities. Given our position in the industry, we're one of the natural bidders and usually one of the first calls to see opportunities. We've got a large corporate development team that's very active in exploring these. I think overall, we continue to be very disciplined in how we think about when is the right time to pursue additional deals beyond the one that we announced earlier this summer.

Great. Thanks for taking my questions.

Our next question comes from the line of Darren Aftahi with ROTH.

Hi, guys. Thanks for taking my questions. First one, I guess, Jason, your comments about improved utilization outside of just the M60 new machines. Is there anything from a like logistical best practice that you're doing that's improving utilization? Or is it just the exclusively machine performance?

Yes, Darren, there's a huge number of projects that we've got underway to improve this utilization. And of course, we're pleased with the results that we're seeing from these miners, but there's a whole host of things that we've been implementing and are continuing to implement. We're improving our electrical infrastructure. We're making tweaks to how our cooling works. We're improving our on-the-ground organization around miner repair and support. We have ramped up our analytics and software capability. We're monitoring our operations on a very detailed level now, and it's allowing us to respond to things quicker and address things quicker. We've put a lot of expertise at play here in order to improve this metric. So the new miners certainly helped. That's a big part of it, but there are tens, if not 100 projects that have been underway over the course of 2024 in order to really focus on getting Riot to the state of operational excellence, getting to 2025 operating very strong.

Got it. And then I guess I'd be remiss if not asking this question, I assume somebody else will. As it pertains to Corsicana and the additional 600 megawatts, I mean as it stands today, are you still exclusively thinking that's all going to be spoken for in terms of Bitcoin mining, or do you have other aspirations to use that power portfolio? Thanks.

Yes. So we're building 600 megawatts of additional capacity. Of course, that starts with the substation. So that's bringing new energy. That can be used for multiple uses. Right now, our plans are for that to use with Bitcoin -- for that to use for Bitcoin mining. We are open to opportunities to allocate that capacity in another way that's best for shareholders, that's just better economics. So we've alluded to earlier several weeks ago that we've begun receiving some interest in capacity, particularly capacity that could be available in 2025, and these discussions are preliminary, but they're ongoing. So if there's a good opportunity to make a good deal for power, we are going to pursue that. But as of right now, the course is expanding Bitcoin mining hash rate.

Great. Thanks for the insights.

Our next question comes from the line of Greg Lewis with BTIG. Greg, your line maybe on mute.

Can we move on to the next one, operator? He can re-queue in.

Our next question comes from Paul Golding with Macquarie.

Thanks so much and congrats on the hash rate growth. Just wanted to ask a couple of questions here. One housekeeping question on the substation maintenance that you called out at the beginning of the month. Is that something that was driven by the utility and it's factored into your $12 million in demand response credits? Or is that something that didn't factor into financials? And then...

That was -- I'm sorry to interrupt you, please.

No, no, that was my follow-up, it's unrelated. So go ahead.

Okay. It was purely engineering. It wasn't a demand response kind of action. It was planned and scheduled, our internal teams at Riot handles it.

Got it. Thanks, Jason. And then I wanted to ask -- since you talked specifically about ESSMetron and the capacity of that subsidiary being utilized on government contracts. How do you think more broadly about ESSMetron utilization on third-party deals versus the vertically integrated infrastructure as you build out your capacity? Is it -- is there a marginal benefit to one or the other? How are you thinking about that holistically?

So Riot is actually a fairly small customer out of ESSMetron. As you can imagine, there's so much interest for the equipment right now, building out other types of data centers, generation applications, et cetera. So it is not too much of a give or take decision that they have to make. We don't tease our ability to pursue all the other jobs they have queued up there. They're really valuable though for us getting visibility in the supply chain, reducing our cost to build. And when we do have to make quick modifications, technology is changing, we're pivoting how we're deploying something, ESSMetron can work with us very quickly, probably a lot more flexible than they would be with third-party customers because it's all in the family together. So with that government contract now being shipped out at the end of the third quarter, this has freed up significant manufacturing capacity for this engineering division. That's great because they can get back on track towards prior revenue and gross margin levels. In this industry, the fourth quarter is typically slower for engineering division results. But with this new capacity that's now available, we are going to begin working on higher-margin contracts that will start seeing booked and worked on in the first quarter of 2025.

Got it. Thanks. And if I could just sneak one quick one in here at the end. Anything specific to call out as a key driver of the Kentucky timeline adjustment for the -- I believe it's 1.8 exahash you noted. Thanks.

Yes. So all of the planned pipeline support growth in Kentucky remain intact. So nothing is being canceled, or really just moving around. I touched on right at the portfolio of assets, and we're optimizing that portfolio based on what makes the most sense with the full landscape in front of us. The only reason that that growth in Kentucky has been pushed out was so we can spend some extra time in order to maximize the power capacity that we get, while also ensuring that we're getting the best possible economics. So in this short, it's simply a matter of prioritizing [indiscernible]

Got it. Thanks so much.

Thank you, Paul.

Thank you. Our next question will come from Joe Flynn from Compass Point Research & Trading. Your line is open.

Hi, guys. Thanks for the question. I was hoping you could provide more details into the continued increases in SG&A, which you attributed to onetime items, but it looks like that's spilling over into the fourth quarter. And I guess on the litigation front, like what is the status of ligation of the hosting counterparties as that continues to be a gross profit drag on the business? Thanks.

Yes. Thanks, Joe. So I'll start backwards. So I can't provide any update on the litigation. We can't really comment on litigation. But these cases are still ongoing. We have been -- speaking to the cash G&A, we have been extremely active in M&A during 2024. And so, you see in our financials, the closing of the acquisition of Block Mining resulted in $3 million of expenses being expensed under that acquisition-related cost bucket. And for M&A deals that have not closed such as activities related to our engagement with Bitfarms. In Bitfarms, of course, we incurred approximately $4 million in onetime costs, and those are classified on our financials under G&A. As you noted, we also had elevated expenses due to ongoing litigation. This is with legacy hosting customers that we inherited from the Whinstone acquisition in 2021. Now what we think is important here is that on a run rate basis, when you remove onetime M&A and litigation-related expenses for the quarter, our cash SG&A came in at $26.5 million, which is in line with our previous guidance. And noting this includes $700,000 in cash SG&A costs in business and compensation expenses as a result of the Kentucky acquisition and closing those operations in. So yes, we do expect the litigation costs to be elevated in the fourth quarter, unfortunately, but these are temporary in nature. They're not relative to the run rate of operating our business on an ongoing level. So the ones we unfortunately have to incur right now, and we're looking forward to having behind us when concluded.

Thanks. And piggyback off the earlier question. It sounded like you would be open to all options regarding the 600-megawatt substation. Just curious if like you've started conversations with -- even if early, with potential HPC counterparties and -- or if going forward and building that 600 megawatts substation could that lead to increased activity? Thanks.

Our belief is more power capacity is more optionality and the explosion of demand with AI HPC only makes that optionality more valuable. So -- like I noted earlier, these discussions are still preliminary, but they are ongoing. We're trying to see if there's a good deal that can be struck here to monetize this capacity that's an improvement over Bitcoin mining. If that reaches a conclusion, then we'll certainly update the market. But we are at least encouraged by the fact that we've seen interest from multiple parties.

All right. Thanks. That’s all from me.

Our next question comes from Bill Papanastasiou with Stifel.

Yes. Good evening, gentlemen. Thank for taking my questions. For the first one, I just want to touch on ESSMetron. Curious whether you're able to quantify this demand in growth in recent quarters from the AI HPC space. Can you share some color on how scalable ESSMetron is today and its ability to satisfy this growth in demand. Thanks.

I would say for these type of services, there is a lot of demand. ESS is limited by the size of that facility and the workers and the equipment, but mainly the size of the facility available for manufacturing there. And there are interest in jobs that they will accept delivery times way far out just to get on the line for equipment at this point. So while there's a lot of demand for immediate growth, there are many companies planning for growth many years into the future, and they just want to get in line right now for when that capacity increases. I don't have a forecast for you how we can increase that capacity right now. Obviously, that is something that we think about in order to fully capture this opportunity available. And unfortunately, I cannot -- I don't have a number for you to quantify what the demand is. But I can tell you, it's a very robust demand. And the limiting factor for us is really just the size of that facility and how much equipment we can fit on that factory floor basically. So we're looking at opportunities to increase that capacity because that would enable us to increase the revenue profile of that business.

That's great. Thank you. Helpful. And then for the second one, following the settlement agreement with Bitfarms, just curious how management is thinking today about its active stake and the playbook. My understanding is that, the settlement agreement did preclude you from making another attempt at going at Bitfarms and curious on your thoughts there.

Yes, that's correct, Bill. So I mean, first and foremost, as a large shareholder of Bitfarms, we clearly want them to succeed. We believe as a result of our engagement with Bitfarms, a number of positive corporate governance changes have been made. And today, Bitfarms is a much different company than it was at the start of this year. You think this is a change that benefits all shareholders and will help Bitfarms to be successful. We now have entered into the settlement agreement, there are no other attempts at corporate governance changes that could even possibly be made for some time. So with respect to our current position, we're going to continue to evaluate that and we're going to determine what we believe will be the best use of our capital. We haven't made any final decisions on what our longer-term plans are here. A lot of this is really going to be driven by a number of factors such as Bitfarm's own strategic development and execution as well as the Riot's strategic development execution as well as all the sector and market dynamics at play.

Thanks, Jason. Really appreciate the color there.

Our next question comes from Greg Lewis with BTIG.

Can you hear me? Hello?

Hi, Greg. Yes, I hear you.

Okay. Definitely technical difficulties out there. Hi, guys. I was hoping you could talk about -- clearly, you're highlighting the build-out of Corsicana. I'm just kind of curious, like, is there land and the possibility to kind of -- and I guess this goes for Rockdale as well. Is there any potential possibility over the next few years to expand those sites to make them bigger in terms of power capacity, if you were to go through the necessary filings with ERCOT?

Thanks for the question, Greg. With what we've built out in Texas, I don't really mean the operational base we built out, but the relationships we've built out, what we've learned everything in place as a result of building these two huge sites, we feel we have a really good advantage in being able to pursue greenfield opportunities and get additional capacity in Texas, whether it's near our current sites or elsewhere in Texas. These are things we're working on, on a regular basis. One of the things that having this pipeline of immediate growth at a place like Corsicana affords us is the ability to work and think longer term. So we're able to have our operations team developing Corsicana up to its full 1 gigawatt. And meanwhile, we're working on all these other opportunities or projects in the background that could either come in the immediate future year, 2025, 2026 or even beyond that. So I don't have any other detail that I can update for you with right now. We are always looking to create more optionality for us and increase our power capacity. And we're doing that with both potential organic growth opportunities and M&A opportunities as well.

Okay. Super helpful. And then on the delays, the Corsicana seems pretty straightforward. There's -- the transformer is just going to show up later. Any kind of color around Kentucky and it sounds like we're going to be more conservative with the guidance going forward around that. But kind of any kind of -- any kind of context you can give us around what maybe some of the delays that are kind of in Kentucky?

Yes. So I'll give you two pieces of color on that, Greg. The biggest reason is that -- well, first off, all the growth pipelines remain intact in Kentucky. The main reason that these growth timelines were pushed out is because there's an opportunity to spend some extra time in order to maximize the power capacity that we're getting out of these and also helping us to get the best possible economics. So we kind of made the decision of prioritizing getting the most out of these as opposed to prioritizing getting them as quickly as possible. There's also an element of that for us on the design opportunity. We found some ways that we felt we could build better operations or cheaper actually, but some equipment would take a little bit longer of a time ironically. So with all the capacity growth we have, we didn't feel an urgency to try and cut off opportunities or options for us by trying to make Kentucky growth as quickly as possible. We're focused on the high-value growth opportunities we have elsewhere and then we're flushing those out, so those are very solid in the future years to come.

Okay, perfect. Super helpful. Thanks, Jason.

Thank you, Greg.

Our next question comes from Brett Knoblauch with Cantor Fitzgerald.

Hi, guys. Thanks for taking my question. Maybe the first one, it seems like there's quite a pickup in urgency to add or expand your power infrastructure assets. Are you guys feeling that urgency to maybe go out and find additional sites, whether it's inside or outside of Texas in addition to Rockdale or Corsicana...

Hedges -- sorry, it was very difficult to hear. Were you talking about power hedges. Did I hear you correctly?

Yes. I was just looking for additional sites outside of the ones that you guys have maybe outside of Texas [indiscernible] the increased urgency on your guidance.

I wouldn't say there's necessarily an increased urgency. It's kind of in our DNA to try and procure as many high-value power assets as possible. And this is work that goes back as far as four years ago, at the end of 2020 -- end of 2020, Bitcoin is $12,000, $14,000 or higher, were felt extreme amount of urgency in being able to develop a vertically integrated platform to start layering in different power assets. So I wouldn't say there is an urgency because we are very disciplined in our process, we're not looking to bring in power assets just for the sake of capacity. We go through an incredible amount of diligence to make sure the opportunities that come across our desk are the ones that we actually want to pursue and have long-term value. So -- but short, the pipeline of growth that we developed in Corsicana, Rockdale and Kentucky means we are not dependent on M&A to achieve significant hash rate growth. We have a 2-gigawatt pipeline, and we've only developed about half of that so far. So we are patiently evaluating opportunities to continue and bolster that pipeline in the future years to come.

Perfect. Thank you. Maybe just one more. I know it's kind of been asked a couple of ways on the AI HPC optionality that's maybe embedded at Corsicana. Regarding the customer interest, have you guys been going out and marketing on that site or that optionality or have customers been coming to you expressing interest? Thank you.

We have not had a marketing and sales process. We have been receiving inbounds. Obviously, something we touched on before is in these types of deals, the counterparty quality is incredibly important. So we've been having discussions with those counterparties that we believe are blue chip and have the capital and credibility to bolster a long-term agreement. And I think Riot's reputation and our image of having so much the power capacity is what's resulting in us getting the unsolicited offers for really significant amounts of power capacity. The interest that we're seeing is for hundreds of megawatts, not necessarily small amounts.

Thanks very much. I appreciate it.

Our next question comes from Mike Grondahl with Northland Capital Markets.

Hi, guys. This is Owen on for Mike. Just super quickly for me. Can you provide some more color on the power curtailment strategy? And is it safe to assume the reasoning for the decline in power curtailment revenue on a year-over-year basis is mostly due to lighter demand?

Good question. So our -- so the power strategy has a few main components. One, for our power that's unhedged, we simply want to curtail when power on the spot market is above our breakeven levels. And what's great about Texas, the abundance of energy there we are really able to achieve a very good cost of power, only curtailing a few percentage of the year. In fact, we back tested a breakeven price for an M66S miner and back-tested over 2023 energy prices in Texas and if we curtailed 3%, 4% of the time, we're able to get a $31 per megawatt hour all-in cost of power. Now those 3% to 4% hours is where we're able to earn credits with our hedged power. In 2023, there was a lot of volatility in the summer months, and we were able to earn quite a bit of power credit. So even with the same volume of hedges in 2024, we do not see that same level of volatility, so we did not earn the same level of power credits. Now that feeds into our strategy though, because the lack of volatility meant that there were lower prices that we were able to procure at Corsicana now using more power than Rockdale at the spot level. We're always going to be involved in trying to demonstrate the value of Bitcoin mining. That means helping provide grid stability, helping improve the financial profile of generator assets, being a large flexible load that responds to events on the grid and that either comes in the form of a saving on power cost, not paying high prices and shutting off our load during those time periods or being able to monetize the financial commitment that we made with the hedge during those periods as well. So we have a whole team dedicated to our power strategy that's always looking at opportunities. We believe the forward curve has been relatively elevated relative to the market prices of power that we're seeing. There was a lot of fear of volatility going into summer 2024, and that volatility did not materialize. A real abundance of solar was able to fill in the gap that caused volatile prices in the future. So I know I covered a lot there. The short of it is, we are always trying to figure out ways that demonstrates the benefit of Bitcoin mining and also that improves our cost of power, improves our economics.

Great. That was really helpful. Thank you.

Our next question comes from Brian [indiscernible] with Needham.

Great. Thanks, guys. Just a couple of questions from our side. So just a follow-up to some of the last couple. Just what would you guys need to see to get into HPC? Is it simply a kind of Bitcoin cycle dynamic or the right customer coming around, if you could kind of pick between the two? And then separately, just on the timeline delays. For the electrical equipment delays, what's the latest on timelines for getting some of those long lead time items going?

So your first question, what will we need to see to get in the AI HPC. One of the components you nailed is a strong blue chip counterparty. This would be a significant amount of development, repurpose of assets going down a direction it's not very easy to return from. So we really want to be sure we're working with a very strong, well-capitalized counterparty. We're not really trying to time the cyclicality of the Bitcoin mining market, we're really looking at are these economics that are going to be better for us than Bitcoin mining? And where that's particularly relevant is on the upfront CapEx side. Building AI HPC data centers is incredibly more expensive than building Bitcoin mining facilities. So I think we'd be looking to pursue one of these type of deals, improving our capital efficiency, not making it more challenging. So I think that's the easy answer to your question. It depends on the counterparty, and it depends on the type of deal that's put in front of us. And remind me of your second question?

Just on the -- that's...

The long lead items.

The long lead items, exactly.

Yes. So while we have just recently initiated this Phase II development, we have ordered those long lead items in the past. When you're talking about 345 kv, 138 kv substation, these things are 18-plus months in lead time that can be even 24 months. So it is quite a long lead time for these items. So thankfully, we already have these orders in. And that's why we expect to receive them in a little under a year as opposed to the 18 or 24 months that a new order might be looking at right now.

Great. Thanks, guys.

Our next question comes from Lucas Pipes with B. Riley.

Thanks you very much, operator. Good afternoon, everyone. Jason, you mentioned a few times that you've been active looking at M&A. And I wonder where does this focus rank today. And kind of bigger picture, what sort of M&A opportunities are you looking at? Are you elephant hunting? Are you looking at smaller bolt-ons? Would be great to have a little bit better feel for that. Thank you very much.

Thanks, Lucas. So I would not say it is a choice of one or the other for us. We made the decision long ago in the company to invest in building out the corporate development team. So while one part of the company is focused on building out operations and the organic pipeline in front of us. We have a completely separate team of talented individuals that are looking at M&A opportunities. So by building out this corporate infrastructure, we're able to do both of these things at once, which we think is very important because of the scale and the sense of urgency in the small space. With respect to the types of M&A opportunities that we're looking at, let me turn that question over to Jason Chung, our EVP and Head of Corporate Development and Strategy.

Thanks, Jason. Hi, Lucas. A couple of comments to that question. First, when it comes to the type of opportunity and whether we're whale hunting or not, I would say we're relatively open to all to many different types of transactions. It does -- there does need to be a certain level of scale for it to really move the needle for us. And so we're open to larger deals. But sometimes, we see interesting opportunities or interesting valuations on the smaller end of the scale, which over time can eventually grow into something that's much more meaningful. So I don't think we think of it as wheel hunting versus -- and ignoring some of the smaller opportunities. It's really that we find a combination of valuation, operational excellence and operating in a jurisdiction that we want to be. I think the last comment I'll have to that question -- to your question, Lucas, is, although we did recently complete a transaction this past summer, the only thing that precludes us from closing another deal is finding the right opportunity. So we're very open to M&A. We're actively exploring opportunities to help supplement our large organic growth pipeline.

Thank you, Jason and Jason. A quick follow-up on this theme. First, do you find yourself competing with hyperscalers, AI HPC leading organizations or not? And secondly, when you screen for acquisitions, does AI HPC factor in? Or are you really more focused on the BTC side? Thank you.

I'll take that, Lucas. So there is a competition with AI HPC companies on some assets. But our advantage is the universe of assets that work for Bitcoin mining is much larger than that of assets that work for AI HPC. So really talking about locations and quality different sites. Some areas maybe very, very remote and very difficult to build. Maybe take some more time to build AI HPC, where Bitcoin mining can work a lot quicker. There are cases where people are building Bitcoin mining facilities in very remote locations and using just cell phone Internet in order to add Internet to those. Obviously, that's not going to work for an AI HPC data center. So the fact that this universe of assets that work for assets that work for AI HPC companies, we have an advantage over them in securing additional power capacity. I would not say we're necessarily looking at AI HPC companies specifically, but when we're looking at power assets, we are thinking about the optionality that gives us, and if they are potentially assets that we could strike a good deal with an AI operator. The key point is, we're trying to get access to power.

Jason and Jason, thanks again for the color and all the best of luck.

Thank you, Lucas.

Our next question comes from the line of Reggie Smith with JPMorgan.

Hi, guys. Thanks for taking the question. Most of mine have been hit. I was just curious, I guess one of your larger competitors recently made comments about kind of pausing greenfield development and using proceeds to buy Bitcoin directly and they kind of cited hash price and things like that. obviously, that company has a different asset base and land base to you guys. But I was just curious how you think about the decision to buy Bitcoin to build sites and things like that within the context of hash price and whether that kind of weighs into your capital allocation decisions?

Yes. Thanks, Reggie. So first and foremost, as part of this vertically integrated strategy, we prioritize building a portfolio and a pipeline of assets that we can act on, and how and when we monetize those is really up to our discretion. Of course, of recent years, the priority and the opportunity has been to build out those assets for Bitcoin mining. We think by what we've demonstrated as a low-cost producer that with one of our -- one of the industry's lowest cost of power, $0.031 per kilowatt hour for the third quarter of 2024 here, that our best method of accumulating Bitcoin is to leverage that power efficiency over a wide scale and effectively buying -- being able to procure Bitcoin at a discount to the market price. Our cost to mine for the quarter, including our power and on-the-ground operations expenses was $35,376 per Bitcoin. Now that's considerably less than what the market price of Bitcoin was during the period. So we think by being a low-cost producer with this industry-leading power strategy, that is the best way for us to get exposure to Bitcoin. Of course, we're a Bitcoin company. So anyone buying Bitcoin, any institution is exciting to us. Everyone has a different take how they prioritize their capital. We're using the low cost of power and putting that to work showing the benefits of Bitcoin mining.

If I can ask a quick follow-up on that. I totally appreciate the low cost of mining. One of the things that we've been kind of talking about is not just the cost of mine, but the kind of the time it takes to mine the amount of coin. Can you talk a little bit about maybe how that -- or how you consider or think about the time? Because presumably you could buy a Bitcoin today or you could mine Bitcoin. There's some time differential there. How does that play into your calculus, if at all?

Well, I think what Bitcoin mining affords is really a mechanism for averaging in the Bitcoin over a period of time. The price of Bitcoin went down, presumably in most cases, when it goes down for a long period of time, network difficulty responds as the higher cost producers fall off. And then you're mining Bitcoin at a lower price. This is a dynamic you saw if you compare 2021 to go into the bear market from 2022 and 2023 when cost of mine fluctuated around changes in network difficulty. So I think with Bitcoin mining, what you're doing is you're positioning yourself to average in overtime instead of picking one price and saying, okay, instead of the CapEx that I would load out into building out a facility, a new operation, I'm going to load into Bitcoin at this price. And you're instead kind of smoothing out and derisking what that exposure would be. It also allows us to be there when the Bitcoin price appreciates, when the economics in Bitcoin mining suddenly and unpredictably explode and then we're there already in-place operations, no lag in deploying hash rate in order to capture that opportunity. So I think the short answer to your question, Reggie, is it kind of comes down to your time. Do you want to average in over time? Or do you want to take a swing right now. We think with our cost efficiencies, it makes the most sense and is perhaps less risky to average in over time.

That actually makes a lot of sense. If I could sneak one more in, and I know you guys have talked about HPC ad nauseam tonight. But I was curious, I look at your two sites and them being located so close to Dallas and Austin. I was just curious whether or not that has come up as like an asset or a key feature of your sites in discussing -- obviously the scale of it as well, but in discussing HPC with potential partners or not? Just curious because it seems like you guys have a really good location, but maybe I'm overestimating that. I don't know if you've heard that echoed as well in your discussions? Thanks.

Yes, that is a good question, Reggie. Those locations near the major metropolitans is an advantage. First off, for getting people. It takes an army of people to operate these large sites whether it's Bitcoin mining or if it's AI HPC data centers. So you want high quality people there. And if you're near a bigger cities like Dallas or Austin, they are more nearby. Particularly, if you look at our Rockdale Facility, there's a tremendous amount of development in that area, particularly with the Samsung foundry that is being built there, there's a lot more talent that's coming in around there. Also as a result of being near these large metropolitans, there's multiple fiber Internet options. So that mix -- that's an attractive quality to potential AI HPC data centers as well. We've also -- near some of those locations that already exist large tech companies and that just is furthermore value to potential counterparties that we want to build around there. So major metropolitans have been -- seem to be an attractive quality.

Got it. Okay, thank you.

That concludes today's question-and-answer session. I'd like to turn the call back to Phil McPherson for closing remarks.

Thank you, operator. We'd like to thank everybody for joining Riot Platforms on their Third Quarter 2024 Earnings Call. We look forward to updating you on future developments, and we're always available for your questions. We'll see you early next year for the year-end. Thank you.

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