Riot Platforms Q1 Earnings Q&A | Latest Bitcoin Mining Stock News | CEO Jason Les | RIOT Stock

Thank you for having me on, Bryce and Anthony. Looking forward to talking about all the things Riot's been up to. Should be good.

Yeah, Riot had a lot of really positive developments, good things in the first quarter. You know, of course, a big part of our strategy is our Bitcoin treasury strategy, whereas the mark-to-market of that Bitcoin value hits our financials every quarter. Obviously, Bitcoin has a tremendous amount of long-term value opportunity and we've seen a tremendous appreciation, but quarter-to-quarter, you know, there's volatility there and how that impacts our results. So, that was a big hit to our GAAP income. But at the same time important to highlight that Riot had record revenue for the quarter and that's despite network difficulty increasing substantially year-over-year. Riot achieved record revenue as a result of all the new hash rate that we've got online and more importantly how much more efficient that hash rate is now running thanks to all the work that our teams in the field has been doing. So seeing very good results on the mining operations side.

Aside from the financials, there's I think quite a few key milestones that we highlighted in our earnings report in our earnings release last week. This the acquisition and settlement of Rodium assets completely eliminates the third-party hosting element to Riot's business. Rodium was our last hosting customer in operation. That was a hosting agreement inherited from the acquisition of Windstone in 2021. We've been losing on average somewhere around $15 million a year if you annualize recent periods with that contract. So we are now able to eliminate that loss. We are getting all of Rodium's assets that we are evaluating how to repurpose for own use. We get the use of that power capacity that we're also taking a look at and eliminate those litigation expenses going forward. And then finally a lot of substantial progress on the AI/HPC front. You know, to put into perspective, it was just about, you know, three months ago, a little more than three months ago, that we commenced our feasibility study with Almanzor to evaluate how we could pursue AI/HPC opportunities for our Corsicana facility with the total of 1 gigawatt interconnection that's available there. We've made substantial progress building out our division to build this AI/HPC data center segment within Riot and do a bunch of things to make the site more attractive. The site is amazing as is. We think it has very high potential for data center customers, hyperscaler data center customers, but we've done a number of key things to enhance it just to make sure that we are positioned to get the best possible deal with the best possible counterparty. We are adding land to increase the overall campus size. We've been making progress adding water in there. We are doubling the amount of fiber routes that are available there. And all the while we're continuing the substation development to make sure that power is delivered on an aggressive timeline here. So, we're really excited about all of the things that we've accomplished in those three areas over the past quarter, but there's a bunch more in the works, and we think we're going to we're in a good position to continue to share positive milestones as we progress on all of these.

Two major things that we've accomplished, Anthony, to improve the metric that you're talking about, improving our operating efficiency. One, as you highlighted, coming online and being the dominant portion of our self-mining hash rate using new infrastructure design and new miners that has yielded, you know, fantastic operating results. And then there's been a lot of work as you highlighted done at Rockdale, getting once again refreshing the mining fleet there, making some tweaks here and there, and we have that facility in all air cooling, you know, might I add, running very smoothly now. So, it's been a quite a turnaround. You know, we talked, you know, many months ago when our operating results weren't as good in that area and I was on talking with you guys about operational excellence being a key and didn't mean that we were there right then, but it meant that that was the direction that we're aiming towards. We've showed substantial progress on that metric. We were averaging about 90%, just shy of 90% for the first quarter, utilization of hash rate. And by the way, that we're still impacted there when we're curtailing for power prices. So that's not solely just an operational uptime metric that accounts for when we have to curtail for power prices are high, which we are benefiting from as well. So substantial progress. We aren't resting on our laurels. We're continuing to find ways where we can drive incremental improvement. We've gotten to a good spot, but we aim to get better.

Yeah. So one of the tenets of Riot's balance sheet that we've always talked about is one of the tenets of our strategy rather is to always have a very strong balance sheet. We think about that from a cash perspective, from a Bitcoin perspective, debt levels perspective, and then, you know, looking at all the options that we have available to us. That being said, we have ongoing needs for capital. We have to finance growth in our business. We have to finance ongoing operations and historically we used the ATM to do a lot of that. You'll note that we had very little ATM use in the first quarter. I believe we issued somewhere around 5 million shares at an average price of $13 a share. When the share price was lower, we just really did not want to run the ATM. So, we had to look at the different levers that, you know, we had to grow our business. And once again, we're very pleased about the advantageous position we put ourselves in where we're not only relying on one option. We have lots of tools we can work with to maintain the to get to achieve the lowest cost of capital without putting the business or its future value proposition at risk. During the first quarter or actually subsequent to quarter end, we rolled out our Coinbase facility and we're taking a very reasonable amount of leverage relative to how much Bitcoin that we had. We have a hundred million dollar facility open with Coinbase right now and that is out of, you know, nearly $2 billion of Bitcoin that we hold on our balance sheet. So very reasonable level of leverage. And then the other tool that we used, as you're asking about, Anthony, is we sold our monthly production in April. We sold just a little bit more just because we set up a sales plan to sell at the beginning of the month and then production ended up being slightly lower than that. You know, while we hate to sell Bitcoin because we think there's so much tremendous opportunity with Bitcoin and it's why our treasury strategy is such a core part of what we do at Riot, but that was the best option for us to minimize dilution while continuing to fund ongoing operations and growth of the business. It's something we look at on an ongoing basis. We do not have a dogmatic policy of we are always doing this, we're always doing that. We look at the options that we have in front of us. We look at our capital needs and we're evaluating this on an ongoing basis. So we may sell some of monthly production in the future. We may not. It's an ongoing decision.

Yeah. Well, I think Strategy, you know, formerly MicroStrategy has something that's very valuable and that is a track record of executing on this strategy. So, I think the market has a confidence in Michael Saylor and his team and their ability to deliver on that stated strategy. The market looks at miners a bit different. You know, while the Bitcoin treasury strategy is substantially all of their business, because of how big it's grown at this point, at other miners such as Riot, we have other parts of our business as well. So, you can't look at it as just the treasury strategy. There's multiple components that the market that investors are looking at. With respect to the first part of your question, Anthony, you know, we issued a convert to buy Bitcoin in December. I sold Bitcoin in April. These are two dramatically different time periods. You know, market conditions change. As a management team, we have to look at the playing field and make decisions based on what we believe are going to yield good long-term results, but also based on conditions on the ground today. So, we had a fantastic opportunity to take on long-term convertible debt at very reasonable terms in December and we utilized that to add a significant amount of Bitcoin to our balance sheet. In April, market conditions were not great for our share price. So, to fund ongoing operations and growth, we utilize the best tool we had in front of us. And in that case, it was selling monthly production, selling some of our Bitcoin. So, it's important I believe for management teams to remain flexible. We have our long-term goals, but we have to make the decisions that are going to bring in capital at the lowest cost of capital price while not putting the business at too much risk.

Yeah, so first, you know, of course the Bitcoin price is up comparatively to those two periods. So that helped with us helps us as well. Offsetting that is the halving and the network difficulty. So major headwinds and tailwinds impacting results quite a bit. But what we can control is our operations. Riot has I believe over tripled our operating hash rate comparing Q1 2024 to Q1 2025. So we've got significant amount more hash rate online and deployed and we are operating that hash rate better. That is really what helped drive that significant improvement in results comparing the quarters of 25 and 24. Also our engineering segment is starting to ramp up. You're seeing that in the results. We completed the acquisition of E4A Solutions which tucks into our engineering segment. We completed that acquisition in December. That adds a new service line and capability to our engineering segment. Also, you know, ESS Metron on the manufacturing side has been starting new contracts that are better than those large government contract that we had in the past that took up a lot of space, time, and not great margins. That business is able to take on higher margin contracts now and we're seeing better results from that. Really, I think what we've accomplished operationally that has driven more than anything the improved results in revenue year-over-year and we're going to continue making strides on this front.

So with the acquisition of Rodium, we acquired the tangible assets that they've had at Rockdale and we acquired of course the buildings that those miners are operating in. We ended those hosting agreements that had 125 megawatts of capacity to them. And if you look in our earnings deck, we have a slide that shows what capacity Rodium was occupying, all of Building C at Rockdale and a good portion of Building B at Rockdale as well. C being immersion, B being air cooled. What we're doing right now with our operations team is going through everything they have and determining what we want to keep running and how we want to keep running that. That gives the upside for our hash rate in the future. We don't know exactly what that's going to be yet. The machine mix is a mix of some latest generation equipment and there's some mid-generation and maybe slightly older generation equipment in there as well. So it's kind of an inventory and testing and evaluation process right now. And then after our teams have time to go through that and we decide, you know, what we want to operate from that in an ongoing basis, we can update our hash rate guidance accordingly, our deployed hash rate figure. But additionally that power capacity brings other opportunities. As I touched on earlier, we're focused on building out our data center business segment. So having more power capacity at Rockdale available gives us more potential to do data center deals there as well. I think Corsicana is still the best natural first step because of, you know, a variety of reasons and attributes we can talk about later, but having additional power capacity brings more value opportunities to the table. So all around we're excited about this transaction. We're excited to get the additional assets. We're excited to eliminate this problem that has, you know, costed us and been a strain on our financials historically.

So with your first question on the power price. So the power price at Rockdale is determined by, you know, a number of factors. We have our hedge price. We're buying some power at spot and then we're doing things with our power strategy trading power. All of that results in a facility-wide power price. It's not really chopped up from one part of the facility or the other. With Rodium there was an agreement to deliver power to them or charge them a certain rate for power that was very low and so the loss that you would see in our financials was basically the spread between what it would take us to acquire power and then what they were being charged for power. So what we have is a 700 megawatt substation total capacity that's been built out there. So there is additional capacity that can be used, you know, depending on how much of Rodium's hash rate we end up using, you know, that will impact what the total amount of available power at Rockdale is. So we think this also presents an opportunity for potential AI HPC data center deals. The Dallas market is more attractive. We have a pad ready to go with land cleared for first stage development at Corsicana. So we think that is going to be a tenant's likely preference for a first deal, but we're very open to opportunities at Rockdale. We are also working to enhance the offering at Rockdale to make it appealing to hyperscale AI HPC customers. So we'll just have to stay tuned and see what happens.

Yeah, so in our earnings deck, we had a slide highlighting what our cost to mine was for Q1 2025. Our all-in direct cost to mine was $43,888 per coin. Large amount of that is power. We've continued to demonstrate economies of scale as we've scaled up our operations. The non-power portion of that all-in cost has been getting smaller. That's a trend that started in Q3 2024, continued in Q4 and now we report even more improvement there in Q1 2025. So, we're very pleased about that. What the go-forward all-in cost per coin? You know, obviously that's going to be dependent on power prices. That's going to be dependent on how network difficulty goes. But Riot has continued to demonstrate one of the best power prices in the industry because of our proprietary power strategy and the know-how and capability we built around that. So very confident Riot is always going to be very competitive on that standpoint. On your question on Bitcoin yield, so obviously Riot takes no credit for this. This was coined by Michael Saylor as a metric that measures the increase in Bitcoin per fully diluted share year-over-year. So for 2024, Riot had a Bitcoin yield for the year of 39%. That means one share of Riot at the end of 2024 had 39% more Bitcoin underlying it than it did at the start of the year. For Q1 2025, we reported a Bitcoin yield year-to-date of just around 7%. This metric is important because it drives a bunch of key operating metrics together. One, Bitcoin production or however we're adding Bitcoin to our balance sheet that is going to enhance Bitcoin yield. The lower the cost that we have to do that is going to enhance Bitcoin yield. So if we're low-cost efficient operators, we are able to do that more efficiently. And then finally, it drives discipline around dilution. While adding Bitcoin to your balance sheet will enhance Bitcoin yield, issuing more shares is going to decrease Bitcoin yield. So it really makes us think about what is the most shareholder-friendly, what is the most accretive way for shareholders that we can increase our Bitcoin on our balance sheet. I think it helps hold us to very accountable. It helps us think about all elements of the business. While there's volatility to that number as well, you know, it won't always necessarily go up quarter over quarter over longer time periods. If we are successful at what we're doing, if we're executing well, then we should continue to be able to show an increase of Bitcoin per share over time. And as Bitcoin appreciates in value, shareholders benefit from that.

Well, I can't speak to what MicroBT's plans are. You'd have to ask them themselves, but they are continuing to show improvements multiple times a year in their machine offerings. So, I'm really impressed of what they've done and I have a lot of confidence in MicroBT to continue delivering industry-leading equipment. As far as what Riot needs from that with our operations at Corsicana, I think Anthony, you're asking we need to refresh our fleet as miners get more efficient. At the end of the day, what we're trying to accomplish is a low direct cost per coin. And if you look at just the power side of that, that is going to be driven by your machine efficiency and also your cost of power. So if you are a low power cost producer, you are not going to be as sensitive to what the machine efficiency is in delivering a strong margin. So because Riot is so strong on the power side, we don't have the same pressure to always need to have the latest generation equipment and be refreshing miners very quickly in order to maintain a healthy margin. So because a lot of these machines are, you know, most of the machines are at most one year old, I think it's way too early to think about...

machine refreshment there. We have a competitive fleet. Our all-in fleet efficiency is 21 joules per terahash right now. With our cost of power, we're still showing a very, very competitive all-in cost per mine. Like we talked about, our power cost to mine in the first quarter was $35,313 per coin. And I think we're in a really good spot. So, long ways off, I believe, from having to look at machine refreshment at Corsicana.

So first to level set, both air cooling and immersion cooling and hydro cooling, they all make sense. They all have their pros and cons. We did not build immersion at Rockdale, I'm sorry, at Corsicana because we think that's the only way to build. That is what made sense in that buildout. One of the advantages of immersion is you can achieve better density. We can get more hash rate, more power used in a smaller land footprint. And that was important with the land profile that we were looking at at Corsicana. Other advantages to immersion are the stable temperatures that machines will operate at. And what we've seen so far is that requires less maintenance, less repairs. Machines are operating in a more stable environment. So that's fantastic. Immersion though does have a higher upfront cost. The infrastructure is more expensive than air cooling. However, we believe that will ultimately be offset by the extra lifespan that these machines will get. Because the immersion miners that we're using at Corsicana are purpose-built for immersion. It's been a very smooth operating experience. Historically, when we did immersion at, for example, Rockdale, we were taking air-cooled miners and doing work to them to convert them to make them work in immersion. That's a lot of extra steps and complexity and man-hours and surface area for problems, and eliminating that has been a huge gain. So, we're very pleased with the immersion operations at Corsicana. The new immersion tanks we're using are running very well. The miners are a huge improvement over the past and we're very pleased with that. At the same time at Rockdale, we've also put in new air-cooled miners from MicroBT at Rockdale over the past 12 months. We're also seeing fantastic results there. We're seeing real excellent uptime even during the highest temperatures throughout the year in Texas. So, both make sense. Both have pros and cons. We're really happy with the design decisions that we've made and it'll be good to get out there again with you guys and show you what it looks like all operating. I think the last time you were there it was a little earlier in construction and deployment of miners. So it's quite a sight to see now.