Q1 2024 Riot Platforms Inc Earnings Call

Participants

Phil McPherson; Vice President of Capital Markets & Investor Relations; Riot Platforms Inc

Jason Les; Chief Executive Officer, Director; Riot Platforms Inc

Colin Yee; Chief Financial Officer; Riot Platforms Inc

Jason Chung; Executive Vice President, Head of Corporate Development & Strategy; Riot Platforms Inc

Greg Lewis; Analyst; BTIG

Mike Colonnese; Analyst; H.C. Wainwright & Co., LLC

Darren Aftahi; Analyst; Roth MKM

Martin Toner; Analyst; ATB Capital Markets

Reginald Smith; Analyst; JPMorgan

Lucas Pipes; Analyst; B. Riley Securities

Owen Rickert; Analyst; Northland Securities

Presentation

Operator

Greetings, and welcome to the Orion platform first quarter 2024 financial results conference call. At this time, all participants are in a listen only mode. A brief question-and-answer session will follow the formal presentation. If you should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Vice President of Capital Markets and Investor Relations. Thank you, Bill, you may begin.

Phil McPherson

Thank you, Devin, and good morning and welcome to Wright platform's First Quarter 2024 earnings call. My name is Phil McPherson, and joining me on today's call are Jason Les, CEO. Holland, the CFO, and Jason Chang, Executive Vice President of Corporate Development and Strategy on the right investor relations website. You can find our first quarter 2024 earnings press release and earnings presentation, which are intended to supplement today's prepared remarks and which include a discussion of certain non-GAAP items. Non-gaap financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP and are included as additional clarifying items to aid investors in further understanding the company's first quarter performance.
During today's call, we will may be making forward-looking statements regarding potential future events. These statements are based on management's current expectations and assumptions and are subject to risks and uncertainties. Actual results could materially differ due to factors discussed in today's earnings press release in Comments and responses made during today's call and in the Risk Factors section of our Form 10 K Form 10 Q included for the quarter ended March 31st 2024, which will be filed today after market close and other filings with the Securities and Exchange Commission.
With that, I would like to turn the call over to Jason West, CEO of Riot platforms.

Jason Les

Thank you, Phil, and good morning, everyone. Right filed our first quarter 2024 press release and earnings presentation this morning, both of which are available on the Investor Relations section of FireEye's website.
Right? Primary strategic focus has been on developing a leading vertically integrated bitcoin mining company, built on the three key pillars of developing and owning operations have significant scale being a low cost producer of Bitcoin and building a balance sheet of strength by focusing on a vertically integrated strategy, we are best able to build these pillars. Over the past three years, we have been focused on developing this strategy at scale. This began with the acquisition of our Rockville facility development and operations teams and low cost fixed power contracts, strategy continued with the acquisition of the U.S. metro and the introduction of our engineering segment, which helps control the key supply bottleneck for electrical equipment and building out bitcoin mining infrastructure.
And finally, the development of our course Cana facility has broadened our portfolio of access to power capacity and purpose-built bitcoin mining facilities. The benefits of this strategy are on display today. And as a result, we see other miners in the space moving towards a similar strategy since Riot has developed this strategy most fully and at scale we are able to build out facilities. Like course, I cannot further while others who have not already ordered key pieces of electrical equipment faced 18 plus months of supply chain constraints the energization, of course of Canada this month means that right has a clear fully funded growth plan. This landmark achievement is the result of our team's dedication to our long term strategy. The first phase of this facility puts us well on track to increase our self money hash rate to 31 extra cash by the end of 2024 of course, the Canton facility utilizes a merchant cooling for all of its building, a technology in which way it is the industry leader in deploying at scale. We are very excited about the incredible pipeline for growth. Of course, the Cana facility provide for the next several years, and we look forward to further executing on this plan through owning and operating our own sites and an unmatched portfolio of 345 megawatts of fixed price long-term power agreements. We have the unique ability to execute on our powered strategy, which demonstrates the benefits of bitcoin mining for grid stability and significantly drives down our cost of power power is the primary variable input for Bitcoin mining, and that is why we have built our reputation as a leader in this key part of our business, making large acquisitions, developing pipelines for growth and maintaining fixed price power contracts at scale requires a strong financial and liquidity position. Our unmatched balance sheet strength makes all of this possible and is responsible for their success. With this strong position, we are funding our near and intermediate term growth plans to expand course at Cana and increase our hash rate through purchasing leading-edge miners on a long term fixed price basis from ICRBT.
In conclusion, we remain focused on the growth and enhancement of our self mining business. In 2023, we terminated two remaining legacy hosting contract at the Rockdale facility because of both customers' failure to perform under those agreements. As a result of the reduction in hosting revenue, we have eliminated the data center hosting business as a separate reporting segment starting in the first quarter of 2024 and are consolidating results into the Bitcoin mining business segment. Our rights focus is maximizing bitcoin mining results, and our strategy is enabling us to execute on this at an unprecedented scale.
With that, I would like to now turn the call over to Colony CFO of ride platforms.

Colin Yee

Thank you, Jason. I'm excited to present Wright's financial results for the first quarter of 2024, during which right achieved a number of key milestones for ease of reference.
Slide 5 presents a snapshot of key metrics for the first quarter of 2024. So let's go over some highlights on the following pages. We own and operate one of the largest bitcoin mining operations in North America. And during this past quarter, we continued to deploy miners in Rockdale. We have also pushed ahead with development activities at our new course of Canada facility, which has since been energized and operations have begun at the end of the first quarter of 2024 our Bitcoin mining business, semi segment had a total deployed hash rate of 12.4 extra hash, which represents an 18% increase year over year. And as Jason previously mentioned, we anticipate achieving a total self mining hatchery rate capacity of 31 extra half by the end of 2024. During the first quarter of 2024, we mined 1,364 bitcoin, which represents a decrease of 36% from the 2,115 bitcoin we mined during the first quarter of 2023. This was primarily due to the significant increase in the bitcoin network difficulty, which has more than doubled since January 2023. However, with a significant increase in growth in our hatchery capacity expected by the end of this year, we anticipate producing more bitcoin per day by the end of the year than we did in the first quarter of 2024, even in spite of the recent halving that occurred a few weeks ago on April 20, 2024, right. ended the first quarter of 2024 with 8,490 bitcoin, up significantly relative to the 7,094 bitcoin that we held at the end of the first quarter 2023.
In the first quarter of 2024 right reported total revenue of $79.3 million as compared to $73.2 million for the first quarter of 2023, an 18% increase year over year. This increase was primarily driven by a 131% increase in average Bitcoin prices year over year, offset by lower bitcoin production, which decreased 36% year over year, again, due primarily to the significant increase in bitcoin network difficulty, which has more than doubled since January 2023.
In footnote number one, you should note that power curtailment credits received totaled approximately $5.1 million for the quarter as compared to $3.1 million during the first quarter of 2023, and this equates to approximately 98 bitcoin as computed by using average daily closing Bitcoin prices on a monthly basis if these power credits received were applied to our total cost of revenues, our non-GAAP gross profit margin would have equaled $37.3 million or a 47% margin non-GAAP adjusted EBITDA for the first quarter was $245.7 million as compared to the non-GAAP adjusted EBITDA of $81.7 million in the first quarter of 2023 based on size, these final standard on crypto assets issued in December 2023, under which right now recognizes it's bitcoin held at fair value and with changes in fair value now recognized in income right elected to early adopt this guidance in 2023. Net income for the quarter was $211.8 million or $0.82 per share compared to net income of $18.5 million or $0.11 per share for the same period in 2023.
As a reminder, our net income for the quarter included a change in the fair value of bitcoin equal to $234.1 million non-cash stock-based compensation expense of $32 million and depreciation and amortization of $32.3 million beginning in the first quarter of 2024. We adjusted our depreciation schedule for mining hardware from a two year to a three year schedule. Based on our evaluation of market practice and our own operational history. In 2023, Riot terminated its two legacy data center hosting agreements during the first quarter of 2024, revenue from the final data center hosting agreement was no longer material from both revenue and profit. And so commencing this quarter, we will no longer report data center hosting as a separate reportable segments. We also have no plans to offer data center hosting services to new customers for the first quarter of 2024 Bitcoin mining revenue totaled $74.6 million, which included $32 million in hosting revenue, an increase of $26.6 million year over year. This increase was primarily due to higher Bitcoin prices in the first quarter of 2024, which averaged $52,343 compared to $22,706 in the first quarter of 2023. However, this increase was partially offset by a decrease in bitcoin mined in the first quarter of 2024 compared to the first quarter of 2023, again, due to the significant increase in the bitcoin network difficulty. Bitcoin mining cost of revenue primarily consists of direct production costs, including electricity, labor and insurance. It excludes depreciation and amortization, Bitcoin mining revenue in excess of bitcoin mining cost of revenue for the quarter was $33.5 million, which is a margin of 45% as compared to $26.1 million or a margin of 54% from the first quarter of 2023. This increase was primarily driven by the increase in revenues from the expansion of bitcoin mining capacity at our Rockdale facility. If power credits were directly allocated to Bitcoin mining cost or revenue, Bitcoin mining cost of revenue would have decreased by $5.1 million, increasing our Bitcoin mining margin to $38.6 million or 52% on a non-GAAP basis, Bitcoin mining costs also included $4.5 million of power costs for the remaining hosting contracts.
Slide 9 breaks down rights costs to my first quarter of 2024 for right had changes to our reporting segments in 2023, right terminated the two remaining agreements under the legacy data center hosting business due to the failure of both customers to meeting their obligations under the agreements. As such, costs have previously been captured and reported in the data center hosting segment have been absorbed by ourself mining operations and presented within the bitcoin mining segment in our first quarter 2024 financial statements. Direct cost of mine in the first quarter 2024 was $23,034 per bitcoin, of which power costs were $16,764 for 73% of the total other costs of $6,200 represents the remaining 27%. The increase in the global network hash rate and accompanying increase in network difficulty was the primary driver behind an increase in the rates average direct cost to mine Bitcoin. Other costs include direct labor miner, insurance Miner & Miner related equipment repairs, land lease and related property taxes, network costs and other utilities expenses. We have already ordered new micro BT. machines to be deployed at our Rockdale facility, which deployment will begin in the second quarter 2024. And as additional hash rate is deployed and operational uptime has increased. We expect increased production of bitcoin at the Rockdale facility. So as production increases, these fixed costs will be spread across a greater number of bitcoin produced thereby lowering our cost to mine each bitcoin rights engineering business carried on through rights wholly owned subsidiary of ESS., Medtronic reported revenue of $4.7 million in the first quarter of 2024 as compared to $16.1 million for the same three month period in 2023. The decrease of $11.4 million was primarily attributable to global supply chain constraints resulting in decreased receipts of materials. This delayed the completion of certain custom products for two large projects potentially worth $13.2 million which ended up not being delivered in the quarter, and therefore, we were not able to recognize this revenue. These supply chain shortages also impacted projects in our backlog due to the lack of manufacturing capacity. However, we anticipate that those supply chain issues currently impacting our engineering results will be resolved towards peak and the third quarter of this year.
Engineering gross margin for the quarter was similarly impacted by these issues, resulting in a gross loss of $1.3 million as compared to a gross profit of $0.5 million for the first quarter of 2023.
I will now turn the call back over to Jason Les.

Jason Les

Thank you, Colin. Pictured on this slide is an aerial shot of our new course Akeena facility. We purchased the land for this facility in 2022 due to its strategic location.
Next to the Navarro switch, where one gigawatt of power capacity was available over the past two years, we have work to develop this site to support reaching one gigawatt in total capacity, beginning with the first phase consisting of 400 megawatts of 100%, a merchant called particularly my new infrastructure, which spans four total buildings, the 400 megawatt substation for the first phase, of course, the tenant development was energized last month and mining operations have already commenced. Construction remains underway to complete the rest of the first phase by the end of 2024 and in 2025, we intend to continue development of this site to eventually reach one gigawatt in total capacity, which would submit course, again, of course, the chemist facility status as the largest dedicated bitcoin mining facility in North America and potentially globally rights infrastructure pipeline and long-term minor purchase agreement with micro BT. provides us with a clear and direct path to reaching 100 extra hash and film money in hash rate. Based on our current purchase agreements and development plans, Wyatt plans to exit 2024 with a total hash rate of 31 extra hash. This includes 2.7 extra handsome growth at our Rockville facility and 16 extra hash of new growth at our ports. The Canton facility altogether, when fully developed this would represent a 154% increase in self mining hash rate over 2024, fully developing the course of Canada facility through the remaining 600 megawatts of remaining capacity following the completion of the first phase of development and executing a part of our purchase option of micro BTM. 66 S minus would allow Riot to reach nearly 60 extra hash in total hash rate capacity. In other words course, I cannot provide a substantial amount of the infrastructure needed for Riot to utilize the purchase options of micro beauty and reach our 100 extra hospital. These components give Ryan the most directly visible and predictable pipeline for growth in the bitcoin mining sector in order to fully utilize our pipeline of infrastructure. Over the past 12 months, we have entered into a series of agreements with micro beauty to a total of 32 extra hash of next-generation miners. The decision to enter these large-scale purchase agreements came after several months of testing various latest generation micro BTU miners in both immersion and air-cooled environments and observing strong operating performance as a result of this investment. Full deployment of our purchase orders is expected to improve our overall fleet efficiency by 21.3% to 21.8 joules per Terra ash as part of our long-term agreement with bakery team, we have purchase options for an additional 75 extra half of miners on terms substantially similar to our original order. This option provides for a fixed price ceiling of $16.50 per terra hash on next-generation miners in order to support Riot, further growing its fleet and improving overall efficiency. Assuming full exercise of our purchase options and deployment of those miners, our fleet efficiency would improve even further to 19.7%.
Joules per Terra house Wyatt prioritizes maintaining a strong balance sheet with significant cash and Bitcoin holdings in order to drive long-term value creation for our shareholders. As a result, we can act decisively and continuously scale our business to meet the growing opportunities in the bitcoin mining space, our current growth plans to reach over 40 extra hash in 2025 call for $619 million in capital expenditures, which you can see broken down on this slide. We have some we have sufficient financial resources to fund these growth plans entirely, and we expect to end 2025 with total liquidity exceeding that as of the end of the first quarter of 2024?
Yes, Wright's vision is to be the world's leading bitcoin driven infrastructure platform strategy. We have been executing on over the past several years has now begun bearing the results which position us to realize this vision. Through our vertically integrated strategy. We have created an unmatched infrastructure crude pipeline to increase our hash rate by 154% this year to 31 extra hash and to ultimately lead us to our goal of reaching 100 extra hash in total some money nationally, right? Balance sheet strength underpins our ability to achieve these targets. And as a result, our 2024 and 2025 growth plans are fully funded We are incredibly excited about what about what Ryan is accomplishing this year, and we look forward to executing on our stated goals on our path to achieving 100 ex ash Thank you all for listening to our presentation. We would now like to open the call for questions. Operator?

Question and Answer Session

Operator

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question for the from the queue For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys One moment, please. While we poll for questions, Phil, the floor is now yours for the Q&A session.

Jason Les

Can you hear Germany? We'll take our first call from Kevin Dede of H.C. Wainwright. Kevin KEVIN, it looks like it dropped off. We'll move to the next one. Our next question will come from Greg Lewis of BTIG.

Greg Lewis

Yes, hi, thank you and good morning, good afternoon. I'm Jason, I'm just watching the strategy unfold in terms of the bitcoin inventory management arm. It seems like we've kind of gone through ebbs and flows in terms of funding some operations with Bitcoin more recently, at least based on the monthly production guidance, it seems like we started holding back and really trying to build that bitcoin inventory in February and March. I don't think we saw I think maybe we saw a couple of Bitcoin. I mean, opposed to having now as we look at the, I guess, May and beyond how are you thinking about managing the, you know, the puts and takes in terms of using bitcoin makers generating to do kind of offset some costs at And then at the same time trying to build that inventory at any kind of thoughts around that.

Jason Les

Sure. Thanks, Greg. So our strategy is to always maintain a strong balance sheet. I think by now we've all seen how this has played out as a key strength for Wright. This includes both in cash and in Bitcoin. We are here because we're bitcoin company, we believe in the long term value Bitcoin. So we tried to hold as much Bitcoin as possible. As you noted at the beginning of this year in January, we stopped selling bitcoin in February and March through our monthly updates we reported we have not sold any Bitcoin, but so currently we are not selling any Bitcoin. However, we are continuing to always monitor monitor our balance sheet in light of what we need from top of capital expenses and what we need for operational growth by retaining such a strong balance sheet with a cash position that we're reporting today, we have sufficient cash reserves and we have further access to cash through our ATM program to continue to fund all of our growth plan and our operating expenditure so it's a decision that we're making on a month-by-month basis evaluating the market, evaluating the financing options value in our cost of capital. And with the parallel goal of trying to hold as much equity as possible.

Greg Lewis

Okay, great. And then just my other question was on the on the engineering business, realizing that it's not a major driver of the company. Clearly that's the bitcoin mining arm. But but there was kind of a I guess there's a two-part question here in terms of the engineering arm with the first being is, is there any seasonality that we should be thinking about as we look out over the next, I don't know, three, four quarters.
And and then also, I was kind of curious, clearly, when you when you bought Medtronic and others an opportunity to kind of get involved on the on the infrastructure equipment side, not realizing maybe that riots core function as a miner isn't going to be around AI data centers. Is that business on Medtronic? Is that position that all that to benefit from kind of this ongoing AI infrastructure wave? That seems like it's you know, we're in the midst of.

Jason Les

Yes. So let me tackle those starting with the last question, Greg. So first, there is incredible demand for this type of electrical equipment, right? Now while Riot owns ESS Metron, we are one of the smallest customers. Overall. They have a ton of business and a ton of demand from all these data centers. Ai data centers that are rapidly trying to build out and meet demand for this type of service. So they are really overloaded with with business opportunity.
And what is limited done has been manufacturing warehouse capacity and com our access to the input parts from the global supply chain. So they are benefiting quite a bit from this, and we are looking to increase the capacity of this business so they can they can meet the demands of these for the data centers and a I did say, the data centers, et cetera. But as you stated are number one purchase reason for purchasing the assets not drawn was strategic. No one. We noted in our deck here, it has reduced our CapEx expense for purchasing this electrical equipment from them by about $10 million over the two years since we've acquired them. But even more important than that, it has been a critical component of controlling our supply chain while other competitors might have to rely on external parties to procure the electrical equipment and design, custom engineering design what they need. We're able to control this in-house. We have visibility of supply chain. We can move around this. We can make changes. It's been very advantageous to us as we've built out both Rockdale and Corsair Canada.
And then your first part of your question, though, was the seasonality of results. I think you will see a good amount of seasonality this year. Like we noted, the first quarter results were impacted by these global supply chain, global supply chain issues, which held back two big orders are moving forward. So not only could those orders not move forward and be recognized as revenue are occupied space that stopped other jobs from being completed. So we expect these to be cleared up during the second half of 2024. We have additional warehouse space. We procured there on top of resolving the supply chain issues. So that will allow these two future contracts to report. We can recognize them as revenue and then we can keep the backlog flowing with the other demand, which is known, as you asked about quite full of data center and AI infrastructure.

Greg Lewis

Perfect. Super helpful. Thank you very much.

Jason Les

Thanks, Brett.

Phil McPherson

Our next question is from Mike called AC from H.C. Wainwright.

Mike Colonnese

Hi, good morning, guys, and thank you for taking my questions. Are first one is really more of a high-level question for me. Just curious how you guys are thinking about the operating environment here with cash prices at all-time lows post having the implications for your growth trajectory at Riot and how you expect the M&A landscape to play out as less efficient miners are forced to power down here?

Jason Les

Sure. Thanks for the question, Mike. Let me ask answer the first part and then a second question and I'll turn it over to Jason Chang, our Head of Corporate Development, to talk about M&A here on, I think you have to have you is always a tough time for miners immediately after this one, it seems not as bad because but a huge influx of transaction fees that we've that we saw right there were blocks with 30 bitcoin and transaction fees and scale down from there, but that really offset the decrease and the from the block reward having. But that has subsided. And recently the price has gone down. I think by focusing on being a low-cost producer, right? It is very well positioned for these types from trough periods and Bitcoin mining economics coming into the summer here, especially with our power strategy, we are able to be very responsive with the price of power use that to lower our direct cost to mine. And that allows rates to be a low-cost producer when others have to fall off the network here. And with those higher cost producers falloff now, as you know, difficult to adjust that and then that widens the margin again, as we're mining more Bitcoin. So we believe this is the type of environment where rights strategic pillars are on full display. Obviously, we're long-term bullish on Bitcoin. So just talked about, we're holding bitcoin because we believe in the upside of this system long term, but to be to reach that long term to be a leading bitcoin mining company, we have to focus on having this low cost of power and maintain a low cost of production through more difficult points in the market.
But on the M&A question, I'll go ahead and turn it over to Chase and John?

Jason Chung

Thank you, Jason.
Hey, Mike, thanks for the question.

Jason Les

From our perspective.

Jason Chung

Historically, I think yields have really been hindered in the sector by a number of factors. From, we can look at volatility in the underlying public minor stock volatility in the underlying Bitcoin prices, differences in bitcoin price expectations across buyers and sellers, among other factors and all of these factors have really led to what we've seen as a pretty a fairly wide gap between buyer expectations on valuation and seller expectations on valuation historically. But I think our sense is that that gap has started to narrow, particularly pre having. And now that we're post-COVID, I think that trend will continue. At the same time, we've seen very healthy deal flow pre having. And we think that deal flow will further increase post halving.
So when you take these two factors into consideration together, I think there's a really interesting window of opportunity approaching for deals to be done in the sector. And on our side, we spent a lot of time building out what we believe is the most sophisticated corporate development team in our space precisely to address this upcoming winter as great color.

Phil McPherson

Appreciate that.

Colin Yee

And going back to the engineering business for just a moment, how should we think about engineering revenues once the supply chain issues are resolved later this year, especially given the growing backlog you guys are experiencing, should we expect the run rate to go back in line with what we saw last year, should we experienced more of a elevated level, especially given the growing demand for that business?

Jason Les

Mike, I would say you can you can think about it just following the historical performance for now, I think the main thing that we need to work on to scale this business is increasing the capacity of that engineering segment that that will really be the driver of improved financial performance there. And the demand is enormous that that has not been an issue for us. It's really expanding our manufacturing warehouse capacity. So we're working on that, but I wouldn't guide towards expecting a higher increase for that at that time. But it's something I think we can touch on at our next earnings call.

Phil McPherson

We'll take our next call from Darren Aftahi from ROTH MKM.

Darren Aftahi

Yes, thanks. Um, two questions, if I may. The machines you're going to replace in Rockdale, I think in the release you said those are going to start in the second quarter. Could you just kind of speak to the cadence of how those are going to be added in and out?
Secondly, on the hosting capacity. Any kind of sense on resolution there, at least what you can publicly say in terms of taking kind of shift some of that to self mining in the future? Thanks.

Jason Les

Yes, Darren. So for the hash rate replacement and growth at Rock, the output from this is with the M. 60 a series of latest-generation MicroVision miners that we purchase. We are receiving those this month. We've been preparing to deploy those miners. I would say we can probably expect this to begin at the end of May continued through June and July. I think the bulk of the deployments will happen during June. But over the about the eight weeks or so starting later this month is how we foresee those deployments going and that tool both replace these problematic machines, which will increase the operating performance in our existing facility. And then we are growing our hash rate as well. So that will take Rockdale from the 12.4 and fashions at now to a little over 15. International was monitored deployed. We're really excited about this enhancement and growth. We've tested these M6-C U.S. miners, our view toward the end of 50 miners and other major beauty miners considerably before making this decision. We're really impressed with the performance that we saw, the resilience under tougher operating conditions. So we're really excited about the results that we did to see from those miners as we deploy them over the next couple of months here with respect to the hosting related litigation. We know litigation is always unpredictable. I can't really give guidance on that. We are certainly putting a lot of effort and resources towards that litigation. And I think we'll just have to see how it goes from him.

Darren Aftahi

Thank you, James.

Phil McPherson

Our next question comes from Martin Toner at ATB Capital.

Martin Toner

Martin, thanks very much and congrats on some great progress here on a particular data center hosting. Can you talk to the drivers of sequentially higher SG&A in the quarter and maybe what we should be thinking about for a run rate going forward?

Jason Les

Sure. So two things here. One I had just touched on. We've had increased level of legal litigation expense as we go through the litigation process with these hosting customers. This is not a type of expense that should continue long term, but it's one we're continuing right now.
And the other point that I would touch on is as I mentioned in the presentation, we've eliminated the data center hosting segment as a result of eliminating that segment, some of the costs that were previously in cost of revenues for that segment have now gone into SG&A.
The final point I'll leave you with on the commentary there is and we're building a large business here. We have built this business into what we do now are growing into. So we have built the business for 30 extra hash and beyond and now with what we're accomplishing and of course, the Cana and the results we're seeing we're starting to see there. We're growing into that newer sites. So as far as what SG&A can look like going forward, I think you can expect that $22 million to $25 million a quarter in cash expenses. I think that's a good estimate that we can give right now. And we've got legal and litigation expenses that are not ongoing and continuous falloff. Hopefully we will be able to improve that number.

Martin Toner

Great. Thank you very much. Can talk a little bit about about the curtailment revenue in the quarter? Any puts and takes that are noteworthy And then have there been any changes to the power strategy since the Analyst Day a few less than a month ago?

Jason Les

So most of the power study results are really Q3 weighted. We see some every quarter, but most of them really come in the third quarter and the summer months. And of course, at the end of the second quarter. We get some of that in June. And so the five approximately $5 million you see from the first quarter, that's us really taking advantages of just limited opportunities that have come up in that corner during that quarter and the ancillary services revenue that we always participate in.
So how it plays out and this summer and you know, mainly Q3 coming up here. It is hard to predict. It's going to be based on external factors like weather and generation performance that we cannot control. However, because we have this 345 megawatts of fixed price power because we have these blocks 24 seven. And because of what we've learned and the power strategy that we've developed we are in a really good position to act on the opportunities when they occur here. So battery and 45 megawatts that is at Rockdale. So we'll be up executing our power strategy at Rockville selling power when it's when that FOB price of power is exceeding bitcoin mining revenue and that over a course of Canada, we are beginning unhedged and we'll just be responding to the spot spot prices of power as they occur there, which also gives us the benefit of capturing it was very low price or negative price dollars when they occur as well.

Martin Toner

That's great. Thank you so much, and that's all for me.

Jason Les

Thank you.

Phil McPherson

Our next question comes from Reggie Smith of JPMorgan. Reggie.

Reginald Smith

Good morning and thanks for taking the question. Appreciate the disclosure on Slide 9. I'm still not all the way clear on, I guess the drivers of the sequential increase in and your cost to mine. I'm looking at the network difficulty component and it seems rather large in relation to the 4Q number. Maybe a little color on those two components that and the other costs and how much of that you think is kind of recurring versus one-time-ish or any color you can provide there just kind of bridge bridge that increase in cost to mine would be helpful. And then I have one follow-up question. Thank you.

Jason Les

Sure.
Thanks, Reggie. So first, as you noted, there's about a 20% increase in network difficulty quarter over quarter. So that accounted for about $43 cost per point basis, $44 cost per point basis, or $400 cost per point basis increase in our cost per coin from other cost increased by about $5 million.
I'm sorry, $5,000 per coin for the quarter. So what is driving that is going to be the elimination of the data center hosting big business and therefore the consolidation of some of those expenses that were previously in that segment now in the bitcoin mining segment. So some examples of these past include things like minor repair. Our minor bear is slightly elevated at this time. So we hope especially when we are replacing all or above, all of that is minor. But this cost is going to go down, not continue at least at this at this quantity, I what I would say is when you look at on slide 9, our cost per coin, including $6,300 per point and other costs, I think the best we can do at this time is no guide to about that APPROXIMATELY continuing. Of course, the heavy has an impact on that, but that notwithstanding other costs, which should probably continue at the same rate, but we are going to hope to decrease those by having a lot less minor repair going forward.

Reginald Smith

Got it in you say minor repairs, the unit repairing the equipment from your hosting partners now are you?

Jason Les

No, sorry, let me clarify.
I guess the comments were were blended there. I'm trying to figure out like how much of it was kind of the, I guess, the overhead drag from the hosting business versus some of the other things as Just let me clarify on minor repair costs have always been in a cost of goods for self mining so that that is not that is not a new expense. I would say that the minor repair costs have been elevated in both Q4 and then now in Q1 of 2024, sorry, Q4 2023 in Q1 of 2024. And we expect that those are going to go down going forward. And these are third party repair costs. These are the costs that we are paying to third party vendors for repairing our miners.
The other costs increase quarter over quarter by approximately $5,000 per coin. That's largely these other expenses that were previously included in data center hosting cost of revenue that is now in bitcoin mining cost of revenue so some examples of this would be some direct labor expenses, some land lease and property taxes and the network costs and other utility expenses that we incurred at it makes sense and then I guess one big picture question for you, Tom.

Reginald Smith

I appreciate the disclosure on kind of the 100 extra has as you think about growth, beyond course, economy. Yes, I mean, does that look different in terms of the size of a facility, like, of course, kind of like the last final big, big facility? Do you think that the smaller ones going forward.
And I ask that just in light of all of the AI. interest and power assets and things like that, I guess how are you thinking about like that next 40 extra hash of capacity kind of beyond core second line, what would that look like?

Jason Les

Yes. I think that what we have, of course, in Canada is very valuable because it is probably the last one gigawatt site. Well, the only one gigawatt site that exists and probably the last one that will ever be approved access to power is going to be paid, no critical constraint for Bitcoin miners and these other industry scaling up going forward. So I think what you should expect to see from us is capturing smaller opportunities and we're not opposed to doing smaller sites. We've merely been acting on the most frictionless growth path that's been in front of us, which has been these two sites with a large capacity were open to new sites and new opportunities of all size, and we're working on that quite a bit right now. So we look forward to sharing more results as those ideas become more actionable going forward?

Reginald Smith

And I guess that could be outside of Texas or maybe even the United States.

Jason Les

Are you still trying to think about staying in Texas now we are open to operating, I would say in the United States and North America, we operate in Texas because that has been the easiest pathway to growth. And we really like the power market here, we're able to really achieve this industry leading low cost of power here, which is just so critical in bitcoin mining. That doesn't mean those opportunities doesn't don't exist elsewhere, though. So we look at opportunities all over the country all the time on international opportunities, I think to be determined. We're seeing some interesting things in South America and elsewhere. But there's other considerations always just besides power costs. So we looked at a lot of things, but I think you can expect to see our growth in North America in the foreseeable future.

Reginald Smith

Perfect. Thanks. Thanks, guys.

Jason Les

Nice progress. Thank you, Regina.

Phil McPherson

And Our next call comes from Lucas Pipes of B. Riley Securities. Lucas.

Lucas Pipes

Thanks very much, Phil. Good morning. Everyone. So my first question is back on the on the hosting side and if if if we were to be on site today, or would there still be machines from your former host or customers or have they been removed? Thank you very much.

Jason Les

Yes, Lucas. So while we terminated our last two remaining hosting agreements in towards the end of 2023 and one of those customers still remains operating on site. So for the first quarter, that accounted for about $3.2 million in revenue that was included in our Bitcoin mining revenue. And then their power cost of about $4.5 million was included in our cost of revenues for Bitcoin mining. So you would see that one remaining customer they're performing I'm sorry, operating while we continue through the legal process here and tried to get to a resolution.

Lucas Pipes

And the other one is fully out of your facilities at this point.

Jason Les

That's correct. That's correct.

Lucas Pipes

Thank you. And kind of taking a step back, would you consider going back into the hosting business? Was the lesson learned here? Never again.

Jason Les

Yes, I think that's the lesson learned here. Maybe I'll spend a little more strongly than I would say. And I think we have seen the best use of this infrastructure and building new infrastructure is for growing our self mining operations. We want to get maximum exposure to Bitcoin. We want to leverage our efficient cost of production over the widest scale possible. And I think expanding the hosting business really just takes away that valuable infrastructure pipeline, which I think generates the results and better grows. Our business is more what our shareholders are looking for so we are not looking to grow the hosting business any further.

Lucas Pipes

Very helpful. Thank you. And then just to round this out, when you look at M&A, you mentioned earlier you see you are inquisitive. If you build data, sophisticated corporate development team, would you rule out any targets that have posting agreements to date and more generally, what would the ideal target look like for you.

Jason Les

Sure. Let me turn that back to Jason Chang, our Head of Product Development.

Jason Chung

Thank you, Jason, and thanks for the question, Lucas. We in the M&A world we see we see a very wide variety of opportunities, and it's rare to see I target that 100% and cap rate encapsulates everything you're looking for. So sometimes there are situations where there's an opportunity to make a deal, but it might come with some amount of hosting, for example or other factors which may not completely tied to our overall strategy. And that's something that we have to take into account when we evaluate some of these opportunities in the market. So I'd say, you know, as long as an opportunity to be able to check most of most of the financial and strategic and operational boxes, the criteria that we have and we'll consider it. That being said, at the same time, we are incredibly blessed that right to have an organic growth opportunity, unlike any, unlike others in the space. And so ultimately, we have to evaluate all these opportunities relative to our ability to control our own destiny acquisition candidates and develop our pipeline.

Jason Les

We'll have full control over what that looks like.

Lucas Pipes

Thank you. And and in terms of size, what do you think is the is there a sweet spot either in terms of value dollars or kind of megawatts Vasovist?

Jason Chung

I wouldn't say there's a specific U.S. sweet spot in size. We do look at opportunities across the spectrum. Obviously, as a large scale miner, we like looking at large-scale opportunities that can move the needle. But I think there are some interesting, interesting businesses that aren't necessarily large scale that may be a little less appreciated by the market or kind of fly under the radar. And so there are some interesting deals that can be done there as well.

Lucas Pipes

Really appreciate all the all the color and comments continued investment.

Jason Les

Thank you, Lucas.

Phil McPherson

Okay, we've got time for one more question. Our last question is going to come from our own record at Northland Securities.

Owen Rickert

Owen. Hey, guys. Thanks for taking my question. I'm on for Mike Grondahl the day. So just quickly, I guess, what's your confidence level on getting to the 31 extra hash by the end of the year? And what are some of the challenges you might face or you're currently facing to get there?

Jason Les

Thanks for the question, and I think we feel pretty confident about our ability to execute on that growth target. We're taking things step by step here. I would say a lesson that we learned from Rockdale was rushing to fast to get every miner online as quickly as possible. Kind of can oftentimes miss some steps that you have to come back and address later so we're very incrementally approaching the development here. Big milestone was energizing that substation. That was huge. We're very proud of that. And now it's a matter of just incrementally putting up these buildings, deploying the immersion equipment and putting the miners in and going from there. So we're making these deployments step-by-step, and you can expect to see this continue over the rest of the year from the challenges are really just kind of the small things that will come up in any large development. Now as you build and scale out more, you'll incur different problems like, hey, this electrical switch switching, something that networking being the resolution here or now this immersion system needs to be altered quite a bit. None of them are critical are a big roadblock. They're just the kind of punches that you will within this surplus and through our experience in building this infrastructure at scale, we become quite good at identifying small issues resolving and then just continuing to report. So kind of to wrap that up, we're very confident about our 31 that's national and we are just marching forward on that for the next seven months of the year.

Owen Rickert

Awesome. Thanks a ton, guys.

Jason Les

Okay, that concludes our Q&A and thank you, everyone, for listening to our presentations and for the questions from our analysts. I'm very excited about what we have executed. On course, Akeena will be providing updates as we always do on a monthly basis going forward and look forward to speaking with everyone and sharing more results after the end of Q2 and Q2 results in August.
So with that, thank you, everyone, have a good day.

Operator

And this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.