TERAWULF INC. Q3 FY2024 earnings call

• Strategic transaction: Sold 25% stake in Nautilus Cryptomine joint venture for $92 million, delivering a 3.4 times return on investment and streamlining operations.
• Lease extension: Secured a new long-term ground lease at Lake Mariner, increasing acreage by nearly 50% to 157 acres with exclusive rights to up to 750 MW of infrastructure capacity and power.
• Financial milestones: Cleared legacy debt in July, raised $500 million through an oversubscribed convertible bond offering, and approved a $200 million stock buyback program with $115 million already repurchased.
• Operational progress: Cost to mine Bitcoin came in at approximately $54,000 per Bitcoin in Q3, ordered latest Bitmain S21 Pro miners, and made progress on HPC facilities with completion of the 2.5-MW proof-of-concept and on-schedule construction of CB-1 and CB-2.

In the third quarter of 2024, TeraWulf self-mined 442 Bitcoin at Lake Merida, and had a net share of 113 Bitcoin mined at Nautilus, totaling 555 Bitcoin. GAAP revenues were $27.1 million in Q3 2024, down 24% quarter-over-quarter from $35.6 million in Q2 2024. The value per Bitcoin self-mined averaged $61,075 per Bitcoin, totaling $33.9 million. On the HPC front, the 2.5-megawatt proof-of-concept project was completed in Q3, with the 20-megawatt CB-1 and 50-megawatt CB-2 data centers scheduled for Q1 and Q2 2025 respectively. Revenue contribution from Bitcoin mining and HPC is not explicitly broken down by percentage, but the focus is on expanding HPC capabilities.

• 2024: Non-GAAP adjusted EBITDA for Q3 2024 was $6.0 million. GAAP net loss attributable to common shareholders was $23.0 million in Q3 2024 compared to $11.2 million in Q2 2024.
• 2025 plans: Targets $400 million on WULF Compute and related electrical infrastructure, $23 million on construction of Building 5 (50-MW Bitcoin mining building operational in Q1 2025), and $79 million on miner purchases. Expect to announce first HPC hosting partner before year end and have CB-1 and CB-2 data centers operational in Q1 and Q2 2025 respectively.

• Volatility in Bitcoin price and network cash rate affecting the economics of Bitcoin mining.
• Regulatory uncertainties that could impact the development and operation of energy infrastructure projects, such as potential roadblocks in obtaining approvals and meeting environmental regulations.

Q: On slide 12, how much capital has been spent to date on CB-1 and dollar-per-megawatt-hour basis, and thoughts on CB-2 construction in first half '25?

A: Patrick Fleury stated CB-1 build cost is about $100 million for 20 MW, ~$5 million per MW, and CB-2 build cost is $250-$300 million for 50 MW, ~$5.5 million per MW. CB-1 will be operationally complete end of first quarter, CB-2 end of second quarter.

Q: Thoughts on first customer expected by year end in terms of megawatts, contract structure, and counterparties?

A: Paul Prager and Patrick Fleury mentioned likely one or two customers for 72.5 MW, negotiations are advanced, and they will announce a definitive lease agreement before year end, not a non-binding LOI.

Q: On demand environment, change in pricing per kilowatt hour and interest in sites?

A: Paul Prager said private deals done, pricing per kWh increased on margins, and FERC ruling has put higher value on sites with access to power, land, and water.

Q: Expectations for back half of 2025, CB-3 building, and long-lead items?

A: Patrick Fleury said '25 guidance will be provided in February, and progress depends on customers' pace; CB-3 build depends on customer demand and capital raise.

Q: Current game plan for WULF Den, timing for revenue generation, and update on 250 MW utility approval?

A: Patrick Fleury said WULF Den capacity will go to customers, 250 MW utility approval timing is end of fourth quarter/beginning of first quarter, and expected to start pulling energy mid-next year.

Q: Timelines on HPC, delay between construction completion and revenue, and long-term economics of Bitcoin mining vs HPC?

A: Patrick Fleury said WULF Den is operationally complete, CB-1 end of first quarter, CB-2 end of second quarter; long-term economics depend on Bitcoin price and network cash rate volatility, with focus on HPC AI for next 500 MW expansion.

Q: Queue for next 250 MW approval and Cayuga Lake update?

A: Patrick Fleury said queue depends on customer pace, likely next year; Cayuga is a similar asset owned privately, with development ongoing.

Q: Feedback from HPC customers on WULF Den proof of concept, and thoughts on election and regulation impact?

A: Paul Prager said customers were pleased with WULF Den, feedback on cooling location; Paul mentioned election could impact regulation, with preference for sensible regulation enabling energy projects; Bitcoin mining and HPC have different load requirements, with redundancy for HPC customers.

Q: Potential to increase lease economics, key economics of leases, and timing of lease announcement?

A: Patrick Fleury said page 16 of the deck has lease economics, and terms are material non-public; Paul Prager said a customer will be announced before year end with a full agreement.

Q: Redundant power focus, and status of mining machines sold from Nautilus?

A: Patrick Fleury said redundant power focused on HPC customers; Paul Prager said majority miners sold from Cumulus for ~$10.5 million, with some miners changed out for more efficient fleet.

Q: Trend in power capacity demand with HPC discussions, and sustainability of demand?

A: Paul Prager said demand for power capacity is growing, with McKinsey projecting data center demand to triple by 2030, and TeraWulf well-positioned with owned infrastructure.