Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Phil, the floor is now yours for the Q&A session.
Phil McPherson: Thank you, Devin. We’ll take our first call from Kevin Dede at H.C. Wainwright. Kevin? No, looks like he dropped off. We’ll move to the next one. Our next question will come from Greg Lewis at BTIG.
Greg Lewis: Yes, hi. Thank you and good morning, good afternoon. You know, Jason just watching the strategy unfold in terms of the Bitcoin inventory management, it seemed like we’ve kind of gone through ebbs and flows in terms of funding some operations with Bitcoin more recently, at least based on the monthly production guidance, it seemed like we started holding back and really trying to build that Bitcoin inventory in February, March. I don’t think we — I think maybe we saw a couple of Bitcoin. You know, post the halving now as we look at, I guess May and beyond, how are you thinking about managing the puts and takes in terms of using Bitcoin that you’re generating to offset some costs, and then at the same time trying to build that inventory? Any kind of thoughts around that?
Jason Les: Sure. Thanks, Greg. So our strategy is to always maintain a strong balance sheet. I think by now we’ve all seen how this has played out as a key strength for Riot. This includes both in cash and in Bitcoin. We are here because we’re a Bitcoin company. We believe in the long-term value of Bitcoin. So we try to hold as much Bitcoin as possible. As you noted, at the beginning of this year, in January, we stopped selling Bitcoin. In February and March through our monthly updates we reported we have not sold any Bitcoin. So currently we are not selling any Bitcoin. However we are continuing to always monitor our balance sheet in light of what we need for capital expenses and what we need for operational growth. By maintaining such a strong balance sheet with a task position that we’re reporting today, we have sufficient cash reserves and further access to cash through our ATM program to continue to fund all of our growth plan and our operating expenditures.
So it’s a decision that we’re making on a month-by-month basis, evaluating the market, evaluating the financing options, evaluating our cost of capital, and with the parallel goal of trying to hold as much Bitcoin as possible.
Greg Lewis: Okay great and then just my other question was on the engineering business. You know realizing that it’s not a major driver of the company clearly that’s the Bitcoin mining, but there was kind of a — I guess there’s a two-part question here in terms of the engineering. With the first being is there any seasonality that we should be thinking about as we look out over the next I don’t know three, four quarters and then also I was kind of curious clearly when you bought Metron there’s an opportunity to kind of get involved on the infrastructure equipment side not realizing maybe that Riots core function as a miner isn’t going to be around AI data centers. Is that business Metron, is that position at all to benefit from kind of this ongoing AI infrastructure wave that seems like it’s — we’re in the midst of?
Jason Les: Yes, so let me tackle those starting with the last question, Craig. So first there is incredible demand for this type of electrical equipment right now. While Riot owns ESS Metron, we are one of their smallest customers. Overall, they have a ton of business and a ton of demand from all these data centers, AI data centers that are rapidly trying to build out and meet demand for this type of service. So they are really overloaded with business opportunity. And what has limited them has been manufacturing warehouse capacity and access to the input parts from the global supply chain. So they are benefiting quite a bit from this and we are looking to increase the capacity of this business, so they can meet the demand for these data centers and AI data centers, et cetera.
But as you stated, our number one reason for purchasing the ESS Metron was strategic. One, we noted in our deck here, it has reduced our CapEx expense for purchasing this electrical equipment from them by about $10 million over the two years since we’ve acquired them. But even more important than that, it has been a critical component of controlling our supply chain, while other competitors might have to rely on external parties to procure their electrical equipment and design, custom engineer and design what they need, we’re able to control this in-house. We have visibility in the supply chain. We can move around this. We can make changes. It’s been very advantageous to us as we’ve built out both Rockdale and Corsicana. Then your first part of your question though was the seasonality of results.
I think you will see a good amount of seasonality this year. Like we noted, the first quarter results were impacted by these global supply chain issues, which held back two big orders from moving forward. So not only could those orders not move forward and be recognized as revenue, they’re occupied space that stops other jobs from being completed. So we expect these to be cut up during the second-half of 2024. We have additional warehouse space we procured. They’re on top of resolving these supply chain issues. So that’ll allow these two key contracts to move forward. We can recognize those revenue, and then we can keep the backlog flowing with the other demand, which is — as you asked about, quite full of data center and AI infrastructure.
Greg Lewis: Perfect, super helpful. Thank you very much.
Jason Les: Thanks, Greg.
Phil McPherson: Our next question is from Mike Colonnese from H.C. Wainwright, Mike?
Mike Colonnese: Hi, good morning, guys, and thank you for taking my questions. First one’s really more of a high-level question for me. Just curious how you guys are thinking about the operating environment here with hash prices at all-time lows post-having, the implications for your growth trajectory at Riot? And how you expect the M&A landscape to play out as less efficient miners are forced to power down here?
