Earnings Call Transcript - CIFR Q1 2026

Operator, Operator

Good day, and thank you for standing by. Welcome to Cipher Digital's business update for the first quarter of 2026. Please be advised, today's conference is being recorded. I would now like to hand the conference over to your speaker today, Drew Armstrong. Please go ahead.

Drew Armstrong, Head of Investor Relations

Good morning, and thank you for joining us on this conference call to address Cipher Digital's business update for the first quarter of 2026. Joining me on the call today are Tyler Page, Chief Executive Officer; and Greg Mumford, Chief Financial Officer. Please note that our press release and presentation can be found on the Investor Relations section of the company's website where this conference call will also be simultaneously webcast. Please also note that this conference call is the property of Cipher Digital, and any taping or other reproduction is expressly prohibited without prior consent. Before we start, I'd like to remind you that the following discussion as well as our press release and presentation contain forward-looking statements. These statements include, but are not limited to, Cipher's financial outlook, business plans and objectives, and other future events and developments, including statements about the market potential of our business operations, potential competition, and our goals and strategies. Forward-looking statements and risks in this conference call, including responses to your questions, are based on current expectations as of today, and Cipher assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. Additionally, the following discussion may contain non-GAAP financial measures. We may use non-GAAP measures to describe the way in which we manage and operate our business. We reconcile non-GAAP measures to the most directly comparable GAAP measures, and you are encouraged to examine those reconciliations, which are filed at the end of our earnings release issued earlier this morning. I will now turn the call over to our CEO, Tyler Page. Tyler?

Tyler Page, Chief Executive Officer

Thanks, Drew. Good morning, everyone, and thank you for joining us today. I'm Tyler Page, CEO of Cipher Digital, and I'm pleased to welcome you to our first quarter 2026 business update call. 2026 is the year of execution for Cipher, and we kicked the year off with a strong first quarter. We signed our third data center campus lease with an investment-grade hyperscale tenant, completed a $2 billion high-yield bond offering for Black Pearl, fully funding the project through completion, closed a $200 million revolving credit facility from a syndicate of leading global financial institutions and made substantial progress on the construction of our Barber Lake and Black Pearl HPC data centers. Execution, that is what defines this quarter and what will continue to define the rest of this year. When we rebranded to Cipher Digital, we did so with a declaration, "We are Built for Hyperscale." That phrase carries real meaning for us, and I want to spend a moment on what it means in the context of this quarter's results. Built for Hyperscale is not a marketing tagline. It is a description of the foundation of this company and the best-in-class team we have built, in-house power origination, engineering, construction management, and operations, all purpose-built to deliver bleeding-edge data center infrastructure at the speed and precision hyperscalers require. Each quarter, we add another point of proof. Our first lease at Barber Lake was proof of concept. Our second at Black Pearl was the proof of repeatability. Our third lease this quarter is proof that Cipher Digital itself is a leading development platform Built for Hyperscale. As we move through 2026 with 2 data centers under construction, a third preparing for mobilization and an extensive pipeline behind it, our differentiation will become increasingly visible to the market. Slide 4 provides a snapshot of Cipher Digital as it stands today. We are a vertically integrated developer and operator of industrial scale data centers built to serve the world's leading companies. Our in-house capabilities support the delivery of power dense, large-scale facilities to exact hyperscalers specifications at speed. As of today, we have 907 megawatts of operating and contracted capacity, anchored by 3 signed data center campus leases with world-class hyperscalers. That portfolio carries approximately $11.4 billion in contracted revenue across base lease terms of 10 to 15 years, providing Cipher with durable, high-quality, and long-term cash flows. Beyond that, we have an approximately 3.3 gigawatt pipeline of grid capacity, providing an extensive runway for future growth. The quality and scale of our pipeline is a competitive advantage that is difficult to replicate, representing years of disciplined power origination work. We are no longer an aspirational HPC developer. We are a company with signed contracts, billions of capital raised, and multiple data center construction projects progressing toward completion. Zooming out, Slide 5 shows the full geographic reach and scale of our development platform. Our portfolio consists of approximately 4.2 gigawatts of grid power across operating, contracted, and pipeline sites. Roughly 78% of that capacity represents pipeline HPC opportunities with the remaining balance split between our existing contracted capacity, our newly contracted capacity from this quarter's third lease, and our operating Bitcoin mining site at Odessa. The geographic concentration in West Texas is intentional. For years, the conventional wisdom in the traditional data center industry was that hyperscalers would not venture outside major metropolitan areas and that our sites were, as I described once before, at the edge of the known world. We disagreed and the market has proven us correct. West Texas has become one of the most sought-after regions in the country for large-scale AI infrastructure development, and Cipher is well positioned to execute on this unique opportunity. The addition of our Ohio site at Ulysses reflects our intentional geographic diversification. Major hyperscalers require data center capacity across multiple markets and power grids. Our ability to offer sites in both ERCOT and PJM strengthens our value proposition as a development partner for tenants with multi-market capacity requirements. This portfolio, the scale of it, the quality of the sites, and the geographic reach is the product of years of on-the-ground sourcing work. It cannot be assembled overnight, and it will continue to be a source of competitive advantage as demand for large-scale data center capacity continues to intensify. Let's now turn to the future trajectory of Cipher's contracted cash flow profile. Our 3 executed data center campus leases are expected to generate approximately $787 million of average annualized net operating income from October 2026 to September 2036. In 2035, we expect to have approximately $892 million of contracted net operating income. The addition of our third lease this quarter further strengthens this profile of contracted cash flows and adds meaningful net operating income to our projections. As a reminder, this is contracted net operating income, not a projection based on assumed future leases, not a model dependent on speculative outcomes. These are signed long-term agreements with investment-grade counterparties that create visible, stable contractual growth over the next decade. This slide shows the fundamental change in the financial character of this company. We are a business defined by stable long-term cash flows. The leases are signed, the financing is in place, and the construction is underway. The cash flows on this chart are not aspirational. They are contracted. Let me now walk through the specific highlights that defined our first quarter. On the corporate side, we accomplished 3 significant execution milestones that speak directly to the strength and maturation of this platform. First, we signed our third data center campus lease, a 15-year initial term agreement with an investment-grade hyperscale tenant. This is now 3 consecutive long-term leases with world-class counterparties in the span of approximately 8 months. We also completed a successful bond offering for $2 billion at a 6.125% coupon, fully funding the build-out of Black Pearl through delivery. The offering was significantly oversubscribed, and it included a reimbursement of approximately $233 million to Cipher for our prior equity contributions to the site. And finally, we closed our inaugural $200 million revolving credit facility, supported by a syndicate of leading global financial institutions. This was a landmark moment for Cipher. For the first time in our history, we now have a corporate level committed credit facility, a reflection of the maturation of our platform, the quality of our contracts, and the confidence of the world's strongest institutional lenders in Cipher. On the physical execution side, our results are equally impressive. At Barber Lake, we had over 1,100 daily active workers on site in April with more than 1,400 expected in May. More importantly, we have exceeded 1 million cumulative labor hours on site with 0 lost time incidents. That is an extraordinary safety record for a project of this scale and complexity, and it reflects the culture of operational discipline we have built within our construction team. At Black Pearl, we completed the demolition of the existing Bitcoin mining infrastructure for the Phase I retrofit within 1 month of kickoff. Phase II broke ground just 3 months after design kickoff. With both sites tracking, we have entered the second quarter with significant momentum. Now let's take a more detailed look at our current development portfolio. At Barber Lake, construction is well advanced, and the focus is entirely on delivery. I am pleased to report that Barber Lake is tracking well. In April, the building officially topped out, marking the completion of the primary structural steel. From the first column to the last structural beam, it took 127 days to stand up a roughly 800,000 square foot structure. This achievement is a testament to the quality of our construction management team and the depth of our supply chain relationships. Mechanical, electrical, and networking work fronts are now progressing in parallel, and the project continues to track toward meeting all contractual early access and substantial completion milestone dates. From a procurement standpoint, we have secured approximately 99% of the equipment required to complete this project. Equipment delivery schedules are aligned to support our construction completion targets, which means the risk of supply chain disruption to our timeline is minimal. Our design is 100% complete. All design milestones have been achieved on schedule, which eliminates another meaningful source of construction risk at this stage of the project. The next slide gives investors a visual representation of what has been accomplished at this site, and I encourage you to take a moment to look at it closely. Slide 10 shows an aerial photograph of the Barber Lake campus taken last week. Look at this image carefully because I think it captures something that numbers and bullet points cannot fully convey. Eight months ago, this was an open field in West Texas. Today, it is one of the largest data center structures under active construction in the United States. The scale of what this photograph shows is immense, a facility built to deliver 207 megawatts of critical IT load for some of the world's most sophisticated technology companies rising from the ground with a speed and precision that we believe is unmatched in this industry. When I think about how we got here, the years of site sourcing, lease negotiations, the financing work, the design and engineering, the procurement, the construction management, and I look at what stands on this site today, I am genuinely proud of every member of this team. This is what Built for Hyperscale looks like in practice. We look forward to welcoming our tenants to the campus later this year. Similar to Barber Lake, Black Pearl is progressing with the same level of discipline and velocity. The decommissioning of Bitcoin mining infrastructure is complete. The site has fully transitioned to data center development mode. Phase I of the retrofit is progressing well with mechanical, electrical, and networking work fronts in full swing. Crews are actively working to install the cooling and electrical infrastructure to enable the legacy building to accommodate the new HPC equipment. On the procurement front, approximately 93% of Phase I equipment is secured and delivery schedules are aligned to support our completion targets. On Phase II, site layout and earthwork began in April, just 3 months after design kickoff. We have also secured approximately 80% of Phase 2 equipment and delivery schedules are aligned to support our completion targets. The project is tracking to meet contractual early access and rack ready dates across both phases, and we remain confident in our ability to deliver this campus on schedule. Slide 12 provides a first look at construction progress at our Stingray site in Andrews County, Texas. As a reminder, this site has 100 megawatts of gross capacity fully approved with a target energization date in the fourth quarter of 2026. Development activity at Stingray began during the first quarter. Earthwork and pad preparation are currently in progress. Electrical work for the substation has commenced, consistent with our Q4 2026 energization timeline. We look forward to providing further updates on this site as construction mobilization progresses. Odessa continues to mine Bitcoin and the site performed well in the first quarter. As a reminder, Odessa's fixed price power purchase agreement at approximately $0.028 per kilowatt hour continues to position Cipher among the lowest cost Bitcoin producers in the industry. Today, we are operating 207 megawatts of capacity, generating approximately 11.6 exahash per second of total hash rate at a fleet efficiency of approximately 17.2 joules per terahash. In the first quarter, we mined approximately 346 Bitcoin at Odessa. Our mining operations remain fully self-funded. We do not anticipate additional capital investment in this part of the business as we continue prioritizing our platform towards HPC. Odessa continues to generate healthy cash flow as our data center leases ramp towards revenue commencement later this year. Let's now shift to an update on our development pipeline. Turning to Slide 15. I want to walk through the specific sites in our near-term pipeline and give investors a sense of where each stands today. Reveille and Ulysses represent our most advanced precontracting opportunities and are both fully interconnection approved. Reveille, located in Cotulla, Texas, has received ERCOT interconnection approval for 70 gross megawatts, and substation development has been initiated. We are in active and advanced discussions with multiple potential tenants for an HPC hosting lease at this site. Given Reveille's capacity falls below the threshold that would trigger ERCOT's batch process and given that its interconnection is already approved, the site's energization timeline of Q3 2027 is not subject to batch process uncertainty. The load is firm, the approvals are in hand, and we are actively converting this site into a contracted asset. Ulysses, our 200-megawatt site in Southeastern Ohio, has all necessary approvals to participate in the PJM market, and we are similarly in advanced discussions with prospective tenants for an HPC hosting lease here. This site is Cipher's first in PJM, and it is well suited for HPC data centers. We are targeting energization in Q4 2027 and remain highly confident in that timeline. Looking beyond these near-term sites, we have McLennan, Mikeska and Colchis. Each is advancing through the ERCOT interconnection process and tracking well. We continue to push all required workflows forward, fund all deposits on schedule, and ensure these energization timelines are preserved. All 3 sites are expected to energize in 2028, and all 3 sites are expected to be in batch 0 of the new ERCOT batch process. We have strong conviction in the quality of our pipeline positioning and continue to engage proactively with prospective tenants at each of these sites. Slide 16 brings the entire portfolio together in one view and illustrates the depth of the platform we have built. On the left, our current operating and contracted capacity, 207 megawatts of Bitcoin mining at Odessa, 300 megawatts contracted at Barber Lake with FluidStack and Google, 300 megawatts contracted at Black Pearl with Amazon Web Services, and 100 megawatts contracted under our newly signed third lease. Together, that totals 907 megawatts of operating and contracted gross capacity today. On the right, the pipeline capacity timeline tells the story of what comes next. In the 2027 window, Reveille and Ulysses together represent 270 megawatts of near-term pipeline capacity. In 2028 to 2029, Mikeska, McLennan, Milsing, and Colchis add up to 2.5 gigawatts of additional pipeline capacity. And looking to 2030 and beyond, an additional 500 megawatts at Barber Lake represents a further upsized opportunity at an already contracted and operating site. Altogether, this represents up to 4.2 gigawatts of total portfolio capacity from the grid. Our conviction has only strengthened over the past quarter. We believe Cipher is among the best positioned companies in the world to continue converting this pipeline into contracted long-term cash flows, and we look forward to demonstrating that over the quarters ahead. I'll now turn the call over to our CFO, Greg Mumford, who will walk through our financing activities, capital structure, and financial results for the first quarter. Greg?

Greg Mumford, Chief Financial Officer

Thanks, Tyler, and good morning, everyone. Over the past year, Cipher has taken significant steps to reshape the financial profile of the company, transitioning from a start-up Bitcoin miner to an institutionally backed digital infrastructure platform with long-term contracted cash flows and a purpose-built capital structure. In the first quarter, we continued to strengthen that financial foundation in ways that meaningfully derisk execution and improve forward visibility. We entered 2026 focused on strategic capital allocation, isolating construction risk via nonrecourse financing, and improving our corporate liquidity. In Q1, we successfully completed 2 additional financings, the $2 billion Black Pearl project level financing that fully fund our second data center campus through completion and a $200 million revolving credit facility. This revolver marks the first of its kind amongst our peer group, securing multi-year committed liquidity from leading financial institutions, including Morgan Stanley, Goldman Sachs, JPMorgan, Wells Fargo, Santander, and SMBC. Each of these transactions highlights the continued maturation of Cipher's platform. The Black Pearl financing represents our third successful project-level bond issuance, demonstrating repeat access to the capital markets and a growing diversified institutional investor base following our story. We achieved highly competitive pricing while maintaining structural flexibility through a callable format, which we believe positions us to actively manage and optimize our capital structure over time. The revolving credit facility supported by a broad syndicate of leading global banks further underscores the increasing confidence of institutional lenders in Cipher as a scaled and creditworthy counterparty and provides the liquidity foundation to support our continued growth. Turning to Slide 18. I want to walk investors through our full capital structure and liquidity position as at March 31, 2026. At the corporate level, we have a 4-year committed revolver for $200 million and 2 unsecured convertible notes. Revolving facility bears interest at SOFR plus 125 to 175 basis points, subject to the company's total debt-to-market capitalization ratio. This facility was undrawn at quarter end, but provides us the flexibility to support working capital, issue LCs, and fund growth initiatives. At the project level, we continue to pursue nonrecourse financing through construction, reflecting our disciplined approach to capital allocation. Cipher Compute LLC, the entity that holds the Barber Lake lease, carries approximately $1.7 billion of 7.125% senior secured notes due November 2030. These notes amortize aligning debt service with the cash flows generated by the lease. Black Pearl Compute LLC carries $2 billion of 6.125% senior secured notes due February 2031. Both bonds are currently trading at a premium to par, reflecting investor confidence in our ability to execute on both projects. In aggregate, total principal outstanding on our debt was approximately $5.2 billion. Unrestricted cash and cash equivalents stand at $715 million, providing substantial corporate liquidity in addition to Bitcoin totaling $76 million and our undrawn revolver availability. Restricted cash of approximately $3.5 billion includes approximately $1.8 billion at Cipher Compute or approximately $1.5 billion net of DSRA and interest-bearing construction accounts and approximately $1.8 billion at Black Pearl Compute or approximately $1.5 billion net of DSRA and interest-earning construction accounts. Both projects remain sufficiently capitalized through construction based on our current estimate to complete. This capital structure is purpose-built and our liquidity position is sufficient to fund our near-term development pipeline without requiring additional equity, providing clear visibility into execution. Importantly, the majority of our debt is nonrecourse and tied to contracted assets, isolating risk through construction and aligning debt with cash flow. Let's now turn to review of our financial results for the first quarter of 2026. Revenue for the first quarter was $35 million, down from $60 million in Q4, reflecting the planned wind down of mining operations at Black Pearl and our transition toward contracted data center revenue. Mining at Black Pearl was fully decommissioned in February. For the quarter, we reported a GAAP net loss of $114 million or $0.28 per diluted share compared to a GAAP net loss of $734 million or $1.85 per diluted share last quarter. The Q1 loss was primarily driven by a decrease in revenue from the planned wind down of mining operations at Black Pearl, the decrease in the fair value of our PPA, and the increase in interest expense from our new debt facilities. The Q4 loss was primarily driven by noncash and one-time items, including the embedded derivative revaluation on the 2031 convertible notes and mining asset write-downs. Cost of revenue for the first quarter was $18 million, down from $24 million in Q4, reflecting the transition to Odessa as our sole operating site. Compensation and benefits were $35 million in the quarter, in line with last quarter. Year-over-year compensation increased from $14 million, primarily reflecting headcount growth and equity-based compensation associated with scaling the platform. We increased headcount from 50 people in Q4 to 70 in Q1, and we're starting to normalize and slow hiring around 85 full-time employees. General and administrative expenses were $12 million, up from $10 million last quarter, primarily reflecting increased legal and professional fees associated with our lease negotiations and financing transactions. Depreciation and amortization decreased to $19 million from $52 million last quarter, primarily due to mining asset sales and decommissioning associated with the Black Pearl retrofit. The change in fair value of our power purchase agreement was a $28 million decrease this quarter compared to a $12 million decrease last quarter. As we've consistently noted, this is a noncash item. The value of the Luminant contract lies in its long-term fixed price power, supporting industry-leading power costs of approximately $0.028 per kilowatt hour, among the lowest in the industry. Moving below to the operating line. We generated $32 million of interest income in the quarter, up from $19 million last quarter, reflecting higher average cash balances following the Black Pearl financing. Interest expense was $59 million, up from $33 million last quarter, reflecting our project level financings. The change in fair value of our warrant liability was $44 million noncash gain this quarter compared to a $13 million loss last quarter, reflecting the changes in the value of the Google warrants associated with the Barber Lake lease. Turning to our balance sheet as of March 31, 2026. Total assets grew to $6.4 billion at quarter end, up from $4.3 billion last quarter, primarily driven by the Black Pearl project financing reflected in growth in both property and equipment as well as restricted cash. Cash and cash equivalents were $715 million. Restricted cash ring-fenced at the project entities and dedicated to construction spending totaled approximately $3.5 billion across current and noncurrent portions, including proceeds from the Black Pearl financing. Property and equipment net of depreciation grew to $1.3 billion from $633 million at year-end as a result of ongoing construction across multiple projects. On the liability side, borrowings totaled approximately $4.7 billion. Accounts payable grew to $198 million at quarter end from $40 million at year-end, consistent with the ramp-up of construction activity and normal timing of vendor payments. Balance sheet reflects the company in an active investment phase, deploying capital across multiple large-scale construction projects with associated contracted revenues ramping as assets come online. We are executing in line with plan, and we remain well positioned from a liquidity and capital allocation perspective to execute on our commitments and scale the platform. Before we open the call to questions, I want to take a moment to reflect on the full picture of where Cipher Digital stands as we close out the first quarter of 2026. We have executed 3 long-term data center campus leases, generating approximately $11.4 billion of contracted revenue over the base lease terms. We have 2 data centers under active construction, both tracking well. We have a third site where we will begin mobilizing construction in Q2. We have a strong balance sheet and have demonstrated a repeatable ability to finance construction projects competitively. We have retained flexibility in our financings and our capital structure will continue to evolve over time. Finally, we have approximately 3.3 gigawatts of additional capacity in our pipeline that positions us for continued growth well into the back half of this decade. We remain firmly committed to disciplined execution, capital efficiency, and delivering long-term value to our shareholders. The next 12 months will be defined by construction milestones, revenue commencement, and the continued conversion of our pipeline into contracted assets. We look forward to updating you on each of those fronts throughout the year. Thank you for your continued support. Tyler and I would be pleased to take your questions.

Operator, Operator

Our first question comes from Paul Golding with Macquarie.

Paul Golding, Analyst (Macquarie)

Congrats on all the progress on the sites. I just wanted to ask, first off, around pricing. It seems just doing the back of the envelope math that the incremental Stingray lease, the NOI seems to be per megawatt at least an improvement on the other 2 on average. Just wanted to ask as you're engaged in these incremental conversations with prospective tenants, how pricing is trending? Is it continuing to trend in a positive direction relative to your existing deals? And then as a follow-up, I just wanted to ask, in general, given the strength of these leases and lease negotiations, how you're thinking about compute? Is that sort of a business that you're considering at all? Has your thinking changed there? Or is the leasing environment for colo just so strong that you're sticking with that for now?

Tyler Page, Chief Executive Officer

Thanks, Paul. Let's start with pricing. It's hard to give a one-size-fits-all answer for leasing because it's a dynamic question that's really linked to speed to market and speed to availability. When you've got a site that is already energized or energized in the very near future, it trades at a premium as far as what it can get for a lease. As you continue to demonstrate the ability to build things at an accelerated pace like we are capable of doing, that also makes those timelines more realistic and gives you more pricing power. So yes, fair to say we continue to see premium pricing in our negotiations. But that's also because we have had sites that are available in the near term. We still have 2 sites that we are currently marketing in Reveille and Ulysses that I would consider near-term availability that have a fair amount of interest. I expect our pricing power to maintain there. Based on the conversations we're having, I do not see lease rates going down for premium sites with good timelines. On the compute question, historically we've said that if you are getting premium lease rates for colocation, it's generally a better business than owning the GPUs or TPUs or whatever chips you're running. We are looking at an interesting test case at Reveille. Given that Reveille is still a big data center at 70 megawatts, but maybe below the targets of the largest colocation tenants, we are evaluating a variety of business models at Reveille, including ones where we may participate in the ownership of the compute. There are interesting trends right now with credit support for Neoclouds. There are larger, more creditworthy supporters of Neoclouds that will provide credit support to try to ensure their success. At Reveille, given its scale, it is an attractive site for Neoclouds. Those Neoclouds can now get investment-grade support or other forms of support, whether it's a guarantee or prepayment. We are considering potential structures where we would also participate in owning and operating the compute at that site. On a risk-adjusted basis, the returns there could be favorable because we could get some support participating in that side of the business. At that scale, the returns can become interesting. So Reveille is our test kitchen site. We've had inquiries also at Ulysses on that. Our appetite for participating in compute ownership may be more in the scale of Reveille if we were to do so. But in general, when you can get very elevated lease rates, we favor the colocation business.

Paul Golding, Analyst (Macquarie)

That's really interesting. Do you see that decision being more prospective counterparty led or internal business model driven?

Tyler Page, Chief Executive Officer

It's a mix of both. For Neoclouds, generally they're trying to leverage any credit support they can get because these are expensive data centers to ramp up. They're not the very largest Neoclouds that have broad capital market access; they may live in the ecosystem of an NVIDIA or an AMD or similar. From conversations, they often have compute offtake lined up if they can find a good site within a favorable time window. Our discussions focus on factors like what type of credit support would make a smaller Neocloud attractive as a tenant—investment-grade backstops are ideal. Prepayment of fees can significantly derisk a project; we've seen anecdotal examples of large prepayments which materially change the risk profile. Ultimately it comes down to math: how much prepayment or strong enough credit support exists to influence our willingness to participate in the compute side of the business. Historically, owning the compute hasn't been as attractive because while compute offtake agreements can pay back machines in five years, there is often a debt overhang on the data center after that term. That creates extended life risk for today's machines and potential exposure if the compute tenant ramps down. Given our experience with ASICs, returns can change quickly. When you can secure higher lease rates and longer contracts in colo, you can have a fully paid-for asset at attractive returns. That aligns with our broader thesis about West Texas sites having significant terminal value. It's complex, but the short answer is we seek the best risk-adjusted returns for shareholders. As credit support in the space has evolved, participating in owning the computers at a site like Reveille has become more interesting.

Operator, Operator

Our next question comes from Joseph Vafi with Canaccord Genuity.

Joseph Vafi, Analyst (Canaccord Genuity)

Congrats on all the great progress, really great to see. Maybe, Tyler, any update on the Odessa PPA? Obviously, the market is really strong, and I'm sure that this is a top-of-mind issue. And then I have a quick follow-up.

Tyler Page, Chief Executive Officer

It's valuable to have such a low-cost power PPA at Odessa. That contract gives us very favorable margins in Bitcoin mining and is locked in at a low rate for the next 14 months or so. We have a lot of interest in Odessa, and we've had hyperscaler interest in that site. We would be interested in potentially evolving that site, similar to Black Pearl, from a Bitcoin mining site to an HPC campus. That would involve several counterparties because we would need to renegotiate the PPA, and we'll work with the counterparty there. The PPA is a strong bargaining chip as we consider the future of that site. That future could be to continue mining Bitcoin there for the next 14 months and generate attractive mining economics; we're not in a rush because the economics are favorable.

Joseph Vafi, Analyst (Canaccord Genuity)

Sure. That makes sense. And then just sticking to the behind-the-meter theme. I know, Tyler, in previous calls, you've mentioned exploring behind-the-meter options. I mean, clearly, you got a big power portfolio, but an update on your strategy and what you're thinking on behind-the-meter opportunities.

Tyler Page, Chief Executive Officer

We've had some of our best people focused on behind-the-meter in recent months. The potential for on-site generation is considerable for our sites given the local access to cheap natural gas in West Texas. There are significant challenges: engineering to support the HPC load profile when running on behind-the-meter generation, arranging gas infrastructure, working with independent power producers, air permitting, financing, and structuring long-term guarantees for billions of dollars. It is complex. The good news is we have the ingredients to pursue it. It largely hasn't been done at scale; the ecosystem is fragmented and requires alignment across many parties. The potential is exciting, and tenants are interested enough that we're spending meaningful time on it. If successful, it could bring substantial upside to our business.

Operator, Operator

Our next question comes from Brian Dobson with Clear Street.

Brian Dobson, Analyst (Clear Street)

So congratulations on the new contract. Can you give us any color, are there any potential options to expand on the initial 100 megawatts?

Tyler Page, Chief Executive Officer

It's 100 megawatts to start. As I mentioned, our sites are situated above large natural gas resources, and we own significant land, so there could be opportunities to expand in the future. But under the current contract, it covers the initial 100 megawatts.

Brian Dobson, Analyst (Clear Street)

Okay. Excellent. And then as you're looking out over the next few years, do you see a point where you could exit Bitcoin mining entirely? And what do you think the business looks like, call it, by 2030? You spent some time talking about the long-term goals of Cipher.

Tyler Page, Chief Executive Officer

It's a great question. I see Bitcoin winding down in our story because we do not plan to deploy further capital into Bitcoin mining. We have an operational site at Odessa that could run with favorable economics until the end of July 2027. That site produces positive cash flow every month, so we're comfortable operating it while it's attractive. We're not in a rush to sell our Bitcoin inventory; we've managed inventory prudently and have collected option premium at times. I would expect Bitcoin to cease being material to our financials prior to 2030 and likely be out of our story by the end of 2027 at the latest. Looking toward 2030, the upside is compelling. We expect to convert our pipeline into contracted long-term cash flows, particularly if ERCOT's batch process results favorably. The HPC business can be a flywheel—sign leases, demonstrate execution, finance competitively, and then repeat. Our two recent project financings are trading above par, which supports our confidence. By 2030, I expect to have high-quality long-term leases with top tenants across many sites and to be operating multiple gigawatts of HPC capacity at attractive colocation rates. There's a lot of work to do, but I'm very optimistic about our team's ability to deliver.

Operator, Operator

Our next question comes from Michael Donovan with Compass Point.

Michael Donovan, Analyst (Compass Point)

Congrats on the progress. Can you discuss what equipment remains outstanding for Black Pearl's Phase I and II?

Tyler Page, Chief Executive Officer

For the outstanding equipment at Black Pearl, the items remaining are generally commodity-like items that fit on our procurement timeline. We secured approximately 93% of Phase I equipment and about 80% of Phase II equipment. The remaining items are not long lead-time components; they tend to be things like cabling, miscellaneous mechanical equipment, and other commodity materials aligned with the expected procurement schedule.

Michael Donovan, Analyst (Compass Point)

Great. That's helpful, Tyler. And then a follow-up. As your contracted backlog has expanded, has your view changed on how far in advance of expected site energization you would sign a new lease?

Tyler Page, Chief Executive Officer

Having the interconnect in hand is an important proof point for tenants. We're watching the ERCOT batch process closely. If we have interconnects for large sites expected to energize in 2028, we'll proceed with lease negotiations promptly. A gigawatt site is very attractive, and tenants need enough time to build. Historically, the interconnect is a gating factor—many purported sites fall apart when you diligence the grid connection. Our ability to deliver quickly is a major advantage; we manage procurement in-house and have a strong construction and supply chain team. At this point, we are more likely to deliver ahead of schedule than behind, which strengthens our position in lease negotiations and feeds the flywheel I described earlier.

Operator, Operator

Our next question is from Ben Sommers with BTIG.

Benjamin Sommers, Analyst (BTIG)

So you mentioned earlier on the inquiries you've gotten to potentially own your own compute at Ohio at Ulysses. I guess kind of just zooming out here, curious on the broader demand you are seeing for the site. And is there anything to call out here given that it is in a different power market than the rest of the portfolio?

Tyler Page, Chief Executive Officer

We have inquiries and live discussions with multiple hyperscalers for Ulysses. If we were to dip our toe into owning compute, it's more likely at Reveille given its size and risk profile, but never say never for Ulysses. We also have strong interest in Ulysses for traditional colocation. PJM is a market we've targeted for some time, and the site looks great; I visited two weeks ago. PJM typically has higher deposit requirements than ERCOT, making attractive sites scarcer, which can put a premium on Ulysses. In short, there's high interest in the site and PJM demand is solid.

Benjamin Sommers, Analyst (BTIG)

Awesome. Super helpful. Then on to the financing side, just kind of curious if there's anything to call out on potentially project level financing for the new 100-megawatt contract. And I guess just anything you're seeing kind of the project level financing for colocation contracts that you want to call out?

Greg Mumford, Chief Financial Officer

Thanks for the question. We've executed three successful project-level bond issuances now, demonstrating our ability to access the capital markets and build a diversified institutional investor base. I'm confident that if we were to pursue another bond similar to what we've done, we would be successful and could price at similar or better terms. That said, at our current stage of growth, maintaining flexibility in our capital structure is critical. Noncallable long-duration financings can look attractive on the headline, but they can limit our ability to optimize assets over time. We're focused on flexibility, nonrecourse financing to isolate construction risk, and optimizing capital structure as the portfolio grows. We'll evaluate each financing opportunity holistically and choose what best supports the company's objectives. We're comfortable with our current financing approach and confident in our ability to access capital markets on favorable terms.

Tyler Page, Chief Executive Officer

Judging from the pace of calls from investment bankers to Greg who are eager to provide capital, I'm confident there is strong appetite for our paper.

Operator, Operator

Our next question comes from Mike Grondahl with Northland.

Mike Grondahl, Analyst (Northland)

See, I'm going to assume Reveille and Ulysses are pretty baked here. And I kind of want to look at McLennan, Mikeska, and Colchis. Tyler, what are the major hurdles or challenges to get those 3 energized? And then what does demand look like today for that 2028 power? How are those conversations going?

Tyler Page, Chief Executive Officer

The key challenge for those sites is the ERCOT batch process, which has evolved as stakeholders provided input. We've participated actively in the process and believe we've completed everything required to qualify those sites for batch 0 approval. ERCOT has changed requirements at times and delayed the process, so while we have done what's necessary, we await the final approvals. We expect a decision in June and remain confident that these three sites are well positioned. Historically, tenant interest is highest in the 1.5-year-out window, which is where 2028 capacity sits. Given the scale of these sites—gigawatt or large multi-hundred-megawatt campuses—in Texas, in a market that is attractive for data centers and where we've managed local issues effectively, I expect significant demand once interconnect uncertainty is resolved. We're very bullish on appetite for these sites.

Mike Grondahl, Analyst (Northland)

Got it. Yes, a month isn't that far away. And then maybe just a follow-up. How should we handicap the odds that on your pipeline slide at, say, year-end 2026, there's new sites that you've acquired on there. Would you say that's low, medium, high?

Tyler Page, Chief Executive Officer

That's hard to quantify precisely. We've seen more inbound opportunities as our reputation has improved, but many of those are far out in timing and haven't been compelling for our near-term plans. The finalization of ERCOT's batch process could produce opportunities where well-positioned but less-capitalized developers seek a partner, because participating in the batch process often requires significant deposits and development capability. I'm cautiously optimistic that the finalization could create attractive inbound opportunities, but building the 4-plus gigawatts we already have will keep us busy in the meantime.

Operator, Operator

Ladies and gentlemen, this does conclude the Q&A portion of today's program. I'd like to turn the call back over to Tyler for any further remarks.

Tyler Page, Chief Executive Officer

Just to say thanks again for everyone for dialing in and your continued support. We are really excited about what's going on, and look forward to talking to you again soon. Cheers.

Operator, Operator

Thank you. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect. And have a wonderful day.