GWAC Good Works Acquisition Corporation

Good morning ladies and gentlemen. Thank you for standing by and welcome to the Cipher Mining and Good Works Acquisition Corp Conference Call. We appreciate everyone joining us today.

Before we begin, I’d like to remind everyone on the call that the information discussed today is qualified in its entirety by the Form 8-K that has been filed today by Good Works Acquisition Corp, and may be accessed on the SEC's website, including the exhibits thereto. In conjunction with today's discussion, please see the investor presentation furnished as Exhibit 99.2 in Good Works' Form 8-K, follow along, and carefully review the disclaimers included therein.

Please note that a Q&A session will not be conducted as part of today's presentation. Also, statements made during this call that are not statements of historical facts constitute forward-looking statements that are subject to risks, uncertainties, and other factors that could cause our actual results to differ from historical results and/or from our forecast including those set forth in Good Works Acquisition Corp Form 8-K filed today and the exhibits thereto.

So, why does Good Works like this transaction? Well, first, it is a constructive way to invest in the crypto space, giving investors an attractive asymmetric return profile by offering greater downside protection than pure currency exposure. Second, we value Bitfury with its experience of putting 500 MW to work globally, its reputation for innovation, providing efficient servers with leading-edge chips, having highly-regarded operating services, and importantly, conducting business with a high degree of transparency and professionalism.

Third, Good Works values the work Cipher Mining has already done in securing four attractive power sites and power purchase agreements, along with the cornerstone agreements it has with Bitfury around the supply of equipment and services that offers first-in-line access to servers, most favored nations pricing provisions, and a non-compete in the United States.

Fourth, we believe that investors in Cipher Mining will greatly benefit from Cipher Mining becoming a public US company, including such important attributes as financial transparency, capital markets access, and the contract protections afforded by the US legal system with respect to its agreements with its key counterparties.

Good Works is confident in Cipher Mining's management team and its experience, strategic vision, and accomplishments made to date. The team is ready to execute its plan and to create value for its shareholders.

But before I turn it over to Tyler, let me just give a brief summary of the transaction.

Cipher Mining will have a $2 billion enterprise value at $10 per share; the valuation is based upon conservative estimates of the future price of bitcoin, where we have modeled the price to go from $25,000 to $50,000 over the next five years. The implied multiples based on 2023 EBITDA and free cash flow numbers are therefore very attractive. Cipher Mining's post money valuation will be approximately $2.5 billion, with $501 million of primary funds through the SPAC and PIPE cash proceeds, along with Bitfury investing $50 million into the PIPE through an equipment discount.

Cipher Mining, importantly, will have no debt. Cipher Mining will be the majority owner with just over 72 percent of the company, with the PIPE investors at 13 percent; and Good Works and its founders at 7.5 percent. Cipher Mining and Bitfury shareholders will be subject to a two-year lockup and Good Works will retain one of seven board seats.

So, what does that give us? It gives us a business with expected steady cash flows generated via the bitcoin rewards and transaction fees that we will be collecting; and by 2025, we forecast to make over 21,000 bitcoin per annum.

Let me give us some background on Bitfury. Bitfury's been around ten years; it's recognized as a global leader in the blockchain sector, it has produced over seven generations of semiconductor chips, and deployed over 500 MW of data centers globally. Specifically, it has stood up to seven data centers in five different countries and mined over 600,000 bitcoins since inception.

Over the years, it has expanded into other tangential businesses and software, and data center technology, and we will be leveraging all those key experiences as we build out the portfolio at Cipher Mining.

So, based on this transaction, Cipher Mining will begin its initial build-out of four sites: three in Texas and one in Ohio, comprising 445 MW initially. Our first data centers will come online before the end of the year 2021, and we will complete the 445 MW build-out by the end of 2022. Then, from ongoing operations, we plan to expand our operations by 100 MW per annum in Years '23, '24 and '25, and we plan to fund all of that out of our ongoing operations; we plan for no further capital raises at this point.

We're going to leverage key partnerships to drive industry-leading execution. Specifically, from Bitfury, we will have preferred access to their next-gen equipment; they plan to deploy en-masse production a 5 nm chips powering their servers later this year; with regards to those machines, Cipher Mining will have first-in-line access to all supply and will have Most Favored Nation pricing. In an industry that is often challenged with the supply chain, we think this will be a significant competitive advantage and being vertically integrated up the supply chain is something that clearly distinguishes us from the rest of the competition.

In addition to that, Bitfury has expertise managing their own supply chain and has secured assurances up to the foundry level that they will be able to deliver the servers we need.

So, let's talk about the business model overview real quick. We will use the capital from this transaction to build out our data centers and purchase mining equipment; and then on an ongoing basis, we will purchase electricity to power. Those data centers will produce a hash rate, and we will contribute that hash rate to the bitcoin network. The bitcoin network is a decentralized ledger that keeps track of value storage and transmission, and relies on miners like Cipher Mining to keep the network alive; we provide the vital infrastructure that makes the network work.

In exchange for contributing our compute power to supporting the network, we are paid bitcoin, paid via two revenue streams: one revenue stream is through the bitcoin reward that is programmed into the bitcoin software; and the second fee stream is in transaction fees that we get paid to settle transactions across the network. Bitcoin has seen increasing acceptance among institutions over the last few months, and I’d note that this isn't just from cutting-edge technology companies, but you're now starting to see broad adoption from some of the most traditional names in financial services, and there are very exciting predictions for potential growth of the future price. We are big believers in bitcoin and supporting the network is what our mission is at Cipher Mining.

The dynamics of bitcoin are such that it has a fixed supply that gets released over time; and with that growing demand primarily driven by institutions recently, we've seen increased prices recently. So, what does that mean for a mining company? It creates a massive bitcoin mining opportunity. At the bottom of Slide 13, you can see our estimated forward projections for what the total mining revenue streams will be out in 2025, based on some price path assumptions we have built for the path of bitcoin prices.

On the left envisions a future where bitcoin goes from $25,000 to $50,000 over the course of five years, resulting in a $13 billion total addressable market for mining revenue in 2025; and on the right-hand side tracking closer to where we are today thus far, you see a price path of bitcoin growing from $25,000 to $100,000 in five years. In such a scenario, we would envision a $25 billion total addressable market for minor revenues and so when we produce estimates of what our share of the total network hash rate will be in 2025, we are projecting what our share of this total addressable revenue pool will be.

So, again, the investment highlights for Cipher Mining, we are creating a US bitcoin mining champion with a planned build-out of 745 MW of data centers over five years; while we do that, we will be leveraging our strong position on the global cost curve at ¢2.7/kWh; we're getting three key relationship advantages from our parent company Bitfury; specifically, we will be leveraging their technology leadership in ASIC chip development, we will be leveraging their supply chain management, and we will be leveraging their data center deployment expertise.

To give a sense of the mining capacity of the largest bitcoin miners, we have, on Page 15, listed the competitive landscape from a publicly listed company perspective. I think it's important to note that in our initial two-year plan, we will build out 445 MW of total capacity, and over our five-year plan, 745. But we actually have a line of sight to 1.135 GW with our current power providers and so it is our hope that we will continue to build out this portfolio, and believe we have the greatest potential for expansion in the space.

I note that all of our data centers are located in the US and we are a US company; we do think that the industrial champion for bitcoin mining should be based in the United States and leverage the strong regulatory environment and rule of contract.

On Slide 16, you can see where Cipher Mining sits on the global cost curve for electricity. This is important to understand as electricity represents over 80 percent of our expected OpEx; and so, if you can lock in a cheap cost of power, this drives the ability to be the low-cost producer of bitcoin from a mining perspective--particularly when you power computers that are best in class and that are contributing hash rate to the network.

Bitfury has a long history of developing high performance chips and servers with proven demand response features and also as a leader in tangential technologies like immersion cooling. We will take advantage of our unique economic relationship as well as contractual relationship with Bitfury, and we look forward to using their equipment in our data centers.

Their eighth-generation ASIC chip will be in mass production later this year; it is a 5nm chip referred to as the NIVEN chip. Bitfury has an anticipated deployment timeline of the NIVEN chip as shown on Slide 19. They plan to tape out this month; later this year, they will be in mass production and we hope to have these servers to power all of our data centers beginning later this year. In addition to these plans, I would note they have actively managed their relationships and have a high degree of confidence that, at the foundry level, they will have adequate supply to fulfill all of our orders.

Bitfury has a unique track record of execution in data centers; they have a large team of engineers and they have prolific experience in deploying large data centers--as I mentioned, seven data centers in five different countries in the past; they will be acting as engineering procurement and construction management leader on our projects, and we have engaged them at a very, very low cost to provide these services. Slide 21 shows their track record of data center deployment over time.

And lastly, let me talk about some of the opportunities that we believe will present themselves to Cipher Mining in the future. If you move forward in our plans, we will be one of the largest producers of bitcoin in the world; those bitcoins will be freshly minted and never been transacted, and they will have never left the US regulatory system. We think that makes our inventory particularly attractive for potential partnership opportunities ranging from everything as simple as loading out our inventory to enhance the yield, to partnering with fintech or financial services firms to produce strategic partners and asset management products.

I’d also note that as the space continues to evolve, we expect larger investors to be more interested in the space, and there are probably further opportunities in the future to drive efficiencies out of the funding model to build data centers and perform services like mining as a service.

None of these factors are built into our base case model that we showed today, but we do think that there will be interesting opportunities in the future.

Let's talk a little bit about our expected timeline for build-out. On Slide 24, you can see our expected timeline for build-out across our four initial sites; we do expect to have our first two data centers up and running in 2021, and we will complete the initial build-out of 445 MW by the end of 2022. This build-out will result in an estimated 14.8 exahash per second of hash rate; and then going forward, as I mentioned, we plan to deploy an additional 100 MW per annum in each of years 2023, 2024, and 2025 resulting in our total estimate for five years of 745 MW deployed creating 39.8 exahash per second.

This business produces tremendous resilience against drops in the bitcoin price; and this, to me, is what is most exciting about bitcoin mining as a business. If you can ensure that you have a reasonable cost of power and that you have best-in-class machines, and that you have very reliable deployment operations and maintenance services, then you can be the low-cost producer of bitcoin; and that provides additional advantages in bitcoin mining versus other commodities, production type businesses, because not only does that mean that you can continue to operate when it becomes less profitable for operations if the bitcoin price drops and your competitors have to shut off their machines, in the case of bitcoin mining, there's an additional factor that if you keep running in those periods, you can grab market share from the competition. And let's talk about how that works on Slide 25.

On the right-hand side of this slide, we show four potential price paths that we will talk about when we get to the financials. So, we have taken, as our base case, as we mentioned, that bitcoin starts at $25,000 and grows to $50,000 over five years. In addition to that, we've added three other scenarios to illustrate the strength of our model and downside in flat scenarios. So, on the left-hand side in the upper right, we've got an estimate where bitcoin starts at $25,000 and drops to $12,500 per bitcoin over the course of five years, a scenario where it's flat at $25,000; our base case $25,000 to $50,000 for bitcoin; and then on the right, the more bullish case, we're showing which is, again, as I mentioned tracking closer to reality, these $25 to $100,000 over five years.

And in each of these bars at the top, you'll see our estimate for future total network hash rate given that price path. What this means is that as prices of bitcoin go higher, the mining business becomes more attractive and we would expect more mining activity to enter the space, resulting in more compute power being dedicated to the network overall, and a higher network hash rate which is represented by the numbers on top of these bars.

In the light blue shaded area of each bar, you can see Cipher Mining's contribution to the total network hash rate; and you'll see in the scenarios that are more negative, we have a larger share of the network hash rate overall. This is, again, due to our lower cost structure, it is still profitable for us to mine even if bitcoin drops a tremendous amount. And what does that mean? If you look at the bottom of the screen on the right, you see our estimated monthly quantity of bitcoin reward received in each of those price scenarios; and so, if the bitcoin price drops, not only do we have more resilience because we can keep mining while other higher-cost miners need to shut off their machines, we will actually produce more bitcoin in those scenarios. And so, what that means is on a dollar basis, we are very resilient against the bitcoin price overall.

I think this is the real opportunity in investing in a mining business, particularly right now given market conditions; and this really from an investor's perspective, can produce an asymmetric risk-return profile versus investing in bitcoin directly.

With that, I’d like to reintroduce Ed and hand it off to him to walk you through some of our financials.

Thank you, Tyler. Let's start with some highlights. First, we intend to scale the operations to 745 MW; and over the five-year period, you'll see our bitcoin production will increase with 21,000 bitcoins expected, by 2025, per annum. We expect to have positive EBITDA in the fourth quarter of 2021 and positive cash flow by the first quarter of 2022. Our expected EBITDA margin will be 71 percent, and our free cash conversion ratio will be 58 percent by 2023. As a scaled miner with low operating costs, our business model will be resilient to downward moves in the bitcoin price. Our operating model will be lean with low management overhead.

These graphs present a picture of a few key performance indicators. The financials assume a conservative base case assumption on the price of bitcoin going from $25,000 to $50,000 over five years. The upper left graph, this is our anticipated bitcoin mine; this output is what we expect to generate from our data centers. Each year, our plan will bring more than 100 MW online which results in an upward trend in 2025, where we expect to mine over 21,000 bitcoin.

The upper-right graph will measure how we are executing our plan. The bar graph shows our plan to build out 745 MW over five years; the line above shows the amount of hash rates that will be generated each year. The lower left illustrates our cost to acquire bitcoin; this highlights that our cost structure will enable us to mine at a significant discount to market price. As Tyler referenced earlier, Cipher Mining, as a low-cost miner, will be protected if the price of bitcoin drops. The reason is that the higher-cost structured miners will cease their production, enabling us to increase our market share by contributing more hash rates to the network. And the last KPI on the lower right highlights the outside margins that this business will yield that will be sustainable as we scale upward.

Here are a couple financial projections, again, based on our base case. Here are our revenues and gross profit on the left; and as you can see, consistently scaling upward and to the right. On the right side, you can see our forecasted EBITDA, CapEx, and free cash flow conversion. Let me point you to the year 2023, which will be the year we're in full production after the initial build-out. As you can see, we plan to have $465 million in EBITDA, $194 million in CapEx relating to building out the additional 100 MW. You can see that we still have a significant amount of extra cash that we can dedicate to further deploy to our data center.