Earnings Call Transcript
Riot Platforms, Inc. (RIOT)
Earnings Call Transcript - RIOT Q1 2025
Operator, Operator
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.
Phil McPherson, Vice President of Capital Markets and Investor Relations
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.
Jason Les, CEO
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 while enhancing our internal expertise with key additions to the team and 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.
Colin Yee, CFO
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 leases 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 costs 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.
Jason Chung, Executive Vice President and Head of Corporate Development and Strategy
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.
Jason Les, CEO
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 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 among 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 the 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
And our first question will come from Nick Giles of B. Riley Securities. Your line is open.
Nick Giles, Analyst
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?
Jason Les, CEO
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 provide 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 the grid with respect to the technical aspects and requirements. 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 from any type of large load. I think that experience interacting with grid operators is one of the reasons that Riot is so successful at leveraging powered land and operating sites at really unprecedented volumes of power.
Nick Giles, Analyst
Jason, I appreciate all that information. My next question is about how you're considering the potential economics of the situation, especially since some key capital projects are nearing completion. What benefits could arise from any deal? Additionally, is there a specific level of capital expenditure we should be aware of moving forward?
Jason Les, CEO
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 considering what is going to yield maximum value for 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 and bringing in additional fiber, securing additional land, and addressing traditional water requirements, all of these things continue to progress on the site. You can think about this as advancing what would be the power shell stage of traditional development. By doing this work, we believe we are making the overall offering just more attractive as time goes on. But to core of your question, what does this mean for a development cost or those types of specifics, I think it's too early to say. Our focus is on making this as valuable as possible and ensuring our success when engaging with hyperscalers.
Nick Giles, Analyst
Hi, fair enough. Well, again, congrats on the progress so far, and continued best of luck.
Jason Les, CEO
Thank you.
Operator, Operator
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.
William Copps, Analyst
Hi, how's it going? This is Will Copps on for Patrick. Thanks for taking my question. Since you started exploring AI and HPC opportunities, have you noticed any changes in demand or shifts in decision-making timelines or signed agreements during discussions with potential tenants? Thanks.
Jason Les, CEO
Yes. Well, I would say that demand continues to be robust as ever. 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 fill in a short period. 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 spend and commentary from other hyperscalers that they continue to focus on securing more data center capacity. So we're encouraged.
William Copps, Analyst
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 tap into the Bitcoin treasury kind of like you mentioned with the April production, or what would that look like?
Jason Les, CEO
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 this 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 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. We believe the quality of the tenant we eventually execute will positively influence the amount and quality of financing options available to us. 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.
William Copps, Analyst
Thanks a lot, guys.
Operator, Operator
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.
Paul Golding, Analyst
Thank you. Congratulations on the efficiency nearing 90%. I wanted to explore the discussions regarding the focus on HPC this year. How significant is the vertical integration with ESS Metron in relation to timelines and meeting HPC client expectations? Additionally, I wanted to discuss power issues, particularly regarding backup generation. In the presentation, you mentioned on-site backup diesel generation. Could you provide insights on other long-lead time items, your approach to them, and your inventory levels? Thank you.
Jason Les, CEO
Yes, Paul. Thank you for the question on 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 manufactures 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 received 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 regularly for counterparties. So we feel we are well-positioned there and will have good insights into that supply chain. We don't have any commentary on what we've 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.
Paul Golding, Analyst
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?
Jason Les, CEO
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 deals. However, if economics are attractive and things develop along those lines, the whole 1 gigawatt is potentially on the table. The focus is just maximizing the value of that asset overall.
Paul Golding, Analyst
Great. Thanks so much, Jason.
Jason Les, CEO
Thank you.
Operator, Operator
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.
Ben Sommers, Analyst
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?
Jason Les, CEO
Let me turn that over to Jason Chung.
Jason Chung, Executive Vice President and Head of Corporate Development and Strategy
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 issue 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 in 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.
Ben Sommers, Analyst
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?
Jason Les, CEO
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 from 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. I think the opportunity for Riot is that 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 gain 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.
Ben Sommers, Analyst
Thanks for taking my questions.
Operator, Operator
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.
Darren Aftahi, Analyst
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.
Jason Les, CEO
There are several development strategies we can pursue with the available land. We can choose to increase density significantly, but this might result in higher costs and could limit the future flexibility of the design. The reason we are acquiring more land is that a larger footprint offers more development options. The upcoming substation and the completed development pad are advantageous in discussions with potential tenants, particularly hyperscalers, since this isn't starting from scratch in our first phase. We can initiate our first phase while simultaneously preparing for additional phases. However, to prepare those extra phases, we will need to conduct some civil work and electrical work. From our observations in the market, larger tenants are typically interested in multi-phase developments. The ability to commence with one phase and then proceed with others in parallel enhances our offering. While I can't provide concrete guidance, what is feasible on that site includes accommodating around 100 to 200 megawatts of critical IT load, depending on the tenant's needs. With increased expenses, we could achieve a higher density. Our focus is on enhancing the site's flexibility and ensuring its success when engaging with hyperscalers.
Darren Aftahi, Analyst
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.
Jason Les, CEO
I believe it’s too early to determine precisely how we will utilize the assets and power capacity we acquire. Our goal is to pursue the value-maximizing strategy with these assets. The fact that part of a substation is already constructed indicates that it could be beneficial for AI/HPC data center development. It will have the same attributes as Corsicana, which is why we are prioritizing Corsicana. What’s particularly valuable about this acquisition is that it helps us eliminate ongoing hosting losses and litigation losses, and provides us with a significant amount of power to decide how to use. To answer your question more directly, Darren, we are not inclined to retrofit that building for AI/HPC, but we do have land available in the vicinity. We could potentially develop a data center or a building in that area using the available power, depending on the path we decide to take, but it's still too early to make that determination.
Darren Aftahi, Analyst
That's helpful. Thank you.
Operator, Operator
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.
Reggie Smith, Analyst
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.
Jason Les, CEO
Yes, that's a good question. On the power infrastructure side, the impact can vary by component. For switchgear, our Engineering division produces these components domestically, so purchases from the OEM wouldn't face tariffs. However, they source their own components to assemble this equipment. The situation with tariffs is fluid, and opinions are changing daily, making it difficult to predict how they might affect our Engineering division and its components. More generally, for suppliers of electrical infrastructure, especially regarding high voltage transformers, costs could be impacted for units produced in China or other electrical equipment coming from there. We are closely monitoring the situation, but it's too soon to determine the overall impact.
Reggie Smith, Analyst
Understood. I have a question regarding client-facing milestones in the HPC area. As we look ahead to the next 12 months, what indicators should we watch for that would suggest progress in your efforts? You don't need to provide exact dates, but what kind of announcements should we anticipate?
Jason Les, CEO
That's a good question, Reggie. I think you'll see us continuing to work on 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. The ultimate milestone finish line would be securing a lease with a tenant. They would ultimately have the requirements for what the design work would look like, and we would work collaboratively with them on that design. In addition, financing would be an important milestone along the way as well. We are really focused on this, and we strongly believe in the opportunity. We think there is a great opportunity for Riot to build an AI/HPC data center business, and that's our priority. I think we are in a very good position to be successful in doing so.
Reggie Smith, Analyst
That makes a lot of sense. I'm not sure if there’s anything else that could happen, but regarding the tenant agreement, are there any milestones that might lead to a deal or come before a deal that we should be aware of? Is there typically a negotiating window, or is it just that a lease is announced without prior market indication?
Jason Les, CEO
Reggie, I think you'll probably see some commentary around an LOI before a lease takes place. A lease in this type of arrangement is a pretty big undertaking and is typically preceded by the two parties entering into an LOI. The terms around that LOI, I can't say right now, but that would probably be the first step that you see before a lease.
Reggie Smith, Analyst
Got it. Okay. That makes sense. Perfect. Thank you, guys.
Jason Les, CEO
Thank you.
Operator, Operator
Thank you. One moment for the next question. And the next question is coming from the line of Bill Papanastasiou of KBW. Your line is open.
Bill Papanastasiou, Analyst
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?
Jason Les, CEO
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 difficult to predict those. Those come so lumpy, and different milestones come up. For example, this quarter, all of a sudden we're 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 $33 million run-rate SG&A, a cash SG&A. The expenses that are core to running our business, litigation, or any type of special advisory fees are more unpredictable. We still do have active litigation with one of the former hosting customers, and we will likely incur litigation expenses on that, but it's very difficult to predict. So we can't provide guidance around that right now.
Bill Papanastasiou, Analyst
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?
Jason Les, CEO
Yes. As you noted, Bill, we're most inclined to the options that are going to maximize the value of our assets. From that perspective, we are narrowing down 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 being solely self-performing in developing that to entirely relying 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. We've received strong interest from potential financing partners because of our focus would involve greater internal capabilities than what we entered 2025 with, but we are rapidly assembling a data center team and 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 shell or leasing land, maximizes value, we are very open to that. But that's not what we're seeing in the marketplace today. 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 with an open-minded approach.
Bill Papanastasiou, Analyst
Appreciate the color. Thank you.
Operator, Operator
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.
Martin Toner, Analyst
Thank you for your question. Now that you are becoming more flexible in how you raise capital, how should we think about the range for the amount of Bitcoin you will choose to hold in the future?
Jason Les, CEO
Martin, we're in a strong position because we've established various financing options. We can utilize an ATM, and we have a significant Bitcoin balance. The Coinbase facility has shown us we can borrow against that balance with low risk. We're also exploring additional financing options. As you mentioned, we can sell our monthly production while still maintaining a robust Bitcoin balance. Our focus is on assessing our capital needs and choosing the most cost-effective and least dilutive option at any given time. Recently, that has meant selling our monthly production, which we might continue doing in the coming months. However, we continually evaluate our best position among all available options, and we are thankful for the flexibility we have.
Martin Toner, Analyst
Makes sense. Thanks. On this nearby Corsicana, I'm assuming that will need to go through the typical approval process before you guys can start holding?
Jason Les, CEO
No, there's no regulatory process. We already have the power approved at our location, and buying additional land is a very simple land acquisition. That just gives us additional land on to use the power from our existing FDA.
Martin Toner, Analyst
It's perfectly fungible with the existing assets that are already approved.
Jason Les, CEO
Yes.
Operator, Operator
Thank you. One moment for the next question. And the next question will be coming from the line of Mike Grondahl of Northland Capital. Your line is open.
Mike Grondahl, Analyst
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, does any one or two potential tenants stick out, or is it kind of a wide-open contest right now?
Jason Les, CEO
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. 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 the Dallas Tier-1 datacenter, there are a lot of different things you can do at that site. Our view is the whole hyperscaler landscape and beyond that, our potential tenants in this for the Corsicana facility are broad. As far as feedback, feedback from our advisors matches really what we've gotten from tenants, and that's why we've been working on improving the land, 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 improve the offering 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. What we've just been working on in parallel with having these conversations is doing different things to enhance the overall offering and put ourselves in the best position to be successful.
Mike Grondahl, Analyst
Got it. Thank you. That's helpful.
Operator, Operator
Thank you. One moment for the next question. And the next question is coming from the line of Brian Dobson of Clearwater. Your line is open.
Brian Dobson, Analyst
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 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.
Jason Les, CEO
Yes, Brian, that's a great question. There's usually a delay between when the hash rate is being implemented and the market signals. As of May 1st, it's been about six months since Bitcoin started gaining traction, particularly around the election. Miners who noticed the increase in hash price back then and wanted to capitalize on it are now seeing their hash rates coming online. We're observing growth in hash rate on a global scale, though I can't pinpoint a specific trend in any one area. However, there continues to be strong growth in the United States. Many of our publicly traded peers are still achieving significant hash rate growth this year and have more plans in progress. It appears that publicly traded Bitcoin miners are playing a vital role in the overall global hash rate growth.
Brian Dobson, Analyst
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.
Operator, Operator
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.
Joe Flynn, Analyst
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 fiber 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.
Jason Les, CEO
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 data center fully utilized on that site quicker. We have just been looking at feedback to improve the offering of the site and enhance 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 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, there's significant fiber we can tap into 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. For a tenant that is looking for substantial capacity, they could potentially have a 1.7 gigawatt campus connected with their own fiber in between. We're in a good area to do this. We're bringing in outside help to help us get this done, and it will probably take about 12 months to complete the additional fiber.
Joe Flynn, Analyst
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 interest in these microgrids. Do you ultimately see an opportunity for net-run gas turbines as a source of redundancy in addition to your grid connects? Any color there would be helpful.
Jason Les, CEO
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. Our capabilities with the expertise in generation mean that if there was an opportunity to use gas to provide backup generation using natural gas, that would be something we'd be very well-positioned to do with them. But for Corsicana, diesel generation is likely the best solution.
Joe Flynn, Analyst
All right. Thanks.
Operator, Operator
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.
John Todaro, Analyst
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 power 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.
Jason Les, CEO
Yes, John. So 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. There are 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. 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. Our objective as a management team is to maximize the value of our assets and maintain a wide-open approach to how that might be. What we're seeing right now is that a build-to-suit data center is likely the best way for Riot to accomplish that.
John Todaro, Analyst
Understood. And do you get the sense that if they want a powered shell instead of that, you would consider doing Bitcoin Mining with Corsicana? Is that kind of option number two?
Jason Les, CEO
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.
John Todaro, Analyst
Understood. Makes sense. Sounds good. Thank you, gentlemen.
Jason Les, CEO
Thank you.
Operator, Operator
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.
Phil McPherson, Vice President of Capital Markets and Investor Relations
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.
Operator, Operator
Thank you all for participating in today's conference. You can now disconnect.