Third Quarter 2026 Business Update Conference Call - CIPHER DIGITAL INC

Explicit Guidance:

• CapEx/Cost per Megawatt: Projected cost of $13 million per IT megawatt (up from a prior range of $9–11 million) for Barber Lake post-amendment; expects future projects to target 30–60% design completion pre-lease to mitigate scope evolution costs.
• Delivery Timelines: Barber Lake first capacity (51 MW) delivered August 2026; first data halls expected Q4 2026 through Q1 2027; full grid connection completion expected Q1 2027.
• On-Site Generation: Lateral pipelines for 2.5 GW capacity initiated; first power available as early as late 2027.
• Regulatory Milestones: Final batch zero classifications for the 1 GW Colchis site expected December 2026 following data center audit.
• Interconnection: Horizon 70 MW site expected to energize in 2029; PCLR designations at Mekeska, Apollo, and Stingray expected to receive full power on submitted timelines with potential curtailment subject to backup generation engineering.
• Liquidity: Pro forma unrestricted cash of ~$724 million post-October convertible offering and Barber Lake funding.

Business-Segment Outlook:

• HPC Development Pipeline: Pipeline totals ~5.9 GW of near-term opportunities; full portfolio (operating, contracted, and future) stands at 6.8 GW.
• Lease Expansion: Barber Lake lease amended to 20 years with $9.1 billion total contracted revenue (including $5.2 billion incremental rent); tenant active deployment ongoing.
• Site Acquisition: Acquired 685 acres at Barber Lake and 256 acres at Black Pearl for future expansion; acquired 70 MW Horizon site in Texas (interconnected, 2029 energization).
• Legacy Assets: Odessa Bitcoin mining site (296 BTC Q3 production) under evaluation for monetization as HPC development site; no equity injection planned.
• Revenue Recognition: First HPC lease revenue recognized at Black Pearl in Q3 2026; revenue expected to scale as Black Pearl, Barber Lake, and Stingray deliver capacity over coming months.

Market and Competitive Outlook:

• Demand Trends: Tenant demand described as "never been stronger"; exceptionally strong demand for 2027-2028 site availability; high interest from hyperscalers and AI labs in pipeline sites.
• Pricing and Yields: Yield-on-cost target maintained at ~15% for new leases; willing to increase rental rates in line with inflation and financing costs; competitive lease structures evolving to include pre-lease CapEx reimbursement agreements.
• Supply Chain: Tight labor market and longer lead times for equipment (turbines, engines) expected to persist through 2027; mitigated via early procurement and 30–60% design set completion pre-lease.
• Capital Markets: Project bonds trading with tightest spreads in market (3 of 4 tightest trading bonds); ability to secure capital at 0% coupon for convertible notes (2032 maturity).
• Competitive Position: Focus on "creditworthy tenants" and "long-term co-location" model distinguishes from "neocloud/neoclub" providers; risk-adjusted returns prioritized over headline revenue growth.

Macro / Industry Outlook:

• Cost Environment: Inflationary pressures on labor and construction costs expected to continue into 2027; supply chain constraints on long-lead equipment anticipated.
• Regulatory Environment (ERCOT): Texas regulatory landscape viewed as manageable; PCLR designation seen as a critical value driver allowing full power ahead of local transmission upgrades; curtailment risks to be managed via backup generation or on-site power.
• Geographic Concentration: Current focus remains on Texas due to speed-to-power advantages; monitoring opportunities in Ohio and other locations but noting longer timelines and higher deposit requirements in non-Texas jurisdictions.
• Interest Rates/Capital Costs: Higher cost of capital in broader market; firm stance on protecting spread between yield-on-cost and cost of capital; reliance on project-level non-recourse financing to isolate parent balance sheet risk.

Strategic Initiatives:

• Design Rigor: Evolution from signing leases pre-design to requiring 30–60% design set completion prior to lease execution to reduce change order risks.
• Capital Recycling: Proceeds from 2032 convertible notes ($850M) used to fund Barber Lake amendment; early equity release from stabilized sites reinvested into development.
• On-Site Power Strategy: Development of lateral natural gas pipelines (2.5 GW capacity) to enable 1 GW of data center leases powered by on-site generation; structure involves IPP/tenant direct PPA with Cypher financing the data center shell.
• Community & ESG: Committed $10 million (joint with partners) to Colorado City water infrastructure upgrades.
• Debt Management: Converted $166 million of 2030 convertible notes to equity; retired >90% of notes; total debt ~$6.7B with ~$6.0B carrying 0% coupon.

Risks and Headwinds to Outlook:

• Construction Cost Inflation: Labor shortages and scope evolution pose risks to cost targets; 2027 labor inflation expected.
• Supply Chain Constraints: Lack of global availability for turbines and reciprocating engines; delays could impact schedule if not secured early.
• Regulatory Uncertainty: ERCOT transmission upgrade timelines and curtailment terms for PCLR sites subject to future clarity.
• Interest Rate Sensitivity: Margins on new leases remain sensitive to cost of capital fluctuations.
• Execution Risk: Potential for change orders and schedule impacts if design alignment is not finalized pre-lease.

Management Tone on the Future:

• Confidence: High confidence in the "underlying fundamentals" of compute demand and the value of the "expressway" business model despite short-term market volatility.
• Strategic Pivot: Shift toward "deliberate" execution over speed; willing to accept shorter near-term growth pace to secure higher long-term certainty and value.
• Discipline: Emphasis on maintaining investment-grade credit profiles and risk-adjusted returns; rejecting "neocloud" exposure despite potential revenue upside.
• Outlook: Optimistic regarding the 6.8 GW pipeline and the ability to leverage scarcity of power to command premium yields; view on Texas regulatory environment as stable long-term.

Miscellaneous:

• Financial Results Reference: Q3 2026 GAAP net income $32M; Adjusted EBITDA loss $10M (improved from $30M loss Q2).
• Asset Base: Total assets $7.7B as of Sept 30, 2026; Net debt ~$3B pro forma.
• Tenant Relations: Deepening relationships with leading AI labs; "Barber Lake" tenant identified as potentially the "most significant co-location tenant in the world."