How y'all? Welcome back to Blockspace Live, presented by CleanSpark.
For the final day of week one of earnings week here at Blockspace, we've got CleanSpark and Mara's earnings that dropped yesterday after market close to tear through.
We will lead with CleanSpark right after our usual Friday hash rate index update. And then after CleanSpark, we've got a slew of interviews to chew through today.
We've got Luxor's Khan Farahani on to talk about their most recent look back series for the month of July.
Following that, we've got Brandon Bailey of Nakamoto and DiMetrics on to discuss Q2 earnings for the Bitcoin miners turned AI pivots that we cover, and also unpacking some of the fun metrics that you can find on DiMetrics.
And after that, our keynote interview today, Hut 8 CEO Asher Gornut on to talk about their earnings, and we're specifically interested in if Batch Zero will throw a wrench into their expansion plans at Beacon Point in Texas.
And then we will close the show going through Mara's earnings and taking a look at the fact that they could be getting close to their first AI tenant based on the analyst questions and Q&A at the end of the call.
That's right. Blockspace goes live weekdays at 1:00 PM Eastern. We are Compute's daily show featuring quick hits on AI, data centers, compute markets, and emerging technology.
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That's not blockspace.com, that's blockspace.media. This show is brought to you by CleanSpark, NASDAQ listed ticker CLSK. More on them later on the show. It's Friday, Colin, so let's kick it off with a hash rate index.
Little hash rate index update coming at y'all from Luxor. And Charlie, you'll be shocked to hear that it's a little more or less of the same, and we're gonna get into some of the numbers.
July was actually a pretty interesting month, uh, on the Bitcoin mining side, specifically when we look at Luxor's derivatives and who won out on USD versus BTC hedging for hash price, that is. But if we look right now,
not too much good to glean, Charlie. I mean, Bitcoin making another run at 65K. We love to see that. 65K gang undefeated for the last two, two months. 64K gang. We're at $32.60 per petahash per day for spot price.
Lot better than being in the 20s, but still obviously not what miners wanna be seeing right now. Network hash rate kind of making a little bit of a recovery here at 930 exahashes on the seven-day average.
We're entering the hottest time of the year. Don't expect much growth here as we round out the summer. Could be wrong, though.
The most recent difficulty adjustment was -0.74%, marginal, and also it's looking like we could get a, or we will get a bump marginally again, um, almost offsetting this last, uh, difficulty adjustment at plus 0.7%.
So hash rate kind of just range bound, man. I mean, not really too much to say about that. Fees aren't really doing anything, you know.
Um, transaction rate per day is going up a little bit, but really not too much to say on that front. Overall, still slim pickings out there for the Bitcoin miners who are staying true to the game- Yeah...
and not chasing the shiny new thing. We're, you're, you're not, I'm not stuck in here with you. You're stuck in here with me.
[laughs] Look, the only interesting thing happening, uh, I think in blocks right now, we'll get, we'll get into this with, with Khan here in just a moment, um, is that at the end of this difficulty adjustment, which is tomorrow on Saturday, uh, that is when the BIP110 fork is, uh, going to happen.
So that's when the mandatory signaling period for nots nodes happens, which b- will result in a chain split if they are able to produce a block. So we'll have to see what happens then.
I've obviously got opinions, which I've been unrelenting with on Twitter, but that's the end of that story, Colin.
It's day five of earnings week one, so that means we have to kick off with our final earnings update of the week. [beeping] Yes. That'll wake you up if you haven't already. [laughs] If you- Earnings.
Last night we, uh, had watch parties for both CleanSpark and Mara. I think we'll tackle CleanSpark first with you, Colin. Take it away. Yeah. We'll tackle CleanSpark here.
We've got a recap here on the Blockspace website. Go ahead and check it out. I won't spend too much time on what's written here. I've got a bunch of notes to chew through.
And I would like to start with numbers, but I'll be brief 'cause I think the meat of the call honestly came from the Q&A session with analysts, and there was a, a decent amount of alpha to be gleaned from that, Charlie.
So going over numbers really quickly. Revenue came in, and this is fiscal year 2026 Q3, came in at 138 million versus expectations for 154.85 million, so pretty decent miss, you know, 11%. I think
to me it, you know, I don't know, analysts haven't been modeling their hash price out very well.
As, we've actually seen this, uh, time and time again with some of the Bitcoin miners, um, which is strange 'cause a lot of them usually are like p- they know how to use this metric at this point, and usually they're pretty spot on.
But I guess- I don't know, maybe, uh, CleanSpark might have had some more downtime. Maybe there was curtailment that they weren't pricing in. But nonetheless, a little bit of a revenue miss.
Although, n- these numbers, I just wanna caveat it going into this for Mara and for CleanSpark, like the analysts honestly don't really care about these numbers that much because they're a- they're really looking at the AI segment.
Yeah- So-... these numbers aren't moving the stock at all. No, not at all. Net income or came in, or net loss came in at 239.8 million, largely driven by change in fair value of Bitcoin holdings.
CleanSpark has the third-largest Bitcoin treasury of any of the companies in this cohort, following Riot at second and Mara at first.
Earnings per share came in at negative 89 cents per share, uh, and that fell short of FactSet estimate for almost 50 cents, for, uh, 48 cents per share, negative 48 cents per share.
Adjusted EBITDA came in at negative 113 million. Cash and equivalents stood at 202 million. Bitcoin holdings fair value stood at 814.9 million. Total assets, 2.7 billion.
Total debt, all long-term, no current, 1.8 billion.
So those are the numbers, but again, I think that they belie the actual thing that mattered on the call, which was the management commentary regarding Sandersville, also their expansions into Texas that are under exclusivity for the tenant at Sandersville.
So just to recap that deal for those who may or may not remember, the Sandersville deal for CleanSpark came in at [sighs] let me see. I... Hmm. 10 to 12?
That's tough. [laughs] It's a $6.6 billion deal. Yeah. And I believe the contract terms are for 15 years. I just wanted to make sure I was being specific about it. Um, it's getting buried in my notes here.
But they did not announce who the tenant is for this site. There's been a lot of speculation that it could be Meta.
There are a lot of unconfirmed reports that suggest as much, but Harry Sudock and other management like Matthew Schultz made very clear that they are an investment-grade counterparty and that they are a global tech company with high investment grade ratings.
So there's really only a few companies this could be. And Meta has had some job openings for the Atlanta area. That might just be noise. It's hard to tell, right? It's a huge company.
They probably have job openings all around major metro areas in the US, but they did not disclose who the tenant is at this t- point in time. Again, speculation that it could be Meta. We don't know for sure yet.
I, I will comment that, like, the term investment-grade tenant has done a little bit of heavy lifting, um, for some of these announcements, uh, because I've heard, uh, I f- if...
I can't remember who it is, but some folks have said that, have used that term, and they're referencing perhaps, like, an Anthropic or OpenAI who's not public.
And so they're kind of assigning by the pro- by the transitive property the other folk on the other side of the deal who is providing said non-public company with perhaps some investment-grade credit. So- Yeah. Yeah.
A good example of that being Hut 8 and TeraWulf- Exactly... uh, and, and, um, uh, Cipher with Fluid Stack. Exactly. Google being on the end of that compute that's going to be hosted at those facilities. Yeah.
So quick, uh, fact-- Sorry. Quick fact-check for myself here. $6.6 billion deal over 20 years for 175 megawatts of critical IT load at the Sandersville site. On the call, they,
they revealed that they expect the cost of construction to be between 10 and $12 mega, doll- uh, million dollars a megawatt. It's a total greenfield, by the way. Yes. This is important because
the Bitcoin mine is- Those are costs. Yeah. Yeah. The Bitcoin mine's still gonna be sitting adjacent to the HPC site so that they can continue to make use of that electricity.
The substation's already in place, which is great news. If you don't have to worry about that, that's a huge cost. Also lead time, probably crazy, so that's important.
They also, the CFO, mentioned that, uh, the equity portion's already been funded for Sandersville. Really important here too with regard to the investment-grade counterparty, Charlie.
Um, there's a backstop, but they said that there's no equity given up and no credit wrappers for that backstop.
If you remember when TeraWulf got the backstop from Google, which was the first of its kind for the whole cohort, they ended up giving up, I think, roughly like 14% of the company in warrants to Google, and CleanSpark here saying that there's no equity component to that backstop.
Wondering what they did to sweeten the deal to make sure that they could get that. They didn't really talk about that on the call, but I think that's absolutely worth noting. A few more updates.
All data center long lead items are ordered and prepared for the Q4 2027 first data haul. The 122-acre greenfield parcel lets them build without disturbing the mining footprint, like we said.
Um, and noticeably, uh, noticeably engineering, uh, firms and general contractors are the tenant's preferred partners, and that the firm also manufactures MEP and cooling components with a track record with the specific tenant.
So they already have the contractors and the engineering acumen via this counterparty. Again, investment grade, high investment grade, uh, large tech company. Don't know who it is. Another big reveal from the call.
CleanSpark, according to CFO, um, Vecchier all-- Vecchier, uh- Becciarelli, excuse me He's Italian My southern tongue has trouble with Italian names, man Yeah I just...
We don't, we don't have many Italians down south Yeah Um, he said that they will utilize high loan-to-cost project level debt.
Quote, "As you've seen, some of the recent deals, financing excess of 90% loan to cost is very common, and that's our target.
Obviously, the higher the loan to cost, the greater the internal rate of return is, because you're bringing less equity to the project."
This is a notable departure from our interview with Patrick Fleury, and we're actually...
We- we'll touch on this theme one more time when we talk about Salomon Khan's comments on how they're funding the Long Ridge acq- acquisition for Mara. We're seeing three different financing strategies.
One with a lower loan to cost, more equity given by the parent company, TeraWulf. Here, higher loan to cost, less equity committed, CleanSpark. And in Mara's case, lot of Bitcoin.
They're actually taking on Bitcoin-backed loans for some of these acquisitions that they're seeking, specifically the Long Ridge one. Um, last few things here, Charlie, before we move on.
The rest of the segment, the rest of the Q&A segment rested on Texas, and there were questions as to whether or not the Batch Zero process will affect Sealy and Brazoria, CleanSpark's two sites that they have acquired in Texas, and which this tenant at Sandersville has exclusivity on once, uh, they decide whether or not they want to, uh, exercise that option.
The Sealy site, 285 megawatts, is baseload designation in Batch Zero. They acquired this in 2025. Um, or the...
Sorry, that was, um, that, that, uh, baseload designation was made in 2025, and so it just needs final deper- determination for the interconnect through Batch Zero. So that one seems like it should be pretty secured.
Brazoria Phase One is the same. 300 megawatts, classified baseload, shouldn't have any problems with Batch Zero. The only one up in question is Brazoria Phase Two. That's 300 megawatts.
That's the second half of Brazoria. That still needs a study. And, you know, it also bears to mention that,
I mean, I assume they're p- probably pushing it through Batch Zero, but, like, considering the construction timeline on these, it might not be an issue.
They're probably not going to break ground on that site for some time. The other really interesting point from the earnings call was what CleanSpark highlighted for future expansion.
They highlight an 86-megawatt site in Washington, Georgia that is energized today, but they've also submitted a line study at MEAG's request to expand it by up to 500 megawatts, and has secured options on several hundred adjacent acres for that expansion.
So if you're looking at where they might try to strike next, probably gonna be down south in Georgia. Schultz also said the value of non-Texas assets for 2027 and 2028
went up significantly, quote, unquote, because of the Abbott audit. They also confirmed 100 megawatts in Wyoming, 60 megawatts in Jackson, Tennessee, and, and s- uh, a small footprint in Ripley, Tennessee.
But it seems like the one they're really going after right now is that Washington County or Washington, Georgia site. 86 megawatts, looking to expand to 500.
So if you're looking at where they might strike next for potential AI expansion, my bet would be on Georgia. Overall, though, some clarity on exactly what the financing will look...
Well, or not exactly, but the shape of what the financing will look like for Sandersville. Looking, uh, you know, some assurances that lead times,
uh, are, are prepaid items and lead ti- long lead time items are secured for the first data hall.
And also Texas not p- most of the Texas portfolio won't necessarily be disrupted by Batch Zero, other than just the timeline getting pushed out. So... Yep.
So I think that probably wraps up the first of the two earnings that we'll cover today. We'll cover Mara on the back half of this stream. But we've got Khan in the wings.
We're gonna talk about this month's hashrate index look back. But before that, a word from our sponsor, CleanSpark.
[gentle music] We are CleanSpark, America's Bitcoin miner, a publicly traded company with the largest operating hashrate, powered entirely by self-operated infrastructure across four states.
This is our proof of work. We are setting the standard for what's next. Learn more about the intersection of energy and Bitcoin at cleanspark.com. All right.
We got Khan in the audience for our monthly hashrate index look back. Khan, welcome back to the show. Thank you so much, Colin and Charlie. Good to see you both. Good to see you too, man. Yeah. Okay. So it's July.
Summer's, you know, over halfway done, but doesn't mean that things weren't interesting in July. I'll throw it to you. I've got the look back pulled up here. We can hop around to it.
Give me the, the high level TLDR before we go into specific questions, Khan. Definitely. Um, July was quite interesting. Um, so let's start with the headline on hash price.
First thing we saw was monthly average dollar-denominated hash price rose to $31.21 per, at a hash per second per day, um, up 2.8% month over month.
But it only recovered a sliver of June's fall. We saw that in June, hash price slit 17%, or $6.23. And July only regained around 84 cents of it.
Now, at $31.21, July ranks as the second lowest monthly average hash price on record. Behind June, which was $30.37, and just under March, which was $31.27.
So these three lowest reading-- Uh, these are the three lowest readings, um, in Luxor's Bitcoin Hash Price Index, and they all fall inside the year of 2026.
Now, for comparison, in 2025, monthly averages ranged from around $38 to 59, with a mean of $50.68. So this gives you an idea of what it feels like to be a miner these days.
Yeah. Okay. It looks pretty choppy and brutal, man. [laughs] I, I just don't see... Do you see light at the end of the tunnel?
Is there anything in the look back that makes you think, "Okay, things could be improving from here"? Because to me, the light would've been the four CP season for the miners who could still s- remain online. Mm.
But it hasn't made that much of a difference 'cause so much hash rate's kind of already come offline. Is, is there anything that gives you hope? Yes.
There is some good news, and I'm gonna share some of that, um, right now. Uh, but before I get into that, um, another interesting aspect here is on difficulty.
So what we saw with difficulty trends is there was a double drop, um, which of course contributed to this slight recovery in hash price. Um, during July's epochs, difficulty fell twice. The first was on the 11th of July.
It was a minus 5% decrease. And then a second one on the 25th, which was 0.74% decrease. Overall, a 5.71%, uh, net decline in difficulty over the month.
Now, this trend was driven by four CP curtailments, and also notably, the July 11 difficulty drop was the fourth-largest difficulty decrease of 2026. Now, I mentioned that the trend was driven by four CP curtailment.
How do we know this or how do we get to this conclusion?
Uh, the reason is because Luxor's energy desk saw that ERCOT dispatched events clustered heavily across this 10-day period at the very beginning of the month, spanning from the 1st to the 10th of July.
Um, we saw that there were more than a dozen curtailment events d- during these 10 days.
And then the following difficulty epoch spanning from the 11th to the 25th saw less than half of that and produced a much lower difficulty adjustment, right? From 5% down to 0.74.
So the main message here is that curtailment intensity and the size of the difficulty adjustment tracked each other pretty closely.
Another interesting insight, uh, which I think is highly relevant, is at this stage, difficulty has now closed below the one Zettahash equivalent, which comes out to 139.70 trillion for 10 consecutive difficulty adjustments spanning from the 20th of March to the 25th of July.
So right now in early August, it's been over 130 days where we've firmly been below the one Zettahash milestone.
And then a third distinction, um, between the previous month of June and this month of July was that the difficulty drops that we saw in June coincided with two different factors.
One was record low hash price, which caused marginal mining machines to shut down, and then there was also, um, seasonal curtailments via four CP peak avoidance behavior for flexible loads.
July saw a hash price rise by 2.8%, which removed some of that economic layer. So that's why we're coming to this conclusion that the trend was driven by four CP curtailment.
Of course, we can't be absolute about it, but we believe that it was a significant contributing factor.
And this actually gets into something I think you've talked a- you've brought up in the, uh, in the look back, which is we peaked last year at, like, 1.1 Zettahash, and we're down to the average moving average is the mid-900s or low 900s now of Exahash, which means there's an estimated 227 Exahash idle.
Mm. Pretty interesting here. Um, any, like, color you can give to this? Uh, economically unviable? Is this just rotting? Is it, uh... What are the implications of this, uh, for the, you know, foreseeable future?
Definitely. Yeah. So that's an interesting, um, observation that's been driven by our latest mining economics projections.
Uh, and basically what we're seeing is that since that peak of the one Zettahash milestone back in around September, October of 2025, difficulty peaked around 155.97 trillion, I believe.
We're down around 19% from there since then.
Um, throughout this time, going back to what Colin just talked about in terms of good news, what this means is for any miner that's online and still hashing, that's relief, right?
The Bitcoin network is paying more BTC per unit of SHA-256 hash rate at the moment for those that have survived and stayed online.
Um, another interesting insight that we can draw from our projections is that at a price range right now of between 59 to 66K in terms of Bitcoin price action, we would expect USD hash price to range in the 28 to 33 dollar range.
Now, that's not-- that's above the level that triggered the marginal shutdowns in June, but it's not far enough to bring back mid-generation mining machines back online.
So we're talking about the 25 to 38 joule per terahash tier. So Charlie, a lot of that idle capacity is coming from this mid-gen, uh, mining machine tier.
Even more interestingly, at $40,000 Bitcoin price, our sensitivity tables would put equilibrium hash price around the $25 mark per peta hash per second per day.
And what we think is that the price point that really, really matters is around $33,000 for Bitcoin, because at that point, um, assuming an average industrial power cost of $48 per megawatt hour, we would see that the break-even efficiency would drop under our estimate of the network efficiency, which is around 20 joules for a tera hash.
So the message there is that the median machine would stop covering its power bill at that point.
So the differences in idle capacity versus active hash rate and these sensitivity estimates gives you an idea of, uh, where we're sitting right now and how Bitcoin price action might affect hash rate.
I've, I've got kind of two questions to follow up on that, Con. The first one involves those machines that are still active. Mm-hmm.
'Cause right now, break-even efficiency at July's hash price is, like, 27 joules per tera hash. Mm-hmm.
A- assuming, what, like, $48, $50 per megawatt hour, and the 25 to 38 joule per tera hash tier has sat below break even for t- three months against an estimated network average cost that we've just mentioned. Have...
Do you think we've reached a kind of
ceiling for hash rate for right now, in the sense that, like, we're kind of getting to that point where equilibrium is setting in, the machines that are still online are the only ones that can take it, the operators that can't hash profitably under this hash price are gone?
And the second part of that question, i- are there any insights from the ASIC trading desk as to, like, where that 20- 227 exahash is gonna go? Is that just scrap at this point? Like, are...
Is there any room for that to migrate to lower-cost jurisdictions? So just two, two parts there. You can tackle them in, in whatever order you want. Yes, really good question. First is on the idle capacity.
Um, this idle capacity could be idle for reasons beyond economics as well. Um, some machines fail. We know this. Eventually, all machines will fail.
And some might be under, going under maintenance, or as you mentioned, Colin, they may be moving elsewhere around the world, chasing the cheapest electrons. Um, so it's a confluence o- of these factors.
And then the second part to your question is a lot of our estimations for these mining economics projections are driven by insights we get from our hardware team, and specifically for our latest run, we saw that there was a major downward revision in terms of monthly production estimates for incoming hash rate supplied by ASIC manufacturers.
And the reason is quite clear. Excuse me. The reason is quite clear. Mining economics has deteriorated quite a bit, um, so machines are incoming at a slower rate,
which of course affects, um, th- the level of hash rate supply coming in as well. So I want to talk about hash rate contracts and how hash rate traded. Always a really interesting,
uh, thing to have you look at, especially in the middle of the summer. Um, yeah. Uh, I guess first, how did hash rate trade, and then we'll get into how the hedgers performed. Yeah, good question.
So how future hash rate traded throughout the month was we saw that the forward market lowered its difficulty and hash rate expectations again in July, deepening rather than reversing the reduction it made in June.
So every forward contract from August to December fell by an average of around 6%, and the implied network hash rate for end of year, December of 2026, dropped from 1.05 zeta hash to now 985 exahashes.
So Colin, touching back on what you just mentioned, the forward curve is expecting, um, hash rate to remain below the one zeta hash level throughout the end of the year.
And then second, uh, Charlie, when it comes to hash rate hedging performance, what we've seen is instead of looking at, um, single month contract performance, I think it's more interesting to look at rolling hedge performance over different timeframes.
Two main messages here.
The first is that over the past 12 months, the trailing 12 months, it's generally made sense to hedge against dollar-denominated hash price and to remain exposed to spot Bitcoin-denominated hash price.
This is driven by two different factors.
First is, uh, weak Bitcoin price action, which obviously affects dollar-denominated hash price, and then the second is the decline in difficulty that we've seen, which relieves Bitcoin-denominated hash price.
So generally, dollar-denominated hash price hedgers have won, uh, and those remained, uh, remaining exposed to spot Bitcoin hash price have also won throughout this period.
Now, if we zoom out further to the halving, uh, since April of 2024, the picture changes a little bit.
The main message being there that regardless of your hedge horizon or, or your contract denomination, it's generally made sense to hedge against hash price.
So as a group, miners that have engaged in consistent hedging have come out on top, um, versus spot mining alone.
Um, so let's get into how the, uh, USD and BTC-denominated sellers performed. It looks like USD won, what, two out of five, uh, horizons? So- That's correct. Yeah... I've kind of a...
Yeah. So what... Yeah. Uh, dive into this for me. So, so for this month in, in specific, uh, dollar-denominated hedges won throughout April and May.
Uh, and any hedge struck outside of that time period, uh, was out of the money. Um, and conversely, on the Bitcoin-denominated side, buyers of Bitcoin-denominated hash price won across the board.
For the fourth consecutive month, anyone who's selling forward in terms of Bitcoin-denominated hash price has been out of the money.
Uh, and the reason is because difficulty is declining, so why would you hedge against difficulty or transaction fees as well?
And there's some interesting insights on, on transaction fees that we can touch on, um, as well. Of course, there's a very relevant exploit which shows up, um, through these on-chain signals.
I assume you're talking about the cold card exploit and specifically increased fees from sweeping those funds. Exactly, yes. Um, the data clearly showed up, um, towards the end of the month.
So throughout the month, uh, fees accounted for 0.69% of total block rewards. This is still below 1% for a 13th consecutive month.
So we've seen this trend, uh, since July of 2025, uh, bone-dry fees.
Um, in terms of dollar-denominated terms, average fee revenue per block came out to just under $1,400 per block, um, 8% decline month over month, and the estimated network-wide fee revenue for the full month of July was around $6.2 million.
Now, the fee distribution was heavily skewed towards a single day, and we believe that, uh, the cause was the cold card exploit rather than organic block space demand.
We saw that on the 31st of July, fee collection peaked, uh, which was 67% above the monthly average. It also saw the highest fee revenue per block coupled with the lowest transaction counts of the month.
So the 31st of July saw an average of 30, um, 3,900 transactions per block against the monthly average of 4,700. Why is this the case?
It's because sweeping thousands of compromised addresses into a handful of consolidation addresses produced a small number of input-heavy transactions.
So block space was being filled with these handful of very large, heavy transactions rather than many ordinary ones. Uh, and miners were able to capture some of this fee competition.
Um, but yeah, safe to say that the, the data showed quite clearly that something happened towards the end of the month, and we attribute it towards this cold card exploit. An unfortunate note to end on, but
salient insight. Khanh, thank you for joining. Really appreciate it. We're looking forward to next month, see if hash price improves, and we'll see if that ceiling on hash rate holds. Have a good weekend, man.
Thanks so much. Take care. All right, I'm gonna pause. Can I... Just, uh, gonna do a quick live mic check. Colin, is my mic super quiet still? It's a little better. Okay, let me try this.
[inhales] Boosting a bunch of manual stuff. Is this better? Yeah, that's better. Okay. Um, anyway, [claps hands] moving on.
We've got Brandon Bailey, uh, the guy behind DI Metrics in the wings, and we'll bring him on up here to talk about the latest in data centers and data center insights. Before Brandon, a word from our sponsor, Luxor.
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All right, let's get data whisperer Brandon Bailey up here for a little Q2 recap and also [static] a little show off of DI Metrics. Brandon, welcome to the show, man. Welcome back. Welcome back. Thanks, guys.
It's good to see you. Good to see you too, man. So
we're about halfway through-- a little over halfway through in terms of the companies we cover for earnings, and I just wanted to start this segment off with what have been some of your key takeaways so far from what you've seen specifically on, it could be financial metrics, or it could be on the operational side and the qualitative side with company updates?
Yeah, I, I would characterize this most recent earnings season as being another one of sort of strong execution, um, across many of the miners.
Um, a lot of what we heard on various earnings calls is that demand for power capacity continues to be strong and robust.
So, um, what's constructive about that is the fact that we're seeing, um, some pricing power, um, with respect to some of the companies, uh, as it relates to their lease rates.
They feel confident that, uh, their ability to sign new deals at higher rates, um, is continuing to, to trend in the right direction, and I think that that's a function of just scarcity, right?
I think, uh, something we might end up touching on is, you know, the badge zero process, other regulatory sort of hostility as it relates to data centers that is making it even harder to ultimately get capacity online.
Which is making the near term or the power capacity that's already available even more valuable.
Um, another thing that I think we, we heard on earnings transcripts or from various CEOs was that they're starting to try to differentiate their sort of capabilities from a, uh, from like a, how they, how they pursue the debt financing terms, and then also with respect to key terms in the leases they sign.
So that's pursuing triple net leases versus modified gross leases.
Um, some of the, the credit backstops or other various, uh, I would say covenants or clauses that they're including in, in some of their leases or even how they go about the pro- uh, project financing debt.
Um, they're really starting to focus on how they go about the execution across these items for differentiation, uh, between their peers, and I think that that's gonna be a really important point as we go forward, as most of these companies now have signed a lease.
I think we're past the point of, can these companies actually sign a lease? And now it's coming down to who can actually get the best economic terms or sign the best deals.
Um, another big point that we heard was around the behind-the-meter power generation. I think that is another big, uh, sort of key component that's gonna start to come into play.
And I think another element that kinda is a little bit related to the Batch Zero process.
Again, as it becomes more difficult to get net new, uh, capacity permitted, um, and approved, looking for ways that you can kinda go behind the meter or find alternative routes to getting power capacity online is going to be another big opportunity for a number of these companies.
Let, let's touch on Batch Zero here, Brandon, 'cause I think that was probably the defining jitter a- across a bunch of these earnings calls.
And so, so much so that some stocks with exposure to Texas, and those who were more exposed to Texas than others, actually sold off pretty significantly following the earnings calls.
First question, is that justified to you?
Second question, kind of building on the first, uh, do, do you think that that should be nullified by the idea that suddenly electrons outside of Texas are now much more valuable, but then there's also increased competition from everyone for those electrons?
I think that's right. I mean, in, in my personal opinion, I think there's been a little bit of a market overreaction to, to the news.
I actually think for groups like, uh, a HUD-eight, a Cipher, many, many of these companies, it's actually, um, uh, more of a... It could, could even be a bullish thing for them. 'Cause I think that Greg Abbott's, uh,
you know, comments in, in wanting to delay the process is really about distilling the signal from the noise.
Like, who are the real players here versus who are sort of the pretenders or the people that are just trying to be opportunistic, um, you know, with respect to, to this opportunity.
And so I think, you know, companies like Cipher, HUD, um, you know, Wolf, others that we're talking about here have, you know, taken all the appropriate steps when it comes to, you know, their, their applications with respect to the Batch Zero process.
So I think that this maybe even gives them an opportunity to demonstrate, you know, why they are a competent sort of, you know, uh, uh, player, um, and, and should be selected or be one of the, the, the companies that, that should be granted, you know, the permission to kinda, you know, um, continue to operate, uh, in the space.
I think it also creates opportunities for these companies on the M&A front,
as there are likely to be some sites that, you know, either don't make it, where they might be able to pursue a interesting sort of, um, purchase option style contracts for sites.
So it, it might actually even present an opportunity for them to boost their pipeline capacity at fairly, uh, competitive or cheap rates.
And then the last thing, again, it goes back to, uh, this just being another item that is ultimately going to make it more difficult and more challenging to get power capacity online, right?
Which increases the value of already approved and permitted capacity that is available. And permits, that's becoming, like, the constraint. And, uh, with, with Diametrics, uh, you've been tracking this.
The moratorium map, I have to bring it up 'cause it's the thing everybody's thinking about. It's very difficult to track because it's all inconsistent about. But, but so what's your assessment?
How would you characterize moratoriums, uh, across the United States right now? And then we can get into some, uh, more narrow questions. For sure. I think you're definitely seeing a growing number of moratoriums happen.
Uh, the trend has mostly been...
I, I would say the counties or towns that have been the loudest with respect to wanting moratoriums against data centers are typically the more educated, affluent, sort of urban towns or counties, um,
that, that, you know, ultimately it's sort of like a NIMBY effect. So I've, I've found that most interesting. Um, I think that, uh, a lot of people assume that it's, it's mostly Democratic, um, sort of counties.
That is a correlation, but it's not as strong as ultimately the level of affluence and educational attainment in a, in a, in a general area.
And so what you typically see is that more rural areas aren't necessarily against data centers, or at least they haven't been. It's mostly, you know, those, those urban areas that I've, that I've been mentioning.
Um, and so again, overall, you continue to kinda see the noise around data centers continuing to just trend up and to the right.
Um, one of the things that I, I think is somewhat unfortunate for counties is the fact that these data centers have the opportunity to bring significant, uh, tax revenue, especially in smaller counties. So, um-
You know, I kind of understand some of the public outcries, um, but I think that counties should look at the bigger picture of what allowing data center development in your county can do for the local budget.
That could be new schools, that could be new parks and recreation, it could be, you know, uh, new... getting a new fire station.
Whatever proffer conditions, uh, that ultimately add value to a community, um, there's a real opportunity there if they can work collaboratively with data center developers, where I think everybody could really win.
I wonder how much of that is not properly communicated. W- I, I'm, I'm inclined to think that that's not necessarily the case for most of these companies.
I mean, like, if we look down the roster, right, you can look at, you know, HUD 8's done this, they've done a lot of community engagement. Meta has done a decent amount of community engagement.
I believe TerraWolf as well has done quite a lot of community engagement. So I wonder how much of it is, like, you know, are, are they not being educated enough on, like, what exactly the money will...
like, how much money it will generate in local property taxes and other, other injections of capital, and what that will mean for infrastructure in these areas?
Or I wonder if it's a wooden-headedness of just, uh, this feels like a deal to the devil with a lot of people who, like, don't fully understand what these things are.
I mean, when you go out into some of these rural towns, man, it's like everyone grew up there, their great-grandparents, like, settled there, and they've known everyone in the 600-person town their entire lives, and there's almost, like, a element to where they don't want anything to change.
And I'm not really saying that derisively, but, like, when you think about just, like, putting a massive data center, they, they might see it as, like, you know, counter to the, this, the, the, the town's, uh, you know, values or whatever.
I- I'm kind of rambling here just w- to ask, like, if you think this is someti- something of an intractable problem for certain areas, or if you think that there just need, there just needs to be more education and outreach.
I think there definitely needs to be more education and, and outreach. I think, you know, it, it's also a little bit depending on the county.
I could understand how, you know, a massive data center development coming to your county could feel like a big boogeyman, you know, big business, uh, sort of, you know, uh, having, uh, an, a new business development come to your town that kind of seems counter to the culture, right?
Where you have these big, giant organizations that, you know, y- you may envision don't really appreciate the culture of the town and, and, and having some hostility towards that.
I could totally, um, you know, have, have sympathy for, for, for that understanding. But I do also think that there are large, like, social campaigns going around that are spreading misinformation.
You know, there have been many studies that have been conducted that, you know, uh, s- debunk effectively,
you know, the, the, the power consumption as it relates to the data centers and what it means for local electricity rates, the water consumption, and how much water is actually being used, the environmental considerations.
Um, but there, there's a lot of social, social media-led misinformation about these things.
And not to be too tinfoil hat about it, but I also think that, um, there's a lot to gain from other nations like a, a China to try to incentivize that data center development is, is bad in the United States and is something that should be banned.
Anything that can ultimately slow down this train and curtail data center development is advantageous for somebody like China.
There could even be smaller politics or games being played whereby, you know, the competition at the frontier is fierce.
Imagine, I'm not saying I have any evidice, uh, evidence of this, but just imagine this for a second. Um, Anthropic is planning a mega data center, a mega campus. What if you are Meta?
Could it be in your best interest to try to stall that data center from ever coming online? Even if you can delay development by six months by maybe pushing a campaign, it gives you an opportunity to catch up.
I'm not saying those things are happening, but it, it's not that hard for me to believe that there are some political games that are being played across the country, maybe between different countries, and then certainly at a, at a much larger scale as well.
So many competing incentives, yeah. Yeah, totally. And we've covered this. We've covered, uh, with Sam Lyman of the Bitcoin Policy Institute on the Chinese, uh, program, uh, to drive to elevate these, uh, concerns.
We've seen it with oil and gas for the past 20, 30 years. Um, okay, one last question. Again, gotta quadruple down on moratoriums.
That said, all this that you've said before, are the moratoriums or delays actually affecting data center projects?
There's been headlines of X number of gigawatts, X num- billion dollars of data centers, like, canceled or delayed. Um, is that true? Are those indicative of what's actually happening?
Are there delays, or are these project cancellations, or are these projects actually ever really materially gonna happen? To what actually is the impact of the moratoriums in your view as of right now?
I would say there's, um, definitely been some impacts.
We've, we've had a, a couple of different data center projects absolutely be impacted, um, by some of these moratoriums or just, like, public outreach that has cau- that has caused either, uh, delays in the permit process, additional, uh, community hearings, um, requests for more time to study and evaluate these projects.
Um, so it, it's certainly having an impact on, on, uh, certain developers. But I would say that being said, it's in very specific geographies.
So I would say we've, we've seen more of these, uh, impacts be felt- In, uh, like a, a market like PJM, so Ohio, um, you know, states like Illinois, uh, uh, Michigan, um, and, and others. Um, certainly in Virginia.
I know in Loudoun County there's a lot of, uh, pushback. Ashburn, places like that. Um, so it's not all created equally. It very much is region-dependent.
But I would also say that a lot of the new plan capacity, um, is mostly in Texas.
You know, there's not a lot of new data center capacity planned in a location like Ashburn, Virginia, or Loudoun County because of known hostility.
Um, and so I think that on a go-forward basis, it's gonna be really, really important to, to watch sort of what happens with, you know, places like Texas with the Badge Zero process, um, any other changes that ERCOT plans to make as it relates to, um, how capacity gets studied.
That will have a really material impact. Um, but I would say, for now, it's been more sort of one-off projects here and there. All right. Brandon, thank you so much for your time.
A shout-out, uh, if you like what Brandon's talking about and you want more info, go to dimetrics.ai. Dimetrics spelled D-I-metrics.A-I. Brandon, thanks for coming on the show. Thanks for having me. Happy Friday.
Happy Friday. All right. We have Asher Knuth, CEO of Hut 8, in the wings, and we are bringing him on up here. We'll talk about the latest going on with Hut. Let's bring him o- on up. Asher.
Asher, welcome to the show. How's it going, guys? How you doing? Pretty good, man. Thank you for joining. Uh, obviously super busy couple weeks for you, coming fresh off of Q2 earnings this week.
We really appreciate you taking the time. Of course.
And I would love to start with the question that you've probably gotten 100 times this week, and was a feature of most of the calls this week for, uh, the cohort of Bitcoin miners turned AI companies.
And that's expe- explicitly how does the new audit from Greg Abbott and the delay to Badge Zero affect Hut 8 specifically as it relates to the Beacon Point data center?
Overall, what I think Greg Abbott has done is extremely good for the ecosystem, and you actually saw even QTS came out and supported him.
We need more people to give kind of local voters, constituents, community members comfort that data centers are not this big scary thing that's gonna come and take everyone's water and ener- and increase energy bills and so forth.
I think what we're seeing a lot across the country is that, like, this misinformation has spread and really got into people's heads.
And for a data center developer, it's harder to get there and say, "Hey, look, we don't do these things."
Because they think, "Okay, well, you are biased in saying that because you're trying to invest into th- this project, and obviously you're gonna say y- the data centers are fine.
They're not gonna consume water," and so forth. So I actually think what Governor Abbott did was extremely smart because there's so much investment in data centers going into Texas.
It is better to get ahead of this and say, "We're going to make sure that this investment is done in a responsible way that helps build communities," rather than let the fear become so large that it's hard to reverse later.
And so, like, we're extremely supportive of the initiative. And also, we were one of the few that actually responded to the PUC in their questionnaire that related to a lot of these topics.
And frankly, that questionnaire was many of the same things that Governor Abbott and, and his office, uh, released.
And so, overall, we're gonna work through the process, but think this is good and healthy for the ecosystem because he also didn't take an extreme approach of, like New York, they said, "All right.
We're gonna do a moratorium. No more data centers."
He said, "We're going to do an audit process to make sure that these investments are good for the communities and don't have a negative impact," and I think that's, that's great.
This is kind of off the cuff for me, but going back to the, the PUC survey. If I recall correctly, it was like 26 companies out of over 100 that actually ended up- Yeah, like 28 of-...
or projects that actually ended up responding... 300. Yeah. Um, three... Yeah. Thank you, Charlie.
And I think that underscores what Brandon was talking about earlier, about the fact that what this is really about is chasing phantom load out of the equation.
It's like if you're not serious about building, you need to just get out of the queue and then let the people who actually have their ducks in a row kind of tackle this. Um, so
j- to, to, to dig in on that one just a little bit more though, Asher, as I understand it, the second phase of Beacon Point already has the agreement with AEP Texas, correct? Correct.
So- We already have an interconnection agreement in place. So, a- and, and it seems from what we've seen from Morgan Stanley that, uh, there's a high chance...
And I, I'm not gonna try to get you to say this with certainty. Sure. I understand that. But there's a high chance that Hut 8 will be considered base load for this Badge Zero, and that it should smooth over the process.
So you're generally confident about Hut 8's prospects, I would assume, going in even to this audit and into the extension of the Badge Zero Yeah.
Before the extension happened, obviously today was when they were g- supposed to really- Yeah. [laughs]... approve them. We felt very confident and, and, and such.
And I think at the end of the day, like, the criteria doesn't change, right? The amount of developments doesn't- don't change.
And I think all of the questions that Governor Abbott had asked, um, in his, uh, audit are things that we've already answered publicly through the PU- PUC survey.
And so we think that this is net positive and it's net helpful. Obviously, it's creating some volatility into the ecosystem, volatility into the Hut 8 stock today.
But overall, like, we are proud of the projects that we're building because, uh... Like, I'll, I'll give you an example, and I, I, I spoke about this to our team the other day.
Our first site that we ever built back in the Bitcoin days was a former DuPont sodium smelter that was a brownfield site that we retrofitted, 'cause it had a 50 megawatt substation, into a Bitcoin data center.
And when we were building that site- The subcontractors that were there were talking about how important that factory was for their parents and their grandparents, and it was like, it was a center part of the community, right?
It helped employ a lot of folks. It was... People thought fondly of the, the, the factory.
And I think data centers should have that similar impact on communities they go into, whether it be the, by the folks they employ, whether it be by the technologies that they can teach people, right?
We're looking at different things where we can l- work with local schools and teach them on the technologies, the infrastructure stack, and so forth, or the different community projects that they invest into.
And so overall, like, there's too much negative sentiment on data centers out there, and I think what I've heard through kind of some folks is some of that is driven by foreign adversaries, some of that is driven by, um, different kind of stakeholder groups.
But at the end of the day, what should come out is the truth versus what's real and what's not.
And any process that helps verify what's real and what no- what's not, I think should be welcome, because it's hard to fight against things that are, that are not real. It's much easier to just say, "You know what?
These things we don't do. We do not consume water because we have a closed loop water system. We pay for our energy infrastructure, our players and our supply. We're not driving price up.
We're actually helping the grid by increasing infrastructure." Right? "We don't have big noise concerns because we've run all the noise and traffic studies."
All of these things a responsible developer should do, and that's how we're gonna allow us to go and compete against other countries in this AI race.
But, like, we've got to get ahead of this, otherwise we're going to just be dealing with all of this FUD that is gonna be hard to actually develop responsibly. Yeah.
And that, that's a good point, I think, with regards to making sure that the process is buttoned up so that we can address some of these concerns that often ca- oftentimes are overblown in the media and in the, uh, cultural conscience.
On, on the note of expansion, Asher, HUD8's got 5.4 gigawatts under due diligence, 11 sites across six states. Can you provide any insight into where y'all are at with the timeline for some of these?
And specifically, can you give us an update on Batavia, Illinois, and what y'all are thinking in terms of prioritizing these sites going forward? Sure. We have sites across the whole US today.
Um, we have, uh, I think over 10 different states that we're operating within, uh, and, and looking at different projects within. Those sites range from end of '27, '28, '29, um, and some in tw- 2030. That kind of...
And some of the sites ramp up per year as well. And so, uh, it, it's a whole slew. The... You'll see that number continue to increase. We're spending heavy investment on growing that pipeline.
That pipeline does not include all of the M&A opportunities that we're exploring right now as well. We have a whole team that explores those opportunities.
Or behind the meter generation opportunities where we can bring generation and power, where there's a lot of opportunities there as well. Um, and Batavia is, is, is a relatively small site of ours.
It's 50 megawatts right outside of Chicago. Uh, that, that site is going through a restudy process with ComEd now.
And when it goes through that process, there's ample demand there, but it's a relatively small project in our whole portfolio.
A quick question on the development pipeline, Asher, and if I'm misunderstanding something, please correct me here. Sure.
But it seems like the Fluid Stack right of first re- uh, right of first offer on the one gigawatt expansion at RiverBend is excluded from the stated development pipeline. That's right.
We don't include, uh, we don't include expansion at RiverBend today. Okay. Um, w- uh, could you give us an update on what the timeline for that decision is?
And if Fluid Stack passes, will that capacity be earmarked for a new tenant? Does it revert to the general development pipeline? Like, what's the process there for getting that moved through to a deal? Sure.
We, we have, uh, interesting timelines that Entergy, the utility, has provided, and then we have some other kind of go fast solutions on behind the meter generation on that campus as well.
And we have multiple folks that are interested in that capacity, uh, whether the ROFO is executed or not. Thanks for the update on that. Um, a few questions on financing here- Sure... Asher.
So, um, with the CoAd II convertible note, uh, converted to equity in May, there's no general recourse debt now sitting at the parent level.
So I'm just curious if that is the strategy going forward, if HUD8 will continue to try to pursue deals where there is no recourse at the parent level, and if we should expect investment grade notes like the ones we've seen for Beacon Point and RiverBend to kind of become the standard for the, for the financing stack going forward.
Because y'all closed, like, what, $7.5 billion in these- Yeah... in these deals throughout the quarter.
Is that the template we should expect, or, uh, are there other avenues for fundraising that HUD8 would, uh, you know, uh, look at in the future for these builds?
So today, we have zero debt at the HUD8 le- parent level, as you had mentioned, and that was done very purposefully.
And also, the financings that we did at the project level are all 16 and a half year investment grade bonds, so there's no refinancing obligation.
A lot of the construction loans that you see, once you build it, you have to go refinance the market, and you have to raise capital to pay off the loan, and then have the longer term loan that you put in place.
I think the reason why we've done both of those things is the markets are volatile, as we see today, [laughs] right?
Um, HUD8's down 22% this week because of some letter that was posted that we actually think is good for the market.
[laughs] Um, and so as a result, like, the market is volatile and we've lived through that volatility, especially in the Bitcoin world.
And what we've learned is it's actually really good to be in a place of strength when the markets are not strong.
And so having a re- a really strong balance sheet and having no refinancing needs allow us actually to be a buyer in markets where things are cheap.
Because I think when things are good, I think that's when you bolster the balance sheet. And when things are bad, that's when you deploy.
Um, and so that, that's how we think about strategy and how we think about growth for the company. Asher, I've got two more questions before I kick it to Charlie.
This one kind of builds on what Brandon was saying about the batch zero process potentially leading to some projects just bailing entirely.
Do you expect that to lead to potential M&A opportunities in the Texas region specifically? Like, is that something y'all are actively thinking about? We have a team that covers ERCOT and SPP.
Uh, we have a lot of inbound, uh, opportunities, even when the kind of r- requirements for the 50,000 in megawatt were being posted, we had a lot of inbounds. I, I think at the end of the day,
sites and power is valuable, as everyone knows. But equally as valuable is the execution strategy in delivering built capacity. And so I think there are opportunities where developers say, "You know what?
We don't have the financial wherewithal, or we don't have the execution capabilities to go and build this. Can we pay...
Can, can we sell this to you and potentially get a piece of the upside if you just take it to the finish line?"
I think the more and more Hud8 executes, the more and more people have confidence on, "Hud8, can you just, just please come do this for us?" And, and we're looking at those opportunities as well.
At the end of the day, it's also a matter of bandwidth, right? What opportunities are we spending the time with that drive the best return for our shareholders? Um, 'cause we can't do everything.
Think about this all the time when I'm going through these, the, the qualitative updates on these earnings, and I think about, you know, like here's a site that we're looking at, and here's a site that we're looking at, not just Hud8, but any of these companies.
And I, I just can't imagine the level of work to due diligence it and to actually try to move it forward to getting a deal signed. It just seems- Yeah... Herculean to me.
And how do you scale with, like qual- the same quality of rigor and talent, right? And so I, I've told the team, I said,
"Our reputation is what matters most, our ability to deliver and continuing delivering, have people trust us in that delivery."
Because in some of these deals, like the third deal we did, we were able to get that deal done in like a week with a couple phone calls, right?
Because the trust was there, the contractual structure was there, everything was relatively simple, and so that's paramount.
And as we think about growth, I'm 31 years old today, we're gonna be running this business for a very long time.
And so it's like growing in a sustainable way and not sprinting so fast that you end up falling a- on, on, on top, top of yourself.
Because once you lose your credibility and your reputation, like that's very, very hard to build back. Um, and so we have measured growth.
We wanna grow aggressively, but we also wanna be measured to maintain quality and execution. Asher, I've got one last question for you, and it involves, uh, ABTC, specifically the Vega site.
I have to wonder, as the constraints for power become more apparent, as deal flow continues to come through and demand is knocking at y'all's door, at what point would Hud8 consider utilizing the 205 megawatts at Vega or looking at Salt Creek, Madison Hat, or Alpha for AI and HBC builds?
Is that totally off the table, or is that something that you would consider given the right conditions?
No, I think everything's on the table, and there's actually really interesting models that are net positive to Hud8 and ABTC in a world like that. So I'll chime in here, Asher.
Um, last time you were on, we talked a bit about data center aesthetics. There's a bit of a curveball. And I think you said something to the effect of like we want people to drive by and then, then look like museums.
Wanna spend a little bit more money on making them aesthetic. And I look at a lot of the community pushback, and I'm in the Facebook groups, and they, they hate how these things look.
And I feel like [laughs] if that were to change, or if they were to feel that this da- these data centers were just gonna...
These giant construction projects in their community, if they were to be a little easier on the eyes, people would feel way better.
Can you tell me about your mindset and just the company's mindset about how you design how a data center looks and feels?
So we're actually in the process of doing that today, and I would say we'd have two parallel paths. We have the existing data centers that we're building, and it's interesting because when we want to go redesign...
'Cause buildings, there's a struct- like right now structural steel is a long lead time item, right?
And so if now you go change the structural steel of the building 'cause you wanna design it differently, that's gonna impact timelines.
And so what we're looking at on existing buildings that we're doing is actually putting a wrapper around the building afterwards and designing basically the aesthetics on top of the building so then you're able to still hit timelines for tenants, but also focus on that community element.
At the same time, we're looking at our standard design and how do we build these buildings from day one with this aesthetic kind of mindset that, in, in mind.
And, and one thing that we're, we're, we're spending time thinking about as well is different communities also perceive beauty differently as well, right?
Now how do you think about what types of buildings are interesting and look cool based on different environments that you build in as well? Um, so the team is having fun doing that.
We have a, we have a kind of team focus on that, and they're, they're having a good time doing it. But, uh, we're, we're focused on kind of what that's gonna look like, and we have a couple cool renderings.
Next time on I'll have the team share with you guys, and we, we can share. We've got a couple cool ideas we're working on. Looking forward to seeing- Love to see some renderings. Yeah. Yeah.
Yeah, what the design team's cooking up. Asher, appreciate you taking the time, man. Uh, best of luck with the rest of the year, and, uh, looking forward to seeing what y'all have cooking for the rest of the year.
Thanks for having me on, guys. Cheers. Thank you. Cheers. Bye. Always a great interview. Sharp guy. I'm excited to see some renderings.
I wanna do a, I wanna do like a data center aesthetic, uh, like tier list or something. Data center aesthetic tier list, yeah. Yeah. [laughs] What would we put, like the Chicken Shack miners at the bottom?
Well, depending- And then like Hud8 and TeraFab somewhere in the A and S tier perhaps. In some communities, the Chicken Shack would be the revered design, who knows? [laughs] Return to tradition, Charlie. Exactly.
I'm from Oklahoma, man. We kinda- [laughs]... it's nostalgic. [laughs] Okay, uh, we're gonna... Again, we gotta go back to the earnings. We're not quite done.
The last segment we're gonna cover Mara yesterday, Mara Holdings. But before we go to Mara, a word from our sponsor, Ligos. [static sound] Stop and ask yourself one simple question.
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Let's bring it on back. Bring it on home. Yeah. We've got Mara's earnings call right here. I can share it on my screen here, Charlie. Yeah, you got it.
So Mara eyes 4.8 gigawatt power portfolio as data center firm targets AI lease by end of 2026.
4.8 gigawatt power portfolio is pretty massive, Charlie, but there's a catch, and that catch is that is prospective and they still have some, uh, some, uh, approvals a- and hurdles on the regulatory front to clear.
But overall, qualitatively, not a bad quarter for Mara in terms of showing folks that they're getting serious about the AI business line. We'll go over some quick numbers before I hop on over to the
operational updates from the Q&A and from the earnings call. Revenue for Q2 2026 came in at $174.9 million.
That was down nearly 27% year over year, and b- missed consensus estimates by 17% of $209.62 million. Net loss came in at $611.3 million. About half of that was change in fair value of Bitcoin [inhales]
and earnings per share came in at negative $1.6-- at negative one point... No, $1.60 negative per share. And adjusted EBITDA not, uh-- Adjusted EBITDA was... I don't have it here in front of me. I will come back to that.
Cash and cash equivalents at $421.3 million. Bitcoin holdings fair value at $1.54 billion, which includes $542.5 million of Bitcoin receivables.
Um, so $200- $2.08 billion in total of digital assets.
And total debt includes $202.45 billion total, with $485.4 million of that being the current portion. Now, like with CleanSpark, net loss, not really important.
That's an accounting thing based on the change in Bitcoin over the quarter and also analysts don't really care about the Bitcoin mining segment.
They wanna hear what Mara is doing for their, uh, AI segment, and they had quite a few operational updates. So going back to that 4.8 gigawatt number.
On completion of pending transactions and approvals, Mara expects 4.8 gigawatts, roughly 2.5X where it started the year. There are two major sites driving this.
There is the Matagorda County, Texas site, 1,200 acres, up to two gigawatts, which is subject to ERCOT and interconnection approval, and Longridge. Longridge is a gas plant that they are purchasing in Ohio.
I believe 505 megawatt gas plant, of which they actually have a Bitcoin mining site already in the area, the Hannibal site. Looking at Matagorda specifically, rights to a powered land site up to two gigawatts.
Transmission lines are already in place for this one, Charlie, so that is a huge boon for Mara regarding this site. They're not going to have to worry about that CapEx.
And listeners will recall that part of the new PUC rules and ERCOT rules are telling data centers, "You're gonna have to fund that transmission. You can't expect the utility to do it," because guess what?
The utility has all the leverage in this scenario. All of you wanna buy electrons from them. [inhales] The deal structure, there's a contingency and milestone-based deal structure here.
Uh, there was a-- There wasn't 100% certainty on the Batch Zero approval when the deal was struck, so Mara built in the ability to wait for that approval before fully committing to the site.
But there, there is a, quote, "Terminal point in time where we either have to close or step away," end quote. I believe that was Fred Thiel on the business call.
Salman Khan al- Salman Khan also added that the structure aligns with Mara's and the counterparty interest at the projects-- as the project progresses.
So they wanna see whether or not this is actually gonna go through Batch Zero. That's still up in the air.
There's a h- l- probably a good chance that it does go through, especially considering they have that transmission line in place.
But unless if, if that doesn't materialize, then Mara will drop this from their prospective pipeline. Another big thing, Matagorda is not automatically part of the Starwood partnership that Mara has.
So s- Mara struck this partnership with Starwood, which is a data center developing company, and the Matagorda site was announced after the partnership was an- was struck.
They will probably fold them into this, I would imagine. If you have a partnership with a developer and you end up developing that site for AI, why wouldn't you tap that relationship? But it's not guaranteed.
It's not locked in. They have the option to do it. Another big thing here is Matagorda may be a hybrid site, or at least it will be a stopgap between Bitcoin mining and AI. They have hosting contracts.
Roughly 30% of Mara's, like, 70-ish, give or take, exahash hash rate is hosted at other facilities. Most of these hosting agreements expire in Q3 2027 and Q1 2028.
All of that hash rate, according to Mara, will be absorbed into Matagorda after- Matagorda after those contracts expire. So interesting tidbit there.
Little re- a little hash rate reshuffling, and maybe we'll finally get the mullet miner thesis pl- pl- uh, panning out, but we'll see.
All right, the big one though here, I think, in terms of going back to what Brandon was saying about working towards behind the meter or owning generation is this Longridge site in Ohio. The Longridge site
has an enterprise value of 1.5 billion, 144- $144 million annualized EBITDA, and 900 million in debt that Mara will assume if the site is, um, if, if they end up, um, closing on the site.
It has a 505-megawatt nameplate combined cycle nat gas power plant capacity, and it sits on 1,600 contiguous acres alongside the Ohio River in Monroe County as in inside the PJM interconnection footprint.
So this would be a vertically integrated site if they can pull it off, but there are still questions remaining as to what ne- a- a- as to whether or not this will close sooner rather than later.
Most, uh, importantly, they need FERC approval, and they were very confident about this on the call. Fred Thiel said, quote, "If you look recently, Wolf just got approval for one of their acquisitions,"
and they expect FERC approval as well by end of the year. There, this is not a signed deal.
Negotiations are advancing, and closing the acquisition is presented as the only remaining bottleneck in terms of getting a deal done at the site. This was probably the most important aspect of the call.
From a direct question from analyst Greg Lewis, Thiel said outright, quote, "We're in a holding pattern from signing a lease," end quote, but clarified that the company is, quote, "Very actively engaged with prospective tenants," end quote, discussing what they'll build, fiber routing design and permitting, et cetera, running at essentially the same pace as if Longridge had already been closed.
He explicitly said, quote, "There's nothing holding us back now other than closing the transaction for Longridge."
So we should expect if Mara gets Longridge closed, it gets FERC approval and it closes before the end of the year, there's a high chance that we will see Mara announce its first AI lease at Longridge and maybe s- and, and perhaps for Matagorda as well.
If, um, Matagorda as well, if they get that closed.
In fact, Needham came out with a price target of holding Mara after the earnings call, saying that they expect two AI leases at the end of the year, and specifically talking about Matagorda and talking about the Longridge site.
One thing that I thought was super interesting with this, Charlie, and then I will close on, um, I, I, I will end on the operational side of things.
Mara funded the cash consideration for the Longridge site with $600 million in new Bitcoin-backed credit facilities.
They have 35,000-plus Bitcoin on their balance sheet, and they locked in credit facilities from Coinbase and 2Prime at a 7.56% weighted average cost, which is pretty incredible for a Bitcoin-backed loan.
That's pretty good. Yeah. I mean- And it's, it makes sense. It's a, it's a huge, uh, it, it's a huge chunk of, of c- of Bitcoin they're locking up.
I also wonder if that indicates that Coinbase and 2Prime are really hurting for lending customers right now. I mean, maybe they've got some holdovers from the Bitcoin Treasuries of yesteryear.
But I, you know, perhaps there's just not as much interest in this right now.
Obviously, with Bitcoin being down, there's also a lot more risk, it's worth saying, like with Bitcoin in bear market territory and volatility potentially right around the corner.
Uh, you know, these are high-risk loans if you can't cover your margin. But 600 million from those Bitcoin-backed loans.
They also refinanced an existing 150 million Coinbase credit facility into a new one, which extends out into a Q1 2027 maturity.
Khan, uh, the CFO, Solomon Khan, was emphatic, quote, "We are funding a $1.5 billion enterprise value acquisition through a Bitcoin-backed debt and assumption of Longridge's balance sheet, all non-dilutive financings."
Interesting use of Bitcoin on the balance sheet.
This is really the first time we've seen one of these Bitcoin miners who have had these Bitcoins sitting around just idle, you know, probably earning some income, very little on, in the options market, right?
CleanSpark does this. Most of the major Bitcoin miners have done this in the past. But most of this Bitcoin sitting there, investors no longer rewarding these companies for having Bitcoin on the balance sheet.
Mara really taking a unorthodox, uh, strategy here for funding this Longridge acquisition. That goes back to what I was saying about CleanSpark's strategy versus TeraWulf.
With CleanSpark, you know, you've got higher loan-to-cost, smaller equity portion, and then with TeraWulf, lower loan-to-cost, higher equity portion. Patrick Flury was very clear that he likes that.
He thinks that it, it protects them. With that, that equity cushion protects them in the future should the deal turn south.
And then with here with Mara, you've got a Bitcoin-backed loan, first that I know of amongst any of these Bitcoin miners, for a serious operational financing event. A- and it's about, and like,
don't wanna disparage, but like Mara really hasn't done anything with their Bitcoin. It's just they've bought it high and sold it low, what, two cycles in a row now? So, so- Yeah... doing something different,
pretty compelling, especially if it's gonna finance a site for AI HPC. That's, yeah. Yeah, that's definitely- That to me is a Bitcoin Treasury strategy. Yeah, I would agree with that.
I think that that's really smart on their end, and, you know, it kinda contrasts pretty sharply with what we saw them do in Q1. Right at the end of Q1, they sold like $1.5 billion worth of Bitcoin.
They Then took 1.1 billion of that and used it to retire convertible notes that they took on, Charlie, at the end of 2024 to buy Bitcoin. I mean, it's kind of, it's kind of absurd when you say it out loud like that.
The only worst trader is Michael Saylor. I know, right? And so, you know, I think that just also goes to show how far we've come from 2024 in the sense that going into 2025, the Bitcoin treasury thesis was hot.
Bitcoin treasury summer in 2025 saw stupendous stock rises across these companies. But
Mara ended up, and other companies too, like Riot did this too, they issued convertibles thinking that Bitcoin was about to go on a, you know, maybe multi-year bull run.
They bought them for like an average price of like somewhere north of like $90,000 a coin. And then they ended up selling them for roughly $70,000 a coin.
They got a 9% discount on the debt, but they took a huge haircut on the Bitcoin. And they still have quite a lot of convertible notes outstanding.
And I wouldn't be surprised to see them shed more of this Bitcoin balance sheet throughout the year outside of what they need to make sure they're covering the margin on this loan to potentially pay down some of the debt.
Because Mara really, from what I could see on, in their 10-Q, they really need to clean up the balance sheet a little bit as they move into this AI pivot. Because
I, I, I don't know what the strike price is on the converts, but I don't think that it's probably in their favor. There's a reason they retired those ones that they issued in 2024.
So, but just to recap, the big update from Mara during this call, Longridge, if they get approval from FERC and get everything squared away with that acquisition, we should see an AI deal from them sooner rather than later.
Um, I have a curveball tidbit that I think everybody missed from the Mara earnings call, and it's only because it's in the little weird niche little- Is it the slipstream thing? The slipstream thing. Yeah.
Everybody missed this one. Um, but I got to do it because we've made it to the end of the live stream so we can kind of go where we want. So, uh, in, you know, during the Q&A at the end of the earnings yesterday,
someone asked about Mara slipstream.
So for those of you who aren't aware, M- Marathon is also a Bitcoin mining pool supplied by their own hash rate, and this allows them to do interesting things, um, when they produce Bitcoin blocks.
And one of the products that Mara has done, we've covered it on this podcast multiple times over the past few years, is a product called Slipstream, allowing users to directly submit Bitcoin transactions.
Don't really need to know a whole lot about Bitcoin, but this is a little bit unconventional. It's like circumventing going straight to the source here.
And because there was this massive hack in Bitcoin over the past week where, uh, hardware wallets were compromised, the seeds to these wallets were compromised, um, it meant that there were a lot of a specific type of Bitcoin secured and was called a multisig, where people have these hardware wallets which you got to have like nuclear codes, one of two, two of three to unlock.
Well, if you had a comp- if you had enough of those compromised wallets,
uh, part of this multisig, then if you tried to sweep or send your Bitcoin to a secure location, the attackers who hacked these wallets could steal that.
The only way you could be certain that you were protected is if you handed that sweep transaction directly to a Bitcoin miner, specifically a Bitcoin pool, and Slipstream did it.
And so I was really interested to see that, um, CEO Fred Thiel actually demonstrated a pretty comprehensive understanding of how Slipstream worked, how it had been functioning as this life raft to Bitcoin holders, and, uh, really interesting to see that make, get some airtime on the earnings call.
Now, this doesn't really have anything to do with, this is not gonna affect their stock price, not gonna affect their, uh, balance sheet at all. In fact, most people listening do not care.
Um, I do think this is pretty, I just think it was really compelling, super fascinating, and demonstrated that, uh, Fred Thiel does actually have a better understanding of how Slipstream works than probably, uh, a lot of other, uh, you know, people at his level, so.
Yeah, it was also just really funny that that was a question that was asked by an analyst. Just because like you said, there's like, it's like materially it means nothing. I mean, that's like pennies.
It's not even pennies. That's, you know, that, that is a fraction of a penny in terms of what they're actually earning from any of their business lines. Yeah, I mean- But it was an interesting question.
Yeah, and you, I mean, basically for, for those who don't understand any of this, it's basically a s- a small little R&D project that, uh, has been profitable if, you know, kind of self-contained to itself.
Cool little proof of concept demonstration that has, in my opinion, big implications long-term, but we'll have to see. Nobody, the market, the market disagrees right now. But yeah.
Mara was, was the hero we didn't know we needed when they made- Yeah... Slipstream in Mara pool. Yeah. All right, Charlie. So I think we can- Wrap up first week of earnings week. Yeah. Multi. First week of earnings week.
Multi. Um, yeah, I mean, so on that we've, uh, on that, this concludes w- earnings week one. Um, earnings week is two weeks here at Blockspace. Next week is another big one.
We've got executive interviews, um, uh, earnings watch parties throughout the week. Make sure to wake up on Monday and check the schedule that we will post to get a forward-looking view on the week next week.
But we've got, again, another packed week. This week we did Cipher, Hut, TeraWulf, Galaxy, CleanSpark, Mara. We had Eric of Fortitude, Ionic, and with Andy, Patrick Flury of TeraWulf, Asher just today with Hut 8.
More coming at you next week, so stay apprised, stay attuned. Make sure to look, uh, follow Blockspace content. Check out the expanded universe of written and live streamed podcast content on blockspace.media. And don't,
uh... And, and we'll see you next week. This show is brought to you by CleanSpark, NASDAQ listed ticker CLSK. I'm Charlie. I'm Colin, and one quick thing, Charlie. [laughs] One quick thing.
For that schedule next week, Keel coming at us with earnings on the 10th. We will have that. We w- we will cover those earnings on the 10th during the live stream.
We've also got CoreWeave earnings coming up on the 11th after market close. We will have CoreWeave's chief business officer on the show.
We're still figuring out whether or not it'll be on Tuesday or Wednesday, so keep, or Thursday, so keep an eye out for that. Nevius' earnings call on Wednesday the 12th at market open, and then
we got Ben Gaggion of Keel on the 13th for an interview. So- Yeah... that's the schedule. Chief, chief captain officer. Hope y'all have... What's up? Oh, he's the chief captain officer. [laughs] Chief captain officer.
Anyway, we'll see y'all next week. Have a good weekend. [outro music]