Greetings, and welcome to the TeraWulf's 2023 Fourth Quarter and Full Year Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Jason Assad, TeraWulf's Director of Corporate Communications. Thank you. Mr. Assad, you may begin.

Thank you, operator. Good afternoon, and welcome to TeraWulf's earnings call. With me today are Chairman and Chief Executive Officer, Paul Prager, and our Chief Financial Officer, Patrick Fleury. Before we get started, I'd like to remind everyone that our prepared remarks may contain forward-looking statements, which are subject to risk and uncertainties, and we may make additional forward-looking statements during the Q&A session of the call. These forward-looking statements are subject to risk and uncertainties, and actual results may differ materially. When used in this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to TeraWulf are such forward-looking statements. Investors are cautioned that forward-looking statements involve risk and uncertainties, which may cause actual results to differ materially from those anticipated by TeraWulf at this time. In addition, other risks are more fully described in TeraWulf's public filings with the U.S. Securities and Exchange Commission, which may be viewed at sec.gov and in the Investor section of our corporate website at terawulf.com. Finally, please note that on today's call, we'll refer to certain non-GAAP financial measures. Please refer to our company's periodic reports on Form 10-K and 10-Q and on our website for full reconciliation of these non-GAAP performance measures to the most comparable GAAP financial measures. We'll begin today's call with prepared remarks from Paul and Patrick, then we'll proceed to Q&A. Now, it's my pleasure to now turn the call over to TeraWulf's CEO, Paul Prager. Paul?

Thank you, Jason, and good afternoon, everyone. We appreciate your attendance today as we discuss our fourth quarter and full year 2023 financial results. This past year has been marked by significant growth and achievements for TeraWulf, showcasing rapid organic growth at our existing sites, substantial debt repayment, and enhanced liquidity. We've not only met, but surpassed several strategic objectives and I'm excited to share these accomplishments with you. Firstly, TeraWulf specializes in Bitcoin mining, leveraging zero carbon energy resources at our two top-tier data centers, our wholly-owned and operated Lake Mariner facility in Upstate New York, sourcing 93% zero carbon grid power, and the Nautilus Cryptomine facility in Pennsylvania, a joint venture with Talen entirely powered by nuclear energy. As of the end of February, these two industrial scale mining facilities achieved a combined self-mining hash rate of 8 exahash per second facilitated by approximately 50,000 deployed miners, representing a more than three-fold increase from last year. Despite challenges posed by record high network difficulty, we produced 971 Bitcoin during the fourth quarter alone, contributing to a total of 3,407 Bitcoin mined throughout 2023. I'd like to take a moment to put these figures in context. During the fourth quarter, we produced 971 Bitcoin, resulting in a total value of $34.8 million and an adjusted EBITDA of $16.4 million. Utilizing Bloomberg consensus annual adjusted EBITDA estimates for 2024 of $96 million and our current enterprise value of approximately $590 million, this would suggest we are trading at a multiple of 6 times. In comparison, some of our competitors are trading at multiples as high as 16 times with an average in our peer group of 9 times. We recognize that market value serves as an important measure of our progress over time. Our steadfast commitment lies in consistently delivering exponential growth in hash rate, with unparalleled access to low-cost, zero-carbon power at our existing facilities. The importance of infrastructure scalability cannot be overstated. It forms the very bedrock of our strategic approach. Scalability ensures not only stability and control, but also confers significant long-term cost advantages. It empowers us to optimize operational efficiency, strategically expand our operations, and enhance profitability. This unwavering focus on profitability assumes heightened significance as we approach the impending halving event. We are committed to achieving a 300-megawatt infrastructure capacity in operation by the end of 2024, with plans to further expand to 550 megawatts of deployed infrastructure by 2025. This expansion will result in approximately 28 exahash, assuming the current generation of miners. Additionally, we are actively exploring options in addition to Bitcoin mining to optimize the utilization of our extensive proprietary infrastructure to unlock additional value. To this end, in 2023, we established Wulf Compute as our internal innovation hub, focusing on research, development, and deploying our extensive and scalable digital infrastructure. Following a successful pilot phase, involving a compact NVIDIA GPU system to enhance generative AI and large language model applications, we took the step of dedicating a 2-megawatt power block at our Lake Mariner facility. With over 300 megawatts of available infrastructure at Lake Mariner strategically positioned to cater to data center requirements, this initial allocation is part of a broader high-performance computing initiative and serves to provide diversification of the company's revenue streams. Investments in cloud infrastructure by prominent hyperscalers such as Microsoft, Amazon, Meta, Oracle, and Google have experienced impressive average annual growth, exceeding 30% over the past five years. In 2022 alone, these entities collectively spent $158 billion. The demanding specifications of hyperscalers necessitate sites capable of accommodating several hundred megawatts to sustain multiple data center buildings ranging from 40 to 80 megawatts each. These locations must also offer direct access to extensive contiguous land suitable for constructing data centers, power banks, parking facilities, loading zones, and ancillary buildings, access to water to run in the most efficient manner, and critically must adhere to a sustainable ESG framework. TeraWulf is uniquely positioned to fulfill all these requirements. Our large-scale energy infrastructure, coupled with access to zero-carbon, low-cost power is invaluable for meeting the growing demand from Bitcoin mining and AI applications. Our infrastructure plays a pivotal role in enabling this demand growth. Turning now to our financial position. We remain steadfast in our strategy to leverage our resilient low-cost infrastructure to maximize profits, repay debt, and return value to shareholders. Our performance in the fourth quarter highlights TeraWulf's consistent achievement of industry-leading profitability. We estimate that our cost to mine a Bitcoin is among the lowest compared to other publicly-listed Bitcoin mining companies at approximately $25,000 per Bitcoin before the halving and $37,000 after the halving. As the halving approaches in a month's time, we anticipate that our position as the lowest-cost producer of Bitcoin will only be further strengthened, underscoring the value of our vertically integrated and sustainable business model. We've also made significant strides in debt repayment and liquidity. We repaid $40 million of principal in the last four months, bringing our debt balance to $106 million. With liquidity of almost $56 million as at the end of February and substantial projected free cash flow for the first quarter, we have the ability to reduce debt even further with an anticipated debt paydown of roughly $30 million in early April, which will bring the debt balance to $76 million. Allow me to address the matter of dilution. Throughout the fiscal year 2023, we exercised prudent management of our ATM facility, strategically selling approximately 58 million shares at an average price of $2.05 per share, resulting in a discernibly accretive impact. From the proceeds, approximately $18 million was used for a voluntary debt repayment. The remaining funds were directed towards essential miner and infrastructure capital expenditures, with an additional $20 million retained as surplus liquidity on our balance sheet to navigate the halving in a few weeks. While I am fully cognizant of the concerns surrounding dilution, both out of my fiduciary responsibilities to you and as a leading and significant shareholder, I urge you to consider the substantial and accretive impact of these allocated funds. Looking forward, we have far more flexibility in sourcing capital given our current cash flow generation. For instance, in February, we produced 364 Bitcoin at an average cost of approximately $26,000 per Bitcoin, providing a total value of $17.8 million, with $8.4 million flowing directly to the bottom line. That's significant. As of April, we expect our net debt will stand at approximately $55 million, nearly 50% lower than at the beginning of the year, placing the company in its strongest position ever. Finally, I'd like to take a moment to thank the incredible team at TeraWulf for their dedication, innovation, and hard work, which have been critical in achieving the milestones I've highlighted today. It is your effort that drives our success, and I'm proud to lead such an outstanding group of professionals. Now, I'll hand the call over to our CFO, Patrick Fleury, for a detailed financial review.

Thank you, Paul. During 2023 and continuing into the first quarter of 2024, the company accomplished several notable steps to achieve positive cash flows from operations: number one, it amended its debt to remove fixed principal amortization and utilized a free cash flow sweep to rapidly reduce our debt balance; number two, commenced mining operations at Nautilus; number three, commenced mining operations at Buildings 2 and 3 at Lake Mariner; and number four, we paid over $40 million of debt and positioned the company with over $20 million of excess liquidity to navigate the upcoming halving. While my remarks for year-end would typically focus solely on annual results in year-over-year financial comparisons, our fiscal year 2022 results are less relevant given we only recently achieved targeted run rate operations of 5.5 exahash in the middle of 2023. Therefore, in my remarks, I will focus on fourth quarter versus third quarter results in addition to year-over-year comparisons. All references to 2024 guidance in my remarks can be found in our March 6, 2024 press release. Before diving into the numbers, a quick reminder, there is a key difference between our GAAP financials and the monthly operating reports and 2024 guidance. As a result of our 25% ownership in Nautilus, the revenue, cost of revenue, operating expenses, depreciation, and amortization at Nautilus are not consolidated into our GAAP financial statements. Instead, the financial impact of the Nautilus joint venture is reflected in the equity and net income or loss of investee net of tax line item on the GAAP income statement. In the fourth quarter of 2023, we mined 608 Bitcoin at Lake Mariner, and our net share of mined Bitcoin at Nautilus was 364 Bitcoin for a total of 972 Bitcoin or about 10.5 Bitcoin per day or a 2% decline over the 994 Bitcoin mined in the third quarter 2023. For fiscal year 2023, we mined 2,168 Bitcoin at Lake Mariner and our net share of mined Bitcoin at Nautilus was 1,239 Bitcoin for a total of 3,407 Bitcoin, inclusive of Bitcoin received from hosting profit share. Our GAAP revenues also saw outstanding growth of 23% quarter-over-quarter, reaching $23.3 million in 4Q '23 from $19 million in 3Q '23. Our value per Bitcoin self-mined this quarter, a non-GAAP metric that includes Bitcoin mined at Nautilus, averaged $35,836 per Bitcoin for a total of $34.8 million, as detailed and defined in our monthly operating reports and press releases. Our GAAP revenues year-over-year increased 361% from $15 million in 2022 to $69 million in 2023. Looking now at our gross profit. We saw an increase of 34% quarter-over-quarter from $10.6 million in 3Q '23 to $14.3 million in 4Q '23. Our total power cost per Bitcoin mined, a non-GAAP metric that includes Bitcoin mined at Nautilus, was $10,178 in 4Q '23 compared to $9,322 in 3Q '23. Gross profit for the year increased from $4 million in 2022 to $41.9 million in 2023. As a reminder, in our GAAP financials, unlike our monthly operating reports, the company records proceeds received and to be received for demand response programs as a reduction in cost of revenue. These expected proceeds totaled $1 million in 4Q '23 and $3.5 million in 2023. As disclosed in our 2024 guidance, we expect to achieve an average power cost, including demand response revenues and the impact of Nautilus' $0.02 power contract of $0.035 per kilowatt hour in 2024. For 2023, we achieved an average power cost of $0.032 per kilowatt hour. Operating expenses increased slightly quarter-over-quarter from $1.2 million in 3Q '23 to $1.7 million in 4Q '23. Annual operating expenses also increased slightly year-over-year from $3.3 million in 2022 to $4.9 million in 2023. These quarterly and annual increases were due to increases in repair costs, property insurance, and staffing costs as we scaled operations at Lake Mariner. As disclosed in our 2024 guidance, we expect $13.5 million of operating expenses in 2024, which includes operating expenses at Nautilus. Of the $13.5 million total anticipated for 2024, approximately 50% is expected to be incurred at Lake Mariner and 50% at Nautilus. SG&A expenses decreased quarter-over-quarter from $10.3 million in 3Q '23 to $8.8 million in 4Q '23. For the year-over-year period, SG&A expenses increased slightly from $36 million to $37 million. However, this increase was primarily due to an increase in: number one, non-cash stock compensation due related party for achieving a performance milestone; and number two, an increase in stock-based compensation. Adjusting for these items, SG&A decreased 13% year-over-year from $32.3 million in 2022 to $28.2 million in 2023. As disclosed in our 2024 guidance, we anticipate approximately $27.5 million of SG&A in 2024. Depreciation remained stable quarter-over-quarter at $8.2 million in 3Q '23 and $8.3 million in 4Q '23. Year-over-year depreciation increased materially from $6.7 million in 2022 to $28.4 million in 2023, which was the result of an increase in mining capacity and infrastructure placed into service in 2023 at Lake Mariner. During 2023, we recorded a loss on disposal of property, plant, and equipment of $1.2 million related to disposals of miners at Lake Mariner. GAAP interest expense in 4Q '23 and fiscal year 2023 was $9.3 million and $34.8 million, respectively, which includes cash interest expense and amortization of debt issuance costs and debt discount related to the term loan financing. However, cash interest paid during the three and 12 months ended December 31, 2023, was $4 million and $19.6 million, respectively. Notably, cash interest paid during the 12-month period actually includes 14 months of interest payments due to accrued interest for the fourth quarter of 2022 paid in January 2023 and 11 months of interest payments made in 2023 as interest is paid monthly in arrears as of May 2023. In 4Q '23, we reported $3.3 million in equity and net income of investee, net of tax, as compared to $0.9 million in 3Q '23. For the full year 2023, we reported a $9.3 million loss in equity of investee, net of tax, as compared to a $15.7 million loss in 2022. These amounts represent TeraWulf's proportional share of income or losses of the Nautilus joint venture. For the 2023 and 2022 fiscal years, these amounts include impairment losses of $13.6 million and $11.5 million, respectively, related to the distribution of miners from Nautilus to the company, whereby the miners were marked to fair value from book value on the date distributed. Our GAAP net loss for the fourth quarter was $10.8 million compared to a net loss of $19.4 million in 3Q '23. Our GAAP net loss for 2023 was $74.5 million compared to a net loss of $91.6 million in 2022. Our non-GAAP adjusted EBITDA for 4Q '23 was $16.4 million, an 81% improvement over $9 million in 3Q '23, and 2023 adjusted EBITDA was $30.7 million. Turning our attention now to the balance sheet. As of December 31, we held $54 million in cash, with total assets amounting to $378 million and total liabilities of $155 million. With the recent achievement of our targeted 210 megawatts and 8 exahash of operating capacity in first quarter '24, we anticipate a consistent and rapid reduction in our long-term debt with an approximate $30 million payment anticipated the first week of April. Furthermore, in fiscal year 2023, we reduced our net working capital, excluding the current portion of long-term debt from approximately negative $60 million at December 31, 2022, to positive $31 million as of December 31, 2023. As I've mentioned in previous quarters, you may note from our balance sheet that we do not hold our Bitcoin in treasury, but rather execute a 'monetize what we mine' strategy, whereby we liquidate Bitcoin to pay operational expenses and capital expenses and overhead as needed rather than dilute shareholders to fund these costs. We mine Bitcoin more efficiently and profitably than most of our peers with the intent to return that profit to shareholders in the form of debt paydown, organic growth, and potential future dividends and share buybacks. We are among the lowest marginal cost producers in the industry and provide full cost transparency and guidance to our shareholders as any reputable and leading commodity business does. As a former institutional investor myself, I believe the simple fact that certain of our peers, the largest public Bitcoin mining companies and self-declared industry leaders, do not is an insult to investors and research analysts. One can only logically presume that their lack of transparency is by design, knowing that their cost figures are adequately disclosed may materially impact investor sentiment. With the April halving fast approaching and all of us about to lay our cards on the table for all to see, I'm very confident in the hand TeraWulf is holding. We've long suggested that not all exahash was equal and that we anticipate a likely changing of the guard post halving and upon second quarter 2024 earnings results being reported. As disclosed in our 2024 guidance, we expect to achieve a marginal cost of production, which includes every single cost in the company of approximately $36,000 per Bitcoin post halving. In conclusion, I hope that during this call today, our financial objectives were reiterated and made clear and simple: maximize profits, repay debt, and return value to shareholders while providing investors access through transparency and accountability. With that, I'll pass it back to Paul and look forward to answering your questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Mike Grondahl with Northland Securities. Please go ahead with your question.

Hey, thanks guys. Two questions. I'll ask both of them upfront. But the first one, as it relates to your HPC initiative, what are the two assets that have the most value for you guys as you're going out to the market there? And related to that, how do you value those assets? And what's kind of the timeline to harness that value? And then, secondly, any thoughts on kind of the elevated short interest in the stock?

Yeah. Hey, thanks, Mike. Can you hear me okay? It's Patrick.

Yes.

Okay. Great. Sorry for the interruption, we have our management team spread across various conferences today. I'll begin, Paul, but feel free to jump in. Regarding HPC and AI, size and scale along with economies of scale are important. There are very few sites in the United States that can handle over 50 megawatts. We have 300 megawatts at Lake Mariner, along with access to land, affordable and mostly zero carbon power and water. It's worth noting that we're situated at a former coal plant that once drew hundreds of thousands of gallons of water from the lake. Being able to meet all these criteria is quite uncommon and positions us well for value creation, much like our partner Talen has experienced at their site. I'll stop there for now. Paul, do you want to add anything?

No, I think you got it. I would want to underscore how important ESG is to these hyperscalers. So, land, power, cost of power and that green focus is fundamentally critical to these guys. I think one other element here is how quickly they could get active. And I think our sites are already years earlier than maybe some of the competitors that are currently in development, looking for their connections. So, I think the proximity or the immediacy of their availability for a hyperscaler is very compelling to them as well.

In response to your second question, I see short reports weekly and I'm aware that we currently have about 47 million shares sold short. Insiders and management hold a significant portion of ownership among Bitcoin miners, which is why we are very cautious with the ATM. There are approximately 300 million common shares outstanding, with around 100 to 150 million of those belonging to insiders. With 47 million shares short, that represents over 25% of the float available for trading. I've noticed that one fund is shorting close to 70% of the shares sold short, which I believe is a risky position. We're nearing a shift in the industry where profitability will be valued more than revenue and exahash metrics, which I find unreasonable based on past experiences in telecom and power markets. Many of the remaining short interest, estimated to be around 10 to 15 million shares, is likely tied to our lender group, which should resolve itself in the first quarter as they hold warrants in the company. When we fulfill those warrants, the short interest will diminish. We're optimistic about this situation because it may create a potential short squeeze as we continue to deliver strong results.

Got it. And then maybe just a quick follow-up. On the 300 megawatts in the land and the water, have you attempted to put a rough valuation on that? What you think that's worth in today's market?

Not yet, Mike. However, I believe this process requires time. I want to quickly explain that the current landscape is characterized by a barbell approach. On one end, we have companies like the Magnificent 7, which are in a strong position to secure capacity through long-term contracts that can span 5 to 20 years. These deals are more financeable since they involve building infrastructure based on their specifications, with them supplying the GPUs. On the opposite end, there are many new AI and HPC companies, funded by venture capitalists, that are legitimate but have around $50 million on their balance sheets. They typically seek contracts that last from six months to two years and expect us to finance the infrastructure and purchase the GPUs, making these arrangements more capital intensive. Financing is more challenging here, as these are startup companies rather than established financing parties. Thus, we are engaging with both ends of this barbell, where one side represents higher credit risk and capital intensity, while the other consists of longer-term, more financeable contracts with lower capital requirements.

Sure. Okay. Hey, we'll stay tuned. Thanks, guys.

Thanks, Mike.

Our next question comes from the line of Lucas Pipes with B. Riley Securities. Please proceed with your question.

Thank you very much, operator, and good afternoon, everyone. This is actually Fedor Shabalin asking question on behalf of Lucas Pipes. And my first one, so I believe you targeted 300 megawatts by the end of '24 and 550 megawatts by the end of '25 for your total self-mining footprint. And the question is, could the capacity potentially be utilized for HPC or cloud services?

Hi, Fedor, it's Patrick speaking. As Paul and I mentioned in our remarks, we are an infrastructure company and are fortunate to be well-positioned during the current demand for infrastructure from both Bitcoin miners and hyperscalers. Given our insider ownership, we prioritize maximizing returns on capital. If that involves Bitcoin miners, as Paul pointed out, we currently value at 6 times while some peers are valued at 14, 15, or 16 times, and data center companies trade at 25 times EBITDA. I can assure you that, with one of the highest levels of insider ownership in the industry, we are very focused on creating long-term value and will adapt to where the opportunities lie.

Got it. That's helpful. And maybe it's early to talk about this, but would any potential HPC capacity come at Lake Mariner or Nautilus or both? What's the preference here?

The Nautilus facility is exclusively for Bitcoin mining, while the HPC AI capacity will be at Lake Mariner. As mentioned by Paul in his remarks, we have updated our investor deck posted today, which shows that we have 300 open megawatts at Lake Mariner, and we will utilize that capacity for the most valuable and accretive purposes.

Got you. Thank you very much. And are you having any maybe discussions today with potential tenants? And just how would you frame up the demand?

Yes, Paul, I'll respond to that, but feel free to chime in. As we've shared publicly, we've been conducting a 2-megawatt pilot at Lake Mariner since the fourth quarter. We've also had an adviser working with us on the HPC AI front since that same period. We've been engaged in significant discussions for a while, and these processes do take time. There isn't a one-size-fits-all solution; there are options like co-location and funding for all the GPUs for smaller scales, as well as much larger companies targeting significant sizes. Importantly, we're not taking on the GPU technology risk since we aren't purchasing the GPUs. We're hopeful that as we progress through 2024, we'll have more detailed updates to share. Our management team has remained focused on this for a considerable time, and we're excited about moving forward. Paul, do you have anything to add?

Only in response to your question about demand, I would say demand is very, very significant and timely. I think a lot of these folks are trying to get as big as they can as fast as they can. As I said in my remarks, I think we're one of the 10 most premier sites in the country when it comes to size, energy, availability, energy cost, access to water and of course, their unique ESG qualification. So, I think I'm very comfortable representing that our site is in meaningful demand, and we, as management, need to do our job and look at the highest value use for our property and energy.

Thank you so much. And maybe my last one about M&A opportunities that might evolve post halving. So, what's your thoughts on this space? Are you looking at something more beyond these two current sites if an opportunity evolves?

Sure. Paul, do you want me to take that, or do you want to take it?

We're working hard in a space that is quite volatile and filled with misinformation, concentrating on execution. If we maintain our current trajectory and continue to develop our existing facilities, we will have a lot to keep us occupied for some time. This is our main priority. We have extensive knowledge in energy infrastructure, setting us apart from many of our competitors. Therefore, we will consider opportunities that align with our commitment to zero-carbon mining if they arise. For now, our main focus is on implementing our business plan, staying diligent, performing our duties, and maximizing returns for our investors.

Thank you very much for color, and continue. Best of luck.

Our next question comes from the line of Bill Papanastasiou with Stifel. Please proceed with your question.

Yeah. Good afternoon, everyone, and thanks for taking my questions. I want to lead with a question on the term loan. Obviously, management has taken very significant strides of paying down the debt. And I'm curious to hear what the appetite at this point is to refinance, just given the more favorable outlook and the guidance that management has provided to get to 28.3 exahash?

Yeah. Hey, Bill, it's Patrick. Thanks for the question. Good question. So, look, I think given where economics are right now, the biggest asset of this company is its cash flow generating ability, and we're generating a lot of cash. I mean, we're mining 12 to 13 Bitcoin a day right now. And our cost is, call it, $25,000, $26,000. So, you can do the math, but it's $500,000 to $600,000 a day kind of depending on exactly where Bitcoin price is because it's been pretty volatile here. So, as Paul said in his remarks just now, I mean we are kind of head down focused on maximizing cash flow and taking the debt down and ultimately taking it out completely. So, as we move forward in time, yeah, could we pursue something on a refinancing front? Yes, maybe. But I think if we can keep harvesting cash flow and Bitcoin stays here, I think we'll pay off the debt naturally by the sort of end of third quarter, fourth quarter. So that's, I think, more of our focus, Bill, is not necessarily refinancing, it's eliminating.

Great. I appreciate that response. For my second and final question, as noted in the preliminary earnings, the company had just under $50 million in cash at the end of February. Can you share any details regarding any outstanding payments due for equipment purchases or the development of Building number 4? Just trying to get more information on that. Thanks.

Thank you for the question, Bill. To address your inquiry, I'll break it down into three parts. First, we currently have about $20 million in excess liquidity on our balance sheet, which we plan to use to manage through the halving and ensure the company maintains enough liquidity to handle any volatility in the coming months. Second, we do not have any current contracts or liabilities related to miners. This leads into the third point regarding Building 4 at Lake Mariner, which is set to be completed in June and is largely funded from an infrastructure standpoint. We haven’t made any announcements about purchasing miners for that building yet, which is why I noted we don't have any current liabilities. I hope that clarifies everything.

Yeah, thanks. Sorry, I should have been more specific. I did mean for the infrastructure part instead of the mining part. So that helps to clear everything up. That's all the questions from me. Thank you.

Thanks, Bill.

Our next question comes from the line of Josh Siegler with Cantor Fitzgerald. Please proceed with your question.

Yeah, hi, team. Thanks for taking my question today. Really appreciate all the transparency you provided around a bunch of KPIs here. My first question is really around financing for infrastructure. I'm curious if you can dive a little bit deeper into the financing options that would exist for infrastructure committed to HPC compared to infrastructure committed for Bitcoin mining.

Yeah, Josh, this is Patrick. Thanks for your question. I won't go into too much detail right now, but I will provide more information later this year. The short answer to your question about HPC AI is related to our barbell approach, which is essential to consider. Financing is abundant for large-cap customers, typically involving contracts that last 5 to 20 years. For instance, if you think about a 300-megawatt project, the build cost could range from $3 million to $7 million per megawatt. This translates to approximately $1 billion to $2 billion. However, if you have a long-term contract with a high-rated counterparty, you can finance 70% to 90% of that cost. On the other side of the barbell, for smaller, more capital-intensive projects, such as building the infrastructure and acquiring GPUs for our 2-megawatt pilot, costs could be around $20 million to $25 million per megawatt. This involves complete ownership and development, with these contracts typically lasting about two years and resulting in payback over the same period. Smaller companies involved in these projects often contribute around 25% of the contract value upfront, making financing more challenging. However, we are exploring the possibility of doing about 10 megawatts of these projects in conjunction with a financial partner who might also handle larger projects with A-rated companies. By pooling several companies together, we can reduce the associated risks, although this approach is more complex. Both sides do require time, and I know others in the field have reported similarly. Does that help clarify your question?

Yes, it definitely does. I appreciate the additional details and I'm very interested to see how your progress in building that infrastructure develops. For my second question, I wanted to shift focus to the fundamentals of Bitcoin mining. Your power costs for the year exceeded our expectations and your initial guidance. The mix is clearly shifting more towards Lake Mariner, but could you share any insights on how you anticipate that will trend in 2024?

Yes, we recently released an updated investor presentation on our website. We're maintaining our guidance of about $0.035 and I would prefer to stick to that while aiming to exceed expectations. For 2023, we achieved $0.032. We are quite confident in remaining within that range moving forward. Our investor deck includes a slide showing the historical average price at Lake Mariner along with forward pricing. As we've mentioned in our quarterly reports, aside from a few weeks during the winter and summer, Lake Mariner is an ideal location for Bitcoin mining. Nazar Khan and I discovered an interesting fact about Lake Mariner; since temperature records began in the 1970s, it has never exceeded 100 degrees over the last 55 years. This makes it an excellent site for mining Bitcoin, especially with access to abundant zero-carbon hydroelectric power nearby.

Great. Appreciate that. Thanks, Patrick.

Our next question is from James Roland with Meme Stock Watch. Please proceed with your question.

Hey, how are you? Can you hear me?

Yeah. Hey, James, we can hear you.

Hey, how are you? So, I run a forecasting service on miners, all crypto miners in fact, and doing so much digging on Wulf over the past year or so. I made my own personal decision to have my biggest miner position in Wulf as opposed to many others. And on my website, Meme Stock Watch, I offer analysis, fundamental analysis, technical analysis nightly on all miners. And my miner of pick has always been Wulf. So, before I even ask anything, I just wanted to say that this call has been wonderful to listen to. I think the company sounds like they're in great hands. Now, my question to you guys is, what would you say to investors looking to invest in the crypto miner space and looking for a specific crypto miner that they think can perform well post halving? Obviously, there are a lot of doubts and questions raised about that. So, what would you say to someone that's looking to invest in a crypto miner? Why should they take Wulf over others?

First of all, I appreciate your investment in the company. This is Paul. I can try and answer that. I mentioned earlier that we are aware that we trade at a much lower multiple than many others in our peer group, and it's a question we often ask ourselves, why? I believe our debt is misunderstood. I've suggested that it’s a non-event. We have managed it well and paid it down as promised. However, the perception that our debt remains may be why some people haven't invested yet. We've repaid $40 million of principal over the past four months and are set to make another significant payment of about $30 million soon, effectively halving our debt in less than six months. Our strong performance in the fourth quarter highlights our ability to generate considerable free cash flow, and we have excess liquidity of around $20 million on the balance sheet. We are confident in managing the remaining debt, and I hope future investors will consider that. Misunderstood negatives can turn into positives. Secondly, we have faced misperceptions regarding dilution. I have assured shareholders that we will be deliberate in using the ATM to support growth objectives. We have scaled rapidly over the past several quarters and are now making significant cash flow from investments in our equipment and infrastructure. Additionally, our dilution is on the lower end compared to our peers, unlike some who are implementing a massive $1.5 billion ATM facility, which would not happen on my watch. Many of our larger peers appear to prioritize management's lifestyle over shareholder interests, and I am concerned about our lower multiple. It doesn’t sit well with me, and I recognize it will always be a metric for future investors. When evaluating the facts, I hope they understand that TeraWulf stands out as the best investment due to three main factors. First, profitability. Our cost to mine Bitcoin is among the lowest compared to other publicly-listed companies, around $25,000 per Bitcoin before the halving and $37,000 after. Unlike many competitors, we fully disclose all costs, which is crucial. With Bitcoin at $65,000, we are generating nearly $500,000 a day from our current production of 12 Bitcoin daily. That’s substantial. Second, alignment. I am one of TeraWulf's largest shareholders, and our management team is fully invested, aligning our goals with yours. We win only if you win. Our team has more investment in the company than our peers. Lastly, scalability. The scalability of our digital infrastructure is unmatched. It supports our strategy, optimizing efficiency, scaling operations, and driving profitability. As Patrick mentioned, Bitcoin mining valuations are changing rapidly, and profitability should be the focus. A reminder about our larger peers: many start with a big fortune to make a small one in Bitcoin mining. TeraWulf is different; we are currently profitable in mining and will maintain that after the halving. That’s why people should invest in Wulf. I truly appreciate your question and your investment in our company.

Fantastic answer. Thank you so much for your time.

Our next question comes from the line of Joe Flynn with Compass Point Research. Please proceed with your question.

Hi, I have a question about paying down the debt after the halving. Regarding the $76 million, how should we balance between investing in growth to reach 300 megawatts or paying down the debt? You mentioned a timeline of by 2024 or 2025, but do you expect to reduce debt before achieving the 300 megawatts? Thank you.

Sure, Joe, it’s Patrick. That's a good question. Our primary focus right now is on generating free cash flow. As we've discussed, the company is producing between $500,000 and $600,000 in free cash flow daily. Regarding our debt repayment, which we anticipate starting in the first week of April, it will all come from this free cash flow generation and our profitability. We expect to remain profitable after the halving, assuming Bitcoin prices stay around current levels, and we will continue to generate significant free cash flow. Our goal is to use this free cash flow to pay down our debt. Once we achieve that, we can then consider how to use our free cash flow—whether for growth, dividends, or share buybacks. For now, our main priority is on debt repayment.

Great. That's helpful. And then in regards to the purchasing miners, can you maybe talk about the current market appetite for miners, like are there still opportunities to lock in kind of the lower prices that we've seen the 14 to 15 or 15 to 16 joules per terahash? Just like anything you could add there?

Certainly. There are definitely more OEM options available now compared to the last cycle. We anticipate that as the price of Bitcoin continues to rise, the prices for miners will also increase. However, there are still significant opportunities to acquire miners at attractive prices, similar to the levels you mentioned. Therefore, this isn't a concern for us in the near term.

All right. Great. Thanks.

Thank you. At this time, I would like to pass the floor back over to Mr. Paul Prager for closing remarks.

I want to thank you again for joining us today. In summary, I believe TeraWulf distinguishes itself through its best-in-class assets, lowest unit economics, ability to scale owned infrastructure and alignment with investors. As a significant investor in TeraWulf myself, I can assure you that we are well aware of and will only pursue the very best interest of the company and its shareholders. Thank you for your trust and support as we strive to build the leading bitcoin mining company.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.