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Iris Energy (IREN) - 2025 Q2 - Earnings Call Transcript
IRENIris Energy (IREN)2025-02-13 02:59
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Financial Data and Key Metrics Changes - The company reported a record net profit after tax (NPAT) of 18.9millionforQ2FY′25,reflectingsignificantgrowthdrivenbylow−costBitcoinproductionandoperationalefficiencies[6][54].−AdjustedEBITDAincreasedby18.9 million for Q2 FY '25, reflecting significant growth driven by low-cost Bitcoin production and operational efficiencies [6][54]. - Adjusted EBITDA increased by 60 million to 62.6million,withtheaverageoperatinghashraterisingfrom12.2exahashto22.6exahash[55].−Bitcoinminingrevenuereached62.6 million, with the average operating hashrate rising from 12.2 exahash to 22.6 exahash [55]. - Bitcoin mining revenue reached 113.5 million, with operating cash flows of 53.7million[54].BusinessLineDataandKeyMetricsChanges−ThecompanyisexpandingitsBitcoinminingcapacityfrom31exahashtoatargetof50exahashbymid−2025,witharevisedtargetof52exahashduetotheallocationofresourcestotheHorizon1project[7][17].−TheaveragenetelectricitycostperBitcoinmineddecreasedfrom53.7 million [54]. Business Line Data and Key Metrics Changes - The company is expanding its Bitcoin mining capacity from 31 exahash to a target of 50 exahash by mid-2025, with a revised target of 52 exahash due to the allocation of resources to the Horizon 1 project [7][17]. - The average net electricity cost per Bitcoin mined decreased from 35.4k to 21.4k,attributedtoatransitiontoaspotpricingstrategy[56].MarketDataandKeyMetricsChanges−ThecompanynotedasignificantpowershortageintheU.S.datacentermarket,witha36gigawattshortfall,creatingopportunitiesforIRENtoleverageitssecuredgrid−connectedpower[41][42].−Thedemandforliquid−cooleddatacentercapacityisincreasing,particularlywiththeupcomingreleaseofNVIDIA′sBlackwellGPUs[10][23].CompanyStrategyandDevelopmentDirection−IRENisfocusingonexpandingitsAIdatacentercapabilitieswiththeHorizon1project,a75−megawattliquid−cooledfacility,tocapitalizeonthegrowingmarketforAIanddatacenterservices[10][50].−ThedevelopmentofSweetwater2,anew600−megawattsite,aimstocreatea2−gigawattdatacenterhub,enhancingthecompany′sstrategicpositioninWestTexas[12][28].−Thecompanyisprioritizingmulti−tenantcolocationatChildresswhilepreservingSweetwaterforsingle−siteopportunities,indicatingastrategicapproachtomaximizeassetutilization[51][52].Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismaboutthefuture,citingincreasedinterestfromhyperscalersinlarge−scaledatacentercampusesandthecompany′suniquepositiontomeetthisdemand[72][74].−ThemanagementteamacknowledgedtherisksassociatedwithprojectdevelopmentsbutemphasizedthematerialityoftheSweetwater2projectinthecontextofmarketdynamics[29][104].OtherImportantInformation−ThecompanyconfirmeditstransitiontoU.S.GAAPreportingstartinginH22025,whichwillimpacttheaccountingforitsconvertiblenotesandotherfinancialinstruments[60].−IREN′sbalancesheetremainsstrong,withtotalassetsincreasingtoapproximately21.4k, attributed to a transition to a spot pricing strategy [56]. Market Data and Key Metrics Changes - The company noted a significant power shortage in the U.S. data center market, with a 36 gigawatt shortfall, creating opportunities for IREN to leverage its secured grid-connected power [41][42]. - The demand for liquid-cooled data center capacity is increasing, particularly with the upcoming release of NVIDIA's Blackwell GPUs [10][23]. Company Strategy and Development Direction - IREN is focusing on expanding its AI data center capabilities with the Horizon 1 project, a 75-megawatt liquid-cooled facility, to capitalize on the growing market for AI and data center services [10][50]. - The development of Sweetwater 2, a new 600-megawatt site, aims to create a 2-gigawatt data center hub, enhancing the company's strategic position in West Texas [12][28]. - The company is prioritizing multi-tenant colocation at Childress while preserving Sweetwater for single-site opportunities, indicating a strategic approach to maximize asset utilization [51][52]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing increased interest from hyperscalers in large-scale data center campuses and the company's unique position to meet this demand [72][74]. - The management team acknowledged the risks associated with project developments but emphasized the materiality of the Sweetwater 2 project in the context of market dynamics [29][104]. Other Important Information - The company confirmed its transition to U.S. GAAP reporting starting in H2 2025, which will impact the accounting for its convertible notes and other financial instruments [60]. - IREN's balance sheet remains strong, with total assets increasing to approximately 1.9 billion, supporting future growth initiatives [59]. Q&A Session Summary Question: Update on Horizon 1 and CapEx - Management highlighted that existing data center architecture will help deliver liquid-cooled capacity at effective costs, with long lead items already ordered [63][66]. Question: Demand for Sweetwater 2 - Management noted that the demand for large data center campuses is realistic, with many hyperscalers interested in 1 gigawatt plus capacities [72][74]. Question: Challenges in Grid Connection - Management discussed the difficulties in securing grid connections, noting that the process has become more complex due to increased applications and limited utility resources [81][84]. Question: Construction Costs and Tariffs - Management indicated that while construction costs may rise due to tariffs, a diversified supply base mitigates risks [88][90]. Question: ROI Considerations for Horizon 1 - Management stated that the decision to build Horizon 1 was strategic, capitalizing on the growing demand for liquid-cooled data centers [97][99]. Question: Financing Options for Projects - Management confirmed that they are exploring multiple financing avenues, including project-level financing once customer contracts are secured [139].