Presentation for Business Update May 9, 2023
Forward-Looking Statements This communication contains certain forward-looking statements within the meaning of the federal securities laws of the United States. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Any statements made in this communication that are not statements of historical fact, including statements about our beliefs and expectations regarding our future results of operations and financial position, business strategy, timing and likelihood of success, potential expansion of bitcoin mining data centers, and management plans and objectives, are forward-looking statements and should be evaluated as such. Forward-looking statements include information concerning possible or assumed future results of operations, including descriptions of our business plan and strategies. These forward-looking statements generally are identified by the words “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “seeks,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” and similar expressions (including the negative versions of such words or expressions). These forward-looking statements are based upon estimates and assumptions that, while considered reasonable by Cipher and our management, are inherently uncertain. Such forward-looking statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements. New risks and uncertainties may emerge from time to time, and it is not possible to predict all risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements in this communication, including but not limited to: volatility in the price of Cipher's securities due to a variety of factors, including changes in the competitive and regulated industry in which Cipher operates, variations in performance across competitors, changes in laws and regulations affecting Cipher's business, and the ability to implement business plans, forecasts, and other expectations and to identify and realize additional opportunities. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties described in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2022, and in Cipher's subsequent filings with the Securities and Exchange Commission. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those contained in the forward-looking statements. Forward-looking statements speak only as of the date they are made. Readers are cautioned not to put undue reliance on forward-looking statements, and Cipher assumes no obligation and, except as required by law, does not intend to update or revise these forward-looking statements, whether as a result of new information, future events, or otherwise. Non-GAAP Financial Measures We use non-GAAP financial measures to assess and analyze our operational results and trends and to make financial and operational decisions. We believe these non-GAAP financial measures are useful to investors because they provide greater transparency regarding our operating performance. The non-GAAP financial measures included in this presentation should not be considered alternatives to measurements required by GAAP, and should not be considered measures of liquidity. These non-GAAP financial measures are unlikely to be comparable with non-GAAP information provided by other companies. Reconciliation of non-GAAP financial measures and GAAP financial measures are included in the tables accompanying this presentation. Reported results are presented in accordance with GAAP, whereas adjusted results are GAAP results adjusted to exclude the impact of (i) depreciation of fixed assets, (ii) change in fair value of warrant liability, (iii) non-cash change in fair value of our derivative asset and (iv) stock compensation expense. The contents and appearance of this presentation is copyrighted and the trademarks and service marks are owned by Cipher Mining Inc. All rights reserved.
Prudent Growth through the Cycle Deployed fleet of over 59,000 miners Purchased an additional 11,000 miners to complete the Odessa buildout in Q3 Evaluating potential expansion plans at Bear and Chief data centers as well as other new opportunities ~2.7cAnticipated Weighted Average Power Price (c/kWh)(1) ~96%of Portfolio Energized ThroughFixed Price Power Represents the expected weighted average power price at Cipher’s current sites DEPLOYMENT UPDATES BUILT TO SUCCEED
Key Indicators as of April 30, 2023 16.44 BTC Daily Production High 427 BTC BTC Held 59,000+ Operating 406 BTC Monthly Production April 70,000+ Expected Q3 2023 Machines 6.0 EH/s Current 8.2 EH/s 2023 Potential(1) Hashrate Note: Values represented are approximations Potential growth for the 2023 calendar year 7.2 EH/s Q3 2023E
Cipher Mining’s Business Model At certain sites, Cipher can opportunistically elect to use power at data center or sell to the market The block reward is cut in half after every 210,000 blocks are mined (~every 4 years); the latest revision was in May 2020 POWER SOURCE MINING EQUIPMENT BITCOIN NETWORK Data center revenue includes a reward for the block mined, transaction fees, and potential power sales(1) Average block time is 10 minutes Time for Bitcoin system to mine a new block Block reward based on ratio of data center’s computing power to that of entire Bitcoin network Current block reward amounts to 6.25 bitcoins per block(2) Transaction fees are additional bitcoin paid to miners for confirming transactions Bitcoin Mining Dynamics Electricity Electricity Cost Computing Power Transaction Fees Bitcoin Reward Transaction Processing Assignment of Rewards 5
Market Update (1) Represents average USD market price across major Bitcoin exchanges from March 1, 2023, to April 30, 2023, per data.nasdaq.com Bitcoin price $USD(1) Implications Bitcoin Rally – Flight to Safe Haven Rapidly Evolving Regulatory Landscape Buyer’s Market for Rigs Current emphasis Signature Bank Shut Down by Regulators $20,657 | March 12 Coinbase Receives Wells Notice $28,192 | March 22 1 2 3 Silicon Valley Bank Announces Failure $20,363 | March 10 Silvergate Announces Voluntary Liquidation $22,197 | March 8 Expansion Planning Secure Machines While Still Cheap First Republic Reports Dramatic Decline in Deposits $27,591 | April 24
Data Centers Update Alborz – Complete ~$6,747 all-in electricity cost per BTC(1) Bear & Chief – Complete ~$5,927 all-in electricity cost per BTC(2) Odessa – Completion Expected Q3 2023 ~$7,309 all-in electricity cost per BTC(3) Capable of mining up to ~13.6 BTC daily(4) Rapid Scaling KEY UPDATES Reflects electricity cost during March 2023, including taxes, customer charges, and 2021 storm surcharge; March 2023 represents the latest electricity bill received Reflects combined electricity cost during March 2023, including taxes, settlement charges, and TSDP charges; March 2023 represents the latest electricity bills received Reflects electricity cost during March 2023, including TDU charges and net of revenue generated from opportunistic power sales; March 2023 represents the latest electricity bills received Estimated for April 2023, assumes full up-time, network hash rate of 343 EH/s and 927 bitcoins mined per day 7 Hash Rate Growth
Operational Highlights Joint venture with WindHQ LLC, of which Cipher owns ~0.64 EH/s YTD through April 2023; Joint venture with WindHQ LLC, of which Cipher owns ~157 BTC Reflects electricity cost during March 2023, including taxes, customer charges, and 2021 storm surcharge; March 2023 represents the most recent electricity bill received Estimated for April 2023, assumes full up-time, network hash rate of 343 EH/s and 927 bitcoins mined per day Alborz ~$6,747 All-in Electricity Cost per BTC(3) ~3.51 Daily BTC Mining Capacity(4) ~1.3 EH/s 40 MW Operating Capacity(1) ~320 BTC Mined YTD(2) Alborz
Operational Highlights Bear & Chief Joint venture with WindHQ LLC, of which Cipher owns ~0.32 EH/s YTD through April 2023; Joint venture with WindHQ LLC, of which Cipher owns ~98 BTC Represents expansion capacity up to 135 MW at each site; expansion capacity above 75 MW at each site is subject to ERCOT approval Reflects combined electricity cost during March 2023, including taxes, settlement charges, and TSDP charges; March 2023 represents the latest electricity bills received Estimated for April 2023, assumes full up-time, network hash rate of 343 EH/s and 927 bitcoins mined per day ~$5,927 All-in Electricity Cost per BTC(4) ~1.76 Daily BTC Mining Capacity(5) ~0.65 EH/s 20 MW Operating Capacity(1) ~199 BTC Mined YTD(2) Bear & Chief Expansion Capacity up to 270 MW(3)
Operational Highlights As of April 30, 2023 Reflects electricity cost during March 2023, including TDU charges and net of revenue generated from opportunistic power sales; March 2023 represents the latest electricity bills received Estimated for April 2023, assumes full up-time, network hash rate of 343 EH/s and 927 bitcoins mined per day Reflects Canaan A1346 mining rigs for available capacity odessa All-in Electricity Cost per BTC(2) ~13.6 Daily BTC Mining Capacity(3) ~5.0 EH/s 170 MW Operating Capacity(1) ~1,306 BTC Mined YTD(1) Odessa ~$7,309 Hashrate Deployed (EH/s) Odessa Growth Timeline ~1.9 EH/s December ~4.7 EH/s March January ~3.3 EH/s February ~4.2 EH/s ~6.2 EH/s(4) Q3 2023 April ~5.0 EH/s
Optimization Case Study odessa Curtailment at Odessa Optimizing for Increased Profitability Foregone Mining Energy Spread(3) ~$41,193 Opportunistic Energy Monetization(4) ~$145,635 Bitcoin Mining Revenue(2) PPA Fixed Price Open Market Power Prices When Curtailed When Self-Curtailed Power prices per mwh in odessa(1) Represents average 15-minute interval historical ERCOT OECCS CC2 prices from 03/28/23 through 03/29/23 Represents average 15-minute interval historical Bitcoin network economics from 03/28/23 through 03/29/23, assuming machine efficiency of 31.9 J/TH/s Represents bitcoin mining revenue less direct energy expenses; notably, excludes other operating expenses associated with bitcoin mining Incremental profits in excess of Mining Energy Spread $1,266 $1,025 $1,485 $2,056 Mining Energy Spread(3)
Financial Update
March 31, 2023 December 31, 2022 (unaudited) ASSETS Current assets Cash and cash equivalents $ 3,922 $ 11,927 Accounts receivable 281 98 Receivables, related party 1,291 1,102 Prepaid expenses and other current assets 4,279 7,254 Bitcoin 9,576 6,283 Derivative asset 17,129 21,071 Total current assets 36,478 47,735 Property and equipment, net 263,027 191,784 Deposits on equipment 1,143 73,018 Investment in equity investees 34,529 37,478 Derivative asset 54,901 45,631 Operating lease right-of-use asset 4,865 5,087 Security deposits 17,742 17,730 Total assets $ 412,685 $ 418,463 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 10,667 $ 14,286 Accounts payable, related party 1,554 3,083 Accrued expenses and other current liabilities 17,341 19,353 Finance lease liability, current portion 2,638 2,567 Operating lease liability, current portion 1,058 1,030 Warrant liability 44 7 Total current liabilities 33,302 40,326 Asset retirement obligation 17,110 16,682 Finance lease liability 11,542 12,229 Operating lease liability 4,218 4,494 Deferred tax liability 1,893 1,840 Total liabilities 68,065 75,571 Commitments and contingencies (Note 12) Stockholders’ equity Preferred stock, $0.001 par value; 10,000,000 shares authorized, none issued and outstanding as of March 31, 2023 and December 31, 2022 - - Common stock, $0.001 par value, 500,000,000 shares authorized, 253,050,088 and 251,095,305 shares issued as of March 31, 2023 and December 31, 2022, respectively, and 248,906,007 and 247,551,958 shares outstanding as of March 31, 2023 and December 31, 2022, respectively 253 251 Additional paid-in capital 462,181 453,854 Accumulated deficit (117,810 ) (111,209 ) Treasury stock, at par, 4,144,081 and 3,543,347 shares at March 31, 2023 and December 31, 2022, respectively (4 ) (4 ) Total stockholders’ equity 344,620 342,892 Total liabilities and stockholders’ equity $ 412,685 $ 418,463 Consolidated Balance Sheets Note: In thousands, except for share and per share amounts
Three Months Ended March 31, 2023 2022 Revenue - bitcoin mining $ 21,895 $ - Costs and operating expenses (income) Cost of revenue 8,141 - General and administrative 17,420 17,390 Depreciation 11,655 7 Change in fair value of derivative asset (5,328 ) - Power sales (98 ) - Equity in losses of equity investees 750 153 Realized gain on sale of bitcoin (4,021 ) - Impairment of bitcoin 1,805 4 Other gains (2,260 ) - Total costs and operating expenses 28,064 17,554 Operating loss (6,169 ) (17,554 ) Other income (expense) Interest income 76 7 Interest expense (401 ) - Change in fair value of warrant liability (37 ) 48 Total other income (expense) (362 ) 55 Loss before taxes (6,531 ) (17,499 ) Current income tax expense (17 ) - Deferred income tax expense (53 ) - Total income tax expense (70 ) - Net loss $ (6,601 ) $ (17,499 ) Net loss per share - basic and diluted $ (0.03 ) $ (0.07 ) Weighted average shares outstanding - basic and diluted 248,654,082 250,174,255 Consolidated Statement of Operations Note: In thousands, except for share and per share amounts
Three Months Ended March 31, 2023 2022 Reconciliation of non-GAAP net income (loss): Net loss $ (6,601 ) $ (17,499 ) Non-cash adjustments to net loss: Depreciation and amortization 11,877 7 Change in fair value of derivative asset (5,328 ) - Share-based compensation expense 8,810 9,514 Other gains - nonrecurring (2,254 ) - Change in fair value of warrant liability (37 ) 48 Deferred income tax expense (53 ) - Total non-cash adjustments to net loss 13,015 9,569 Non-GAAP net income (loss) $ 6,414 $ (7,930 ) Reconciliation of non-GAAP basic and diluted net income (loss) per share: Basic and diluted net loss per share $ (0.03 ) $ (0.07 ) Depreciation and amortization (per share) 0.05 - Change in fair value of derivative asset (per share) (0.02 ) - Share-based compensation expense (per share) 0.04 0.04 Other gains - nonrecurring (per share) (0.01 ) - Change in fair value of warrant liability (per share) - - Deferred income tax expense (per share) - - Non-GAAP basic and diluted net income (loss) per share $ 0.03 $ (0.03 ) Three Months Ended March 31, 2023 2022 Reconciliation of non-GAAP income (loss) from operations: Operating loss $ (6,169 ) $ (17,554 ) Depreciation and amortization 11,877 7 Change in fair value of derivative asset (5,328 ) - Share-based compensation expense 8,810 9,514 Other gains - nonrecurring (2,254 ) - Non-GAAP income (loss) from operations $ 6,936 $ (8,033 ) Non-GAAP Measures Note: In thousands, except for per share amounts The following is a reconciliation of our non-GAAP loss from operations, which excludes the impact of depreciation and amortization non-cash change in fair value of our derivative asset share-based compensation expense nonrecurring gains, to its most directly comparable GAAP measure for the periods indicated: The following are reconciliations of our non-GAAP net income (loss) and non-GAAP basic and diluted net income (loss) per share, in each case excluding the impact of (i) depreciation and amortization, (ii) the non-cash change in the fair value of our derivative asset, (iii) share-based compensation expense, (iv) nonrecurring gains, (v) the non-cash change in the fair value of our warrant liability and (vi) deferred income tax expense, to the most directly comparable GAAP measures for the periods indicated:
Appendix
Statements of Changes in Stockholders’ Equity (Deficit) Note: In thousands, except for share amounts Three Months Ended March 31, 2023 Three Months Ended March 31, 2022 Common Stock Additional Accumulated Treasury Stock Total Shares Amount Paid-in Capital Deficit Shares Amount Stockholders’ Equity Balance as of January 1, 2023 251,095,305 $ 251 $ 453,854 $ (111,209 ) (3,543,347 ) $ (4 ) $ 342,892 Delivery of common stock underlying restricted stock units, net of shares settled for tax withholding settlement 1,954,783 2 (483 ) - (600,734 ) - (481 ) Share-based compensation - - 8,810 - - - 8,810 Net loss - - - (6,601 ) - - (6,601 ) Balance as of March 31, 2023 253,050,088 $ 253 $ 462,181 $ (117,810 ) (4,144,081 ) $ (4 ) $ 344,620 Common Stock Additional Accumulated Treasury Stock Total Shares Amount Paid-in Capital Deficit Shares Amount Stockholders’ Equity Balance as of January 1, 2022 252,131,679 $ 252 $ 425,438 $ (72,156 ) (2,852,259 ) $ (3 ) $ 353,531 Delivery of common stock underlying restricted stock units, net of shares settled for tax withholding settlement 1,554,064 2 (3,053 ) - (659,231 ) (1 ) (3,052 ) Warrants exercised 20 - - - - - - Share-based compensation - - 9,514 - - - 9,514 Net loss - - - (17,499 ) - - (17,499 ) Balance as of March 31, 2022 253,685,763 $ 254 $ 431,899 $ (89,655 ) (3,511,490 ) $ (4 ) $ 342,494
Three Months Ended March 31, 2023 2022 Cash flows from operating activities Net loss $ (6,601 ) $ (17,499 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation 11,655 7 Amortization of operating right-of-use asset 222 140 Share-based compensation 8,810 9,514 Equity in losses of equity investees 750 153 Impairment of bitcoin 1,805 4 Non-cash lease expense 401 - Deferred income taxes 53 - Bitcoin received as payment for services (21,717 ) - Change in fair value of derivative asset (5,328 ) - Change in fair value of warrant liability 37 (48 ) Realized gain on sale of bitcoin (4,021 ) - Changes in assets and liabilities: Proceeds from sale of bitcoin 20,958 - Accounts receivable (183 ) - Receivables, related party (189 ) - Prepaid expenses and other current assets 2,975 2,288 Security deposits (12 ) (1,010 ) Accounts payable 2,913 120 Accounts payable, related party (1,529 ) - Accrued expenses and other current liabilities 65 2,904 Lease liabilities (248 ) 106 Net cash provided by (used in) operating activities 10,816 (3,321 ) Cash flows from investing activities Deposits on equipment (1,106 ) (96,914 ) Purchases of property and equipment (17,947 ) (7,059 ) Capital distributions from equity investees 3,807 - Investment in equity investees (3,094 ) - Net cash used in investing activities (18,340 ) (103,973 ) Cash flows from financing activities Repurchase of common shares to pay employee withholding taxes (481 ) (3,052 ) Net cash used in financing activities (481 ) (3,052 ) Net decrease in cash and cash equivalents (8,005 ) (110,346 ) Cash and cash equivalents, beginning of the period 11,927 209,841 Cash and cash equivalents, end of the period $ 3,922 $ 99,495 Supplemental disclosure of noncash investing and financing activities Reclassification of deposits on equipment to property and equipment $ 71,533 $ - Property and equipment purchases in accounts payable, accounts payable, related party and accrued expenses $ 5,940 $ 3,003 Equity method investment acquired for non-cash consideration $ 1,925 $ 7,118 Finance lease costs in accrued expenses $ 1,017 $ - Deposits on equipment in accounts payable and accounts payable, related party $ 691 $ 2,511 Bitcoin received from equity investees $ 317 $ 195 Right-of-use asset obtained in exchange for operating lease liability $ - $ 5,859 Investment in equity investees in accrued expenses $ - $ 428 Reclassification of deferred investment costs to investment in equity investees $ - $ 174 Consolidated Statement of Cash Flows Note: In thousands