Terawulf Inc. Q3 FY2025 Earnings Call

Greetings and welcome to the TeraWulf 2025 Third Quarter Earnings Conference Call. Please note that this conference is being recorded. I will now turn the conference over to John Larkin, Senior Vice President, Director of Investor Relations. Thank you, Mr. Larkin. You may begin.

Good afternoon, and welcome to TeraWulf's 2025 Third Quarter Earnings Call. Joining me today are Chairman and CEO, Paul Prager; and CFO, Patrick Fleury. Before we get started, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. During this call, we may use words like anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions, which indicate forward-looking statements. For a more comprehensive discussion of these and other risks, please refer to our filings with the SEC available at sec.gov and in the Investors section of our website at terawulf.com. We will also reference certain non-GAAP financial measures today. Please refer to our 10-K and 10-Q filings on our website for a full reconciliation of these non-GAAP measures to the most comparable GAAP measures. We will start today's call with prepared remarks from Paul and Patrick, followed by a Q&A session. Now I'd like to turn the call over to our CEO, Paul Prager.

Good afternoon, and thank you for joining us today. The third quarter was truly transformational for TeraWulf, both operationally and financially. During the quarter, we executed one of the most significant steps in our company's evolution, signing approximately 360 megawatts of critical IT load with Fluidstack backstopped by Google at our Lake Mariner campus in Upstate New York. This 10-year agreement representing average annual revenue of approximately $670 million and average annual net operating income of more than $565 million before extensions, firmly validates our high-performance computing hosting strategy and establishes TeraWulf as a leader in designing, building and operating low-carbon enterprise scale compute infrastructure. In October, we reinforced that leadership by closing $3.2 billion in senior secured financing backed by the Google credit enhancement to fully fund the Lake Mariner high-power compute build-out. This transaction is a milestone for the broader industry, demonstrating a repeatable end-to-end development model that begins with design and site control, extends through customer contracting and construction and culminates in long-term credit-enhanced lease revenue. The third quarter also marked an operational inflection point for TeraWulf as we recorded our first HPC revenues with lease commencement at WULF Den and CB-1. We remain on track to deliver CB-2 near year-end, subject, of course, to tenant fit-out requests, which will complete our delivery of 60 megawatts of critical IT for Core42. Across our platform, these early deployments are proof points that our strategy is working and our execution is disciplined. At Lake Mariner, our team continues to perform exceptionally well. In terms of executing for Fluidstack and Google, the majority of long lead items have been contracted through CB-5 and construction progress is both visible and measurable. CB-3 is more than 50% directed. The final concrete pour is scheduled within two weeks, and the structure will be fully enclosed before year-end. CB-4 and CB-5 are already well underway with underground work beginning next week, field deliveries arriving in early December and building erection expected to begin before Christmas. The progress our construction and operations teams have achieved and with rigorous quality standards reflects TeraWulf's deep experience in developing and delivering large-scale energy and data infrastructure. We also continue to expand our geographic footprint and customer base. Just two weeks ago, we expanded our partnership with Fluidstack and Google, announcing our joint venture to develop and operate the Abernathy HPC campus in Texas within the Southwest Power Pool market. This project adds 168 megawatts of new HPC capacity with expansion potential up to 600 megawatts and replicates the same credit-enhanced structure proven at Lake Mariner. This joint venture with Fluidstack and Google leverages our collective expertise, incorporates Hypertech as EPC partner and includes two additional options to expand the joint venture, one for future phases at Abernathy and another for a separate site elsewhere in the United States. This partnership represents the next evolution of our growth model, scalable, capital efficient and backed by world-class partners. And while we've made tremendous progress executing the business we have, what's equally important is how we're positioning TeraWulf for the next wave of growth. Our approach remains disciplined, expanding only where we have clear structural advantages in power, permitting and partnership and our opportunity set continues to broaden. In August, we signed an 80-year lease at the Cayuga site in New York, laying the groundwork for large-scale high-power compute deployment beginning in 2027. As just mentioned, the Abernathy joint venture offers meaningful embedded expansion potential, both on campus and across future projects with Fluidstack and Google. Meanwhile, our in-house development pipeline continues to mature with several high-quality opportunities now approaching realization. Together, these initiatives form the very foundation for TeraWulf's next phase of growth, executing today while methodically building the platform for tomorrow, scalable, low carbon and designed to meet the accelerating demand for high-performance compute. Reflecting that confidence, we recently increased our annual target for new HPC signings from 100 to 150 megawatts per year to 250 to 500 megawatts per year. We did not make this decision lightly. It reflects the tangible progress we've made in advancing our development pipeline and the strength of customer demand. Over the past year, we've evaluated over 150 potential sites, narrowing that list to a select group that meets our strict criteria, grid redundancy, minimum power thresholds, attractive geographies for end customers and time to power. To support this next phase, we've expanded our site acquisition and development teams, strengthening what is already the most capable organization in the sector. Our deep understanding of what hyperscale and AI customers need, combined with our access to scalable, low-cost power, positions TeraWulf at the forefront of the infrastructure transformation now underway. We are proud of what our team accomplished this quarter, but we are even more excited about what lies ahead. With that, I'll turn the call over to our CFO, Patrick Fleury, to discuss our financial results in more detail.

Thank you, Paul. The 3Q 2025 results reflect a strong contribution from our legacy Bitcoin mining operations and more importantly, the start of HPC Leasing segment revenues. On our 2Q 2025 earnings call, we discussed a series of capital markets initiatives in the second half of 2025. I'm proud to report that with the benefit of our new financial support from Google and help of our partners, including Morgan Stanley and Paul, Weiss, we've executed beyond our expectations, raising over $5.2 billion at incredibly attractive rates, creating durable equity value for our shareholders. Now let me turn to the results. In the third quarter of 2025, GAAP revenues increased 6% quarter-over-quarter to $50.6 million from $47.6 million in 2Q '25. We recognized $7.2 million of HPC lease revenue at WULF Den and CB-1 with intra-quarter lease commencement resulting in 22.5 megawatts of energized hosting capacity. Continuing with our long-term commitment to financial transparency, we've added a page in our investor presentation detailing lease accounting nuances, which we hope you find helpful. We self-mined 377 Bitcoin at Lake Mariner or approximately four Bitcoin per day, a 22% decrease compared to the 485 Bitcoin mined in 2Q '25. Our GAAP cost of revenue, exclusive of depreciation, decreased by 22%, from $22.1 million in 2Q '25 to $17.1 million in 3Q '25. Power prices in Upstate New York normalized in 2Q '25 and continued to decline in 3Q '25 to $0.047 per kilowatt hour, in line with historical levels and our previous guidance of $0.05 per kilowatt hour for the second half of 2025. Proceeds from participation in demand response programs, which are recorded as a reduction in cost of revenue during the period in which the underlying program occurs, increased to $7.4 million in 3Q '25 from $3.1 million in 2Q '25. Operating expenses increased 28% quarter-over-quarter to $4.5 million in 3Q '25 from $3.5 million in 2Q '25. This trend higher throughout 2025 is primarily the result of increased staffing levels at Lake Mariner necessary to support our entry into HPC leasing. SG&A expense for 3Q '25 was $16.7 million, a 17% increase from $14.3 million in 2Q '25. After adjusting for stock-based compensation, SG&A increased quarter-over-quarter from $10.6 million in 2Q '25 to $12.3 million in 3Q '25. Depreciation increased quarter-over-quarter from $18.8 million in 2Q '25 to $26.5 million in 3Q '25. The company recorded accelerated depreciation expense of $7.8 million related to a certain minor building and related miners, of which the company shortened its useful life based on expected shutdown of operations for purposes of supporting the HPC operations. Change in fair value of contingent consideration was $8.8 million in 3Q '25 related to fair value remeasurement of contingent consideration liabilities based on milestones achieved during the quarter related to the acquisition of Beowulf E&D. Loss on disposals of property, plant and equipment net was $2 million in 3Q '25, down from $3.8 million in 2Q '25. These losses related to the sale of 8,900 and 2,900 miners, which were sold or otherwise disposed of for proceeds of $6.9 million and $1.9 million in 3Q '25 and 2Q '25, respectively. GAAP interest expense in 3Q '25 was $9.8 million compared to $4.0 million in 2Q '25, and we recognized interest income of $4.1 million in 3Q '25 compared to $1.2 million in 2Q '25. Cash interest paid during 3Q '25 was negligible compared to $7.1 million in 2Q '25 as the 2.75% interest on our $500 million convertible notes is accrued and payable in 2Q and 4Q of each year. Change in fair value of warrant and derivative liabilities in 3Q '25 was a loss of $424.6 million related to the Google warrants and the conversion feature of the 2031 convertible notes, which was originally accounted for separately as a derivative liability. Our GAAP net loss in 3Q '25 was $455 million compared to a net loss of $18.4 million in 2Q '25. Our non-GAAP adjusted EBITDA improved 25% quarter-over-quarter, totaling $18.1 million from $14.5 million in 2Q. As a reminder, these results are inclusive of significant increases in operating expenses and SG&A over the past 12 months as we invested heavily in our HPC business. These incremental costs have been entirely borne by our legacy mining business until now. Turning our attention to the balance sheet. As of September 30, we held $712.8 million in cash and restricted cash with total assets amounting to $2.5 billion and total liabilities of $2.2 billion. In October, we closed over $4.2 billion in capital markets transactions, including $3.2 billion of 7.75% BB-rated senior secured notes due 2030 and $1.025 billion of 0% convertible notes due 2032. As seen on Page 14 of our 3Q '25 investor presentation, with these financings complete and the La Lupa and Akela data center construction projects at Lake Mariner fully funded, our pro forma liquidity totals over $1 billion, which provides cash for three important initiatives: one, TeraWulf's cash equity contribution to the Abernathy JV with Fluidstack; two, the acquisition of key sites in our pipeline that have advanced to the final stages of diligence and negotiation; and three, excess cash to create a fortress balance sheet to weather any storm. With regard to the Abernathy JV, we anticipate coming to market before year-end with a senior secured notes financing similar in all respects to the offering we recently completed at WULF Compute. As a reminder, the Abernathy JV benefits from $1.3 billion of Google credit support over a 10-year period. The second half of 2025 has been nothing less than extraordinary for TeraWulf and its stakeholders. We have secured over $16 billion of HPC lease agreements and executed over $5.2 billion of financings at incredibly attractive rates, added significant liquidity to the balance sheet and shown we have a deep multifaceted pipeline to grow the business at 250 to 500 megawatts annually in the future. With that, I'll turn it back over to the operator, and we look forward to answering your questions.

Our first question comes from Mike Grondahl with Northland Securities.

First question for Paul. Paul, it was noted that there's some key sites that you're close to closing on. Can you talk a little bit about those sites?

Good question, Mike. There are at least two sites that we're very, very close to sorting out. We're going for some regional diversity where we think our customers are inclined to enter into long-term agreements. We've built out our team on the front end here to focus. We've looked at over 150 opportunities. I would not be surprised if by year-end, we announced at least one, possibly two additional sites.

That's great. And then a question for Patrick. Patrick, I noticed in the slides you're breaking out segments now with BTC and HPC. And I also noticed on the HPC side, the margins look like they were about 72%. And I think in the past, you've talked about roughly 85% margins. Can you kind of reconcile that?

Yes, thanks, Mike. You'll see full detail on the segments when we file the Q, which we’re very proud of due to the start of HPC leasing revenue. The actual margin was about 72%. In the operating expenses, there is about $700,000 of development expense at Cayuga. If you exclude that, it brings the margin for the quarter to around 82%. This is much closer to the 85% we aim for. The quarter is slightly off because we didn't have full revenue, particularly for CB-1, but I anticipate that will normalize quickly in the fourth quarter to about the 85% we’ve guided to.

Great. And congrats guys on all you've accomplished the last 90 days or so.

Our next question comes from Nick Giles with B. Riley Securities.

Congrats on all the progress. Obviously, your agreements to date involve top-tier credits. Just was curious to hear how you're thinking about customer diversity from here. Is there a desire to expand the customer base? Appreciate any comments.

Sure. As you know, we have two world-class credits as our customers, Core42 backed by G42 and then the Fluidstack Google deal and those that may be associated in that deal, if you've taken a look at the recognition agreements, you're aware of that. And so I could not be happier with the credit quality of our customers, which is the critical element here and something Patrick pounds the table on because, obviously, we want to be able to get ideal credit terms for our transactions and the result in financing. So the answer is I would expect we'll continue to grow with the customers that we have. And certainly, we're continuing to have dialogue with a couple of others. But again, the key for us is credit quality. And so it's a little bit of a smaller universe as we move forward. But yes, the sites that we have and the sites that we are anticipating bringing home, all would be very compelling to a great quality credit in addition to, of course, the ones that we already currently have on the books.

Thanks, Paul. That's helpful. My next question was just on the JV. Can you just talk about how that opportunity came about? And then just to clarify, should we consider these types of deals as part of your new updated kind of megawatt per annum guidance? And should we think about that on an attributable basis? Just appreciate any clarity there.

I'll start, and then perhaps Nazar or Patrick can elaborate. We have developed a strong collaborative relationship with the Fluidstack Google team. When you consider what we're building, there are no existing reference models. These are opportunities for design and construction collaboration, so the teams must either work together effectively to succeed or face significant challenges. We prefer to succeed, which is why we put in the effort to collaborate closely with the Fluidstack Google teams. They are present on-site, and we have frequent meetings. I can say they have become an integral part of our team as we explore financing for Abernathy. During our discussions, they expressed that they had the location and credit quality and were contemplating using an EPC, but acknowledged that our expertise in energy infrastructure and financing would enhance the project. As a result, everyone agreed that this approach made sense. Our main strategy moving forward remains consistent: to maintain excellent sites while seeking the right customers. We are genuinely pleased to partner again with Fluidstack Google. As I always say, when Google invites you to collaborate on a project, you should accept. You find a way to agree that aligns with their needs while ensuring it benefits your shareholders as well. That is the approach we took with Abernathy. In the Abernathy deal, there is potential for further growth at that location, and as you know, we also have a continuing relationship for the next project with similar credit quality. So yes, we will develop that project further, but our primary focus is on securing additional sites and targeting more high-quality credit customers for those locations. Nazar or Patrick, would you like to share your thoughts on how we view this from a financial standpoint?

Yes. Nick, it's Patrick. I don't really have much to add. I think as I said in my prepared remarks, we intend to finance this, be in the market, financing it before year-end, and it's substantially similar to the deal that we just printed at WULF Compute.

Got it. And just to clarify, we should think about this on an attributable basis. If we see another one of these announced and we're trying to pair that against your 250 to 500, it would make sense to look at it that way.

Yes, we own 51% of the JV. So, yes.

Again congrats on the transformational quarter. Keep it up.

Our next question comes from Dillon Heslin with ROTH Capital Partners.

Just a follow-up on sort of how you're talking about your power strategy. The non-JV sites you're looking at, are you procuring those sort of in absolute for marketing? Or do you already have customers in mind that you could basically go to right away?

We are actively communicating with our customers in a highly competitive market. We continuously discuss their needs while working on due diligence and negotiations for additional sites. With over 25 years of experience in energy infrastructure development and operation, we have been able to identify potential sites for the next wave of data center development for hyperscalers and high-quality credits. In our partnerships, such as with Abernathy in relation to Fluidstack and Google, we are committed to collaborating with the customer. In the case of TeraWulf, we are also considering other sites that may be beneficial. Our goal is to ensure a competitive process that yields high-quality credit while maximizing returns for our shareholders. It involves balancing both aspects.

Great. As a follow-up, how are you viewing the market regarding build costs? The sites you've developed so far have been at existing locations with redundant power, and at the Fluidstack Abernathy site, you're not constructing a substation, which makes the capital expenditure per megawatt somewhat lower. You’ve also mentioned that you have long lead items procured through CB-5. What is your general outlook on the market, perhaps looking beyond Lake Mariner?

Dillon, this is Nazar. We aim to deliver the majority of our capacity within 12 months of finalizing agreements with customers. This often involves engaging with suppliers for electrical gear and cooling systems ahead of time. We've established relationships with several vendors and maintain a rolling 12-month projected schedule with them, which helps us secure positions in their queues. Depending on the amount of capacity we agree to, we adjust our requests accordingly. Our proactive equipment procurement allows us to provide certainty to our customers during discussions. This approach has been successful, and as we've secured and procured capacity, we've been strong partners with our vendors, who have reciprocated positively on equipment procurement. Looking ahead, the forecast and guidance we've shared for the $250 million to $500 million aligns with this procurement strategy for capacity as well.

Our next question comes from Chris Brendler with Rosenblatt.

Thanks and congratulations on the amazing amount of progress. I'm looking forward to more. I wanted to ask about Bitcoin. I noticed the operating hash rate was about 70% of the nameplate hash rate this quarter and expect it to decline even further next quarter. Can you provide some insight into what's happening there?

Yes, Chris, it's Patrick. We are currently managing our sites for our HPC clients. As we approach the time to activate all of Core42's capacity, we need to make some electrical adjustments at the site. In my earlier remarks, I mentioned an accelerated depreciation of $7.8 million related to one of our minor buildings this quarter, as well as the sales of miners. As we reposition the site, especially concerning power lines and redundancy for the HPC buildings, we are implementing some changes in our Bitcoin mining operations, which are reflected in those figures. This involves optimizing our fleet for better efficiency while primarily focusing on HPC operations. The site remains very profitable, and we had a strong quarter from a Bitcoin mining standpoint. Moving forward, this will be our strategy, which includes the sales of miners and the accelerated depreciation on the minor building.

Makes sense. And I guess from that comment, it sounds like that continues in 2026.

Yes, I believe so. As we mentioned, we provided some guidance in the presentation regarding our expectations for the fourth quarter. Moving forward, our plans will depend on market conditions. However, our intention is to continue mining Bitcoin at least until the end of 2026. Depending on when we receive the additional 250 megawatts requested from the New York ISO, we may continue operating beyond that, potentially until the next halving. Ultimately, this will depend on securing additional megawatts at the site as well as Bitcoin profitability.

Excellent. Great. Speaking of additional megawatts, I like the slide that broke out how you think about the pipeline on the power side on Slide 8 and some great details there and helpful to think about where that comes together. The gigawatt plus of development pipeline, is that in the Phase 4 or the Phase 2? I wasn't quite clear where that comment on the following page fits relative to Slide 8 on the phases.

I think, Chris, that's really just going to Paul's comments, which, again, when you think about our funnel, which is really what Page 8 is meant to kind of show you, just the amount of time and effort that goes into cultivating that pipeline. And again, I think unlike some of our peers, we're not telling you a fictitious pipeline of thousands of megawatts all in the same region. We're telling you about stuff when it's literally imminent and ready to go. So I think as Paul mentioned, we're getting very close on a handful of sites that hit on Page 9, the development pipeline of a gigawatt.

Our next question comes from Stephen Glagola with Jones.

On the raised AI capacity growth targets to 250 to 500 megawatts net annually, are there any structural or operational constraints, like whether, I guess, like EPC capacity, financing availability or like internal bandwidth that could just limit the number of projects you can execute simultaneously?

This is Paul. I'll start. The answer is yes. I mean, I think we've always tried to emphasize here a focus on our ability to execute. And I think that we're more than capable of meeting that goal of 250 to 500 megawatts. But it takes a lot of time to really get to the bottom of these sites. It's a very competitive market. You need to sort of look near and far afield. You have to make determinations on site suitability for the customer, but also what's power like at the node, what are the environmental and regulatory considerations. It's just a lot. So we're very confident we could do what we now say, which is an increase from where we're at. I'm not terribly worried about the EPC side. I feel pretty good about that and procurement capability and supply lines aren't what they were. I feel very good about that. I think that the key is going to be our ability to meet schedule and price. That's what the Street is looking for. That's what our customer wants. That's what we promised to our shareholders. So I'm very comfortable at 250 to 500. And as we grow, listen, we're building, as Patrick used to say, serial model #6. As we get down to 10 or 11 and we find more efficacious ways to do this and neater ways to scale, then we could grow from there. But I think 250 to 500 is the right way to think about us for the coming year.

And if I can just ask one more. Are you seeing any meaningful demand from tenants for the AI capacity with ready for service dates beyond 12 months? And how is that shaping your pipeline site acquisition priorities?

Yes, the demand is genuine and consistent. Recently, I learned about a site in Ohio that received a letter from AEP indicating they were queued for power in '26. However, it's better to plan for power availability around '29 and '30. This emphasizes the importance of carefully selecting sites and understanding the grid's capabilities. You must assess whether you're in a region where the grid’s capacity isn’t sufficient to meet the demand, which can be three times higher. When we discuss this with customers, they are generally open to shifting timelines, agreeing to move from '26 to '27 and from '27 to '28. However, I don’t believe the power issues will be resolved by then. Hyperscalers are now considering their own generation sources, so they can supply their own power, which is likely four to five years away. For instance, the deal with NextEra for returning nuclear power involves a 30-year agreement but won’t start until '29, and I doubt that nuclear power will be back by then. Overall, the demand is rising significantly, and it took some time to reach this point as everyone was waiting for the first major move. Now, it’s clear that hyperscalers and cloud companies have substantial demand.

Our next question comes from Justin Pan with Clear Street.

This is Justin on for Brian. Obviously, the increase in incremental HPC guidance underscores a lot of optimism in demand over the next two to three years. You guys have had a great couple of months. Some of your peers have had a great couple of months. But could you dig in a little bit deeper into what gives you the confidence in the heightened demand outlook over the medium term? It seems like a pretty interesting dichotomy in the market at the moment, right? We're seeing some talk over AI valuation frothiness. But at the same time, there's been a ton of material success momentum in your space. So...

I'm happy to start, and you can follow up. As I mentioned, our customers have requested that we explore opportunities to provide our own generation. If we're going to do that, we need to consider that it takes at least four years. The inquiries we've received from top-tier clients indicate a substantial demand. The energy shortfall is genuine and larger than our initial forecasts, especially regarding the needs of high-load data centers. We've been receiving calls since May, and the interest hasn’t waned. Each time we identify a potential site, we receive at least five inquiries asking if it might be suitable. If you look at the hyperscalers and a few leading cloud companies, they are aggressively pursuing new locations. Many of these sites won’t have electrification available for two to three years. Therefore, I can only say that the demand is significant, and we don't expect it to decrease anytime soon.

Our next question comes from John Todaro with Needham & Co.

First one here, as we kind of move from a phase of signing some of these leases to executing on them, can you just give us kind of any color as it relates to penalties if you missed timeline of delivery and then just kind of frame up your confidence in hitting delivery dates? And then I have a follow-up question.

Yes, this is Patrick. Sorry, Nazar, go ahead?

No, go ahead, Patrick.

Yes. So, John, just with regard to penalties, I'm not going to tell you the specific ones because that's confidential to the lease. But I would tell you, given the accelerated build timelines and all the work we've done with our customers here, there are pretty significant grace periods. So the leases cannot be terminated until we're over 180 days late. Obviously, as Paul said, we're meeting weekly, daily, monthly, like both in person and via teleconference with our customers. So there's no surprises. So folks are well aware of budgets, timelines, et cetera. In general, we have very minimal penalties for the first 30 to 90 days. Generally, there's a penalty for the 30 days, then there's another one for 60, another one for 90, and then the penalties start to accelerate from day 90 to 180. But those are relatively de minimis for us through 90 days and then scaled from 90 to 180.

Great. That's very helpful. For my second question, could you provide some insight into how your team has managed to expand the power pipeline? It seems that some projects, like Abernathy, were secured quite rapidly. With major hyperscalers, Neo cloud, and even private equity all in the mix, competition appears to be intense. Could you elaborate on how your company has been able to succeed in this environment?

Yes. I'm not sure I understand the question. I wouldn't view that as happening very quickly. We have a long-term relationship with Google and Fluidstack. We are aware of their strategy, and they felt that including us would enhance the overall effort. However, I'm unclear on the specific balance of your question.

I guess just the main crux of it is if we take a step back and there's such a power constrained environment, one of the biggest questions we get from investors is just how these guys are able to continue to procure capacity like that 250 to 500 megawatts you talked about when we are in still a constrained environment, and there's just likely so many bidders for these assets.

Yes. Some are exploring island generation where they create their own power. Others are considering high electrification sites that have previously been used for industrial purposes and are looking to transform them into data centers. Additionally, some are discussing potential agreements with utilities, similar to the NextEra transaction. They are employing various strategies to address long-term demand, which is urgent in the short term, while also considering 25- and 30-year contracts. For instance, the Abernathy deal spans 25 years. While I can't definitively say what the long-term solution is, it’s clear that the United States needs to increase its power generation. Most stakeholders are aware of this. The key question is whether there are viable sites within the right regulatory framework and environmentally suitable for high-quality credit customers. I believe the answer is yes, but it requires knowing where to search. I should emphasize TeraWulf in this context, which is why I think we will have at least one or two more sites operational before the end of the year.

Our next question comes from Tim Horan with Oppenheimer.

Was there a specific trigger that caused you to kind of basically guide to more than doubling your incremental capacity per year or your customers? I mean it seems like demand is much stronger than maybe you were thinking about we were six, nine months ago. Yes, anything that really drove that?

Is that you Naz?

Maybe I can start, Paul, you can jump in. Yes, I think there's a few things, right? So one is if you go back a year ago, we hadn't gone through the full cycle, right? As we have laid out in the deck, there's not just the site, there's not the design, there's the engineering, there's a financing and then there's a construction. So we've been through that full cycle now. And so sitting 18 months ago, looking forward, there was pieces of that process that we had not completed. Pending this quarter, through this quarter, we've completed all of those cycles. And so now we have a much better nuanced understanding of what's required for each one of those phases, what we can get done. There was a question earlier on capacity. So all of that is factored into that 250 to 500-megawatt forecast, which, again, 1.5 years ago, we didn't have that visibility. So I think that is a reflection both of our capacity capability to get each of those phases done as well as the size of the demand that's coming from the customers.

I would like to add a couple of points. First, after we had 42 online, we were able to showcase our capabilities to other customers, significantly increasing our credible inquiries compared to before. Secondly, Patrick, who has been instrumental in our financing strategy from the start, aimed to ensure that our customers were not financing our capital expenditures. Instead, we approached it by securing credit support for effective financing. Thanks to Patrick, we secured excellent financing options. This allowed us to acquire the necessary capital to build these projects and demonstrated to our customers how we operate. Patrick's leadership set the standard, and while others have followed, we were the first to take that initiative based on his original vision. The successful execution of both Patrick's and Nazar's ideas has led to a demand that we hadn’t fully anticipated.

And just two quick questions. Abernathy, do you have a sense how much equity you're going to have to put up to finish that project? And are we talking like $8 million per megawatt for the build-out? And then Lake Mariner, can you talk about what items or item is on the critical path on the construction schedule, please?

Yes, on Abernathy, we've given you guidance of $8 million to $10 million per critical megawatt. If you do that quick math and again, take the wide end of the range, it's roughly $1.7 billion, and there's a $1.3 billion Google backstop. So, again, you can kind of do that quick math. And I would, again, just say stay tuned. We're kind of sorting out the details with Morgan Stanley and our partners right now, and we'll be in the market as soon as we can be.

And then the construction item critical path.

On the second question regarding the critical path, we are either on schedule or ahead of schedule for all major equipment pieces. The construction for CB-4 and CB-5 is on track, and we are currently increasing the workforce at the site. We expect to reach peak labor levels around March. The immediate focus is on ramping up this labor, which is crucial for our progress. We have several initiatives in place to achieve this, and ensuring this ramp-up lays the groundwork for CB-4 and CB-5 as we move from civil construction into full mechanical and electrical operations over the next couple of months.

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Paul Prager for closing comments.

Listen, everybody. I really appreciate you joining us today. I think if there's one takeaway from the quarter is that TeraWulf is executing. We're methodical, we're consistent, and we're doing this at scale. We are building a differentiated platform at the very intersection of AI, power and infrastructure, supported by long-term contracts, strong partners and a proven ability to deliver. I'm convinced we have the right strategy, the right team and the right assets to continue this momentum well into '26 and beyond. My focus and our focus remains disciplined execution, thoughtful expansion and creating sustainable long-term value for both our shareholders and partners. I want to thank you for your continued support and confidence in TeraWulf. Thank you again.

This concludes today's call. You may now disconnect your lines.