RIOT - NASDAQ

Good day, and thank you for standing by. Welcome to the Riot Platforms First Quarter 2025 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 over to Phil McPherson, Vice President of Capital Markets and Investor Relations at Riot Platforms. Please go ahead.

Thank you, Lisa. Good afternoon, and welcome to Riot Platform's first quarter 2025 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; Benjamin Yi, Executive Chairman; 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 first quarter 2025 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 first quarter 2025 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 Form 10-Q, including for the three months ended, March 31, 2025, 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. Before we dive into Riot's first quarter 2025 results, I'd like to begin with a review of Riot's key accomplishments during the first quarter of 2025. Mining Uptime. Throughout the quarter, we were able to achieve an average uptime of nearly 90% in our Bitcoin Mining operations representing a significant improvement on prior periods and a testament to the work our teams have been putting in to enhance our operating efficiency. The acquisition of Rhodium Assets and settlement agreement. As announced on April 28, Riot has acquired certain assets of Rhodium, Riot's final hosting customer, including all of Rhodium's mining operations and access to 125 megawatts of contracted power at the Rockdale Facility. Riot and Rhodium have also entered into a settlement agreement in which we have mutually agreed to end all litigation between the two parties. This acquisition can potentially enhance our hash rate capacity in the near future, while giving us access to significant power capacity for future development. Further, it will significantly reduce operating losses and litigation costs associated with this legacy contract, which was inherited as part of our acquisition of Whinstone U.S. in 2021. This strategic acquisition aligns closely with Riot's long-term objectives to streamline operations, significantly reduce ongoing operating costs and reallocate resources to our more profitable core business. Prudent Financial Management. As a result of our strong balance sheet, Riot has had limited use of our ATM program in 2025 year-to-date, limiting dilution to our shareholders. Instead, we have been able to access other sources of financing to fund the necessary capital for growth and operating expenses. For example, during the month of April, Riot sold our monthly Bitcoin production and also entered into our first Bitcoin collateralized credit facility with Coinbase, allowing us to leverage our strength to reduce dilution while maintaining a strong balance sheet, which remains a core pillar of our business strategy. Advancing our AI/HPC data center business. Riot has made significant progress on building our data center business this quarter, and advancing on this objective remains our primary focus as a management team. In addition to the completion of Altman Solon's feasibility study of Corsicana for data center development, we are expanding our site footprint with additional land acquisitions are enhancing our internal expertise with key additions to the team and our advancing ongoing engagement with potential counterparties. I am proud of what we have been able to achieve in the first quarter of 2025 and look forward to continuing to report on our progress throughout the year and beyond. With that, I would now like to turn the call over to Colin Yee, CFO of Riot Platforms, to present our Q1 2025 financial update.

Thank you, Jason. I'm excited to present Riot's financial results for the first quarter of 2025. For ease of reference, we have highlighted key metrics on Slide 6, which presents a snapshot of key financial and operating metrics for the first quarter of 2025. I'll give everyone a moment to look over the snapshot before I jump into the details on the following slides. During the first quarter of 2025, Riot increased its self-mining hash rate from 31.5 exahash to 33.7 exahash, representing a 7% increase over the course of the quarter, nearly keeping pace with the increase in global hash rate, which rose by 10% in the same period. Despite the global network hash rate growing at a slightly greater pace than Riot's deployed hash rate, Riot produced 1,530 Bitcoin in the first quarter of 2025, an increase as compared to the 1,516 Bitcoin produced in the prior quarter. Riot was able to mine more Bitcoin than in the prior quarter due to substantial improvements in our operating efficiency. Year-to-date for 2025, we have increased Bitcoin holdings per million fully diluted shares from 44.3% to 47.4%, representing a Bitcoin yield of 7% through the period ended March 31, 2025. Going forward, we will continue to focus on generating an accretive Bitcoin yield in order to ensure that our shareholders are able to participate in the long-term value creation opportunity that Bitcoin represents. Riot also ended the quarter holding 19,223 Bitcoin, an increase of 8% relative to the 17,722 Bitcoin that we held at the end of 2024. For the first quarter of 2025, Riot reported total revenue of $161.4 million as compared to $142.6 million for the previous quarter, a 13% increase quarter-over-quarter. This increase was primarily driven by increased uptime and improved operating efficiency in our Bitcoin Mining business. Gross profit for the first quarter of 2025 was $73.6 million as compared to gross profit of $55.7 million for the prior quarter. Gross margin in the first quarter of 2025 equaled 46%, an increase from 39% in the prior quarter. Non-GAAP adjusted EBITDA for the first quarter of 2025 was negative $176.3 million as compared to non-GAAP adjusted EBITDA of $296.3 million for the prior quarter. Net loss for the first quarter of 2025 was $296.4 million, or $0.90 per share compared to a net income of $136.4 million, or $0.43 per share for the prior quarter. This net loss was primarily driven by mark-to-market adjustments due to the quarter-end decline in Bitcoin price and marketable securities totaling $271.2 million. As a reference, the Bitcoin price at the end of the fourth quarter of 2024 was $93,354, while the price at the end of the first quarter of 2025 was $82,534. This resulted in a mark-to-market downward adjustment of $208 million for the quarter. Net loss for the quarter also included depreciation and amortization expense of $77.9 million and non-cash stock-based compensation expense of $29.6 million. Cash SG&A for the quarter was $41.9 million, including one-time litigation expenses of $8.6 million and advisory fees of $3.0 million. Excluding these one-time expenses, Riot's cash SG&A expenses equaled $30.6 million, in line with our prior guidance of a run rate of $30 million to $33 million per quarter for 2025. For the first quarter of 2025, Bitcoin Mining revenue totaled $142.9 million, a 13% increase relative to the prior quarter Bitcoin Mining revenue of $126.3 million. This increase was primarily driven by an increase in Bitcoin production for the quarter, which resulted from our 7% increase in self-mining hash rate and enhanced operating efficiency. Bitcoin Mining gross margin for the quarter was 48%, nearly flat when compared to the Bitcoin Mining gross margin of 50% for the prior quarter. Direct cost to mine, excluding depreciation in the first quarter of 2025, was $43,808 per Bitcoin, of which power costs amounted to $35,313 per Bitcoin, or 81% of total direct cost per Bitcoin. Quarter-over-quarter, our net power costs decreased from $0.038 a kilowatt-hour to $0.034 a kilowatt-hour as Riot's power strategy continued to yield strong results. Direct non power costs, which include direct labor, miner insurance, miner and miner-related equipment repairs, land lease and related property taxes, network costs and other utility expenses totaled $8,495 or 19% per Bitcoin mined, down from the fourth quarter of 2024 when direct non-power costs accounted for 21% of total costs. This represents the third consecutive quarter in which direct non-power costs as a percentage of total direct cost per Bitcoin have dropped, and is a strong demonstration of Riot's ability to leverage improved economies of scale at our operating facilities. For the first quarter of 2025, Engineering revenue totaled $13.9 million, a 20% increase relative to the prior quarter Engineering revenue of $11.6 million. Total revenue does not include $6.4 million of intercompany parent purchases made in the first quarter by Riot for capital expenditures associated with our mining operations. Riot's prior fiscal year 2025 guidance of $100 million in Engineering revenue included approximately $16 million of intercompany purchases, which under GAAP accounting, are not included in our reported consolidated results. That being said, we remain on track to meet GAAP guidance of $84 million, and we expect revenue to continue increasing in upcoming quarters. The Engineering division also saw a return to profitability this quarter, achieving a gross profit of $2.1 million, representing a gross margin of 15% as compared to a gross loss of $2.4 million in the prior quarter. Our recent acquisition of E4A Solutions has helped support this profitability rebound in our Engineering division, which continued to see robust demand growth as this was the first full quarter, which incorporated the financial results of E4A Solutions in our Engineering business. With that, I would now like to turn the call over to Jason Chung to provide an update on our most recent transaction.

Thank you, Colin. On April 28, Riot announced the acquisition of Rhodium's operations and tangible assets, including all ASIC miners at our Rockdale facility, as part of a settlement agreement, which also included an agreement to mutually dismiss all existing litigation and a release on all future claims not connected to the closing of this transaction. The transaction consideration totaled $185 million and was comprised of $129.9 million in cash, return of Rhodium's $6.1 million power security deposit, and $49 million in Riot common stock. For background context, Riot assumes certain legacy Whinstone hosting agreements, including the agreement with Rhodium as part of Riot's acquisition of Whinstone U.S. in May 2021. As outlined on this slide, Rhodium formerly occupied roughly one half of Building B, and all of Building C at our Rockdale facility, and had contractual rights to 125 megawatts of power capacity representing a significant portion of total square footage and power capacity available on site. This legacy hosting contract was responsible for an approximately $14.6 million loss in 2024 alone and had a remaining term through December 2030. With this acquisition and settlement agreement, Riot has completely exited the hosting business and now has full control over the onsite infrastructure and 125 megawatts of power capacity previously dedicated to Rhodium at our Rockdale facility. We are in the process of evaluating the best use of this additional capacity to optimize the value of the additional infrastructure, power capacity and on-site assets going forward. I will now turn the call back over to Jason Les.

Thank you, Jason. Riot had $48.9 million in capital expenditures in the first quarter, primarily to continue the 600 megawatt substation expansion at Corsicana and advance on initiatives to enhance the optionality of the site for data center development. We have also incurred capital expenditures to grow Bitcoin Mining hash rate at our Kentucky facilities. As part of our work developing our AI/HPC data center business, Riot has secured the necessary easements for municipal water at Corsicana, while also acquiring additional land parcels for data center development. Riot is also in the process of securing additional fiber capacity for Corsicana, which will increase the number of connections from two to four. By taking these early steps to address long-lead items, we continue to aggressively pursue a value-maximizing outcome for our data center business. Riot's hash rate growth forecast for 2025 remains unchanged from our previously issued guidance. However, with the recent acquisition of Rhodium's assets at our Rockdale Facility, there is potential upside to our hash rate forecast. Our operations team is currently in the process of performing a full evaluation of the assets to determine the value-maximizing use of this new capacity. As this work is completed, we will update investors on the anticipated impact these new assets will have on our hash rate guidance. Earlier this year, Riot commissioned a feasibility study with Altman Solon, a leading consultant to the data center industry, to validate the opportunity for an AI/HPC data center campus at our Corsicana facility and to identify potential areas for improvement. We were pleased with the results of Altman Solon's feasibility study, which reinforced our thesis that large-scale access to power in close proximity to Tier-1 markets, as we have at Corsicana, is scarce and valuable. Altman Solon identified four primary factors at our Corsicana facility that they believe make it ideally suited for data center development. Number one, secured power. Corsicana is fully approved to draw 1 gigawatt of power, and we are actively developing infrastructure to support this power availability. Number two, own land. Corsicana has 35 acres immediately ready to develop a first-phase data center. And in the coming weeks, we are closing on the acquisition of significant additional land. Number three, the attractive location. Corsicana is only 60 miles from a Tier-1 datacenter market in Dallas, in close proximity to existing core hyperscaler architecture. And finally, scalability. Beyond the 600 megawatts of available capacity at Corsicana, Riot has additional expansion potential through its existing portfolio, and our Engineering division provides critical advantages to deliver on aggressive timelines. The civil work already completed at Corsicana provides a prime development pad for immediate first-phase development for our AI/HPC data center campus. The overview map on this slide shows the current layout of the site, which features the existing Bitcoin Mining operation on 20 acres, our current and future substation expansion, which, upon completion, will cover 15 acres, and the remaining available footprint totaling 35 acres. While this area is well-suited for our first phase development, we have proactively been procuring additional development acreage to fully utilize all 1 gigawatt of power. This month, we will be closing on an additional 355 acres of land less than a mile away from our Corsicana facility, and we are actively pursuing multiple options to add additional acreage in the immediate vicinity of our Corsicana facility for future development. This additional land, combined with the favorable zoning and tax treatment in Navarro County, allows for maximum flexibility and expedited and expedited development timelines that we can offer to tenants. The Corsicana facility is already well-suited for data center development. And some of the largest constraints facing the market today, such as access to power have already been solved. We are actively working to further improve the site and enhance its attractiveness to tenants. In addition to the progress on the power and land we have already made, additional areas where we have made progress in Corsicana include water. We are progressing with the development of two on-site wells and a municipal water source to bring ample additional water supply in 2026. In connectivity, we are in the process of bringing in additional fiber lines to the site to ensure an optimal amount of redundancy and diverse paths. This continued progress will ensure that our Corsicana site is the most attractive overall offering possible. We are working on an aggressive timeline to achieve the key milestones required for Riot to execute on our data center business objectives. In just the past few months, we have engaged industry experts, added expertise to our Board of Directors, and engaged financial advisers, all while continuing to develop the critical infrastructure components needed to achieve energization in 2026. Over the next few quarters, we will be further expanding our internal expertise to key hires and anticipate we will soon announce a best-in-class team to further drive top-level execution on our data center business. This will allow us to complete the basis of design for the first phase of the Corsicana data center campus, which will ultimately result in us securing an attractive lease with a high-quality tenant. We are continuing to make rapid progress through the pursuit of this initiative and have engaged with several counterparties who are already performing due diligence and will continue to share updates on our completion of these key milestones as they occur. In closing, Riot's first quarter 2025 results were driven by our Bitcoin Mining business and resulted in one of our strongest quarters as a result of improved operating uptime and other efficiencies. Riot's cost to mine in the first quarter of 2025 was essentially flat with the fourth quarter of 2024, despite the network difficulty increasing by 10%. Riot's proven power strategy continues to differentiate us from our competitors. This strategy continues to result in one of the lowest cost to mine Bitcoin amongst our peers, a key differentiator in our industry. Strong and efficient Bitcoin production combined with prudent financial management has resulted in a Bitcoin yield of 7% year-to-date. We will continue to focus on achieving industry-leading results while minimizing dilution and accomplishing our goal of maximizing value of all available power capacity. The development in leasing of an AI/HPC data center is our primary focus in 2025, and we will continue to build on the incredibly positive momentum already underway. We are investing in building a design ready to meet hyperscaler demand and create the most compelling data center offering possible, as we sit in an enviable position with one of the most attractive data center sites available in the country. I look forward to updating you on our progress. We will now open the call up for questions. Operator?

[Operator Instructions] And our first question will come from the line of Nick Giles of B. Riley Securities. Your line is open.

Thank you, operator. Good afternoon, everyone, and guys, congrats on the progress so far. My first question, if I'm not mistaken, Riot was behind the inception of the large flexible load task force, if I'm saying that correctly. And so I was curious what your main learnings are thus far in this process, where you could be moving away from power loads that are more flexible towards power loads that are more redundant in nature?

Yes, Nick, I wouldn't say Riot was necessarily behind the large flexible load task force. The inception of that task force was from legislative action in Texas, but we are closely involved in public policy efforts. So we really keep our ear to the ground on that and try to industry insight, expertise and viewpoints to ensure regulators are as successful as possible in what they're trying to accomplish. So the color I can give you is that when you think about the large flexible load task force, it's not just about curtailing for high prices or participating in the ancillary services, although that's a big part of it. There's a host of technical qualities and characteristics that it's important for all large loads to meet on a grid [indiscernible] the technical aspects and requirements. And I think we've developed a very strong capability with respect to understanding regulator viewpoints, understanding grid operator requirements, and what they're looking for any type of large load. I think that experience interacting with grid operators is one of the reasons that Riot is so successful at separating powered land and operating sites at really unprecedented volumes of power.

Jason, I appreciate all that color. My next question was just really how you're thinking about -- how you're approaching potential economics here, given that -- it seems like some of these key capital projects are being completed now, what could the benefit ultimately be in any deal? Or is there any targeted level of CapEx that we should be thinking about on the back of these?

I think it's too early to know what that exact type of target is. There remains a variety of structures and flavors that this could come together. Of course, we're focused on the structure that is going to maximize shareholder value. So we don't prejudice any structure necessarily, but we're looking at the options and looking at what is going to get us a maximum value of our assets, which we believe are scarce and valuable. What we're doing, Nick, with the work we have going on right now, is ensuring the ball moves forward. The fact that we are continuing to build that substation, bringing additional fiber to the site, to bring additional land, to bring in traditional water, all of these things continue to progress on the site. And it's really -- you can think about as advancing on what would be the power shell stage of traditional development. And doing this work, we think is making the overall offering just more attractive as time goes on. But the core of your question, what does this mean for a development cost or those type of specifics, I think it's too early to say. Our focus is on making this as valuable as possible and ensuring we're as successful as possible when engaging with hyperscalers.

Hi, fair enough. Well, again, congrats on the progress so far, and continued best of luck.

Thank you.

Thank you. One moment for the next question. And our next question is coming from the line of Patrick Moley of Piper Sandler. Your line is open.

Hi, how's it going? This is Will Copps on for Patrick. Thanks for taking my question. So since you all began and looking at AI/HPC opportunities in your comments -- conversations with potential tenants, have you sensed any tone shift or change in demand or change in potential decision-making timelines or signed deal? Thanks.

Yes. Well, I would say that demand continues to be robust as it's ever been. And I think we're starting to see more commentary from other hyperscalers that reinforces that. So we've continued to be very encouraged by the feedback that we've received not just from hyperscalers, but potential financing partners, which would be critical in this development as well. And everyone continues to recognize the value of power that can be delivered in the near term, in this case, we're talking about 2026. The fact remains, there's approximately 5 gigawatts of data center capacity being used for Generative AI today, and the forecast is we're going to need about 30 gigawatts by 2030. So that's a pretty big delta to feel to fill and in a pretty short period of time. And as a result, we continue to see strong demand. There's been commentary, I believe on Meta's earnings call yesterday about how they are increasing CapEx spent and commentary from other hyperscalers that they continue to be extremely focused on securing more data center capacity. So we're encouraged.

And then maybe as a quick follow-up. I know you mentioned financing partners. Can you give us an idea of what would project-level financing for one of these deals look like? Would you a tap into the Bitcoin treasury kind of like you mentioned with the April production, or and what would that look like?

Yes, Will. We will look at whatever is the value-maximizing option and whatever is going to give us the best cost of capital. That's what that decision comes down to. So I wouldn't preclude any option. I think details of what a financing deal would look like would really be dependent on the off-taker terms. We're not, of course, at the level of discussing -- we're not at the stage of discussing that level of detail yet. We believe we're very well-positioned on the financing sources with our advisors Evercore and Northland. And we really think the quality of the tenant is going to -- that we eventually would be able to secure is going to positively influence the amount and the quality of financing options available to us. So that's why our focus remains on not just getting a deal at a binary sense, but going after blue chip, very strong counterparties where the market will value those cash flows and those cash flows can be secured.

Thanks a lot, guys.

Thank you. One moment for the next question. And our next question will be coming from the line of Paul Golding of Macquarie. Your line is open.

Thanks so much. Congrats on the efficiency approaching 90%. I wanted to dive into some of the commentary around the HPC focus for this year. To what extent is the vertical integration with ESS Metron something that has come up in discussions or that you see as being additive to timelines or ability to deliver on an HPC client's expectations? And then secondly, just wanted to touch base on power across a couple of items, one being backup generation. In the presentation, you noted an on-site backup diesel generation. Just wanted to get a sense of some of those other long-lead time items, how you're approaching that, how much is stocked -- or how you're looking at that? Thanks so much.

Yes, Paul. Thank you for the question on the vertical integration. We think this is a really important differentiator that Riot has. We have an electrical engineering and manufacturing division with ESS Metron that engineers and manufacturers critical switchgear, and by the way, manufactures switchgear in the United States, which is becoming increasingly important when you think about de-risking supply chains. But our recent acquisition of E4A also enhances our ability to do electrical work using the skill-set that as you can imagine, when everyone is doing these data center demand is very constrained and difficult to secure that type of expertise. I'll also add that E4A does a considerable amount of work in generation, so they can be very helpful on the backup generation side. So feedback that we've gotten broadly from counterparties and from those who have been evaluating the opportunity, they have been positively, I'd say, inclined around the fact that we have this differentiating capability. On the generator side, as I touched on, that's something that our Engineering division has an expertise and does on a regular basis for counterparties. So we think we come well-positioned there and we'll have good insights into that supply chain. We don't have any commentary on what we secured or when we will secure backup generation of the lead time on that yet, but that is a key component. So that's something that we'll be paying close attention to in order to be aggressive on delivery timelines.

Thanks, Jason. If I could just squeeze one housekeeping question in here as well. I see in the presentation that you have 1 gigawatt approved. Obviously, that's the entirety of the current Corsicana site and then path to HPC of fully contracted 1 gigawatt as well. Presumably, that's adding 400, not reallocating some Bitcoin Mining power. Is that correct?

What we're trying to show on that slide is that we have 1 gigawatt approved 400 megawatts is currently being utilized for Bitcoin Mining and 600 megawatts is available for AI/HPC data center deal. However, if economics are attractive and things develop on the line, the whole 1 gigawatt is potentially on the table, the focus is just maximizing the value of that asset overall.

Great. Thanks so much, Jason.

Thank you.

Thank you. One moment for the next question. And the next question is coming from the line of Ben Sommers of BTIG. Your line is open.

Hi, guys. Good afternoon. Thanks for taking my questions. So first, on the recent. Hi guys, good afternoon. Thanks for taking my questions. On the recent $100 million credit facility with Coinbase, just kind of curious why now for this and how are we thinking about the capital strategy moving forward here?

Let me turn that over to Jason Chung.

Sure. Thanks, Jason, and thanks for the question. I think our financing activities this quarter give a good sense of how we're thinking about all the different financing options that we have available to us. So we saw extremely limited use of the ATM and therefore, very minimal dilution to our shareholders. When we did, issuing to the ATM we achieved an average share price of $13.05 per share. So we feel pretty good about our timing when we did utilize the ATM on a limited basis. But in addition to that, we took two other steps, right. In April, we started selling our monthly Bitcoin production as well, raising additional funds that way. And now with the Coinbase facility, we've opened up another avenue of financing for us that again sidesteps the ATM. So, as we see kind of weak valuations of the market at the moment, we've been very actively exploring these alternative financing options, and we'll continue to aggressively pursue other options in the market as they're available. That comes within the constraint on the debt side, on the leverage side, as we previously mentioned of targeting no more than 40% debt to Bitcoin on our balance sheet to maintain what we feel is a fairly comfortable sort of margin of safety on that.

Awesome. Thank you. Then my follow-up, so kind of on the topic of Global hash. Any color on how you think about Global hash trending in the current tariff environment? And kind of can this open up any opportunities for you guys to increase market share, whether in '25 or beyond there?

Yes. Ben, I think tariffs will generally impact a fair amount of miners growth plans and I think we're already seeing some commentary from different miners on how they are reevaluating their hash growth forecast. Riot is in a good position for a number of years now dating back to 2023 when we entered into a long-term miner purchase agreement with MicroBT out of the U.S. production facilities, that's really helped insulate us from tariffs at least for our growth plans in 2025, per hash rate so far. So I think the opportunity for Riot is that is with it being more expensive to perhaps grow Bitcoin Mining operations, global network hash rate may not grow as quickly towards the end of the year, assuming the Bitcoin price remains where it is, of course, if the price goes up, that would probably incentivize more development. So I think with where Riot sits today and the development that we have going on, we get a good market share from where we're at, and our low-cost operations will ensure that we continue to have margin through any volatility in hash price

Thanks for taking my questions.

Thank you. One moment for the next question. And the next question will be coming from the line of Darren Aftahi of ROTH. Your line is open.

Hi, guys. Thanks for taking my questions. First one, if I may. Just, Jason, you talked about there's a lot of moving parts here with acquiring more land, kind of expanding your water capabilities, and then redundant fiber. So I guess the first question is just around once you get the substation in the existing pad you have in the deck, like what's the capacity theoretically for HPC there? And then I guess, what steps have to be taken to kind of make that other piece of land that you're in the process of acquiring kind of usable, and what's kind of the timeline we can think about in terms of phases, theoretically? And I guess, how is that kind of dovetailing into kind of lease discussions? Thanks.

Yes. So there's a number of development strategies that you can take with the amount of land that's available there. You can get very aggressive on density -- the trade-off could be higher cost and potential limitations on future-proofing of the design, or the reason that we are procuring more land is the more footprint you have available, just the more development options that you have. So the fact that we have a substation that's coming on and a development pad that's already completed makes conversations really helpful with potential tenants, hyperscalers, because this isn't a greenfield exercise for a first phase. You can begin our first phase and work on additional phases in parallel. But the main thing we would need to do to get those additional phases ready would be some civil work. We're not acquiring just development pads there. There would need to be civil work done to get those sites ready for development, as well as some electrical work. But I think you typically, from what we've seen in the market, large players, large tenants are looking for multiple-phase developments. And the fact that we can get started with one right away and then being able to continue from additional phases in parallel in the future makes the offering possible. So we don't like strong guidance on what I can tell you is what's possible on that site, on that footprint. I think something in the range of 100 megawatts to 200 megawatts of critical IT load, depending on that tenant's preference, can be done there. But with higher expense, higher capital expense, you could get higher density there. The name of the game for us is improving the optionality of the site, making it making us as successful position as possible when we're engaging with hyperscalers.

Great. And then if I could just squeeze one more in. Just with the Rhodium building, what's the feasibility that that could be used for something other than Bitcoin? And I guess, what's the decision process between potentially retrofitting that 125 for HPC or actually using existing capacity at Corsicana that you just built? Thanks.

Well, I think it's too early to tell exactly what we're going to do with the assets and the power capacity that we acquire. We want to choose the value-maximizing approach with these assets. The fact that there's part of a substation that's already been built means that this could potentially work hard at AI/HPC data center development as well. It's going to have all the same qualities as Corsicana, which is why we're most focused on Corsicana. But what we get that's really valuable with this acquisition is we get, we eliminate the ongoing hosting loss, we eliminate the ongoing litigation loss and we get a meaningful amount of power that we can decide what to do with. So like I said, we're going to choose the value-maximizing approach with that capacity. To more specifically to address your question, Darren, I don't think we would like retrofit that building for AI/HPC, but we have land available around there. We could -- we have -- without the potential to build a data center development or building around there to just use the power that's already available, if that's the path we chose, still too early to say.

That's helpful. Thank you.

Thank you. One moment for the next question. And the next question is coming from the line of Reggie Smith of JPMorgan. Your line is open.

Hi, thank you. So, two questions for me. The first, I know you talked about tariffs, and I think you were referring to prices. I was curious if there's any exposure on the power infrastructure side to higher tariffs. And I got a follow-up. Thank you.

Yes. So, Reggie, good question. So on the power infrastructure side, it can kind of depend on the component, right. So when you're looking at least like the switchgear side, and what components, like our Engineering division produced, they produce those domestically. So at least purchasing from the OEM would not be subject to tariffs. They have their own components that they source to put these -- to put this equipment together though. And it's such a fluid situation with tariffs but it really is changing in the views and ideas are changing on a day-to-day basis. It's too early to say what it would impact -- how it would impact our Engineering division and their components. But more broader from other suppliers of electrical infrastructure, in particular, if you're talking about high voltage transformers, it would, of course, impact the cost of transformers that would be produced in China or other electrical equipment that would come from China. So we're seeing a lot of things happen all over the marketplace. We're staying really close to it. Too early to say what the overall impact would be.

Understood. Got it. And then this may be a tough question to answer, but I'm thinking about milestones along the path, more client-facing milestones on the HPC side. And so, as we think about the next 12 months or so, like what are some things we should look for to kind of let us know that you guys are kind of moving the ball down the field obviously not -- you don't have to give me any dates, but like what type of announcements should we be looking for or thinking about?

That's a good question, Reggie. I think you'll see us continuing to work at building an internal team to optimize our success here. That doesn't necessarily mean that we would be building something like this on our own. Building internal expertise would augment and support our ability to be successful in a JV type of structure as well. So we're going to continue to work on building that team. We are working on completing a basis of design for what a potential data center would look like. That way, we have something more concrete that we can have discussions around. We think that would be very helpful. And of course, the ultimate milestone finish line would be securing a lease at a tenant. And they would ultimately be -- have the requirements on what a design work would look like. So we would work collaboratively with them on what that design would be. And in addition, also financing would be an important milestone along the way there. So we are really focused on this. We strongly believe in the opportunity here. And we think there is a great opportunity for Riot to build a AI/HPC data center business, and that's our priority. And I think we are in a very good position to be successful in doing so.

That makes a lot of sense. I'm not sure if you can -- if there is anything else that would happen, but related to that tenant agreement, are there any kind of milestones there that may precipitate a deal or proceed a deal that we may look for. I don't know if it's a [indiscernible] negotiating window, like what typically happens there? Or is it just that a lease is announced with no forewarning from the -- from market perspective?

Reggie, I think you probably see some commentary around an LOI before a lease takes place. A lease in this type of arrangement, it's a pretty big undertaking, and it's typically preceded by the two parties entering into LOI. What the terms around that LOI are? I can't say right now, but that would probably first step that you see before a lease.

Got it. Okay. That makes sense. Perfect. Thank you, guys.

Thank you.

Thank you. One moment for the next question. The next question is coming from the line of Bill Papanastasiou of KBW. Your line is open.

Good evening. Thanks for taking my questions, gentlemen. For the first one, just hoping you could provide some more color on how you expect cash OpEx to trend following the settlement with Rhodium. Is that $27 million to $30 million target for quarterly SG&A still in play? Or could we expect that to come even lower in the second half of 2025, now that that settlement has finalized?

So Bill, our guidance on run-rate SG&A for 2025 was $30 million to $33 million per quarter. Now that does not include these one-off non-run rate expenses, like you're asking about like litigation expenses. It's really just so difficult to predict those. Those come so lumpy, and different milestones come up. For example, this quarter, all of a sudden working on an acquisition and settlement agreement with Rhodium in the midst of a bankruptcy process they had underway. That's not something we could have forecasted 12 months ago, but suddenly a bunch of expenses are incurred around that. So we feel good about our guidance on $30 million to $30 million run-rate SG&A, a cash SG&A. So the expenses that are core running our business, litigation or any type of special advisory fees, that's more unpredictable. We still do have active litigation with one of the former hosting customers, GMO. And we -- very likely we will incur litigation expenses on that, but it's very difficult to predict. So we can't provide guidance around that right now.

Appreciate that color and apologies. I got that target number incorrect. In the last earnings call, it was mentioned that you guys were analyzing all sorts of deal structure options in order to maximize shareholder value. Has your assessment of these options changed since the last update? And have you been able to narrow down on selection further, how are you kind of -- that.

Yes. So as you noted, Bill, we're most inclined to the options that's going to maximize the value of our assets. And from that perspective, we are narrowing down -- nearing in on a build-to-suit data center being our optimal path. We believe that type of structure can take all sorts of flavors from us, be solely self-performing in developing that to entirely rely on a JV infrastructure development partner, or kind of somewhere in between. In any one of those scenarios, though, a financing partner is critical, and that's an area where our advisors Evercore and Northland have been especially helpful. And we've received strong interest from potential financing partners because of [indiscernible] would involve greater internal capabilities than what we enter 2025 with, but we are rapidly assembling a data center team, and we are bringing upgraded capabilities to the table for more serious discussions. All that being said, if there is a world where another structure or option, such as doing a power chill or doing lease land, maximizes value, we are very open to that, but that's not what we're seeing in the marketplace today. So what we're trying to do is maximize our ability to be successful with a build-to-suit data center option, or keep an eye on any potential deal structures and keeping an open minded approach.

Appreciate the color. Thank you.

Thank you. One moment for the next question. And our next question will be coming from the line of Martin Toner of ATB Capital Markets. Your line is open.

Thank you for taking the question. Is there -- now that you are being more flexible with respect to the way you raise capital. Is there a way we should think about like the range around which you guys will choose to hold mine Bitcoin going forward?

Martin, I think the way that we're thinking about it is we're in a great position where we've created -- we put ourselves in a position where we have lots of levers for financing all the time. We have the ability to run ATM. We have a large Bitcoin balance. We -- with the Coinbase facility demonstrated, we can take a low-risk vehicle to borrow against that balance. We're working on other types of financing options as well. As you noted, we can sell out of our monthly production and still maintain a very strong Bitcoin balance. So -- but the way we look at it, Martin, is we're looking at our capital needs and we're trying choose the lowest cost of capital, the least dilutive option at any time. And in the recent month, that was selling our monthly for production. We may continue to do that in upcoming months, but it's something that we evaluate on an ongoing basis, and we're just always looking at what our best position is amongst all the options that we've had. And we're grateful to be in the position we have this many levers to choose from every day.

Makes sense. Thanks. On this nearby Corsicana, I'm assuming that will need to go through like the regular -- the typical like approval, like it's process before you guys can start holding?

No, there's no regulatory process. We already have the power approved at our location, us buying additional land is a very simple land acquisition and that just gives us additional land on what to use the power from our existing FDA.

It's perfectly fungible with the existing assets that are already approved.

Yes.

Awesome. Thanks.

Thank you. One moment for the next question. And our next question will be coming from the line of Mike Grondahl of Northland Capital. Your line is open.

Hi guys, thanks. In your discussion with potential tenants, any interesting or helpful feedback you're getting from them on the Corsicana site? And then as a follow-up to that, at this point, does any one or two potential tenants stick out, or is it kind of a wide-open contest right now?

Starting with your second question, Mike, there are a number of hyperscalers and even large companies beyond hyperscalers that are in high need of power data center capacity to meet their growth targets. So I would say, especially because of the location of our site that allows it to be used for generative AI training, inference, or Cloud applications being 60 miles away from Dallas Tier-1 datacenter, there's a lot of different things you can do at that site. So our view is the whole hyperscaler landscape and beyond that, our potential tenants in this for the Corsicana facility. As far as feedback. Feedback from our advisors has matched really what we've gotten from tenants, and that's why we've been working on improving the land of adding wide -- adding water and additional fiber connectivity. These weren't things that were holding us back, but we've gotten feedback on what we can do to make the offering more compelling and put ourselves in the best position possible to be successful. So we have a great site. It is in a very good position as it is. And what we've just been working in parallel with having these conversations, it's doing different things to enhance the overall offering and put ourselves in the best position to be successful.

Got it. Thank you. That's helpful.

Thank you. One moment for the next question. The next question is coming from the line of Brian Dobson of Clearwater (sic) [Clear Street]. Your line is open.

Hi. Thanks so much for taking my question. I was wondering if you could comment and give us a little bit of color on what you're seeing as the core driver of the, call it, semi-recent uptick in global hash. Can you perhaps opine on where that's coming from, which regions of the globe? And if you think it's sustainable, it certainly appears that way.

Yes, Brian, it's a good question. There's always a lag between when hash rate is getting deployed relative to market signals. So here we are now on May 1st, and it was about six months ago when Bitcoin really started taking off, leading up to and then after the election. So for miners who saw that increase in hash price then and wanted to act on it, their hash rate is coming on now. I think we're seeing global advancement in hash rate. I don't have any particular area that I can tell you is a particular global outfit. But there remains to be, I think, robust continued growth here in the United States. A number of our publicly-traded peers are still under -- still accomplished significant hash rate growth this year and have more underway. So it seemed to me that the publicly-traded Bitcoin miners continue to contribute to a lot of the global hash rate growth.

Yes. Certainly. Thanks very much for that color. I mean, we're hearing that there are some pockets globally that are pushing that forward. So we appreciate it. Thanks very much.

Thank you. One moment for the next question. And the next question is coming from the line of Joe Flynn of Compass Point Research. Your line is open.

Hi, guys. I was hoping maybe you could just expand on the initial development you're doing at the site. You kind of touched on it, but specifically was adding the fire lines customer directed, and ultimately kind of what that process entails is just outsourcing to OpEx flyer and any like completion timelines would be helpful.

Yes, Joe, good question. It was not a request from a potential tenant. It was just something that we've identified in the process that adding that would enhance our ability to sign a lease quicker and get a - be able to have a data center fully utilized on that site quicker. So we have just been looking at things from feedback we've gotten, that we can do to improve the offering of the site and improve our ability to get a lease with strong economics with a strong tenant. We think additional fiber probably could be completed in about 12 months. That would be used by -- we would use a third party to get that done. The good news is because of the area that the Corsicana site is in, 60 miles from this Tier-1 market in Dallas that there's a significant amount of fiber that we can tap into that area to add additional lines. So it's not as daunting of an activity as it may be in a more remote location. What's also interesting is because of the close proximity of our two sites, we even have the ability to potentially run dark fiber between the two sites. So for a tenant that was looking for a substantial amount of capacity and within both sites, they could potentially have a 1.7 gigawatt campus connected with their own fiber in between. So good -- we're in a good area to do this. We're bringing in outside help to help us get this done, probably take about 12 months to complete the additional fiber.

That's really good color. And then there's just a longer-term opportunity, but I think at one of your site visits, you talked about the potential to do on-site generation. I think the deck says using generators, but there's also been a lot of interest in kind of these microgrids. Like do you ultimately see an opportunity for net run that gas turbines as a source of redundancy in addition to your grid connects? And any color there would be helpful.

Yes, from the work that we've done, Joe, we think that diesel generation will be the ideal way to provide backup redundant power at the Corsicana facility. And with our capabilities from, like I touched on with the earlier question, they bring a strong expertise in that cash generation. So if there was an opportunity to use power -- I'm sorry, to use gas to provide not -- I'm sorry, if we have the ability to use gas to provide backup generation using natural gas, that was something we'd be very well-positioned to do with them. But for Corsicana likely would be useful.

All right. Thanks.

Thank you. One moment for the next question. And the next question is coming from the line of John Todaro of Needham. Your line is open.

Great. Thanks for taking my question. I just wanted to go back to two points that were brought up earlier. You mentioned an LOI is not in place right now. I just want to confirm that. So no LOI right now. And then the second point, you said you'd be very open to a powered shell, but you didn't think the market wanted that right now. I think we kind of got some of the sense that hyperscalers are maybe pushing Bitcoin miners to do a powered shell. So that'd be interesting if that's not the case, that they want a full stack build. But would love to get color on those two.

Yes, John. So that we -- there is not an LOI in place right now. With respect to my comments on a powered shell, what I meant to convey was we do not believe that is a value-maximizing route for Riot specifically. You -- there's, for example, there's a lot of interest in just leasing land. That would not be value-maximizing for Riot based on what we're seeing right now, but we remain open to that in case the right deal structure came along. I think they -- the hyperscalers out there are looking at all types of options. They are looking to just lease powered land. They are looking to take powered shells, and they are looking at build-to-suit data centers as well. So our objective as a management team is to maximize the value of our assets, to keep eyes-wide-open approach on the way that might be. But what we're seeing right now is that a build-to-suit data center is likely the best way for Riot to accomplish that.

Understood. And do you get the sense that if they want a power shell instead of that, you would maybe just do Bitcoin Mining with Corsicana? Is that kind of option number two?

We're not really thinking about it like that right now. To be honest, John, we're pretty committed to this path. We believe that we can be successful in building a data center at Corsicana. We think it's just such an attractive offering. We are working on putting together a team that will be able to deliver a build here, and I think that's an important differentiator that Riot is going to have when it comes to these conversations. So yes, we're not thinking of HPC or Bitcoin Mining right now. We are committed to the data center path.

Understood. Makes sense. Sounds good. Thank you, gentlemen.

Thank you.

Thank you. And this does conclude today's Q&A session. I would like to turn the call back over to Phil for closing remarks.

Thank you, Lisa. I'd like to thank everybody for joining us today on Riot's first quarter earnings call, and we look forward to updating you on our future progress. Take care.