Greg Lewis: Yes. Thank you, and good morning and good evening, everybody. Tyler, I had a quick question on rig pricing. You mentioned for your purchases that are going to be delivered that rig pricing is up on terahash basis around 15%. I’m curious, not necessarily for these newer-generation rigs, but just post that — I mean, and maybe it’s too early since they having was less than a month ago. What has kind of been the pricing response reaction from the market for kind of older generation rigs that are more in that unit may be that that 30 joules per terahash. Is there a bid for those and how has that been developing?
Tyler Page: Thanks, Greg, I think the real question there is how deep would the secondary market be for rigs and at that efficiency or at worse efficiencies, because there are various some secondary markets that get made by some different players where you see prices, they are obviously down because again, if hash price is $0.05 or $0.055 or even especially, if it’s $0.045, you start looking at an efficiency curve where you have to have really low power prices to make less efficient rigs operate profitably in that environment. So, I would say that the question that’s hard to say is, it’s still too early, because I don’t know anyone moving large quantities of those rigs. And so, could you sell a rig with a 30 joules per terahash?
Absolutely. The price would be probably lower than it had been, but, you know, I’m sure you could get probably mid to high single digits per terahash dollars, if I had to guess. But the question would be how much could you sell? I mean, could you sell 100 of them? Probably. If you tried to sell, 25,000 of them, I think the price would probably go lower, but that could also change really quickly depending on this next, like, difficulty. Part of it is everyone’s trying to predict this question about, well, what’s going to happen to hash rate? Is it going to go more or is it going to come off? And so it’s just hard to say. There’s a lot of questions to that. So I’d say, it’s easy to say it’s less than it was. It’s probably high single-digit dollars or mid-single-digit dollars per terahash, and that could change a lot in a month depending on the next difficulty adjustment or two.
Greg Lewis,: Okay. Great. And then just because it has become topical for any kind of company that has access to power, obviously AI data centers are kind of, everyone wants to talk about them on earnings calls all across the energy and industrial space. I guess what I’m wondering is, and it’s interesting, right? I mean, like some of these major tech companies have been working on AI for years. Really, my question is around, hey, we’re moving forward with Black Pearl. Everyone’s aware that it takes a couple of years from start to finish to actually get a data center up and running. At least in the US, are we starting to run into price inflation on potential data center sites that maybe somebody like Cipher or others in industry are looking at simply because there’s a competitive bid coming from somewhere else?
Tyler Page: That’s a great question. I think, listen, we’ve had many discussions around AI-related data centers, particularly in the last month or two. We have been approached by people asking for capacity for AI at Black Pearl. We have no plans to do that. I think we are still where we have always been with operating AI data centers, which seems like a no-brainer that it’s a huge growth market. I think in some ways it depends on which part of that market you’re trying to play in. But, GPUs are very expensive. Speculating on the progress that those chips will make over time seems highly speculative when you’re spending so much CapEx on the rigs. And on the data center side, it’s also more expensive in general to build a data center that is ready for AI.
There are some questions about stratification within that market where there may be opportunities as that market matures to take advantage of things like managing curtailment like we do. That’s where it starts to get more interesting to us. But the challenge for us, at least, to be in AI at this point is really a cost of funding question. And we have been approached by some people saying that we could set up access to cheap debt capital to do AI-related data centers, set it up in some sort of special purpose vehicle or something. Nothing, we’re sort of trying to keep our finger on the pulse. It is an interesting question to ask about, and I think there was a prominent research analyst on Wall Street that put out a piece about a week ago that said, basically there’s such a crunch and a time lag to get interconnection set up, just the approvals and sites ready, that having these interconnections themselves could be extremely valuable and we could be attractive to someone just to buy for our portfolio sites.
That would be great, and that’s an extra call option for us if that develops, and we’ll just have to see over time. It certainly does take a long time to get approvals for interconnection. So if that becomes the choke point, there is a lot of value in having that.
Greg Lewis: Okay. Great. Hey, super helpful. Thanks for the thoughts. Have a great day.
Operator: Thank you. One moment for our next question. And our next question comes Joseph Vafi of Canaccord Genuity. Your line is open.
Joseph Vafi : Hey, guys, good morning and good afternoon, or good evening to you, Tyler, over in Hong Kong. Nice results. Just at Tyler. I know you have mentioned M&A here a few times on the call, which I think is a lot more than you’ve mentioned in the past, and I think you’ve kind of hinted at what may be what you’re looking at here with some with the having and potentially squeezed other operators that may need to merge. Maybe some extra thoughts here on how that would work? Would you know — do you see site with attractive power costs or is it is it just really it is time to market where you could incrementally increase hash rate profitably given some of your mining your rig contracts, et cetera, maybe just a little more on how M&A might work for you? Then I’ll follow-up.
Tyler Page: Yes, sure. So I’d say we are casting a broad net, because we again, I feel like we’ve been planning for this time period for a while, and so excited to see things develop that. So we looked at everything, but in general, I’d say the two buckets of opportunities we see are if there are greenfield sites where a developer is basically running out of time, they’ve got the interconnection and the approvals and so forth, and they’re set up, maybe their financing didn’t come through or they don’t have access to capital, that really plays to our greatest strengths. Now that’s what we’ll call the longer-term story. Again, over time, I think we probably produce the most value and the highest return on investment in those situations.
So from the starting point, it does tend to be our favorites. That said, there’s a second bucket, which is more what you alluded to and a little bit more related to the shorter-term crunch on existing mining operators, where maybe they have a site. And again, maybe the power set up is decent, but they don’t have as much access to capital, they’re private or for whatever reason, they’re having challenges, maybe they have debt, whatever and their rigs might be getting older. And so there could be situations where we find a site. We do have access to new generation rigs. We have access to capital. And maybe it’s win-win because we can get a site that we can upgrade and make very profitable in the current environment and they cannot. And so I’d say that’s the second bucket of opportunities.
But I’d say those opportunities have been a little bit more reluctant to move over the past few months, and we’ll have to see. Maybe they become more interesting in the coming weeks and months.
Joseph Vafi : Great. And then follow-up kind of related to that, would M&A kind of what could it potentially affect Black Pearl time line if the right opportunities came up and you wanted to move on M&A could that affect the Black Pearl time line? Just thinking about overall capital commitments both in organic and inorganic? Thanks a lot, guys.
Tyler Page: So I think I guess, anything’s possible. We’re very excited about Black Pearl and proceeding full page on that. I think maybe the one way that that could be impacted from a strategic planning perspective would be if we did find one of those opportunities where we could add a lot of value by exercising the current Bitmain purchase option we have to upgrade our site that would then create an opportunity to buy more rigs or think about how we set up the back half of Black Pearl. Again, it will be interesting to see what happens again with the cost of Brexit and what happens with this whole hash price squeeze because that has historically been how the rig manufacturers price their machines is based on the profitability of mining.
So we could — we may have a window that stays open to get attractive rig prices. And so perhaps there’s a reshuffling of our planning of which rigs go where and then I guess anything’s possible depending on, if we do something or not and what that deal might look like, if and when we do it. But certainly, the base case and the plan now is to build all of Black Pearl with the rigs we have on order.
Joseph Vafi: Got it. Great. Thanks a lot, guys. Nice results.
Operator: Thank you. One moment for our next question. And our next question comes from Reggie Smith of JPMorgan. Your line is open.
Q – Reggie Smith: Hey, good morning guys. This is a long call, so I’ll keep it keep it brief. Thanks taking the question. I wanted to ask a follow-up about AI, and I’m curious, how you think I guess the AI investment wave could impact the bitcoin mining industry from the perspective of — will you still be able to build 300 megawatt sites? Do you think you need to scale down to get things done, like how does this impact? You talked about a little bit, but how does this impact the just access the power and being able to get approvals? Thanks.
Tyler Page: It’s a great question, and I think it might be too early to say. On the one hand, we’re looking at a bunch of interesting opportunities and so I know they exist at least for people that can source them and build from a greenfield site. If there’s — I do think there’s an end of the spectrum within bitcoin mining that might find it harder to operate. If you are being hosted somewhere it feels like everyone that’s in the hosting business now wants to talk about AI and so you might find a harder place. You might be squeezed, if you’re just a business that it plans to buy Bitcoin mining rigs and plug them into someone else’s site. I think if you combine that with — I know AWS set a gigantic purchase of the site at Susquehanna from last quarter, and I know Microsoft just announced a big deal, I think it was with Brookfield — lot of data centers, $10 billion, mainly because one thing is for these larger sites, they were for AI.
It requires a much larger amount of CapEx. And certainly, if it’s hyperscalers, they’ve got the CapEx to spend and the access to favorable funding rates to also. So I do think like it could squeeze that end of the spectrum. But if anything, again, I when I look at our capabilities as a company to source opportunities and kind of manage the process from beginning to end, I think if anything. It puts a lot more value on what we do as a business. So we’ll have to see how much we get squeezed out at other large sites. But I don’t see anything today that suggests we will be.
Q – Reggie Smith: And just real quick, just to put a finer point on it in terms of like the size of future sites, but what’s kind of your minimum effective dose is it 100 megawatts, 200 megawatts. When would you be — like you see the industry moving to a place where maybe those are how the metrics look for…go ahead.
Tyler Page: I think generally, we would look at a minimum of 50, typically. And then there’s questions around operational synergies, you know, is it in places where we can trade power and monetize the flexibility of our load also operationally, does it work with where our people are? Is it easy to get to, et cetera. So, a little bit of a dynamic matrix. But in general, I say 50 megawatts is where we start to get interested.
Q – Reggie Smith: Sounds good. Okay, perfect. I’ll follow up with Josh, after the quarter. Thanks. Thanks for taking the questions.
Operator: Thank you. One moment. And our last question today comes from Bill Papanastasiou of Stifel. Your line is open.
