TeraWulf Inc.

Greetings and welcome to the Tarot of 2025 first quarter earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Larkin, Senior Vice President, Director of Investor Relations. Thank you, sir. You may begin.

Thank you, operator. Good morning and welcome to TerraWolf's 2025 first 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 on sec.gov and in the investor section of our website at terawolf.com. We will also reference certain non-GAAP measures today. Please refer to our 10-K and 10-Q filings and our website for a full reconciliation of these non-GAAP measures to the most comparable GAAP measures. We will start this morning's call with prepared remarks from Paul and Patrick, followed by a Q&A session. I'll now turn the call over to our CEO, Paul Prager.

Thank you, John, and good morning, everyone. We appreciate joining us to review our first quarter 2025 results. It was another active quarter for TerraWolf as we continued to build on the strong momentum from 2024. Across both our Bitcoin mining and high performance compute or HPC businesses, we remain committed to executing our strategy, maximizing the value of our megawatts through scalable, sustainable infrastructure. Before turning to the business highlights, I want to take a moment to thank you, our shareholders, especially those of you who have supported us since the very beginning. We are positioning TerraWolf to lead at the intersection of energy and compute. It's a long-term effort, but one that we believe will create substantial value over time. Starting with Wolf Mining, our sustainable Bitcoin mining platform at our Lake Mariner facility in upstate New York. During the quarter, we successfully energized Miner Building 5, bringing total operational capacity to 245 megawatts. We exited the quarter with a self-binding hash rate of 12.2 exahash and fleet efficiency of 18 joules per terahash. As we mentioned on our February call, extreme weather in January and February temporarily impacted power pricing. However, by March and well into April, pricing normalized and our mining operations returned to positive EBITDA in the month of April. I also want to confirm that we received and installed all of our S21 pro miners before any potential tariff implications ensuring uninterrupted deployment. Turning to Wolf Compute, our high-power compute hosting platform, our mission here is to scale our purpose-built, liquid-cooled infrastructure to meet the growing demand for AI and compute-intensive workloads. Demand remains strong, especially from enterprises seeking secure, high-density infrastructure over the next 12 to 18 months. We are focused on working with prospective partners that have capital to deploy, secured GPU allocations, and credit profiles that support project-level financing. Today, we are actively executing on three dedicated buildings for our HPC anchor tenant, Core 42, the Wolf Den, CB1, and CB2. These facilities are our top construction and operational priority. Following five months of close collaboration with our partner and their integrator and many consultants, the Wolf Den is operational and will begin generating revenues in Q2, and we expect CB1 to go live in Q3 and CB2 in Q4. Executing on these initial facilities will drive further demand for our site and further interest in partnering with the TerraWolf team for highly complex HPC deployment. Our partnership with Core 42 is progressing exceptionally well. We collaborate daily to align on technical specifications and deployment timelines. To give a sense of the scale and sophistication involved, Dell Core 42's integrator expects to have over 180 personnel on site during the GPU tuning phase. We are optimizing design elements every day to ensure our infrastructure meets both current and future demands. These refinements may accelerate or delay timing and could affect overall infrastructure costs. Our goal is to design infrastructure that will support future generations of GPUs. So we are committed to getting it right the first time. A successful launch will not only position us for further potential expansion with Core 42, but also establish TerraWolf as a leader in next generation data center development. Success here will also accelerate our broader HPC hosting strategy. Additional prospective tenants are closely watching our progress, and we are actively engaged in discussions to secure new commitments as we build out our capacity. Let me touch on a few additional updates. First, capacity. In April, we received approval from NYISO for an additional 250 megawatts of capacity at Lake Mariner. bringing the current total to 500 megawatts. We intend to request an additional 250 megawatts that will bring our total power at Lake Mariner to 750 megawatts. We appreciate the support and collaboration of NYISO as we scale this site. Second, tariffs. We're monitoring the evolving tariff landscape. Based on current information, we estimate a 5% to 10% impact to build costs. We remain committed to underwriting projects to mid-teens' unlevered returns and will adapt as needed to protect project economics. Third, project financing. We remain on track for mid-year execution of the project financing of our 72.5 megawatt Core 42 build-out. We are scheduled to officially launch the process next week with our advisors at J.P. Morgan and Morgan Stanley, and early feedback from potential lenders has been positive. Finally, our growth pipeline. Beyond our 750 megawatts roadmap at Lake Mariner, we continue to pursue expansion opportunities. At the top of the list is the Cayuga site. a sister facility to Lake Marana located on Lake Cayuga in upstate New York. It shares the same strategic advantages in land, power, and fiber access. That process is progressing with our board and we'll share more when we have firm updates. We're also evaluating additional sites with strong time-to-power potential and opportunities for on-site generation. This is an area where our energy infrastructure expertise truly differentiates us. Lastly, I want to address the company's services agreement with Beowulf Electricity and Data, a private company owned by me that currently provides electricity and digital infrastructure services to Terawolf. We believe the time is right to simplify the structure. We are currently pursuing a full integration of Beowulf and Terawolf to eliminate related party disclosures, streamline operations, and better align incentives across the organization. The process is driven by our board and guided by rigorous governance protocols and independent oversight to ensure transparency and shareholder alignment. To summarize, our key near-term priorities are, one, optimize our self-binding platform following the energization of MB-5. Two, deliver all three Core 42 buildings on time and on budget. Three, lease additional HPC hosting capacity at Lake Mariner. And four, close the project financing for the Core 42 build-out. With that, I will turn it over to our Chief Financial Officer, Patrick Fleury.

Thank you, Paul. The first quarter of 2025 presented challenging market conditions for our Bitcoin mining operations, with a temporary spike in power prices and increasing network difficulty, the impacts of which are reflected in our financial results for the quarter. While our EBITDA was slightly negative for the quarter, it's important to emphasize we are carrying significant incremental costs related to our expansion into high-power compute hosting without any current revenue contributions. As I'll discuss later in my remarks, this temporary burden will soon be addressed as our HPC hosting buildings come online in 2Q, 3Q, and 4Q 2025, as depicted on page 15 of our May investor presentation. In the first quarter of 2025, we self-mined 372 Bitcoin at Lake Manor, or approximately four Bitcoin per day, a 12% decrease over the 423 Bitcoin mines in 4Q24. Our GAAP revenues were flat quarter over quarter at $34.4 million in 1Q25 from $35 million in 4Q24. Our value for Bitcoin self-mined in 1Q25, a non-GAAP metric, averaged $92,600 per Bitcoin as compared to $82,739 in 4Q24. Our GAAP cost of revenue, exclusive of depreciation, for 1Q25 was 24.5 million, a 25% increase over 19.6 million in 4Q24. The quarter-over-quarter increase was due to a 37% increase in realized power prices, from 5.9 cents per kilowatt hour in 4Q24 to 8.1 cents per kilowatt hour in 1Q25, offset by demand response proceeds of 1.3 million in 4Q24 versus 2.8 million in 1Q25. Our power cost, or cost of energy per Bitcoin mine, a non-GAAP metric, was $66,084 in 1Q25, compared to $46,328 in 4Q24. As mentioned previously, this temporary spike in power prices, which began in December and persisted through mid-February 2025, was historic, as it resulted in a 1.76% standard deviation spike in New York ISO Zone A West average energy prices for January and February versus the average for this period over the last 10 years. We expect the remainder of 2025 to be in line with historical power pricing at Lake Mariner with guidance of $0.05 per kilowatt hour for 2Q through 4Q25. which is in line with New York ISO Zone A forward power curves as of May 5th, 2025. Operating expenses increased 6% quarter over quarter from $2.7 million in 4Q24 to $2.9 million in 1Q25, following a 69% increase from 3Q24 to 4Q24. This trend higher is primarily the result of increased staffing levels at Lake Mariner necessary to support our mining expansion as well as our entry into HPC hosting activities. SG&A expenses increased quarter over quarter from $32.3 million in 4Q24 to $50.1 million in 1Q25, primarily due to stock-based compensation in 1Q25. Adjusting for stock-based compensation, SG&A decreased quarter over quarter from $15.5 million in 4Q24 to $11.5 million in 1Q25. Depreciation increased slightly quarter over quarter from $14.9 million in 4Q24 to $15.6 million in 1Q25. Loss on fair value digital currency in 1Q25 was $0.9 million compared to a gain of $0.6 million in 4Q24. Gap interest expense in 1Q25 was $4 million compared to $3 million in 4Q24, and we recognize interest income of $2.2 million in 1Q25 compared to $2.6 million in 4Q24. Cash interest paid during 1Q25 and 4Q24 was negligible as the 2.75% interest on our $500 million convertible notes is accrued and payable on May 1st and November 1st. Our gap net loss in 1Q25 was $61.4 million compared to a net loss of $29.2 million in 4Q24. Our non-gap adjusted EBITDA for 1Q25 was negative $4.7 million down from positive $2.5 million in 4Q24. Turning our attention to the balance sheet, as of March 31st, we held $218 million in cash with total assets amounting to $841 million, and total liabilities of $670 million. Through March 31st, 2025, we spent approximately $130 million of capital expenditures on Wolf M, CB1, and CB2. As disclosed on page 17 of our May investor presentation, we achieved a BTC segment cost of production of approximately $72,000 in 1Q25, And our guidance for 2Q through 4Q25 is anticipated to be well below this at approximately $47,500, primarily due to the aforementioned decrease in forecasted power prices. Regarding fixed operating expense guidance for 2025, page 18 details our anticipated SG&A operating expense and interest expense provisions. These costs reflect significant increases in the number of employees at both Terrell and Lake Mariner as we grow our business and expand into high-power compute hosting. On page 12 of the May investor presentation, you'll find our updated total cost to build and net yield on cost analysis. Since signing the Core 42 leases in December, we've worked hand-in-glove with Core 42 and our respective partners, including Dell, Ramble, and T5, among others, to refine our preliminary data center designs into a final, high-quality product. The result of this tightly knit partnership and design process is an increase in total capital expenditures of approximately $65 million, from $365 million to $430 million, along with a commensurate increase in initial rent from approximately $1.5 million per megawatt to approximately $1.6 million per megawatt. The net result of these changes is a slightly lower net yield on cost, but a 14% increase in year one EBITDA. The incremental spend takes our capex per critical megawatt from $6.1 million to $7.2 million, well within our longstanding guidance range of $6 to $8 million, and well below industry peers as detailed on page 13. This page highlights the unique value of the existing infrastructure and site-specific advantages of building and operating high-power compute loads at Lake Mariner. Regarding our capital position and growth plans for the remainder of 2025, page 14 provides a capital sources and uses bridge. Our data center financing, led by JP Morgan and Morgan Stanley, will officially launch next week. We have a high degree of confidence in executing an approximately $300 million debt raise in the middle of 2025. In anticipation of a sizable, unallocated 2025 cash balance, the Board has authorized a new $200 million share repurchase program for an incremental approximately $150 million to the remaining approximately $50 million on our pre-existing program. We also intend to file an updated ATM prospective supplement of $200 million, which is a housekeeping exercise as the current ATM, with approximately $87 million remaining, has lapsed at year-end. While some may find it unorthodox to have active buyback and ATM programs, given Terawolf's historical realized stock volatility of approximately 130 and current macroeconomic conditions, the management team and board find it prudent to have every tool in the tool shed available and at our disposal. Finally, as a management team, we are repeatedly asked how we value a megawatt of long-term contracted high-power compute capacity. One simple analysis we regularly reference internally is depicted on page 16. In summary, the core 42 leases for 60 megawatts of critical load are worth approximately $2 per fully diluted share outstanding. And every incremental 50 megawatts of capacity contracted at similar economics is worth an additional $1.30 or so per fully diluted share. We hope you find this slide useful as a simple reference tool to measure our success as we announce further high-power compute deals. With that, I'll turn it back to the operator, and we look forward to answering your questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question, Our first question comes from Nick Giles with B. Reilly Securities. Please proceed with your question.

Hey, thank you, operator, and good morning, everyone. My first question, it's good to see the integration of TerraWolf and Beowulf, and so how should we think about any potential cost savings for the parent, and what does the timeline look like there?

Thank you very much.

From a timeline perspective, this is a very rigorous process because it's a related party transaction. So the independent directors of the board have hired independent counsel, independent financial advisors, have negotiated an arrangement with the ownership of Beowulf, and until Until those independent directors approve the transaction and the audit committee approves the transaction as required by the operating company's articles as well as by insurance, I can't comment on that. That's a process they run independently. We think it's something that will be very enabling to Terawolf's shareholders long term to just have everybody in one place and ultimately it will drive real value in terms of development and of additional sites as well as construction of high power compute on our existing site. So we're pretty excited about this opportunity and We think it's near term, but again, it's really up to the independent directors of the board of the company.

Paul, that's very helpful. I appreciate those comments. My second question, one thing that's always stood out about your economics is really the lower capital intensity. And you mentioned the tariff impact of 5% to 10%. So my question is, What are your expectations for build costs more broadly, particularly as you look to Cayuga or other potential sites? Could some of these other sites have the same capital intensity that Mariner is afforded?

Patrick, do you want to field that, or you would like me to? Go ahead.

I'll back clean up. I think we've guided the markets to $8 million a megawatt. Our range was basically 5 to 8. We tightened it up to 6 to 8. The answer is we're working very closely with Core42 and the integrated Dell. And we've had several design changes that have had some cost implications. But that is, A, there's a mechanism within our agreement to capture that. And so nobody should be concerned there. But B, we think it enables us to get to a better standard design for a 50 megawatt gross building, 42 net megawatt building. that we could just replicate over and over again for both the existing customer Core 42 and other customers that come to our site. So, by the way, I look at that learned knowledge, if you will, of the slightly higher price of the finalized design is pretty much optimal leading edge data center design that gives us a competitive advantage going forward. We're pretty much at that range, six to eight million, and it could be at the high end of that range, but I'm good with that.

Yeah. Nick, if I may add a little bit to that. So, you know, as you can see at our new page 13 in our deck, I think this page really highlights, A, the uniqueness of Lake Mariner and the other power sites that we have. and also our ability to take those sites, remediate them. I mean, I think this really encompasses all of our strategic advantages. And I think what Paul just said of, you know, this close-knit partnership with Core42 and all the consultants we're working with really puts us in a competitive advantage vis-a-vis our peers because now we have what I would call a close to a perfected design at a cost that is very attractive. So, yeah, I think it's, again, even if you take tariffs on top of that sort of $7.2 million critical build cost that we talked about of 5% to 10%, you're still within the range that we've been guiding to for a long time of 58%.

Great. Well, Patrick, Paul, I really appreciate all the color and continued best of luck.

Our next question comes from Darren Acidi with Roth Capital Partners. Please proceed with your question.

Yeah, good morning. Taking my questions. Just two, if I may. On page 10, there's commentary, I think, around EBITDA margins being incrementally higher on future capacity. So two questions around that. I guess the first one is, in terms of an additional tenant We're an existing tenant expanding into future capacity. What sort of bogeys need to be seen in order for that to happen? Is it getting, you know, operation buildings at scale and then people can take the next step? And then I guess the question around incremental adjusted EBITDA, what kind of gives you confidence on that? Is it just lease rates and you think that CapEx can stay the same so yields will be higher? Just any kind of color would be helpful. Thanks.

Hey Patrick, if it's okay I'll answer the first part of the question, you could get the second. Sounds good. Yeah. So Darren, I don't think there's a bogey out there that we got to tap in order to sign up additional capacity. I think those conversations are ongoing. We've been having them since we signed up Core 42 or in advance of that even. And we're talking to both Core42 and additional customers. And so, you know, I think what we've tried to share with people is that, you know, we sense, you know, by the way our stock is priced in the market, that some people still don't sort of believe that, you know, that we're very much a show me story. We're really comfortable with that. I think if you want to bet on anything, you want to bet on the execution capabilities of Terrorwolf. And so I think that it is natural for customers who are trying to, whether it's neoclouds or hyperscalers or enterprise folks, I think it's natural for them to, while they are organizing what their needs are, to want to be able to look at something. You know, it's the difference between, you know, it's being able to go in and touch it and see it and hear it and you have all those machines come in and it's just a pretty fantastic thing when you get into one of our data halls. So while I agree with you that, you know, we built Wolf Den in order to be able to achieve that, and in fact we did. We landed the preeminent customer in the space in Core 42. I think when we energize CB1, it will be even more profound in terms of how people want to react to us and get to the place where they're finally willing to contract. So my view is that no bogeys are required. We're open for business now. We're negotiating with a bunch of folks. And we're going to sign up deals if they make sense, if they're top quality credits, if they're the right duration today. But I believe once we energize CB1, we'll be even busier, if that's possible, in sort of discreetly determining who the right customers are and signing them up to the appropriate contract. So I think that's where we are in terms of landing our next expansion. Patrick?

Yeah, Darren, with regard to the margins, I think we've had this page in our deck, I think, since last, about a year ago, last May. And there was some confusion because we initially had That margin, 65% to 75%. And then I think I had spoken publicly, Paul, Naz, or others, about how really that was EBITDA margin. And the midpoint of that, the 70%, was actually we thought about it as effectively cash available for debt service. So meaning EBITDA, less maintenance capex. And so what I've done here is just to reduce that confusion and put in like, this is an EBITDA margin. We expect it after lots of work with our partner, our operating partners, other consultants are hiring plans, actually executing on the ground, that that EBITDA margin will be at about 75% on the first 72 and a half megawatts. We do expect we'll have, you know, going forward, maintenance of about three percent um and then the the call out on the right of page 10 to your point of higher incremental ebitda margins this is the benefit of a big site okay versus having you know multiple sites all over the country i only have to hire for example you know one or two security guards i don't have to hire 10 because i don't have five different sites so there's really significant. And most of the costs that go into that EBITDA margin for the high power compute business are labor. It's just that simple. We got to have a bunch of people on the site. And so once you have that base cost, which we already have, as I mentioned in my remarks, everything beyond that is incremental and comes in at a much higher margin. So I'm not going to tell you what that margin is today. I'll tell you when we announce additional capacity, but expect it will be much greater than 75%. That's helpful.

I appreciate all the detail. Thanks.

Our next question comes from Mike Grondahl with Northland Securities. Please proceed with your question.

Hey, guys. Thanks. I wanted to ask, you know, you've spent a lot of time, many months with Core42. What has been two or three of the biggest learnings for Wolf, you know, through all those discussions?

Nazir Khan, are you on and do you want to address that? I don't know if...

if the operator's allowing him to enter. Why don't I field it, and if Nazir can get on, I'm happy to. Listen, it's been tremendous. The team that Core 42 has brought to bear would indicate that we're in the very, very early stages of these data centers, and each, if you will, generation of CHEPS has their own particular inherent requirements in terms of the design of the rack. So what I like about Core42 is that they've just shared everything with us and our design team and construction team so that we've been able to appreciate why some parties focus on cooling in the building, some focus more cooling on the racks, the weight of some of these water-cooled racks. It's just so constantly fluid because this is new technology and it's sensitive and People are trying to figure it out real time at the same time that there's this massive demand for the high power compute. So I think the biggest lesson learned we have had is that we were right to pick the right partner because in our power experience when we were developing power plants, if we had this level of fluidity as we worked towards the final design, which is where we're at now, because as I indicated, we're going to be energizing CB1 and CB2 very shortly, that it would have been a far more confrontational kind of a thing, but here it's been just a real collaboration, very cooperative, and these design changes, we had there weren't changes as much as like we had it wrong. It was just an evolution of design, if you will. We had a mechanism within our agreement and Core42 has been totally stand up about it. So, you know, I think the lesson learned is, you know, pick the right partner and you'll get to the dance in the right place and you'll have a great time. And so that's been the lesson for me. Patrick, anything you want to add?

I think Nazar's unmuted. Nazar's certainly more better suited to answer this question than I am. Go ahead, Nazar. Sure.

Good morning, Mike. Nazar here. As Paul said, I think, you know, when we signed the agreement with Core 42 in December, they'd gone through 40% or so of all of the design specs. And since that time, we've had the chance to go through every single component of the design, the size of every single valve, the location of every single pipe, the location of every single kind of busway. So now we've had a chance to go through 100% of the design with them. And through that, we've come up with a whole host of things that we're working with them on kind of incorporating into future buildings as well. So as Paul had mentioned earlier, You know, we are in the early stages of the evolution of this business. And what we build in kind of CB1 and CB2 likely will not be what we build for CB5 and CB6. And so that process of really working with our customer and partner, Core42, and being able to go through every single component of the design and thinking through what the trade-offs are. And, you know, for a lot of these decisions, there's no perfect answer. It's always a trade-off, right? You're giving something to get something. And so having that discussion with them and being able to then take those learnings and reflect that on what we want to do next, I think has been a very important part of the process. And as we think about going forward, those learnings are going to be invaluable because both just the way the business is evolving, but also the way the underlying hardware equipment is evolving as all of those trade-offs and those decisions that we made, you know, we're going to have to revisit, you know, as Ruben rolls out and as kind of future generations of those GPUs roll out as well. So that for me has kind of been the biggest is the importance of having a partner to work with and not just simply a customer who kind of signs a piece of paper.

Great. Hey, thanks for the insight.

Our next question comes from Brett with Cantor Fitzgerald. Please proceed with your question.

All right. Thanks for taking my question. Congrats on getting the additional 250 approved for Lake Mariner. You know, it seems like this year is definitely going to be focused on energizing the three buildings for Core 42. You know, you now have 250 capacity, and the charts show, you know, next year you can kind of really allocate additional capacity, would you look to start breaking ground on, say, CB3 or CB4 before signing an additional tenant, and is that something that you would look to start doing this year, or would that be a 2026 thing?

Paul, you want me to take that one? Yes. Yeah, Brad, so I think that the

Short answer to that is, you know, we do do some spend, you know, mostly preparing, you know, so pads. But it's relatively minor, and it's getting us, whether it's, you know, site prep or site electrical. So it's getting us into a position so that, you know, when the customer's ready to execute, we can go right away. So I would say there's some... site level expense that we kind of constantly are spending. And if you look at our presentation, you know, you can see that. Like we have, like on page 14, we have a site electrical and infrastructure column. So, and we've had that, you know, in every single one of our decks. So there are some, you know, site specific things that we constantly are doing. For example, you've got to get electricity, right, high voltage electricity around the site to the various buildings from the substations. So there's prep for that, and then, like I said, there's preparing buildings and pouring pads and things in the appropriate weather. So there's those types of things, but I think anything that's significant and major, we would not expend without a signed agreement.

Perfect. That's helpful. And then, Patrick, maybe just a follow-up on maybe capital allocation priorities, re-up or increase the buyback. Obviously, there is a need for a lot of CapEx to be spent over the next few years. How do you weigh buying back shares versus spending that on infrastructure to sign additional tenants? Is there a point where one is more attractive to you? What is that point? Or is that just kind of like an ad hoc ongoing discussion that you guys look at?

Yeah, look, I... You know, I'll answer that and then Paul can chime in. But it's a management board level decision that we constantly evaluate. And as you know, the purpose of having the buyback, and again, I think as you'll see, as you heard in my remarks, you know, we also had about 87 million left on our ATM. And so as part of that process, we increased it from 87 to 200 million. So we don't intend to use that, but I want every tool in the tool shed, just like I want a buyback. Because as you know, and we've come to realize, Brett, Bitcoin mining in particular is an incredibly dynamic business. Profitability can change dramatically on every day. And so we can go from making very small amounts of free cash flow to very significant amounts of free cash flow very quickly. Other things can change. Also, for example, you know, project financing. We've been targeting 70% loan to cost. Many of our peers are out there doing 80%, 90%, right? So that's a lot of money that would come back to us if that changes. So, again, it's really just like my job in particular in advising the management team and the board is to make sure we have every single tool available. And given the volatility in our stock, I want them all at my disposal, Paul's disposal, and the board's disposal.

Awesome. Really appreciate it, Patrick. Thank you, guys.

Our next question comes from Brian Dodson with ClearStreet. Please proceed with your question.

Hey, good morning. So as you're out in the market speaking with other potential clients, what are you hearing from enterprises and hyperscalers? And what do you feel about the near-term demand environment, but also the medium term?

This is Paul. Thank you for your question. I mean, from a near-term demand perspective, I think people are very keen to sort of get power now. So we've seen a lot of energized land deals in the market. And so, you know, I think that demand is real. I think from a data center perspective, The hyperscalers are still out there. They're refining what they're looking for. I think there was initially this sort of global, you know, let's tie up everything we can. Now I think they're focused on, okay, they have a better sense of their needs and a better sense of what makes a site a great site. Lake Mariner is certainly that. So we have a lot of incomings. all the time, and we have incomings on development sites that we're close to as well. So I think near-term demand is real if you have proximate energy. If you could demonstrate that you have a few hundred megawatts near-term with the ability to scale after that, the demand is real. And you have to understand these customers. A lot of them don't understand energy. So when most of the world is out there advertising one gig and two gig sites, which sounds really, really great, they need to wade through a lot of that, if you will, crap to appreciate that bringing the five nines of quality in terms of electricity to a data hole is tough on the grid operators. And so you've got to really study the site where she is in the grid, how robust is the grid. You've got to do a lot of work. So I think the hyperscalers are getting smarter every day and starting to lean towards higher quality sites with higher quality owners that understand energy and infrastructure. Enterprise customers, the demand has been a constant. And neoclouds, I think, they're running around trying to allocate their book and then figure out what their needs are and how that scales, not only in terms of capacity, but in terms of calendar scheduling. From a midterm perspective, I am, and we have said this all along, we're less sanguine on the likelihood of increased generation hitting the market at the scale that it needs to within the next few years, you know, it just takes a long time to develop a power plant. And so, you know, we think that, you know, enables higher values for us because, you know, we have what we have. And we're energy infrastructure folks that can develop things in a really efficient from a cost and time perspective, more so than I think any of our peers. So we see a lot of demand, so much so that I think we are starting to sort of try and categorize the customers that are coming in on the basis of we want to sell data hall by data hall, and we're seeing a lot of interest now as well for people that want to come in and take half of the data hall. So we're thinking those enterprise customers are starting to show up in the marketplace. So we're pretty constructive, and we just need to continue to execute.

Yeah, thanks. That's really helpful. Just shifting over to the mining business, we've seen elevated global hash rates throughout the last quarter and continuing now. What's your outlook there, and how do you plan to combat that as we head into the next half and over the next couple of years?

So we can't do a whole lot to combat the hash rate. We have to live with it. I think, you know, we... We are happy that the higher price of Bitcoin, and hopefully want it to go higher, benefits those who have Bitcoin and guys like us who have really low cost in generating Bitcoin. We brought on this recent generation of miners, and we're back to really low costs from an energy perspective, and we operate about as efficiently as anybody ever could. So it's a tough business being in mining and we've guided the market to the belief that at this point in time, especially given what we see as the demand for our product in HPC and AI, we want to really continue to focus on that. We're certainly enjoying the benefit of having a mining operation now. But that in time, prior to the next halving, we'll probably look to take those megawatts and deploy them in the highest value. And we think it's likely to be HPCAI. And there's an additional benefit to that, as Patrick has spoken about, which is predictable revenues over a long period of time. And you could get good project financing terms on that. So we're excited about Bitcoin going higher. You know, we have a real Bitcoin zealot, Nazar Khan, you know, on our management team. And we'll continue to mine so long as we can make lots of money doing it.

Hey, Paul, if I may, Brian, you know, just to address your question a little bit more specifically from the finance side. I mean, we just came through a really tough quarter where we had, you know, for us, a one and kind of 10-year type event on power prices. Even with that, you know, we've gone through our fleet upgrade. We didn't bring minor building five on until the very end of March, early April. So really kind of, you know, fighting with a hand tied behind our back. And we still had, you know, and when you consider that the entire business right now is burdened with the cost structure of high power compute, and we don't have any revenue yet. So, you know, The results actually were, you know, not what we wanted, but pretty darn good when you consider, again, we're running with that whole cost structure. We had really high power prices. And now, as Paul mentioned in his remarks, you know, we've really seen in April that's all subsided and, you know, price has kind of ticked up and we're making money. So I think, as we know, you know, a quarter, a year in Bitcoin mining can be a lifetime. And... I think our assets, the efficiency of our fleet is among the lowest of our peers. I think we're about 18 jewels per terahash now. So I think we are positioned well to reap the cash flow rewards of that business should Bitcoin move higher.

Yep, agreed. Thanks.

Our next question comes from Stephen Galagola with Jones Trading. Please proceed with your question.

Hi, thanks for the question. Paul and Nazar, thanks for your color on sort of the Core 42 design discussions. And I was hoping you could elaborate on if the current delay for additional capacity is primarily related to Core 42's customer visibility, or are they waiting to see how the first 72.5 megawatts buildout goes? And then I had a follow-up.

Yeah, I don't like the word delay because I don't think that's a real word. The discussions with Core 42 are going exactly as they're supposed to go because they're really focused, as we are, on delivering what we have contracted. It's pretty intense. It's a collaborative effort. It's a constructive effort. The end result is going to be we're hitting the ball out of the park. The reason for that is that when CB1 and CB2 are energized and they're up and running, you know, that enables Core 42's ability to aggregate customers as well as it enables our ability to talk to other parties interested in the site because there's something they could see and touch and hear and get excited about. And, you know, there's a lot of, you know, listen, people have said they were building data halls and they turned out to be, you know, big buildings that cost a lot of money that didn't achieve their intended purpose. That's not what we're doing. We're building something that we can not only replicate and continue to improve upon and evolve over time, but something that will truly fulfill the contractual requirements of our customer and their contractual requirements to their customers. So we're doing it right. And as a result of that, we're focused on that. And I think having CB1 and CB2 energized enables us to get better terms, better pricing. So I just don't feel that I had a deadline by which I had to sort of land another customer. We had an option within an agreement for them to have more because they wanted that option. But quite rightly, they never talked about it. We never talked about it. We've just talked about how do we grow together. And so, you know, I remain very, very constructive on our ability to sign up, you know, an additional 100 to 150 megawatts and put it in the ground, you know, each year. And that's what we're about right now.

Thanks, Paul. Appreciate that. And then, Patrick, on slide 15 of the presentation, the hosting timeline, Do you anticipate the 170 gross megawatt capacity plans for 26 to be brought online gradually throughout the year, or will the full 178 come online towards the end of the year, 26? Thanks.

Yeah, so there's no customer for that right now that we're announcing today. So that's what we have sort of the arrow in the quiver, so to speak. As we've mentioned, I mean, I think we're trying to perfect a 50 megawatt design. So that capacity is effectively, you know, three different buildings. And I think as we move forward in time, Stephen, you'll see us, you know, from sort of signing a lease to bringing a building online, I think a reasonable timeframe is 12 months. So, you know, I think over the next, six to seven months here before year-end, obviously to bring that capacity online by fiscal year-end 2026, which is what the bar chart says on page 15, we would have to announce contracts for that capacity and start on it by year-end.

Thanks, Patrick.

Our next question comes from John Tadaro with Needham & Co. Please proceed with your question.

Hey, guys. Thanks for taking my question. First one, You know, as you start to deliver for Core 42, do you think that gives quite a bit more comfort to either enterprises or major hyperscalers for some of that additional capacity? Is that kind of the right way to be thinking about it? And then I have a follow-up question.

Yeah, I've been saying that this entire call. I mean, listen, it's one thing to think about what you want to have for breakfast if you're me, right? I'm a short, fat guy, and I like breakfast. It's another thing when I walk into a bakery and I look at the cinnamon rolls and I get really, really worked out and I'm a buyer. The answer is when we build and energize this data hall, it's moved from the stage of talking about something and talking about design to actually delivering to a customer who is also delivering onwards to their customer base. It's a huge deal. And it makes a tremendous difference in terms of our ability to sell our capacity at the terms and price that we require. So I think, again, Patrick likes to say that we're bummed about our stock price. The management team here are serious holders of stock. And we're bummed about it, but we've got to manage the company in the best interest of the shareholders. And in order to do that, we must recognize that we're a little bit of a show-me story. because we're building a data center for the top customer in the business, and this is new technology, new business for everybody, you know, for Core 42, for NVIDIA. This is all new, these kinds of, you know, the rack densities. And so, you know, we recognize that until we energize CB1, there'll be some doubters out there, but that's okay. We don't care about that. We care about execution, and once we deliver... on a energized data hall, I think, you know, we're ready to roll. So I think it's an important element that we must energize CB1 and have a happy customer because that changes, you know, the entire profile of the market.

Yep, fair enough.

That makes sense. You know, think about it. There are only two customers right now in this space. Two, not customers, companies that have made this transition out of mining into CB1. HPCAI, and that's caused us, right? And so the market is, you know, the market is tough in the current economic environment. And so people are, instead of saying the glass is half full, they're saying it's half empty, and that's okay. They're being skeptical. But once you deliver an energized CB1, that all goes away. So I think that our shareholders will benefit by seeing greater value. just outright, and then separately we'll all benefit because the customers will say, wow, that's great. Core 42 is so lucky. I want that too. Or customers will go to Core 42 and say, wow, that's great. I want to be, you know, one of your customers. Can you get some additional capacity from TerraWolf and we'll be ready to go. That's what's happening.

Got it. Thank you. And then maybe one for Patrick. Would there be a point where you look to buy back, to convert? I think they got pretty discounted at one point. Just wondering how you think about that capital management strategy long term.

Yeah, look, I think we'll look at anything and everything on the table, right? So I've gotten a bunch of calls from convert investors about that. I think the It's certainly a consideration. That being said, that's a 2030 maturity. It's a long way out, and it's a low 2.75% cash interest, like very low cost of capital. So certainly not the top of my priority list. I think, like Paul said, right now, again, I view the buyback and the ATM as tools to put away in the tool shed. We have got to execute. Number one, we're executing on CB1, CB2. Number two, we are executing on a project financing, which we talked about today. And then once that is done, we will reevaluate because I think to Paul's point, there may be demands for that cash in growth or otherwise. If there are not, then as long as we have ample liquidity, then yeah, we'll look at the stock, we'll look at the converts, whatever makes the most sense. So anything is on the table, but I think you know, just stating the obvious, like that is a very long-term Bocosta capital, so not my number one priority.

Got it. Understood. Thank you both.

Our next question comes from Chris Brindler with Rosenblatt Securities. Please proceed with your question.

Hi, thanks, and good morning. My first question is, I think, Patrick, you actually already alluded to this in one of your answers, was just how rare the you know, sort of power conditions were in the first quarter, I think you said once in a decade. Was that mostly weather or there were other factors in play that caused such an unusual spike in power prices? And are there ways in the future to potentially hedge that risk from, you know, sort of these black swan events?

Yeah. So that was weather. As you know, we are located in the northeast, you know, just about 35 miles east of Buffalo. We had a very cold December in the Northeast. And then like everyone else, really sort of from the Plains, Texas East had a very cold January that kind of went into February. So it was strictly power related, Chris. I mentioned in my remarks, it was a 1.76, I think, standard deviation event for both January and February over the last 10 years. That is really significant. And with regard to your last question, And I think this kind of shows how long this team has been together, which Paul always likes to talk about. But, you know, in my prior life at Blackstone, I owned this power plant. And Paul and Nazar and Stephanie were the management team that ran it. And we all owned it together. And once every 10 years, it would rain money. And the rest of the time, it was a difficult plant to own. And so for that precise reason of having all that experience in this specific power market, 90 plus percent of the time, the power prices are really, really benign here because we're in a region where there's about 5,000 megawatts of generation and on average, only around 2,000 megawatts of demand. Now, all of that power tries to make its way down to New York City. And so during times of significant demand in the winter when people need heat and a couple weeks in the summer when people want air conditioning. Otherwise, it is a really, really benign power environment. The cost of hedging, which is tying up cash or otherwise, just isn't worth it because it only happens once every 10 years. So unfortunately, that literally just happened to us. But I can tell you from personal experience, we are really comfortable with Lake Mariner long-term. So no, I don't think we will look to hedge that.

That's fantastic, Connor. Thanks so much, Patrick. My second question would be on project financing for the first leg of this HPC strategy. Do you think success on the project financing side will help with additional client prospecting? I do think there is a bit of concern sometimes when larger cap projects hyperscalers in particular are dealing with smaller companies who potentially don't have the balance sheet or the side they're used to dealing with. There's been a little bit of friction there I've been picking up. How important will project financing be to your future HPC prospecting?

Maybe I could start, Patrick. I don't like the premise of the question because I'm not sure I agree that project financing is really as sensitive to the size of our company. I mean, I think ultimately the project lenders are underwriting G42, right, the ultimate credit. And so I don't have – and I think that's consistent with the advice we've gotten from J.P. Morgan and Morgan Stanley. So I don't have quite the concern about our ability to get – not only get the financing done, but more importantly, get the absolute best terms that would be available in the market. You know, I think Patrick's taken a real conservative approach to our financing in terms of leverage. Our credit, you know, is really unique out there in terms of Core 42 and its guarantor, G42. And more importantly, you know, it's already, you know, I think there was a deal done in the market on the back of the credit, Core 42 at 90% leverage, really good terms. We're very, very bullish about our ability to execute on the project financing. And so is it important to us? Absolutely. I mean, we made a conscious decision to move forward using our own equity to build on behalf of our customer. And it was the right thing to do because it put us in a time zone that the customer needed his and her customers. So it's important, and it will enable us to continue to grow at the pace that we want to grow, given the real customer demand that we have. But we are also highly confident of our ability to execute on it at really good terms.

So, I mean, Patrick... I apologize, Paul. I was not suggesting that it would be difficult to get project financing. I was more suggesting that lining up project financing would help sign your next deal.

Yeah, but I think it's in the market, right? I mean, when you look at the announcements made by some of the folks, whether it's Galaxy or Coors, they all guide towards their intent to do project financing. I think in this case, we've got a guy in Patrick and his team that have only done it about a billion times, and B, we're taking a very conservative approach to it, And we have, you know, we're slightly different in the sense that we spent all our own equity to build out this facility. So it's less of a challenge for the project lenders to see what they're financing as opposed to somebody that's drawing money, you know, to build out the project, you know, from a Greenfield site. So I think that, you know, market demand for project finance product is real. very significant, super quality lenders, and it's important for us to get that done because we want to continue to be able to take that cash out, recycle it, and build the next data hall and the next data hall and the next data hall. That's our business model. So, again, I appreciate that you think we'll be able to do it. I think we'll be able to do it at really great terms, at really good timing, And it's near term, as Patrick said. We're launching, you know, maybe Tuesday next week. And he will yell at me now for giving you a day as opposed to saying early next week. But we're excited about it, and we think it is critical to achieve so that we can recycle that cash and continue to go out and build.

Yeah, Chris, I would just add to that, you know, we are looking for a financial partner that can grow with us. And so, yes, I do think Executing on that, which has been part of our business plan from day one, as Paul said, is a show me story. But I'm excited. I mean, look, I was a credit investor for 20 years. Like this is where I shine. This is like my wheelhouse. So, yeah, I'm excited to get that going. And I've got a very high degree of confidence that we'll find the right partner and a partner that not only does this first call it 300 million, but then grows with us as we do additional buildings.

That's fantastic, guys. Thanks.

Our next question comes from Martin Toner with ATB Capital Markets. Please proceed with your question.

Hey, guys. Thanks for taking my questions. I didn't catch what's going to launch Tuesday of next week?

Our project for dancing. CB1, CB2, and Wolf's Day.

Perfect. Thank you. Only one for me is, As you have gone back to prospective customers with higher bill costs, what have you learned about their price sensitivity?

Well, I mean, Nazir, do you want to take that?

Hey, Martin. It's Nazar here. The, you know, we've been very open with our customers on kind of what the built cost is, right? We've been guiding the market where our built cost is and so our customers are aware. And as I mentioned to you earlier, you know, when we went through with Core 42, every single design decision we made, you know, there's both kind of a, there's a cost component that often comes with it as well. So we've been very open with, you know, all of the various customer discussions that we're having, you know, where we are kind of coming out. When you look at what the customer is doing with it, you know, how they use that compute capacity oftentimes drives kind of their ultimate sensitivity. So if you're a NeoCloud player, you know, the cost of moving, you know, $5 or $10 one way or another on your monthly kilowatt per month lease rate some impact, but when you look at their total cost of compute that they're delivering at two bucks or three bucks, you know, a GPU hour, it's, you know, a fairly small component. When you have an enterprise customer that you're having this discussion with, and you kind of look at it, they've got a big, you know, kind of finance team, and they're looking at every single dollar and where it's going. And sometimes, you know, they're more often sensitive to kind of those changes. And then, you know, and for others, you know, it's just kind of how they're looking at it. So For us, I think people are aware that to the extent that there are increases from tariffs, that someone's going to have to pay for it. They understand there's a business that we run. We've guided both the market and our customers on where we want to end up in terms of the margins that we have. So it's been a pretty, I'd say, constructive discussion with those folks. And again, depending upon what the end use is, sometimes we see different sensitivities arise.

That's great. Thank you for that. That's all for me.

Our next question comes from Bill Pepstein with KBW. Please proceed with your question.

Good morning, gentlemen. Thanks for taking my questions. For my first one, just given the increased attention towards landing additional capacity and diversifying your customer base, what would you say the top two to three milestones that should be monitored are? when evaluating your progress of securing new contracts as your build-out continues through 2025? Thanks.

Again, I don't know if there are ways to sort of guide the market to how our discussions are going because we've got customers where we've negotiated a contract to the point of their satisfaction, but they're still trying to figure out their capacity requirements. We've got customers who are certain about their capacity requirements, but want to wait for the next generation check. We've got customers who we've negotiated their requirements from a capacity perspective and the schedule, but they're, you know, want to talk about terms. And so I can't give you you know, a magic bullet here on how we can inform you on our progress other than to say, one, we're having lots of conversations. Two, you're really intense. Three, you know, we're on top of our general counsel to manage her legal costs because we're negotiating on so many different fronts. And four, I think the most important element would be when we energize CB1. I think that will be a big day that Core42 and TerraWolf will celebrate. We hope our shareholders celebrate it because it will reflect that we were able to deliver, that we executed, and it will be a great day for Core42 because their phone will be ringing off the hook. with new customer demand, and we would expect our phones will be ringing off the hook because people will want to take the conversations we're having and convert to a contract. So I think that's the only real hard milestone I could give you.

Appreciate that, Paul, for giving the best color you can provide.

And then just secondly, with respect to the Bitcoin mining segment, should we expect further expansion to that previous 13.1 exit hash target. Not sure if you guys provided commentary that I missed, but is that still in play in the coming quarters, or was there some sort of larger replacement to the fleet upgrade? Just curious if there's any power capacity that's sitting idle that you guys could capitalize on in Q2 or going forward.

Thanks. Yes. Okay. Not for now, Bill.

I mean, I think, you know, from an infrastructure perspective, we've got about 250 megawatts of infrastructure available to us. You know, if you look at the composition of our fleet, we are constantly looking at ways to optimize the amount of fleet. I think, you know, 60 percent or so of our capacity is below 20 joules per terahash. In terms of efficiency, so I think in the near term, we continue to always evaluate ways to optimize our miner fleet. And we've kind of continuously done that over the past year. And so in the near term, I think changes, any changes to the hash rate will likely come through that kind of an activity.

Thank you.

Our next question comes from Joe Flynn with Compass Point Research and Trading. Please proceed with your question.

Hi, thanks for the question. You guys kind of ultimately answered it, but there's just a lot of pod defies inside, you know, it seems like the corporate guarantees, there'll be a lot of interest in that and pretty tight spreads, but maybe just talk about like what the appetite is and where, where you ultimately, you know, who do you hope to partner with?

And yeah, it's like, yeah, look, I think there's a, you know, there's a lot of chatter out there in the marketplace. You can see where deals are pricing and generally, uh, Hyperscaler risk is SOFR plus 200. Core weave risk is kind of SOFR plus 400 to 500, but tightening. So I would expect our customer, in my opinion, I think is a better credit quality than core weave, but as not as well known. So I would expect Joe, you know, we're kind of targeting somewhere probably around that same pricing of so for a kind of 400 to 500. And I, you know, I hope to do better than that. But I think for our first financing, that's kind of, I think, a good target range.

There are no further questions at this time. I would now like to turn the floor back over to Paul Prager for closing comments.

I want to thank all of you again for joining us. TerraWolf is very well positioned at the convergence of energy and compute. Our scalable, sustainable infrastructure, attractive cost profile, and strong project pipeline provide for a foundation for long-term value creation. As we move through 2025, our focus remains on execution. The deployment of our initial HPC buildings will mark a major inflection point. shifting us from promise to proof and unlocking new revenue streams for the company. As a significant shareholder myself, I want to reaffirm that our actions are aligned with long-term shareholder interests. We appreciate your continued support and confidence in TerraWolf. Thank you.

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