TeraWulf Inc.

Greetings and welcome to the TerraWolf'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 Asad, TerraWolf's Director of Corporate Communications. Thank you, Mr. Asad. You may begin.

Thank you, Operator. Good afternoon, and welcome to Tara Wills' 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 TerraWolf are such forward-looking statements. Investors are cautious that forward-looking statements involve risk and uncertainties, which may cause actual results to differ materially from those anticipated by TerraWolf at this time. In addition, other risks are more fully described in Tara Wolf's public filings with the U.S. Securities Exchange Commission, which may be viewed at sdc.gov and in the investor section of our corporate website at tarawolf.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 a full reconciliation of these non-GAAP performance measures for 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 turn the call over to TerraWolf 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 TerraWolf. 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, TerraWolf specializes in Bitcoin mining, leveraging zero-carbon energy resources at our two top-tier data centers. our wholly owned and operated Lake Marina facility in upstate New York, sourcing 93% zero-carbon grid power, and the Nautilus Cryptomine facility in Pennsylvania, a joint venture with Talon, 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 threefold 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 six times. In comparison, some of our competitors are trading at multiples as high as 16 times, with an average in our peer group of nine 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 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 28x hash, 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 Wolf 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 two 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 necessitates 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. TerraWolf 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 TerraWolf's consistent achievement of industry-leading profitability. We estimate that our cost to mine in 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 pay down 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 minor 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 for Bitcoin, providing 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 Terawolf 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.