Greetings, and welcome to TeraWulf's 2024 First Quarter Earnings Call. 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 first quarter earnings call. With me today are Chairman and Chief Executive Officer, Paul Prager; Chief Operating Officer, Nazar Khan; 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 risks and uncertainties, and we may make additional forward-looking statements during the question-and-answer session. These forward-looking statements are subject to risks 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 risks 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 Investors 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. I'd like to also inform investors of our new investor deck, which may be found at terawulf.com. We'll begin today's call with prepared remarks from Paul, Nazar, and Patrick, then we'll proceed to Q&A. 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 presence today as we discuss our first quarter 2024 financial results. A couple of months ago, during our last earnings call, we highlighted TeraWulf's significant growth and achievements throughout fiscal year 2023. We experienced strong organic growth at our existing sites, made substantial debt repayments, and improved our liquidity. These accomplishments underscore the strength of our foundation and set the stage for the growth we are eager to discuss today. For those who are not familiar with TeraWulf, we focus on energy infrastructure, backed by over 30 years of experience. Our primary focus right now is Bitcoin mining, where we utilize sustainable practices and zero-carbon energy resources, contributing to grid stability. Operating from our two main data centers, Lake Mariner in Upstate New York and Nautilus Cryptomine in Pennsylvania, a joint venture with Talen, we pride ourselves on sourcing 95% of our power from clean energy. Our expansive mining facilities currently achieve a combined self-mining hash rate of 8 exahash per second, powered by about 64,000 deployed miners, operating at a fleet efficiency of 24.6 joules per terahash, using 210 megawatts of infrastructure capacity. Notably, our miners consistently operate at approximately 98% of installed capacity. We're actively expanding our mining operations at Lake Mariner, with Building 4 scheduled for completion at the end of June and construction of Building 5 commencing. These expansions are expected to boost our total operational capacity to over 10 exahash per second by mid-year, with fleet efficiency improving to 22.7 joules per terahash, and later exceeding 13 exahash per second with fleet efficiency reaching 20.9 joules per terahash. We have one of the industry’s most efficient miner fleets. As Patrick will detail, we have finalized a new miner purchase and option agreement with Bitmain for S21s and S21 Pros, further solidifying our growth trajectory. This contract ensures the timely delivery of machines for Building 4 and secures favorable pricing for up to 6 exahash of potential future deliveries. Looking to the future, our goal is to reach a 300-megawatt infrastructure capacity by the end of 2024, with plans to expand to 600 megawatts of deployed infrastructure by 2025. As an energy infrastructure company, we are committed to ongoing development and finding the best applications for our megawatts, whether that's Bitcoin mining or high-performance computing. The importance of owning infrastructure and scalability cannot be overstated. Our optionality is enhanced compared to our peers, thanks to our energy background and existing digital infrastructure. In fact, I believe no miner is better positioned than TeraWulf regarding scalable, low-cost, zero-carbon energy infrastructure assets. Over the last nine months, WULF Compute, our internal innovation hub, has focused on researching, developing, and deploying our extensive and scalable digital infrastructure. Following a successful pilot phase with a compact NVIDIA GPU system, we allocated a 2-megawatt power block at our Lake Mariner facility, which could accommodate over 1,000 H100 GPUs as part of a broader high-performance computing initiative aimed at diversifying our revenue streams. TeraWulf's large-scale energy infrastructure, along with access to zero-carbon low-cost power, is crucial for meeting the rising demand from Bitcoin mining and AI applications. Our sites meet the high specifications of hyperscalers, providing direct access to ample contiguous land for data centers as well as abundant water for cooling, all while adhering to sustainable ESG practices. In a short while, Nazar will share more details on our strategic approach to the AI HPC opportunity. The immense value of our available, scalable, and sustainable energy infrastructure has been highlighted in recent research reports from both Morgan Stanley and Goldman Sachs. We believe the market is not adequately recognizing the intrinsic and substantial value of our owned infrastructure in our current market valuation. Turning to our financial status, we remain committed to leveraging our resilient, low-cost infrastructure to maximize profits, pay down debt, and return value to our shareholders. Our performance in the first quarter demonstrates TeraWulf's consistent attainment of industry-leading profitability. We achieved a GAAP gross margin of 66%, which increased to 71% when excluding certain items, and a non-GAAP adjusted EBITDA of $32 million, amounting to an EBITDA per exahash of around $4,100, one of the highest among our public peers. Additionally, our quarterly SG&A was $8 million, and stock-based compensation was $7 million, both notably lower than our competitors. These statistics are essential for management and shareholders because they showcase TeraWulf's competitive advantages over other public Bitcoin miners: our low-cost zero-carbon power; our profitability, generating more EBITDA per exahash than larger public peers which means we need less capital for future growth to achieve similar profitability; and our efficiency. We have a lean operation and manage TeraWulf to maximize profitability for our shareholders. We are not a lifestyle company for management. We estimate our cost to mine a Bitcoin at approximately $40,000 per Bitcoin post-halving, using a network hash rate of 600 exahash, which positions us as one of the lowest-cost producers in the industry. Going forward, we're focused on capital efficiency, ensuring that every dollar spent on CapEx creates value for our shareholders. This approach highlights our commitment to maximizing returns and ensuring long-term sustainability in our business. Before concluding my remarks today, I want to emphasize the importance of capital efficiency within our strategy. At WULF, we believe our success depends not just on the speed of our expansion, but also on the careful allocation of capital to ensure lasting returns for our shareholders. When I talk about capital efficiency, I mean the smart use of funds, regardless of whether they're from free cash flow, debt, or equity, to operate and expand with a strong focus on the relationship between capital invested and the returns generated. This distinction is important because it allows investors to see the difference between companies that are growing profitably and those simply expanding. At TeraWulf, we believe not all exahash is created equal, and the same applies to dilution. As we've shown consistently, our approach prioritizes minimal dilution to align with our stakeholders. Remember, this management team, including myself, holds significant shares, which aligns our interests with you, the investor. So beyond extensive analysis and modeling, what defines our strategy is capital efficiency. Rest assured that when we decide to utilize the ATM, it is with strong conviction that every dollar spent will yield significant returns. Some of our competitors appear not to be focused on profitability in their expansion plans, which sets TeraWulf apart. Capital efficiency is the foundation of our decision-making process, guiding us to make investments that not only promote growth but also guarantee that every dollar spent creates substantial long-term value. This disciplined approach allows us to maintain a lean and adaptable business model while pursuing opportunities that align with our core goal of delivering sustainable growth and returning value to our shareholders. This is also why TeraWulf achieves greater profitability with less dilution than any of our peers. Now, I’ll pass the call to my partner, Nazar Khan, to discuss WULF Compute's initiatives before our CFO, Patrick Fleury, provides a detailed review of our first-quarter financial results.

Thank you, Paul, and good afternoon, everyone. Before delving into the latest developments of WULF Compute, I'd like to provide some context regarding the surging demand for energy infrastructure. As Paul mentioned, our expertise lies in the power generation sector. Over the past 2 decades, we've been involved in the development, construction, financing, ownership, and operation of power generation facilities, both domestically in the United States and in various overseas jurisdictions. Central to our operations has been our key understanding of power blocks, the scale that's particularly pertinent in today's landscape. With the advent of high-demand loads, such as HPC and AI, ensuring timely access to sufficient power has become a critical concern. However, access to power and energy infrastructure remains a significant constraint. These high-density compute loads have 2 primary objectives: first, to secure access to power at scale; and second, to do so within the next 12 to 24 months. Once these primary objectives are met, considerations then shift to securing low-cost and zero-carbon power solutions. Fortunately, the TeraWulf portfolio boasts substantial capacity to fulfill each of these objectives, as high-density compute loads gravitate towards areas with ample power resources, and we're actively engaging with various counterparties to allocate our energy infrastructure accordingly. We are in the early stages of this transition and are thoughtfully analyzing the alternatives. Over the past 9 months, WULF Compute has been dedicated to developing the blueprint for our low-cost zero-carbon and scalable digital infrastructure. Traditional data centers are facing challenges in meeting the escalating rack density requirements of current and next-generation GPUs. To address this, our engineering team has collaborated closely with industry leaders such as NVIDIA to design air-cooled and liquid-cooled facilities tailored to GPU demands. The culmination of these efforts is the construction of our 2-megawatt facility at the Lake Mariner site, slated for completion by early August. We're currently in discussion with several counterparties regarding the utilization of this capacity. Our core expertise of TeraWulf lies in energy infrastructure, and our primary objective remains to expand our facilities to meet the increasing energy demands of the rapidly growing high-density compute market. Following our initial 2-megawatt project, we're now in the final stages of designing the 10-megawatt facility, engineered to be easily scalable. As you'll see in our most recent investor presentation, we've summarized various strategies for extracting value from our infrastructure as it relates to AI and HPC applications. Each strategy entails distinct capital, operational, and margin considerations. Given our dedication to energy infrastructure and our belief in being at the forefront of the growing demand for it, our current focus is on the colocation, white space, and rack-ready model. This approach strikes a balance between long-term ownership of energy infrastructure and the potential for increased revenue per megawatt over time in the most capital-efficient manner. We expect the supply of scaled, low-cost, zero-carbon energy infrastructure to become more constrained over the next year. Hyperscalers are aggressively acquiring and optioning energy interest structures that they plan to grow into over the next few years. We believe the path to creating the highest shareholder value is by designing and building next-generation data center infrastructure that we offer into the market. Looking forward, we envision an opportunity to expand our high-density compute business to 100 megawatts within the next few years. This expansion will leverage our existing assets and may involve acquiring additional sites to bolster our capacity further. Now I'll hand the call over to our CFO, Patrick Fleury, to provide a detailed review of our financial results for the first quarter.

Thank you, Nazar. As Paul stated, our first quarter was strong across all financial metrics, driven by favorable business fundamentals and outstanding execution. In the first quarter of 2024, we self-mined 767 Bitcoin at Lake Mariner and our net share of mined Bitcoin and Nautilus was 284 for a total of 1,051 Bitcoin or about 11.5 Bitcoin per day, a 10% increase over the 959 Bitcoin mined in Q4 '23. We received an additional 6 Bitcoin in Q1 '24 and 13 Bitcoin in Q4 '23 from profit sharing associated with the hosting agreement at Lake Mariner that expired in February 2024. Our GAAP revenues saw outstanding growth of 82% quarter-over-quarter, reaching $42.4 million in Q1 '24 from $23.3 million in Q4 '23. Our value per Bitcoin mined this quarter, a non-GAAP metric that includes Bitcoin mined at Nautilus, averaged $53,750 per Bitcoin for a total of $56.8 million as detailed and defined in our monthly operating reports and press releases. As a reminder, there is a key difference between our GAAP financials and the monthly operating reports and 2024 guidance. Due to 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, in net income or loss of investee net of tax line item on the GAAP income statement. Our GAAP cost of revenue exclusive of depreciation for Q1 '24 was $14.4 million, a 61% increase over $8.9 million in Q4 '23. The quarter-over-quarter increase was principally due to a 37% increase in average operating exahash in addition to higher realized power costs at Lake Mariner in Q1 '24. Looking now at our gross profit, also exclusive of depreciation, we saw an increase of 95% quarter-over-quarter from $14.4 million in Q4 '23 to $28 million in Q1 '24. Our total power cost per Bitcoin mined, a non-GAAP metric that includes Bitcoin mined at Nautilus, was $15,501 in Q1 '24 compared to $10,308 in Q4 '23. As a reminder, in our GAAP financials, the company records proceeds received and to be received for demand response programs as a reduction in cost of revenue. These expected proceeds totaled $1.2 million in Q1 '24 and $1 million in Q4 '23. As disclosed in our 2024 guidance, we expect to achieve an average power cost, including demand response revenues and the impact of Nautilus' power of $0.02 per kilowatt hour in 2024. For Q1 '24, we achieved an average power cost of $0.041 per kilowatt hour. Operating expenses were stable quarter-over-quarter at $1.7 million in Q1 '24 and Q4 '23. 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 total, approximately 50% is expected to be incurred at Lake Mariner and 50% at Nautilus. SG&A expenses increased quarter-over-quarter from $8.8 million in Q4 '23 to $14.9 million in Q1 '24. However, the increase is almost entirely due to $6.2 million of stock-based compensation expense incurred in Q1 '24. Adjusting for stock-based compensation, SG&A decreased 6% year-over-year from $8.5 million in Q1 '23 to $7.9 million in Q1 '24. SG&A spend is more heavily weighted to the first quarter of the year versus following quarters. And as disclosed in our 2024 guidance, we continue to anticipate approximately $27.5 million of SG&A in 2024. Depreciation increased quarter-over-quarter from $8.3 million in Q4 '23 to $15.1 million in Q1 '24, which was the result of an increase in mining capacity and infrastructure placed into service, as well as $3.8 million of accelerated depreciation related to certain miners of which the company shortened their estimated useful life based on expected replacement by April 30, 2024. Gain on fair value of digital currency, net of $1.3 million in Q1 '24 is a new line item for us given our early adoption of the new FASB accounting rule, which marks the company's Bitcoin holdings to the fair market value as of the filing date with changes in fair value recorded in net income. It is critically important to note, this $1.3 million is substantially all realized gains, meaning it is realized cash in our bank account and not theoretical mark-to-market gains on paper, with many of our peers that hold Bitcoin. I am amused watching our public peers report adjusted EBITDA inclusive of theoretical mark-to-market gains on BTC HODL balances as adjusted EBITDA is supposed to help an investor determine normalized cash flow generation for our business. It will be telling to see if our peers stick to this methodology if and when BTC price drops quarter-over-quarter as it's done thus far in Q2 '24. I won't be holding my breath for the self-declared industry leaders to do the right thing. GAAP interest expense in Q1 '24 and Q4 '23 was $11 million and $9.3 million, respectively, which includes cash interest expense and amortization of debt issuance cost and debt discount related to the term loan financing. However, cash interest paid during Q1 '24 was $3.7 million, down over 8% from $4.1 million in Q4 '23. This decrease is the result of repayment of $33.4 million of debt in Q1 '24. This trend will continue in Q2 '24 as we repaid a further $30.1 million of debt in early April. In total, the company has reduced its debt balance by over $70 million since the start of Q4 '23 with $51.5 million of free cash flow from operations and only $18.6 million of equity proceeds. In connection with the voluntary prepayment of $18.6 million of debt in Q1 '24, the company incurred prepayment fees of $0.3 million recognized unamortized discount of $1.7 million associated with the principal repaid, and recorded a loss on extinguishment of debt for a total of $2 million. In Q1 '24, we reported $5.3 million in equity and net income of investee, net of tax as compared to $3.3 million in Q4 '23. These amounts represent TeraWulf's proportional share of net income of the Nautilus joint venture. Our GAAP net loss for the first quarter was $9.9 million compared to a net loss of $10.8 million in Q4 '23. Our non-GAAP adjusted EBITDA for Q1 '24 was $32 million, a 95% improvement over $16.4 million in Q4 '23. Turning our attention to the balance sheet. As of March 31, we held $45.8 million in cash with total assets amounting to $395 million and total liabilities of $123 million. As we move through 2024, we anticipate a consistent and rapid reduction in our long-term debt with an estimated $15 million to $20 million repayment in the first week of July. Our net working capital, excluding the current portion of long-term debt, held steady quarter-over-quarter at positive $31 million. As disclosed in our updated investor deck and 2024 guidance slide, we achieved a marginal cost of production, including every single cost in the company of approximately $29,000 in Q1 '24 and expect to achieve approximately $40,000 in Q2 and the second half of '24. Q1 '24 realized cost per Bitcoin was higher than our expected $25,000 due to seasonally higher realized power costs of $0.041 per kilowatt hour versus our projected $0.035 per kilowatt hour annual average and seasonally higher Q1 '24 SG&A expense due to annual filings, audits, and related legal fees. Lastly, in March 2024, the company entered into a miner purchase and option agreement with Bitmain to lock in pricing of approximately $16 per terahash on an additional 7 exahash of S21 and S21 Pro miners. The company has paid $17.5 million or 5,000 S21 miners, which we expect on-site at Lake Mariner by the end of May and funded a further $9.6 million deposit for an additional 30,000 miners. At WULF, our financial objectives remain 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, once again for joining us today. In summary, TeraWulf stands at the forefront of the industry with its best-in-class assets, lowest unit economics, and unparalleled ability to scale our owned infrastructure. We remain deeply committed to delivering consistent growth and profitability while aligning closely with the interests of our investors. As we look ahead, we believe our infrastructure's strategic importance is currently undervalued by the market. The foundation we've laid and the trajectory run underscore our potential for continued success. We appreciate your continued support and confidence in TeraWulf. Together, we are poised to capitalize on the exciting opportunities to uphold our position as a leader in capital efficiency and deliver sustained value to our shareholders.

The first question comes from Josh Siegler with Cantor Fitzgerald.

I just want to start by saying I really appreciate the breakdown of your unit cost here. It's very helpful for us, investors. For my first question, I was wondering now that we have passed to having, you've demonstrated this profitability now. Do you expect more financing channels to really open up maybe perhaps debt markets once you've proven that profitability post-halving?

Josh, this is Patrick. Yes. Look, it's a great question. I think we've talked about this before. I'd like to see the debt markets kind of from a corporate level, so not the old miner finance model because that obviously didn't work very well. But from a corporate level debt perspective, as the business gets more mature and candidly, post-halving, there's a separation of companies that are profitable and those that are not that are really set up more as lifestyle companies, as Paul mentioned, for management teams. Yes, I think I'd like to see the debt markets reopen. And you'll see in a slide that we put in our slide deck, I think it's Page 12, but we are providing a bridge of capital needs for the year. And we have assumed that we just take all of our free cash flow and pay down our debt. I do think there's a possibility. I've already received a bunch of inbounds, I mean, certainly given our business and the collateral that we put in the ground has grown over time and the debt has been reduced. Yes, I think there'll be opportunities to kind of turn that debt out. So it really will become a question of whether we want to keep it or not. But I think for us, as we pivot a bit more into the high-power compute and AI space, that space, the public companies trade at 20 to 25x EBITDA, and they all have 6x leverage because you've got long-term contracts, and it's a much more stable revenue business. So I could see us as we kind of get into that, really have 2 kind of silos: one for the Bitcoin mining business and the other for the compute business, and those are very different financing beasts. So yes, I'll just leave it at that.

Following up on that, I did want to ask a little bit more about the HPC side of things for my second question, was notably, last you talked about high-performance compute was a couple of months ago. And in your deck, you outlined the 3 potential business models that you could pursue when you have the pilot program in works here. I was just wondering now that time has passed, if you're becoming more comfortable with one specific model over another in terms of what the future of HPC may look like for WULF?

Josh, it's Nazar here. Yes, I think as we've noted, our core expertise is really around energy infrastructure. And so we are getting more comfortable and we've been working to design the next-generation data center, given where GPU rack density is going. A lot of legacy data centers may not be able to most efficiently meet the power needs. And so we think from delivering infrastructure that can be used for not just H100s but even kind of Blackwells and beyond, we're designing digital infrastructure that can meet those needs. So we're getting very comfortable that we can design, put up, and operate that physical infrastructure. So, kind of in that, if you look at page, I think it's Page 14 in our deck, that middle column really kind of what we think is a sweet spot between owning the infrastructure, bringing in customers who may pay for the GPUs, and having kind of a long-term ownership around that. Now that being said, this is kind of the full spectrum of the alternatives that are out there. And as we get further along into it, post our 2-megawatt pilot, we're finalizing the design for a 10-megawatt facility. If we see an opportunity, Patrick just mentioned financing or other things, to be able to facilitate participating in more of the chain, we'll do so. But currently, we're really focused on that middle column and that's where we think our expertise lies. I don't know if Patrick could add to that.

This is Paul. I want to point out something unique about WULF, specifically regarding their sites. Not everyone has the energy infrastructure to support large-scale power needs. Many lack the water permits for the volume required and the contiguous land that large data centers need. This presents exciting opportunities, but it also means that those searching for such resources will drive up the value of energy infrastructure. Recently, Nazar mentioned that we are not looking for a quick trade but instead aiming to build a business. Therefore, our focus is on generating maximum shareholder value rather than catering to major companies like Meta or Amazon. We're in the early stages, and it's important to carefully study and understand the market before making any commitments. It remains crucial for us to continue mining Bitcoin, as we excel in it and firmly believe in its value. As Patrick stated earlier, we envision maintaining several operational areas, one in high-performance computing and another in Bitcoin mining, which will continue to influence our business philosophy.

Next question comes from the line of Lucas Pipes with B. Riley Securities.

Patrick, I guess I'll have to look up that industry classification system, but in more serious matters. We are hearing a lot about the tightness in the power markets with the AI growth. And Paul, you know power markets extremely well. So I wanted to hear your opinion on that. Is that true? Do you see that tightness in the power markets? And then if it is true, who gets that economic rent? Is it the utility, is it anyone with a PPA? And to what extent does geography matter in all of this? Appreciate your thoughts on this.

Nazar, do you want to start with respect to HPC and I'll follow.

Sure, Lucas, it's Nazar here. As we assess the current market, we notice a discrepancy between the demand size and the timeframe for available supply. In terms of infrastructure, if you have sufficient time and financial resources, issues can be resolved. Currently, we're in a situation where near-term demand is depleting available supply, especially for scalable access to low-cost power from zero-carbon sources. There are limited locations where all these conditions are met. Therefore, the entity that owns the infrastructure or has the right to obtain or utilize that power should be able to benefit economically. Presently, we're observing that hyperscalers are in a strong financial position and are actively securing as many of these sites as possible. Their immediate concern is not whether they will ultimately use the capacity; they are focused on securing these options for the time being. From our standpoint, we have 300 megawatts of additional capacity still available for development. We believe we are at a critical juncture where supply is insufficient to meet demand, positioning us to capitalize on that economic opportunity. The business models for how we achieve this are still in development. Furthermore, we're witnessing a shift from the traditional model of data centers, where they would request large amounts of power from utilities, to demand sources taking matters into their own hands and directly procuring power. Examples include Microsoft's recent announcement with Brookfield for a substantial capacity build-out and Amazon's actions at the Talen site. Thus, the locations with access to power capable of meeting demand will be best positioned to capture the associated value.

The only thing that I would add to it is, look at there being some competition then to a Bitcoin miner because he's got to compete with a whole different level of fellow in these hyperscalers for sites with power, and not all sites are created equal. Likewise, I think Patrick mentioned earlier today, he said if you've got a good business model but bad power, well, you're hosed because at the end of the day, you have bad power contracts, it's a bad power contract. You'll never right-size your costs. And so we have good power. We have good location, but green power, but good power in that it's really inexpensive. So I think you have to look at some of the shops in Bitcoin mining that really have great power agreements and are transparent by the way about them. And that's where you ought to be making your bet.

Really appreciate the color. And, yes, that provides a lot of context. Quick second question. Just in terms of that $9.6 million towards an additional 30,000 miners, how should we think about kind of that by itself from a timing perspective and then kind of longer-term or rather beyond that as it relates to growth?

So, Lucas, the whole contract is for a total of 7 exahash. We've mentioned that 5,000 of that has already been paid for and will be delivered at the end of this month. We haven't committed to anything beyond what you see on Page 12 of our deck. Nazar might provide more insight on this, but I want to mention that we believe the model is changing. Recently, we've received calls from individuals discussing ideas like providing us with miners for free in exchange for a profit share. So, we're cautious about committing to anything beyond what we've outlined. This year, we'll have 13 exahash of infrastructure ready, and we expect to reach 10 exahash by July 1. I understand that this might not be as specific as I usually prefer, but there's a lot of movement in that market. Nazar or Paul, would you like to add anything?

Yes, just to add to that, Lucas the contract is for 25,000 remaining machines at $16 per terahash, and that $9.6 million represents a 10% deposit on those machines. And so as Patrick said, we've effectively taken down 10,000 of those machines to cover Building 4, which will come online here, as Patrick said, by July 1. And then the remaining miners are on option available to us. And for us, it's really about capital efficiency. So as we are thinking about continuing to grow the business and allocating the infrastructure most effectively, that capital question comes in. And so as Patrick said, we're looking at a number of different ways to skin that cat, and it ranges from purchasing more miners at $16 per terahash, some sort of profit share, and even kind of something in between which would just be effectively being able to replace hashboards and machines. So you're significantly limiting your capital cost by using the existing box that exists for the miner and swapping out hashboards with the next-generation hashboard. So there's a whole spectrum of things that we're actively looking at in terms of how we will populate those next buildings that are coming up.

And is the deposit transferable? So if you chose to go for it with another option, how should we think about the deposit?

No, I mean the deposit for those machines, so we'll either... but as you know, that deposit works down every time we take a delivery of machines, right? So, yes, the deposit is there to secure the price and future delivery, and then we'll gradually reduce it over time as we receive the machines.

Next question comes from the line of Joe Flynn with Compass Point Research and Trading.

I had a question related to the Nautilus option to expand 15 megawatts. Do the terms of that option change at all with the Amazon acquisition or does it require like a sign-off? And then ultimately, how should we think about timing of getting that capacity online if there's no change?

Sure. The Amazon is a new landlord to the agreement we have. It's the agreement we have, so there's no change in the terms and conditions of the agreement. We are currently working to finalize the designs for that facility. We're targeting a 2025 online date for that. Currently we're focused on completing Building 4 and we've got a pretty quick turn on delivering Building 5 at Lake Mariner. And so we've slated the Nautilus expansion for 2025. And so we are working with a landlord there to finalize the design for the building that we put up at that site.

And Patrick, if you kind of touched on this already, but I guess in this low-cost hash price environment, I mean, how should we prioritize like between paying down debt and CapEx opportunities to push some CapEx out if needed, the flexibility?

Yes, I appreciate the question. Our goal is to maintain transparency, unlike many of our competitors. On Page 12, we have clearly outlined the commitments made by our management team for this year. You will see that we need to raise approximately $45 million to $50 million in the next six to seven months. To provide some perspective, Slide 11 illustrates how this amount is minimal compared to our peers. For instance, some of them have raised over $500 million through ATMs in the first four months of the year without generating significant profits. Two of our largest competitors, which are substantially larger than us, brought in profits of about $10 million and $50 million while we achieved $32 million in EBITDA. We stand by our commitments on Page 12 because we are actively growing the business while utilizing equity sparingly. In contrast, those other companies rely heavily on equity. Furthermore, CleanSpark is very profitable, and using an ATM to support sustainable growth is commendable. However, using it for a strategy that primarily benefits management does not sit right with us. We believe in the principle that revenue can be misleading, profit is important, but cash flow is crucial. Many of our peers focus on exahash output and revenue, but ultimately, profitability matters. Like Uber, companies need to demonstrate profitability to retain investor interest. As we discuss hash costs, which we transparently provide on Page 13, it's important to note that many competitors hesitate to reveal their Bitcoin production costs. It raises concerns about their transparency. We are committed to providing you with clear information to showcase our profitability and our careful approach to accessing capital when necessary for growth.

Next question comes from the line of Mike Grondahl with Northland Securities.

Kind of referring to Slide 14, WULF Compute, or the HPC opportunity. Now you're kind of focused on that center column. Paul, are you thinking of this as a business tens of millions or hundreds of millions, and then maybe as a follow-up, what do you think this business will look like in 3 years to 5 years?

So, Naz, why don't you start, and then I'll come in and give my thoughts on where we're headed.

Sure. We believe we can grow this business to hundreds of megawatts. Our 2-megawatt pilot and the 10-megawatt facility we’re designing are primarily focused on engineering to ensure our product meets all specifications and user demands, both now and in the future, especially for upcoming GPU iterations. We are convinced that the availability of scalable, low-cost, zero-carbon power is becoming scarce. Therefore, we believe we can develop this business into over 100 megawatts over time. With our current capacity of 300 megawatts, we see potential for further expansion, and we are exploring additional sites to enhance our capacity. We aim to establish a business centered on this vision. Looking ahead 2 to 4 years, we anticipate significant market developments. Hyperscalers have the capital to secure their own future, as seen with Microsoft and Brookfield’s 10.5 gigawatts powering Microsoft's requirements. Only a few companies can manage such investments. On the other side, emerging AI companies are likely to grow significantly, and there will also be enterprise customers in between. We believe that outside of the hyperscalers, what we offer will be limited in availability, positioning us as a natural partner for these companies. We are confident that over time, this can evolve into a substantial business.

What I'd like to add is a couple of things. One is, B.B. King has a great song, he used to sing it, don't make you move too soon. These are very early days in the high-speed compute business. And I think it would be prudent for us to really look at all the ways that we can take advantage of our megawatts, of our energy infrastructure. Because that's really our advantage, right? The sites, the water permit, but it's the access to low-cost carbon free energy that is what is so enabling on a long-term basis to building a business at WULF. So I think that is why we're focused on that center column right now because that's where we think it's likely to see the best value for WULF shareholders. That said, we're constantly, I mean, this is all we talk about every minute of the day, trying to figure out how do we get the most to our shareholders out of our energy infrastructure. I think on a long-term basis, you would see WULF having 2 divisions if you will, high-speed compute and Bitcoin mining. We like Bitcoin mining. We are very constructive on the price of Bitcoin. We are the most efficient at it and we don't think it would be prudent to just sort of switch gears and become a high-speed compute company. Particularly at this point in time, there's so much to learn. We think the right thing to do is to sort of continue our analysis, focus on the center column, do what we're doing in terms of the 2-megawatt and then the 10-megawatt, and then continue to be dedicated to Bitcoin mining at the lowest possible cost. And so that's where I think we're headed. I think that will also avail us additional opportunities in terms of our cap structure because I think that, again the high-speed computing space much more, it's much kinder on an institutional level to a business when you think about lending and the kind of terms that are available to you. So I think that's where we'll end up.

And then 1 follow-up. I'm trying to connect Slide 12. One of the uses of the $47 million of capital is WULF Compute and it says $5 million. How does that blend into Slide 14 in the financing line for the middle column, it says equity initially. Can you just speak to the financing and what equity initially means in that center column and how far $5 million goes?

Yes, Naz, would you like to address the first part, and then I can cover the second regarding the $5 million?

Sure. The 2-megawatt pilot that we're building is largely most of that $5 million budget, so that's the full design engineering construction cost associated with that 2-megawatt pilot. That 2-megawatts of capacity will be available in early August and we're in discussions with a number of different counter-parties around utilizing that capacity. So that's where the bulk of that goes and that budget also includes the engineering and design work for the 10-megawatt building as well. And again, that 10-megawatt building is designed to be scalable, and so whether we build 10-megawatts or 20-megawatts or 30-megawatts, it's really just scaling up that design. And so that's what's included in that budget there for the compute business.

To address your question, it's important to differentiate between the build-to-suit model and the co-location model. In the build-to-suit model, which we've touched on before, we partner with a single large public company, similar to the Magnificent 7 stocks. Our experience in this area has shown that while this can create significant value, it is essentially a one-time event that benefits us for the subsequent 15 years. On the other hand, pursuing co-location allows us to bring in third parties to help manage the business, specifically in cloud computing. This way, we can utilize third parties to aggregate enterprise customers and finance off that customer base. Initially, this requires equity, but as the business grows, it can also reach about 80% financing. However, it involves a gradual process of customer aggregation, which provides more stability compared to relying solely on the credit of one corporate client.

Next question comes from the line of Bill Papanastasiou with Stifel.

I appreciate the transparency in this slide deck and those funny analogies on dilution. For my first question, I'm just curious to hear whether there's been an uptick in the number of subscale Bitcoin mining peers knocking on your door following the halving event, just given the dynamics on mining economics. Do any of these peers have compelling assets or operations? That would be of appetite to TeraWulf today? Or will the focus remain on existing growth plans at Lake Mariner and the HPC-AI business?

Listen, I think we have to focus on execution of our business plan and that's what we're focused on. We have even when Nazar mentioned earlier, like pushing Nautilus expansion out to 2025, it's because we have such a low cost to build at Lake Mariner that it just makes sense for us to focus on the careful and considerate execution of our business plan with our existing sites. That said, everybody in the space is talking to everybody in the space. And as you know, we have a management team that's been together for a very, very long time that are really focused on energy infrastructure. And as Patrick went off of that a little while ago, really focused on even a per exahash at the smallest dilution to the shareholders. So culturally finding somebody that would be a right fit for us, it's probably not easy. And we're very focused as well on the carbon-free element to our energy. So I think that sure, everybody is chatting. Are there many likely dates? I don't think so. I think we need to focus on just execution, paying down our debt, and run our way. I think the institutions, when they come to the market, are coming to us. They're appreciating the level of transparency and the actual performance that TeraWulf is delivering under Nazar and Patrick. And I think that we just need to continue to get that message out to the real world. I mean, if you again take a look at that Slide 11, we're talking about EBITDA per exahash and then you take a look at the massive dilution on the right side of the page versus the hardly any on the left side of the page. And then when you put in that third column where you look at stock-based comp, I mean, it really is very troubling and you'll see that there just are a lot of companies out there that just, they shouldn't be out there And it doesn't make sense for us to sort of join with them because we're all about making money through the appreciation of the shares of our stock. We're aligned with our investors. So that's sort of how I look at it. Cultural is a big issue with us because again focused on energy infrastructure and been around a long time.

I appreciate that color. Shifting gears, just hoping to get some more color on the debt repayment plans. Previously there were talks about potentially refinancing once the indebtedness dipped below $100 million. Should we assume that that's completely off the table and whole repayment's going to happen before 2024? Any color you can provide there?

So, as mentioned, in our updated slide deck on Page 12, we've outlined the capital bridge for 2024. Our free cash flow this year will cover all of our debt, and we also have some commitments related to Building 5. Additionally, we have a bar chart on that page illustrating the electrical work at the L&D site, which will enable us to quickly expand to 300 megawatts. This involves significant line expansion and transformer upgrades. If the financing markets become more favorable or if we decide to combine our debt with financing for the computing business, we have several options that could reduce our capital requirements. However, for now, our primary focus is on our cash flow generation capability, given our low power costs and high profitability. We aim to eliminate the debt first and then consider future opportunities.

Next question comes on the line of Marcelo Rossi, a private investor.

I understood Nautilus runs on $0.02 per kilowatt power, but earlier in the call, somebody mentioned there was seasonality power cost adjustments. Can you elaborate on that? What percentage of the power is subject to seasonality?

Marcelo, that's a great question. It’s Patrick Fleury. Currently, we have 210 megawatts operational, which includes 50 megawatts at Nautilus, where we have a fixed power rate of $0.02. The remaining 160 megawatts at Lake Mariner is set to increase to 195 when Building 4 becomes operational on July 1, and that power is variable. We typically see power prices in Zone A of the New York area at that facility. On Page 20 of our updated presentation, you can observe that the pricing at Lake Mariner has averaged around $0.04. For the entire year of 2023, we realized a blended rate of $0.032 across both sites, with approximately $0.02 at Nautilus and between $0.036 and $0.038 at Lake Mariner. Generally, in the first quarter, our power costs are somewhat elevated during the shoulder months, particularly in the second and fourth quarters, which tend to have lower prices at Lake Mariner due to minimal demand. The demand mainly corresponds to heating and cooling requirements, occurring mostly in winter during cold spells and in summer during humid periods. Fortunately, being 30 miles east of Niagara Falls works to our advantage. We haven't revised our guidance for the year; we still anticipate a realization of $0.035, and, as I mentioned, we’re optimistic since we achieved $0.032 last year.

Next question comes from the line of Bob Evans with Pennington Capital. Please go ahead.

Just to follow up a prior question, just to get a sense of scale that you're thinking for the HPC-AI opportunity. I know you're looking at the middle part of the slide, but again is this a hundreds of millions of revenue opportunity or give us some sense of scale, at least what we should think this should ramp to. I know you're trying to put various clients into this project, but just give us a sense of revenue potential.

Yes, I think if we consider our 300 open megawatts at Lake Mariner, we can estimate that by multiplying 300 by 1.3 and 1.5, which gives us a range of $300 million to $450 million. As Naz mentioned earlier, we expect this to be in the hundreds of millions. At this point, we are not fully committing that entire capacity to HPC-AI because we are also quite successful in Bitcoin mining. Additionally, we have a significant infrastructure business outside of the public company. So, I would just suggest that you stay tuned, as there is much more to come this year.

Okay, is the correct way to evaluate the cost per megawatt and revenue per megawatt to take the midpoints of those ranges and divide them? My understanding is that this business may have a payback period of a couple of years, but doing that calculation suggests it might take longer. I'm trying to figure out how to properly assess the cash generated and its ability to pay for itself.

That's a great question, Bob. I want to clarify that we have provided a lot of data on Page 14, titled Potential Illustrative Business Models. We've spent the past nine months studying this business, although we've been in the private power sector for 30 years. Transitioning to a new area requires significant effort to ensure we don't make mistakes. This is just our initial understanding. Generally speaking, the cloud business, which is in the far left column, is more capital intensive but offers quicker returns as there is a strong demand for GPU-as-a-service. Our expertise lies in infrastructure, and we're managing the GPU technology risk required in the far left column. As for the co-location business, you're correct that it has a longer payback period, ranging from three to eight years, rather than the 18 to 36 months typical of other models. However, that's still reasonable. We believe the metrics at the bottom of the page are conservative, and we see this evolving into a stable business with a ten to twenty multiple over time. By focusing on the middle column, we think we can generate more value with less capital compared to the left or right columns.

Okay. So if I was going to simplify it, we'd say, you believe you can build a multi-hundred million dollar business with, call it 70% plus EBITDA margins that should have a higher EBITDA value multiple than a lot of other options out there.

Yes, correct. And the only thing I would add is less capital intensity as well.

I want to add one more point. As Nazar highlighted in this presentation, we have 2 megawatts at WULF Compute and we're constructing a 10-megawatt facility. We're not completely decided on our approach, but we are committed to leveraging the experience gained at WULF Compute to develop this 10-megawatt building. We are also refining our analysis to establish the optimal program for TeraWulf, making use of both our existing infrastructure and the potential access to significant additional infrastructure outside of public vehicles. The 2-megawatts and 10-megawatts represent our cautious entry into this space, ensuring we arrive at the correct solution for the benefit of our shareholders.

I get that. And I agree with you and that obviously things work out to anywhere on this slide, it's a higher multiple, more predictable business model. So I agree.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I would now like to turn the floor over to Jason Assad for closing comments.

Thank you, operator. That concludes today's conference call. Thank you for joining us. Please note this has been one of our highest attended calls. So thank you for the continued and growing support. I'd also like to again remind you about our new investor deck, which may be found on our website at www.terawulf.com. Much like everything we do, it was proposed in the spirit of transparency. We hope investors will find it insightful. If you have any questions or need anything, please reach out directly as always and please remember to follow us on social media. Operator, you may end the call.

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