Q2 2024 TeraWulf Inc Earnings Call

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Operator: ........... [inaudible] Greetings and welcome to the Tower Wolf 2024 second quarter earnings call. At this time, all participants are in a listen only mode.

Speaker Change: Greetings and welcome to the Terrewolf 2024 second quarter earnings call. At this time, all participants are in a listen-only mode.

Operator: A brief question and answer session will follow the formal presentation. Should anyone 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, Jason Assad, Director of Corporate Communications. Thank you. You may begin. Thank you, Operator. Good afternoon.

Speaker Change: A brief question and answer session will follow the formal presentation.

Speaker Change: Should anyone 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, Jason Assad, Director of Corporate Communications. Thank you. You may begin.

Jason Assad: Welcome to Tara Wolf's second quarter 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 that are subject to risk and uncertainties, and we may make additional forward-looking statements during the question-and-answer session. When used on this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to TeraWolf are such forward-looking statements. Investors are cautioned that results may differ materially from those anticipated by TeraWolf at this time.

Speaker Change: Thank you, operator. Good afternoon. Welcome to Tara Wolf's second quarter earnings call.

Jason Assad: 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 question-and-answer session.

Jason Assad: In addition, other risks are more fully described in our public filings with the U.S. Securities and Exchange Commission, which may be viewed at FCC.gov and in the investor section of our corporate website at TeraWolf.com. Finally, please note that today's call will 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 to the most comparable GAAP financial measures.

Teri Wolf: When used on this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to Teri Wolf are such forward-looking statements. Investors are cautioned that results may differ materially from those anticipated by Teri Wolf at this time.

Teri Wolf: In addition, other risks are more fully described in our public filings with the U.S. Securities and Exchange Commission, which may be viewed at FCC.gov and in the investor section of our corporate website at www.terrewolf.com.

Teri Wolf: Finally, please note that today's call

Teri Wolf: will 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 to the most comparable GAAP financial measures.

Jason Assad: An updated version of our new investor deck may also be found at TeraWolf.com. We'll begin today's call with prepared remarks from Paul and Patrick, and then we'll proceed to Q&A. It's my pleasure to now turn the call over to TeraWolf's CEO, Paul Prager. Thank you, Jason. And good afternoon, everyone.

Paul Prager: An updated version of our new investor deck may also be found at www.terrewolf.com. We'll begin today's call with prepared remarks from Paul and Patrick, and then we'll proceed to Q&A. It's my pleasure to now turn the call over to Terrewolf's CEO, Paul Prager. Paul?

Paul Prager: We appreciate your attendance today as we review our second quarter 2024 financial results. To start, let me provide an overview of who we are and highlight some key aspects of our business. For those new to Terrewolf, we are an energy and digital infrastructure company dedicated to utilizing predominantly zero-carbon energy to power our data centers. Our two premier data centers are the Lake Mariner facility in upstate New York, which utilizes over 91 percent zero carbon energy sourced from the grid, and the Nautilus Cryptomine in Pennsylvania, a joint venture with Talon that is directly powered by nuclear energy.

Paul Prager: Thank you, Jason, and good afternoon, everyone. We appreciate your attendance today as we review our second quarter 2024 financial results.

Paul Prager: To start, let me provide an overview of who we are and highlight some key aspects of our business.

Speaker Change: For those new to Terrewolf, we are an energy and digital infrastructure company dedicated to utilizing predominantly zero-carbon energy to power our operations.

Speaker Change: Our two premier data centers are the Lake Mariner facility in upstate New York, which utilizes over 91% zero-carbon energy sourced from the grid, and the Nautilus Cryptomine in Pennsylvania, a joint venture with Talon that is directly powered by nuclear energy.

Paul Prager: We believe our strategic focus on scalable, zero-carbon energy infrastructure gives us a unique and competitive edge. In our last earnings call, we identified a significant shift in the industry, emphasizing that low cost clean energy, operational efficiency, and profitability are becoming more critical than simply scaling operations. This insight will frame our discussion today as we review our second quarter results and strategic position. In the second quarter of 2024, we achieved several milestones that significantly strengthened our position as one of the most efficient public Bitcoin miners and digital infrastructure.

Speaker Change: We believe our strategic focus on scalable, zero-carbon energy infrastructure gives us a unique and competitive edge.

Speaker Change: In our last earnings call, we identified a significant shift in the industry, emphasizing that low-cost clean energy, operational efficiency, and profitability are becoming more critical than simply scaling operations.

Speaker Change: This insight will frame our discussion today as we review our second quarter results and strategic positioning.

Speaker Change: In the second quarter of 2024, we achieved several milestones that significantly strengthened our position as one of the most efficient public Bitcoin miners and digital infrastructure owners.

Paul Prager: First, we successfully completed the construction of Building 4 at Lake Merritt, pushing our total mining capacity to over 10XS per second. With a fleet efficiency of 23.7 joules per terahash and industry-leading power costs projected at 3.5 cents per kilowatt hour for 2024, we have solidified our position as one of the sector's most efficient public mines. Second, we've strategically amended our Bitmain purchase agreements to specify the delivery of S21 ProMiner. Additionally, we opted to acquire approximately 5,000 of the 30,000 minors available under the option purchase agreement, monetizing our option at an attractive rate of $16 per carry.

Speaker Change: First, we successfully completed the construction of Building 4 at Lake Mariner, pushing our total mining capacity to over 10 XAS per second.

Speaker Change: With a fleet efficiency of 23.7 joules per terahash and industry-leading power costs projected at 3.5 cents per kilowatt hour for 2024, we have solidified our position as one of the sector's most efficient public miners.

Speaker Change: Second, we strategically amended our Bitmain purchase agreements to specify the delivery of S21 Prominers.

Speaker Change: We opted to acquire approximately 5,000 of the 30,000 miners available under the Option Purchase Agreement, monetizing our option at an attractive rate of $16 per terahash.

Paul Prager: III, we made significant progress in our AI and high-performance computing initiatives through Wolf Den Pratt. We committed to purchasing a 128 GPU cluster from NVIDIA, financed by an industry-leading OEM. This arrangement minimizes the equity required from the company, preserving capital for future strategic initiatives. And finally, we achieved a pivotal milestone by streamlining our capital structure, eliminating debt, and converting approximately $29 million out of $41 million lender warrants into common shares.

Speaker Change: Third, we made significant progress in our AI and high-performance computing initiatives through the Wolf-Den project.

Speaker Change: We committed to purchasing a 128 GPU cluster from NVIDIA, financed by an industry-leading OEM. This arrangement minimizes the equity required from the company, preserving capital for future strategic investments.

Speaker Change: And finally, we achieved a pivotal milestone by streamlining our capital structure, eliminating debt, and converting approximately 29 million out of 41 million lender warrants into common shares.

Paul Prager: This deliberate restructuring strengthens our balance sheet and positions us for sustained future growth. With that in mind, let me touch on our operational expansion. At Lake Mariner, we currently deploy approximately 200 megawatts of operational infrastructure for Bitcoin mining, achieving industry-leading unit economics, as disclosed in our updated investor presentation found on our website. [inaudible] We also have an additional 300 megawatts of near-term expansion capacity to meet the growing demand for HPC and AI data. Lake Manor's location offers the ideal trifecta for scaling operations, low-cost power, ample land, and abundant water for cooling.

Speaker Change: This deliberate restructuring strengthens our balance sheet and positions us for sustained future growth.

Speaker Change: With that in mind, let me touch on our operational expansion.

Speaker Change: At Lake Mariner, we currently deploy approximately 200 megawatts of operational infrastructure for Bitcoin mining, achieving industry-leading unit economics, as disclosed in our updated investor presentation found on our website.

Speaker Change: We also have an additional 300 megawatts of near-term expansion capacity to meet the growing demand from HPC and AI data centers.

Speaker Change: Lake Manor's location offers the ideal trifecta for scaling operations, low-cost power, ample land, and abundant water for cooling.

Paul Prager: At Nautilus Cryptomine, we currently have 50 megawatts of operational capacity for Bitcoin mining. And earlier this year, we announced plans to expand to 100 megawatts in 2025. Our partnership with Talon, underscored by the recent sale of the Cumulus data portion of the Campus to Amazon Web Service, highlights the strategic value of our direct connection to baseload nuclear power. Amazon's acquisition not only validates the importance of leveraging sustainable energy but also signifies the inevitable convergence of sustainable energy with the growing demand for high performance. From day one, our model has been to strategically locate our operations where we have access to scalable, low-cost, predominantly zero-carbon power. Both of our sites embody this approach.

Speaker Change: At the Nautilus Cryptomine we currently have 50 megawatts of operational capacity for Bitcoin mining and earlier this year we announced plans to expand to 100 megawatts in 2025.

Speaker Change: Our partnership with Talon, underscored by the recent sale of the Cumulus Data portion of the campus to Amazon Web Services, highlights the strategic value of our direct connection to a baseload nuclear power station.

Speaker Change: Amazon's acquisition not only validates the importance of leveraging sustainable energy, but also signifies the inevitable convergence of sustainable energy with the growing demand for high-performance computing.

Speaker Change: From day one, our model has been to strategically locate our operations where we have access to scalable, low-cost, predominantly zero-carbon power.

Paul Prager: Recently, market participants and analysts have emphasized the importance of bringing data center capacity to locations that have access to power. This has been our strategy for many years, bringing our operations to locations with access to predominantly zero-carbon generation resources. In addition to our current operations, we are exploring a pipeline of opportunities outside of the company, including certain properties owned by Beowulf Energy, a private company wholly owned by. However, our primary focus today is creating value through the organic scalability within Teraworld.

Speaker Change: Both of our sites embody this approach.

Speaker Change: Recently, market participants and analysts have emphasized the importance of bringing data center capacity to locations that have access to power.

Speaker Change: This has been our strategy for many years, bringing our operations to locations with access to predominantly zero-carbon generation resources.

Speaker Change: In addition to our current operations, we are exploring a pipeline of opportunities outside of the company.

Beowulf Energy: including certain properties owned by Beowulf Energy, a private company wholly owned by me. While our primary focus today is creating value with the organic scalability within Beowulf, we are continuously assessing the contribution of additional assets.

Paul Prager: We are continuously assessing the contribution of additional assets; any such contribution will be made in a fair and reasonable manner, consistent with their board and committee. Moving on to our financial performance. Tera Wolf continues to leverage our low-cost infrastructure to drive profitability and create value for shareholders. Our commitment to shareholders has always been to deliver on our promises, and we've been successful in doing so quarter after quarter. In July, we fully repaid our debt, well ahead of maturity, and we are now completely debt-free.

Beowulf Energy: Any such contributions will be made in a fair and reasonable manner, consistent with our board and committee charters.

Speaker Change: Moving on to our financial performance, Terre Wolf continues to leverage our low cost infrastructure to drive profitability and create value for shareholders.

Speaker Change: Our commitment to shareholders has always been to deliver on our promises and we've been successful in doing so quarter after quarter. In July, we fully repaid our debt well ahead of maturity and are now completely debt-free.

Paul Prager: This significant milestone not only strengthens our balance sheet but optimizes our strategic flexibility. This is particularly advantageous as we aim to deploy our Lake Mariner facility to support the surging demand for data centers driven by the proliferation of data-intensive applications such as artificial intelligence, machine learning, and big data analytics. In the second quarter, we achieved a gap gross profit margin of 61% and non-gap adjusted EBITDA of $19.5 million.

Speaker Change: This significant milestone not only strengthens our balance sheet, but optimizes our strategic flexibility.

Speaker Change: This is particularly advantageous as we aim to deploy our Lake Mariner facility to support the surging demand for data centers driven by the proliferation of data-intensive applications such as artificial intelligence, machine learning, and big data analytics.

Speaker Change: In the second quarter, we achieved a GAAP gross profit margin of 61%, and non-GAAP adjusted EBITDA of $19.5 million.

Paul Prager: This translates to an EBITDA per exehash of approximately $2.4 million. Our SG&A expenses totaled $11.9 million, and only $7.1 million, excluding stock-based compensation expense, materially lower than our. Looking ahead, as Patrick will detail shortly, our growth plans for the remainder of 2024 are fully funded. This underscores our commitment to Capital Efficiency and ensures the continuation of our strategic initiatives without the need for additional equity financing in the near term. As regards dilution in the second quarter, we took advantage of the favorable stock price and market liquidity to safeguard our future valuation creation path and to facilitate our entry and growth in the HBC AI sector in the most capital-efficient manner. These data points highlight TeraWolf's competitive advantage. Low-cost, zero-carbon power.

Speaker Change: translating to an EBITDA per exahash of approximately 2.4 million dollars.

Speaker Change: Our SG&A expenses totaled $11.9 million, and only $7.1 million, excluding stock-based compensation expense, materially lower than our peers.

Speaker Change: Looking ahead, as Patrick will detail shortly.

Patrick Fleury: Our growth plans for the remainder of 2024 are fully funded.

Speaker Change: This underscores our commitment to capital efficiency and ensures the continuation of our strategic initiatives without the need for additional equity financing in the near term.

Patrick Fleury: As regards dilution in the second quarter, we took advantage of the favorable stock price and market liquidity to safeguard our future valuation creation path and to facilitate our entry and growth in the HVC AI sector in the most capital-efficient manner.

Patrick Fleury: These data points highlight Teri Wolf's competitive advantages.

Paul Prager: Access to some of the lowest cost, predominantly zero-carbon energy in the industry. Profitability [inaudible] Higher EBITDA per ex-a-hash than any other player in the space, requiring less capital to grow. Efficiency, a lean team, an efficient management drive, maximum profitability for shareholders, and Scalable Infrastructure for AI HPC.

Patrick Fleury: Low-cost, zero-carbon power.

Patrick Fleury: access to some of the lowest cost predominantly zero carbon energy in the industry.

Patrick Fleury: Profitability. Higher EBITDA per exahash than any other player in the space, requiring less capital for growth.

Patrick Fleury: Efficiency, a lean team, and efficient management drive maximum profitability for shareholders.

Paul Prager: Wolf has access to over 300 megawatts of infrastructure to scale into high-value and high-performance compute data centers. The true value in Terrewolf lies not only in the Bitcoin we mine profitably but in the quality of our asset base and our ability to generate industry-leading profits while expanding into HPC AI. Even in times of market volatility, as we all experienced in the last week, our focus on maintaining robust infrastructure and profitable operations ensure sustainable growth and long-term return.

Patrick Fleury: and Scalable Infrastructure for AI HPC.

Patrick Fleury: Wolf has access to over 300 megawatts of infrastructure to scale into high value and high performance compute data centers.

Patrick Fleury: The true value in TeraWolf lies not only in the Bitcoin we mine profitably, but in the quality of our asset base and our ability to generate industry-leading profits while expanding into HPC AI.

Patrick Fleury: Even in times of market volatility, as we all have experienced in the last week, our focus on maintaining robust infrastructure and profitable operations ensures sustainable growth and long-term returns.

Paul Prager: With that segue, I'd like to now address our strategic advancements in AI and HPC. Wolf Compute is in the final stages of our 2 megawatt proof of concept project, The Wolf Den, which is on track for completion in early September. This state-of-the-art project is designed to support the latest generation GPU, featuring advanced liquid cooling systems and a high rack density.

Patrick Fleury: With that segue, I'd like to now address our strategic advancements in AI and HPC.

Patrick Fleury: Wolf Compute is in the final stages of our 2 megawatt proof-of-concept project, the Wolf Den, which is on track for completion in early September.

Patrick Fleury: This state-of-the-art project is designed to support the latest generation GPUs, featuring advanced liquid cooling systems and high rack density.

Paul Prager: In addition, we are advancing the development of CB1, a co-location project set to deliver 20 megawatts of growth and 60 megawatts of critical computing power. This building will be tailored to support the next generation of GPUs and is projected to be operational by the end of the year. We are actively engaging with several co-location customers regarding the 300 megawatt expansion capacity at Lake Merritt. Our team is thoroughly evaluating each opportunity to maximize the potential of what we believe is one of the premier data center locations in the country.

Patrick Fleury: In addition, we are advancing the development of CB1, a co-location project set to deliver 20 megawatts gross and 60 megawatts of critical computing power.

Patrick Fleury: This building will be tailored to support the next generation of GPUs and is projected to be operational by the end of the year.

Patrick Fleury: We are actively engaging with several co-location customers regarding the 300 megawatt expansion capacity at Lake Mariner.

Patrick Fleury: Our team is thoroughly evaluating each opportunity to maximize the potential of what we believe is one of the premier data center locations in the country.

Paul Prager: Our primary focus here is on securing the most suitable customers to achieve the highest possible valuation multiple for our common shareholders, among whom management is one of the largest. As we look ahead, Kerouac is at a pivotal moment, as strategic positioning and substantial infrastructure scale offer significant opportunities for value creation. With our large-scale facilities, we are well-equipped to meet the growing demands of the data center market, positioning us to capitalize on Emerging Opportunities and Drive Substantial Growth. We are excited about leveraging our infrastructure and expertise to enhance value for all stakeholders in the coming course. Now I'll turn it over to Patrick to discuss our financial performance. Thank you, Paul.

Speaker Change: Our primary focus here is on securing the most suitable customers to achieve the highest possible valuation multiple for terrible common shareholders, among whom management is one of the largest groups.

Speaker Change: As we look ahead, Terewolf is at a pivotal moment, as strategic positioning and substantial infrastructure scale offer significant opportunities for value creation.

Speaker Change: With our large-scale facilities, we are well-equipped to meet the growing demands of the data center market, positioning us to capitalize.

Speaker Change: on emerging opportunities and drive substantial growth. We are excited about leveraging our infrastructure and expertise to enhance value for our stakeholders in the coming quarters.

Speaker Change: Now, I'll turn it over to Patrick to discuss our financial performance.

Patrick Fleury: As Paul stated, the second quarter and beginning of the third quarter was a transformative time for Wolf, with strong financial results, even in a challenging fundamental business environment following the Bitcoin reward halving in April. In the second quarter of 2024, we self-mined 539 Bitcoin at Lake Mariner, and our net share of Bitcoin mined at Nautilus was 160, for a total of 699 Bitcoin, or about 7.7 Bitcoin per day, a 34% decrease over the 1,051 Bitcoin mined in 1Q26.

Patrick Fleury: Thank you, Paul. As Paul stated, the second quarter and beginning of the third quarter was a transformative time for Wolf, with strong financial results even in a challenging fundamental business environment following the Bitcoin reward halving in April.

Patrick Fleury: In the second quarter of 2024, we self-mined 539 Bitcoin at Lake Mariner, and our net share of Bitcoin mined at Nautilus was 160.

Patrick Fleury: for a total of 699 bitcoins, or about 7.7 bitcoin per day, a 34% decrease over the 1051 bitcoin mine in 1Q24.

Patrick Fleury: The hosting agreement at Lake Mariner terminated in February 2024, and as a result, we received zero and an additional six Bitcoin in 2Q24 and 1Q24, respectively, from associated profit sharing. Our GAAP revenues were down 16% quarter over quarter at $35.6 million in 2Q24 from $42.4 million in 1Q24. Our value per Bitcoin self-mined in this quarter, a non-gap metric that includes Bitcoin mined at Nautilus, averaged $65,984 per Bitcoin for a total of $46.1 million, as detailed and defined in our monthly operating reports, trust releases, and NVNA section of our 10Q.

Patrick Fleury: The hosting agreement at Lake Mariner terminated in February 2024, and as a result, we received zero and an additional six Bitcoin in 2Q24 and 1Q24, respectively, from Associated Profit Sharing.

Patrick Fleury: Our GAAP revenues were down 16% quarter over quarter at $35.6 million in 2Q24 from $42.4 million in 1Q24.

Patrick Fleury: are valued per Bitcoin self-mined in this quarter, a non-gap metric that includes Bitcoin-minded modelists.

Patrick Fleury: averaged $65,984 per bitcoin for a total of $46.1 million as detailed and defined in our monthly operating reports, trust releases, and MD&A section of our 10-Q.

Patrick Fleury: As a reminder, there is a key difference between our GAAP financials and the monthly operating reports in our 2024 guidance. Due to our 25% ownership in the Nautilus JV, revenue, cost of revenue, operating expenses, depreciation, and amortization at Nautilus are not consolidated into our gap financial statements. Instead, the financial impact of the Nautilus JV is reflected in the equity in net income or loss of the net of tax line item on the gap income statement. Our GAAP cost of revenue, exclusive of depreciation, for 2Q24 was $13.9 million, a 3% decrease over $14.4 million in 1Q24.

Patrick Fleury: As a reminder, there is a key difference between our GAAP financials and the monthly operating reports in 2024 guidance.

Patrick Fleury: Due to our 25% ownership in the Nautilus JV, the revenue, cost of revenue, operating expenses, depreciation and amortization at Nautilus are not consolidated into our GAAP financial statements.

Patrick Fleury: Instead, the financial impact of the Nautilus JV is reflected in the equity in net income or loss of investee net of tax line item on the GAAP income statement.

Patrick Fleury: Our GAAP cost of revenue, exclusive of depreciation, for 2Q24 was $13.9 million, a 3% decrease over $14.4 million in 1Q24.

Patrick Fleury: The quarter-over-quarter decrease was due to a 14% decrease in the average cost of power at Lake Mariner from 4.9 cents per kilowatt in 1Q24 to 4.2 cents per kilowatt in 2Q24, and an expected demand response revenue of 1.9 million in 2Q24 versus 1.3 million in 1Q20. Our growth profit, exclusive of depreciation, decreased by 23% quarter over quarter, from Our power cost, or cost of energy per Bitcoin mined, a non-GAAP metric that includes Bitcoin mined at Nautilus, was $22,954 in 2Q24 compared to $15,501 in 1Q24.

Patrick Fleury: The quarter-over-quarter decrease was due to a 14% decrease in the average cost of power at Lake Mariner.

Patrick Fleury: from $0.049 per kilowatt in 1Q24 to $0.042 per kilowatt in 2Q24. An expected demand response proceeds of $1.9 million in 2Q24 versus $1.3 million in 1Q24.

Patrick Fleury: Our gross profit, exclusive of depreciation, decreased by 23% quarter over quarter, from $28 million in 1Q24 to $21.7 million in 2Q24.

Patrick Fleury: Our power cost, or cost of energy per Bitcoin mined, a non-GAAP metric that includes Bitcoin mined at Nautilus, was $22,954 in 2Q24 compared to $15,501 in 1Q24.

Patrick Fleury: As a reminder, in our gap financial, unlike a monthly operating report, the company records proceeds received and to be received for demand response programs as a reduction in the cost of these expected proceeds of 1.9 million in 2Q24 and 1.3 million in 1Q20. As disclosed in our 2024 guidance, we expect to achieve an average power cost of $0.035 per kilowatt hour in 2024.

Patrick Fleury: As a reminder, in our GAAP financials, unlike our monthly operating reports, the company records proceeds received and to be received for demand response programs as a reduction in cost of revenue.

Patrick Fleury: These expected proceeds total $1.9 million in 2Q24 and $1.3 million in 1Q24.

Patrick Fleury: As disclosed in our 2024 guidance, we expect to achieve an average power cost, including demand response revenues and the impact of Nautilus' $0.02 power, of $0.035 per kilowatt hour in 2024.

Patrick Fleury: For 2Q24, we achieved an average power cost of 3.7 cents per kilowatt hour compared to 4.1 cents in 1Q24. This is consistent with historical power price variability in upstate New York with the Lake Mariner facility as well. Operating expenses were stable quarter over quarter at $1.7 million in 2Q24 and 1Q22.

Patrick Fleury: For 2Q24, we achieved an average power cost of $0.037 per kilowatt hour compared to $0.041 in 1Q24. This is consistent with historical power price variability in upstate New York where the Lake Mariner facility is located.

Patrick Fleury: Operating expenses were stable quarter over quarter at $1.7 million in 2Q24 and 1Q24.

Patrick Fleury: As disclosed in our 2024 guidance, we expect 13.5 million of operating expenses in 2024, which includes operating expenses at Knoblauch. Of the $13.5 million total anticipated for 2024, approximately 50% is expected to be incurred at Lake Mariner and 50% at SVNA. SVNA expenses decreased quarter over quarter from 14.9 million to 1Q24 to 11.9 million in 2Q24. The decrease is almost entirely due to 6.9 million of stock-based compensation expense incurred in 1Q24 versus 4.8 million in 2Q20. Adjusting for stock-based comps, SG&A decreased 11% quarter over quarter from $8 million in 1Q24 to $7.1 million in 2Q24.

Patrick Fleury: As disclosed in our 2024 guidance, we expect $13.5 million of operating expenses in 2024, which includes operating expenses at Nautilus.

Patrick Fleury: Of the $13.5 million total anticipated for 2024, approximately 50% is expected to be incurred at Lake Mariner and 50% at Nautilus.

Patrick Fleury: SG&A expenses decreased quarter over quarter from $14.9 million in 1Q24 to $11.9 million in 2Q24.

Patrick Fleury: The decrease is almost entirely due to $6.9 million of stock-based compensation expense incurred in one Q24 versus $4.8 million in two Q24s.

Patrick Fleury: Adjusting for stock-based comp, SG&A decreased 11% quarter over quarter from $8 million in 1Q24 to $7.1 million in 2Q24.

Patrick Fleury: As I've indicated previously, this decline is expected as SG&A spend is more heavily weighted to the first quarter of the year versus the following quarter. With our entry into HPC and AI and need for more staff, we are updating our 2024 SG&A guidance from 27.5 million to 30 million of SG&A in 2024, as indicated on page 14 of our August investor presentation available on our website. Depreciation decreased quarter-over-quarter from 15.1 million and 1Q24 to 14.1 million and 2Q24, which was the result of a quarter-over-quarter decrease of 2.5 million in accelerated depreciation related to certain minors for which the company shortened their estimated useful lives based on expected replacement by April 30, 2024, partially offset by increased assets placed into certain service and depreciated as a result of our continued infrastructure build-

Speaker Change: As I've indicated previously, this decline is expected as SG&A spend is more heavily weighted to the first quarter of the year versus following quarters.

Speaker Change: With our entry into HPC and AI and need for more staff, we are updating our 2024 SG&A guidance from $27.5 million to $30 million of SG&A in 2024, as indicated on page 14 of our August investor presentation available on our website.

Speaker Change: Depreciation decreased quarter over quarter from $15.1 million in 1Q24 to $14.1 million in 2Q24.

Speaker Change: which was the result of a quarter-over-quarter decrease of $2.5 million in accelerated depreciation related to certain miners of which the company shortened their estimated useful lives based on expected replacement by April 30, 2024.

Speaker Change: partially offset by increased assets placed into service and depreciated as a result of our continued infrastructure build-up.

Patrick Fleury: Gain or loss on the fair value of digital currency will be a new income statement line item for us in 2024, given our early adoption of the new FASB accounting rule, which marks the company's Bitcoin holdings to their fair market value as of the filing date, with changes in fair value recorded in that. In 2Q24, we incurred a loss of 0.7 million compared with a gain of 1.3 million in 1Q24. It's critically important to note the six-month 2024 net gain of $0.6 million is substantially all realized, meaning it's real cash in our bank account, not theoretical mark-to-market gains on paper, which many of our peers at HODL have reported. GAAP interest expense in 2Q24 and 1Q24 was $5.3 million and $11 million, respectively, which includes cash interest expense and amortization of debt issuance costs and debt discount related to the term loans advancement.

Speaker Change: Gain or loss on fair value of digital currency is a new income statement line item for us in 2024, given our early adoption of the new FASB accounting rule, which marks the company's Bitcoin holdings to the fair market value as of the filing date with changes in fair value recorded in net income.

Speaker Change: In 2Q24, we incurred a loss of $0.7 million compared with a gain of $1.3 million in 1Q24.

Speaker Change: It's critically important to note the six-month 2024 net gain of $0.6 million is substantially all realized.

Speaker Change: meaning it's realized cash in our bank account, not theoretical mark-to-market gains on paper, which many of our peers at HODL have reported.

Speaker Change: GAAP interest expense in 2Q24 and 1Q24 was $5.3 million and $11 million, respectively.

Speaker Change: which includes cash interest expense and amortization of debt issuance costs and debt discount related to the term loans advancement.

Patrick Fleury: However, cash interest paid during 2Q24 was $2.5 million, down over 33% from $3.7 million in 1Q24. This decrease is the result of repayment of $30.2 million of debt in 2Q24 and $33.4 million in 1Q24. As detailed in our press release on July 9th and debt footnote of our 10-Q, we repaid the remaining $75.8 million of debt with approximately $19.8 million of excess cash flow sweep as defined in our credit agreement and $56 million of equity proceeds from our ATM facility. In connection with the voluntary prepayment of $56 million of debt in July, a third quarter 2024 event, the company incurred prepayment fees of $0.9 million.

Speaker Change: However, cash interest paid during 2Q24 was $2.5 million, down over 33% from $3.7 million in 1Q24.

Speaker Change: This decrease is the result of repayment of $30.2 million of debt in 2Q24 and $33.4 million in 1Q24.

Speaker Change: As detailed in our press release on July 9th and debt footnotes of our 10Q, we repaid the remaining $75.8 million of debt with approximately $19.8 million of excess cash flow sweep as defined in our credit agreement and $56 million of equity proceeds from our ATM facility.

Speaker Change: In connection with the voluntary prepayment of $56 million of debt in July, a third quarter 2024 event, the company incurred prepayment fees of $0.9 million.

Patrick Fleury: Road off an unamortized discount of $3.3 million associated with the principal repaid and recorded a loss on the establishment of debt of $4.2 million. In 2Q24, we reported 0.8 million in equity and net income of investing, net of tax, as compared to 5.3 million in 1Q20. These amounts represent Teri Walsh's proportional share of net income of the Nautilus Joint Venture. Let's take a moment to review in detail how Nautilus impacts our GAAP financial statements and non-GAAP adjusted EBITDA; please refer to the hypothetical quarter on the Nautilus Illustrative P&L and Financial Statement Impact page 10 of our August Investor Deck to follow along.

Speaker Change: rolled off unamortized discount of $3.3 million associated with the principal repaid and recorded a loss on extinguishment of debt of $4.2 million.

Speaker Change: In 2Q24, we reported $0.8 million in equity and net income of investee, net of tax, as compared to $5.3 million in 1Q24.

Teri Walsh: These amounts represent Teri Walsh's proportional share of net income of the Nautilus joint venture.

Teri Walsh: Let's take a moment to review in detail how Nautilus impacts our GAAP financial statements and non-GAAP adjusted EBITDA.

Teri Walsh: Please refer to the hypothetical quarter on the Nautilus Illustrative P&L and Financial Statement Impact, page 10 of our August Investor Deck to follow along.

Paul Prager: Our two premier data centers are the Lake Mariner Facility in Upstate New York, which utilizes over 91% zero-carbon energy source from the grid, and the Nautilus Crypto Mine in Pennsylvania, a joint venture with talent that is directly powered by nuclear energy. We believe our strategic focus on scalable zero-carbon energy infrastructure gives us a unique and competitive edge. In our last earnings call, we identified a significant shift in the industry, emphasizing that low-cost clean energy, operational efficiency, and profitability are becoming more critical than simply scaling operations.

Patrick Fleury: We run approximately 1.85x the hash rate of total capacity at Nautilus and pay $0.02 for 50 megawatts of power. Assuming 98% uptime, a 610 network hash rate, and $60,000 in Bitcoin price. This results in quarterly revenue of $7.4 million, costs of revenue, excluding depreciation, of $2.2 million, and therefore gross profit of $5.2 million. Subtracting quarterly and other operating expenses of $1.7 million, which, as discussed previously, is approximately $6.75 million annually, results in operating profit of $3.5 million.

Teri Walsh: We run approximately 1.85x a hash of total capacity at Nautilus and pay $0.02 for 50MW of power.

Teri Walsh: Assuming 98% uptime, a 610 network hash rate, and $60,000 Bitcoin price, this results in quarterly revenue of $7.4 million.

Teri Walsh: costs of revenue, excluding depreciation, of $2.2 million, and therefore gross profit of $5.2 million.

Teri Walsh: Subtracting quarterly and other operating expenses of $1.7 million, which as discussed previously is approximately $6.75 million annually, results in operating profit of $3.5 million.

Paul Prager: This insight will frame our discussion today as we review our second quarter results and strategic positioning. In the second quarter of 2024, we achieved several milestones that significantly strengthen our position as one of the most efficient public Bitcoin miners and digital infrastructure owners. First, we successfully completed the construction of building four at Lake Mariner, pushing our total mining capacity to over 10XAs per second. With a fleet efficiency of 23.7 joules per terrahash, and industry leading power costs projected at 3.5 cents per kilowatt hour for 2024.

Patrick Fleury: This would effectively be the net distribution of Bitcoin to both from Nautilus and the figure we add back in the non-GAAP-adjusted EVA DAW calculation, including quarterly depreciation of $5.6 million, results in equity and net loss of investee net of tax of negative 2.1 million, which is what would appear on our GAAP income statement and be stripped out of our non-GAAP adjusted EBITDA count. Our gap net loss for the second quarter was $11.2 million, compared to a net loss of $9.9 million in 1Q24.

Teri Walsh: This would effectively be the net distribution of Bitcoin to Wolf from Nautilus and the figure we add back in the non-gap-adjusted EBITDA calculation.

Teri Walsh: including quarterly depreciation of $5.6 million.

Teri Walsh: results in equity and net loss of investee, net of tax, of negative $2.1 million, which is what would appear on our GAAP income statement and be stripped out of our non-GAAP-adjusted EBITDA calculation.

Paul Prager: We have solidified our position as one of the sector's most efficient public miners. Second, we strategically amended our bit main purchase agreements to specify the delivery of S21 pro miners. We opted to acquire approximately 5,000 of the 30,000 miners available under the option purchase agreement, monetizing our option at an attractive rate of $16 per terrahash. Third, we made significant progress in our AI and high performance computing initiatives through the Wolf Den project.

Teri Walsh: Our gap net loss for the second quarter was $11.2 million, compared to a net loss of $9.9 million in 1Q24.

Patrick Fleury: Our non-GAF-adjusted EBITDA for 2Q24 was 19.5 million compared to 32 million in 1Q24. Now, turning our attention to the balance sheet, as of June 30th, we held $104 million in cash, with total assets amounting to $480 million and total liabilities of $93 million. Pro forma for our debt repayment on July 9th, our adjusted cash and Bitcoin balance was $28.4 million. Our net working capital as of June 30th was a positive $18.5 million.

Teri Walsh: Our non-GAAP adjusted EBITDA for 2Q24 was $19.5 million, compared to $32 million in 1Q24.

Teri Walsh: Now, turning our attention to the balance sheet, as of June 30th, we held $104 million in cash, with total assets amounting to $480 million and total liabilities of $93 million.

Teri Walsh: Full format for our debt repayment on July 9th, our adjusted cash and Bitcoin balance was $28.4 million.

Paul Prager: We committed to purchasing a 128 GPU cluster from NVIDIA, financed by an industry leading OEM. This arrangement minimizes the equity required from the company, preserving capital for future strategic investments. And finally, we achieved the pivotal milestone by streamlining our capital structure, eliminating debt, and converting approximately 29 million out of 41 million lender warrants into common shares. This deliberate restructuring strengthens our balance sheet and positions us for sustained future growth.

Teri Walsh: Our net working capital as of June 30th was a positive $18.5 million.

Patrick Fleury: As disclosed on page 14 of our August Investor Deck, we achieved a marginal cost of production, including every single cost in the company, of $41,587 per bitcoin in 2Q24 and expect to achieve approximately $40,000 per bitcoin in the second half of 2024. Regarding our capital position and growth plans for the remainder of 2024, we are fully funded. On page 12 of the August investor deck, you'll find that capital sources and uses bridge for 2Q24, as well as our expectations for second half 24 on page 13.

Teri Walsh: As disclosed on page 14 of our August Investor Deck, we achieved a marginal cost of production.

Teri Walsh: including every single cost in the company of $41,587 per Bitcoin in 2Q24 and expect to achieve approximately $40,000 per Bitcoin in 2nd half 2024.

Teri Walsh: Regarding our capital position and growth plans for the remainder of 2024, we are fully funded.

Paul Prager: With that in mind, let me touch on our operational expansion. At Lake Mariner, we currently deploy approximately 200 megawatts of operational infrastructure for Bitcoin mining, achieving industry leading unit economics as disclosed in our updated investor presentation found on our website. We also have an additional 300 megawatts of near-term expansion capacity to meet the growing demand from HPC and AI data centers. Lake Mariner's location offers the ideal trifecta for scaling operations, low cost power, ample land, and abundant water At the Vautilus crypto mine, we currently have 50 megawatts of operational capacity for Bitcoin mining.

Teri Walsh: On page 12 of the August Investor Deck, you'll find a Capital Sources and Uses Bridge for 2Q24, as well as our expectations for second half 24 on page 13.

Patrick Fleury: We are now debt-free and in a pole position to maximize the value of our assets as we diversify into HBC and AI. Let me take a moment to point out a few key items in the second half 24 capital budget on page 13. We expect the following approximate capital expenditures in second half 24. Number one.

Teri Walsh: We are now debt-free and in pole position to maximize the value of our assets as we diversify into HBC and AL.

Teri Walsh: Let me take a moment to point out a few key items in the second half twenty-four capital budget on page thirteen.

Patrick Fleury: $8 million on Wolf Compute's 2-megawatt HPC-AI Wolf Den, which includes the purchase of 128 NVIDIA H100 GPUs consisting of direct liquid-to-chip cooling with the backbone of a full cluster on which approximately 50% of the purchase price is being financed by a large OEM partner. Thank you. 14 million on the LMD site electrical to allow expansion to 500 megawatts, three. $23 million on the construction of Building 5, a 54-megawatt Bitcoin mining building expected to be substantially complete by year-end 2024, and four.

Teri Walsh: We expect the following approximate capital expenditures in second half twenty-four. Number one.

Teri Walsh: $8 million on Wolf Compute's 2-megawatt HPC-AI Wolf Den.

Teri Walsh: which includes the purchase of 128 NVIDIA H100 GPUs consisting of direct liquid-to-chip cooling with backbone of a full cluster of which approximately 50% of the purchase price is being financed by a large OEM partner.

Paul Prager: And earlier this year, we announced plans to expand to 100 megawatts in 2025. Our partnership with Calum, underscored by the recent sale of the cumulus data portion of the campus to Amazon Web Services, highlights the strategic value of our direct connection to a base load nuclear power station. Amazon acquisition not only validates the importance of leveraging sustainable energy, but also signifies the inevitable convergence of sustainable energy with the growing demand for high performance computing.

Teri Walsh: Q.

Teri Walsh: $14 million on LMD site electrical to allow expansion to 500 megawatts.

Teri Walsh: Great.

Teri Walsh: $23 million on construction of Building 5, a 54-megawatt Bitcoin mining building expected to be substantially complete by year-end 2024.

Patrick Fleury: $30 million on construction of Wolf Compute's CB-1, a liquid-cooled, redundant, and high-power density 20-megawatt HPCAI infrastructure expected to be substantially complete by year-end. The $30 million spend constitutes Wolfe's equity contribution for the 20-megawatt building, and we expect to finance the remaining 70% in the project finance market, as discussed on our 1Q24 earnings call, updated on page 15 of our August investor presentation

Teri Walsh: And four, $30 million on construction of Wolf Compute's CB-1, a liquid-cooled, redundant, and high-power density 20-megawatt HPCAI infrastructure expected to be substantially complete by year end.

Paul Prager: From day one, our model has been to strategically locate our operations where we have access to scalable, low-cost, predominantly zero-carbon power. Both of us like to embody this approach. Recently, market participants and analysts have emphasized the importance of bringing data center capacity to locations that have access to power. This has been our strategy for many years, bringing our operations to locations with access to predominantly zero-carbon generation resources. In addition to our current operations, we are exploring a pipeline of opportunities outside of the company, including certain properties owned by Bayouville Energy, a private company wholly owned by me.

Teri Walsh: The $30 million spend constitutes Wolfe's equity contribution for the 20-megawatt building, and we expect to finance the remaining 70% in the project finance market.

Teri Walsh: As discussed on our 1Q24 earnings call, updated on page 15 of our August Investor Deck,

Patrick Fleury: And, as a peer public co-location company has announced, we are targeting a customer contract with a one-year revenue prepay, which would return Wolf's $30 million equity contribution. Given the quality and quantity of customer interest in our assets, we are comfortable paying this forward so we can deliver sizable HPC AI capacity by year-end 2024 with additional rapid growth in 2025. At Wolf, our financial objectives remain clear and simple.

Teri Walsh: And, as a peer public co-location company has announced, we are targeting a customer contract with a one-year revenue prepay, which would return Wolf's $30 million equity contribution.

Teri Walsh: Given the quality and quantity of customer interest in our assets, we are comfortable paying this forward so we can deliver sizable HPC AI capacity by year-end 2024 with additional rapid growth in 2025.

Paul Prager: While our primary focus today is creating value with the organic scalability within tarotals, we are continuously assessing the contribution of additional assets. Any such contributions will be made in a fair and reasonable manner, consistent with their board and committee trutters.

Teri Walsh: At Wolf, our financial objectives remain clear and simple.

Patrick Fleury: Maximize profits, secure long-term high-quality customers in HPC and AI to minimize Wolf's future equity needs and return value to shareholders while providing investors access through transparency and accountability. With that, I'll hand it over to the operator and look forward to answering your questions. Thank you.

Patrick Fleury: Moving on to our financial performance, tarotals continue to leverage our low-cost infrastructure to drive profitability and create value for shareholders. Our commitment to shareholders has always been to deliver on our promises, and we've been successful in doing so quarter after quarter. In July, we fully repaid our debt well ahead of maturity and are now completely debt-free. This significant milestone, not only strengthens our balance sheet, but optimizes a strategic flexibility. This is particularly advantageous, as we aim to deploy our late-marital facility to support the surging demand for data centers driven by the proliferation of data-intensive applications such as artificial intelligence, machine learning, and big data analytics.

Speaker Change: Maximize profit?

Speaker Change: secure long-term high-quality customers in HPC and AI to minimize Wolf's future equity needs and return value to shareholders while providing investors access through transparency and accountability.

Speaker Change: With that, I'll hand it over to the operator and look forward to answering your questions.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 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 key.

Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker Change: 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.

Operator: One moment, please while we poll for questions. The first question is from Mike Grondahl from Northland Securities. Please go ahead. Hey guys, thank you. How would you characterize the demand environment for the 2 megawatts and the 20 megawatts?

Speaker Change: The first question is from Mike Grondahl from Northland Securities. Please go ahead.

Patrick Fleury: In the second quarter, we achieved a gap gross profit margin of 61 percent and non-gap adjusted EBITDA of $19.5 million, translating to an EBITDA per exohash of approximately $2.4 million. Our SG&A expenses totaled $11.9 million, and only $7.1 million, excluding stock-based compensation expense, materially lower than our- Cheers.

Mike Grondahl: Hey guys, thank you. How would you characterize the demand environment for the 2 megawatts, the 20 megawatts?

Mike Grondahl: and then sort of, you know, 50 plus going forward. Could you just give us a little bit of the flavor of who you're talking to and what you're hearing? Yeah, Paul, I think you're aligned with me. Do you want to take that, or do you want me to take it?

Speaker Change: and then sort of, you know, 50 plus going forward. Could you just give us a little bit of flavor of, you know, who you're talking to and what you're hearing?

Speaker Change: Yeah, Paul, I think you're aligned with me. Do you want to take that or do you want me to?

Unnamed Speaker: Sure. You know, Mike, we're very active. I can tell you that we're talking to a range of customers and a variety of customer classes, if you will. We're talking to a couple of hyperscalers.

Patrick Fleury: Looking ahead, as Patrick will detail shortly, our growth plans for the remainder of 2024 are fully funded. This underscores our commitment to capital efficiency and ensures the continuation of our strategic initiatives without the need for additional equity financing in the near term. As regards dilution in the second quarter, we took advantage of the favorable stock price and market liquidity to safeguard our future valuation creation path and to facilitate our entry and growth in the HVC AI sector in the most capital efficient manner.

Paul Prager: Sure. You know, Mike, we're very active.

Paul Prager: I can tell you that we're talking to a range of customers and a variety of customer class, if you will.

Paul Prager: We're talking to a couple of the hyperscalers, we're talking to end-users, we're talking to enterprise customers of our OEM.

Paul Prager: We're talking to end users, talking to enterprise customers of our OEM, and I think that what's exciting for people is the immediacy that we're able to meet their goals. As you know, we've advertised that we'll have megawatts available by year-end, and we've given a very..., very programmatic schedule for folks in the next 25. So I think interest is, at the beginning, at the tip of the iceberg, not even close to sort of the end of it. I think that the market's continuing to evolve.

Patrick Fleury: These data points highlight terrible competitive advantages. Low cost zero carbon power, access to some of the lowest cost predominantly zero carbon energy in the industry. Profitability, higher EBITDA per exohash than any other player in the space requiring less capital for growth efficiency, a lean team, an efficient management drive, maximum profitability for shareholders and scalable infrastructure for AI HVC. Wolf has access to over 300 megawatts of infrastructure to scale into high value and high performance compute data centers.

Paul Prager: As you know, we've advertised that we'll have megawatts available by year-end, and we've given a very...

Paul Prager: very programmatic schedule for folks in in 25. So I think interest is

Paul Prager: at the beginning, at the tip of the iceberg, not even close to sort of the end of it.

Paul Prager: And a lot of folks are talking to hyperscalers about what their needs are. And a lot of people don't want to be working with hyperscalers, so they want direct access. But we are engaged in this daily, and for us, I think it's very, very important, Mike, that we make the right decision and have a customer that's the right credit quality. You know, we don't want to go out there with, if you will, somebody that isn't somebody that we could scale with over time or that we think, you know, won't be around in a year.

Paul Prager: I think that the market's continuing to evolve.

Paul Prager: and a lot of folks are talking to the hyperscalers about what their needs are and a lot of people don't want to be working with hyperscalers, so they want direct access. But we are engaged.

Patrick Fleury: The true value in tarot wolf lies not only in the Bitcoin we mine profitably, but in the quality of our asset base and our ability to generate industry leading profits while expanding into HVC AI. Even in times of market volatility, as we all have experienced in the last week, our focus on maintaining robust infrastructure and profitable operations ensures sustainable growth and long-term returns.

Paul Prager: daily on this and for us I think it's very very important Mike that we make the right decision and and have a customer that's the right credit quality.

Mike Grondahl: You know, we don't want to go out there with, if you will, somebody that isn't somebody that we could scale with over time or that we think won't be around in a year or two.

Paul Prager: So... I can only tell you that. We're very excited about the prospects, we're very excited about the potential customers we're speaking to, but they come in all shapes and sizes. And again, our primary concern is credit quality and value ultimately to our shareholders in the deal that we struck. I think most of all, that should be indicated by the fact that we're funding this 30 million bucks here. I think that should indicate to you real confidence on our part. No, that's great. And then, just maybe, as a follow-up to that.

Mike Grondahl: So, um...

Speaker Change: I can only tell you that we're very excited about the prospects. We're very excited about the potential customers we're speaking to, but they're coming in all shapes and sizes.

Paul Prager: With that segway, I'd like to now address our strategic advancements in AI and HVC. Wolf compute is in the final stages of our two megawatts proof of concept project, the Wolf Den, which is on track for completion in early September. This state-of-the-art project is designed to support the latest generation GPUs featuring advanced liquid cooling systems and high rack density. In addition, we are advancing the development of CD1, a co-location project set to deliver 20 megawatts growth and 60 megawatts of critical computing power.

Speaker Change: and again our primary concern is credit quality and value ultimately to our shareholders in the deal that we strike. I think most of all that should be indicated by the fact that we're funding this 30 million bucks here. I think that should indicate to you real confidence on our part.

Mike Grondahl: In the last 90 days, as you've taken part in a lot of these discussions, you know, what have you maybe learned the most, or what's been surprising or interesting to you, Paul? Patrick, I'm going to let you start, and I'll give my sort of closing remark on that. Yeah, look, Mike, as you know, I always tend to answer things too honestly, so I would just say, you know, look, I'm the CFO, right? My job is to get the numbers right and get things financed and financially engineered. I think for me... We have a, you know, I won't use the word, but we have a kick-butt team.

Speaker Change: No, that's great. And then, just maybe as a follow-up to that,

Speaker Change: In the last 90 days, as you've taken part in a lot of these discussions,

Paul Prager: This building will be tailored to support the next generation of GPUs and is projected to be operational by the end of the year. We are actively engaging with several co-location customers regarding the 300 megawatts expansion capacity at Lake Mariner. Our team is thoroughly evaluating each opportunity to maximize the potential of what we believe is one of the premier data center locations in the country. Our primary focus here is on securing most suitable customers to achieve the highest possible valuation multiple paternal common shareholders, among whom management is one of the largest. Groups.

Paul Prager: You know, what have you maybe learned the most, or what's been surprising or interesting to you, Paul?

Paul Prager: Patrick I'm going to let you start and I'll give my sort of closing remark on that but

Patrick Fleury: Yeah, look, Mike, as you know, I always tend to answer things too honestly, so I would just say, you know, look, I'm the CFO, right? My job is to get the numbers right and get things financed and financially engineered. I think for me...

Speaker Change: We have a, you know, I won't use the word, but we have a kick-bot team.

Patrick Fleury: And I got to tell you, like, being on the phone with some of the largest and most accomplished data center folks in the world and having our team impress them, I mean, that has honestly surprised me the most, because again, I mean, we're really good at what we do, but, you know, we're getting into a bit of a new lane here, and we've been studying it extremely hard. So I think, you know, to add some fuel to Paul's fire on the customer side, I mean, the customer conversations are red hot, our phones are ringing off the hook, and I think our team is really doing an incredible job.

Mike Grondahl: And I got to tell you, I...

Mike Grondahl: being on the phone with some of the largest and most accomplished data center folks in the world.

Paul Prager: As we look ahead, Tarot Wolf is at a pivotal moment, as strategic positioning and substantial infrastructure scale offer significant opportunities for value creation. With our large-scale facilities, we are well equipped to meet the growing demands of the data center market, positioning us to capitalize on emerging opportunities and drive substantial growth. We are excited about leveraging our infrastructure and expertise to enhance value for us stakeholders in the coming quarters.

Mike Grondahl: and having our team impress those people.

Mike Grondahl: I mean, that, to me, has honestly surprised me the most because, again, I mean, we're really good at what we do, but, you know, we're getting into a bit of a new lane here and we've been studying it extremely hard. So, I think, you know, to add...

Mike Grondahl: some fuel to Paul's fire on the customer side. I mean, the customer conversations are red hot. You know, our phones are ringing off the hook. And I think our team is really doing an incredible job.

Patrick Fleury: I guess for me, what I've learned most in terms of the course of the last 90 days is how different the requirements are for each one of these customers, and yet the one uniform thing that's missing, as sophisticated as these customers are, is a lack of familiarity with power and energy infrastructure. And as we have these discussions and they've advanced, it's been great to watch these potential customers appreciate how important solving the energy infrastructure problem is and the value of partnership in getting that endeavor completed.

Patrick Fleury: Now, I'll turn it over to Patrick to discuss our financial performance. Thank you, Paul.

Speaker Change: I guess for me what what I've learned most in terms of over the course of the last 90 days is how different the requirements are for each one of these customers.

Patrick Fleury: As Paul stated, the second quarter in beginning of the third quarter was a transformative time for Wolf, with strong financial results even in a challenging fundamental business environment following the Bitcoin reward having in April. In the second quarter of 2024, we self-mined 539 Bitcoin at Lake Mariner, and our next share of Bitcoin mine at Nautilus was 160 for a total of 699 Bitcoin or about 7.7 Bitcoin per day, a 34% decrease over the 1,000 is 51 Bitcoin mine in 1,224.

Speaker Change: and...

Speaker Change: And yet the one uniform thing that's missing, as sophisticated as these customers are, is a lack of familiarity with power and energy infrastructure.

Speaker Change: and as we have these discussions and they've advanced it's been great to watch these potential customers appreciate how important solving the energy infrastructure problem is.

Speaker Change: and the value of partnership in getting that endeavor completed. So I think we're spending a lot of time educating these folks about.

Patrick Fleury: The hosting agreement at Lake Mariner terminated in February 2024, and as a result, we received zero and an additional 6th Bitcoin in 2,224 and 1,224 respectively from associated profit sharing. Our gap revenues were down 60% quarter over quarter at 35.6 million in 2,224 from 42.4 million in 1,224. Our value per Bitcoin self-mined in this quarter, a non-gap metric that includes Bitcoin mine at Nautilus, average 65,984 per Bitcoin for a total of 46.1 million as detailed and defined in our monthly operating records, threats releases, and NBNA section of our 10Q.

Patrick Fleury: So I think we're spending a lot of time educating these folks about energy infrastructure, how we do it, how we suggest they do it, and they're teaching us a lot about their requirements. And so. I think it's pretty fascinating, and for me, it's far more than, you know, it's not fascinating because oh, it's interesting; it's fascinating because I believe that it will propel Terrewolf to be an important company, I think, as we continue to expand into HPC-AI, given the backbone of the energy infrastructure that we have. Hey, thanks a lot guys. The next question is from Joe Flynn from Compass Point Research and Trading. Please go ahead.

Speaker Change: energy infrastructure, how we do it, how we suggest they do it and they're teaching us a lot about their requirements and so

Speaker Change: today.

Speaker Change: I think it's pretty fascinating, and for me it's far more than, you know, it's not fascinating because, oh, it's interesting, it's fascinating because I believe that it will jettison Terrewolf to be an important company, I think, as we continue to expand into HPCAI, given the backbone of the energy infrastructure that we have.

Speaker Change: Sure. Hey, thanks a lot guys.

Patrick Fleury: As a reminder, there is a key difference between our gap financials in the monthly operating reports in 2024 guidance. Due to our 25% ownership in the Nautilus JV, the revenue cost of revenue operating expenses, depreciation, and amortization at Nautilus are not consolidated into our gap financial statements. Instead, the financial impact of the Nautilus JV is reflected in the equity in net income or loss of the net of tax line item on the gap income statement.

Speaker Change: The next question is from Joe Flynn from Compass Point Research and Trading. Please go ahead.

Joe Flynn: I think it's the question and got a piggyback off an earlier question. I was wondering if you would expect to have a 20-megawatt customer by year-end, and with the forward guidance on the build of co-location building 2 in future capacity, yo, kind of- build it, and they will come situation, or would you expect to have customers secured before? Yeah, look, Brett hates Patrick.

Joe Flynn: Thanks for the question. To kind of piggyback off the earlier question, I was wondering if...

Joe Flynn: I mean, would you expect to have a 20 megawatt customer by year-end and with the Ford guidance on...

Speaker Change: you know, the building, build of co-location building two in future capacity. Is this, you know, kind of a, you know, build-it-and-they-will-come situation, or would you expect to have customers secured beforehand? Thanks.

Patrick Fleury: I'll answer that. I mean... Look, I would just say, you know, we put a slide in the deck that updates on timing. And, you know, we're having constant discussions where, you know, folks are looking for hundreds and hundreds of megawatts of capacity. So I would say, as Paul echoed, we are really, every day, everyone on the team focused on making sure we've got the right customer or group of customers to achieve the maximum valuation multiple. And so, you know, if that takes a little bit longer than expected, then it will.

Speaker Change: Thank you for watching, please subscribe, like, comment, and share this video with your friends.

Speaker Change: Yeah, look, Brett, it's Patrick. I'll answer that. I mean...

Patrick Fleury: Our gap cost of revenue, exclusive of depreciation, for 2Q.24 was 13.9 million, a 3% decrease over 14.4 million in 1,224. The quarter over quarter decrease was due to a 14% decrease in the average cost of power at Lake Mariner from 4.9 cents per kilowatt in 1Q.24 to 4.2 cents per kilowatt in 2Q.24. An expected demand response proceeds of 1.9 million in 2Q.24 versus 1.3 million in 1Q.20. Ford. Our gross profit, exclusive of depreciation, decreased by 23% quarter of a quarter, from 28 million in 1,224 to 21.7 million in 2,224.

Speaker Change: Look, I would just say, you know, we put a slide in the deck that updates on timing.

Speaker Change: And, you know, we're having constant discussions where, you know, folks are looking for hundreds and hundreds of megawatts of capacity. So I would just say, as Paul echoed, we are really, every day, everyone on the team focused

Speaker Change: making sure we've got the right customer or group of customers to achieve the maximum valuation multiple. And so, you know, if that takes a little bit longer than expected, then it does. But I think, you know, there's a balance here of

Patrick Fleury: But I think, you know, there's a balance here of, We know power is in short supply. We have it. And then we also know folks are scrambling for it. So I'm not going to directly answer your timing question, but there's kind of a sweet spot, as we all know, over the coming months.

Paul Prager: We know power is in short supply. We have it.

Paul Prager: and then we also know folks are scrambling, you know, for it. So I think, I'm not going to answer directly your timing question, but, you know, there's kind of a sweet spot, as we all know, over, you know, the coming months, and that's what we're trying to align with.

Patrick Fleury: Our power cost or cost of energy per Bitcoin mind, a non-gab metric that includes Bitcoin mind at Nautilus, was 22,954 in 2,224 compared to 15,501 in 1,224 as a reminder. In our gap financial, unlike our monthly operating reports, the company records proceeds received and 2B received for demand response programs as a reduction in cost of revenue. These expected proceeds told 1.9 million in 2,224 and 1.3 million in 1,224. As disclosed in our 2024 guidance, we expect to achieve an average power cost, including demand response revenues, and the impact of Nautilus's 2,000 power of 3.5 cents per kilowatt hour in 2024.

Patrick Fleury: And that's what we're trying to align with. Thanks, that's helpful, and then I guess as we look into the future in 2026 and 2027 and you've talked about, you know, the hundreds of megawatts type deal is like, what, what kind of margin profile should we expect as time moves out? Yeah, look, I think, you know, you can see on page 15, we did update that page around the edges if you kind of compare it to our page from the last deck. I think we've kind of stuck with, Thank you. The next question is from Darren Aftahi from Roth Capital Partners. Please go ahead.

Speaker Change: Thanks, that's helpful. And then, I guess, as we look into the future in 2026 and 2027, you talked about, like, you know, the...

Speaker Change: hundreds of megawatts type deals like what what kind of margin profile should we expect as like the you know time

Speaker Change: Moves out

Speaker Change: Thanks. Yeah, look, I think, you know, you can see on page 15, we did update that page around the edges if you kind of compare it to our page from the last deck. You know, I think...

Speaker Change: We've done a stuff quiz.

Speaker Change: 65-75% margins on this co-location business, you know, I know some of our public or one of our public peers has put out a higher number.

Patrick Fleury: For 2,224, we achieved an average power cost of 3.7 per kilowatt hour compared to 4.1 cents in 1,224. This is consistent with historical power price variability in upstate New York with the late-mariner facility is located. Operating expenses were stable, quarter over quarter, as 1.7 million in 2,224 and 1,224. As disclosed in our 2024 guidance, we expect 13.5 million of operating expenses in 2024, which includes operating expenses at Nautilus. Of the 13.5 million total anticipated for 2024, approximately 50% is expected to be incurred at late-mariner and 50% at Nautilus.

Speaker Change: We're going to stick with that sort of 70% for now, and once we have some operations under our belt, we'll update that, but that's what we're sticking with for today.

Speaker Change: Thank you very much.

Speaker Change: All right, thanks.

Speaker Change: The next question is from Darren Aftahi from Roth Capital Partners. Please go ahead.

Darren Aftahi: Thanks, guys, for taking the questions. Can you talk about how the Wolsten, sort of the role it plays relative to the 20 megawatt facility you're building, I guess that's another way of saying it. Is it something that you would showcase for clients that are potentially interested in the bigger capacity? Yeah, that's exactly right, Darren.

Darren Aftahi: Thanks guys for taking the questions. Can you talk about how the...

Darren Aftahi: Wolfson, sort of the role it plays relative to the 20 megawatt facility you're building, I guess that's another way, is it something that you would showcase for clients that are potentially interested in the bigger capacity?

Patrick Fleury: I think it's, and again, on the, you know, as we talked about buying these GPUs, and you can see, as we've kind of laid out on page 15, that is not our core business, but it is a, you know, show me story. And, you know, some of the folks that we're in negotiations with want to come to site, want to see that we can run the, you know, greatest and latest technology.

Speaker Change: Yeah, that's exactly right Darren, I think it's...

Patrick Fleury: SVNA expenses decrease quarter over quarter from 14.9 million in 1,224 to 11.9 million in 2,224. The decrease is almost entirely due to 6.9 million of stock-based compensation expense incurred in 1,224 versus 4.8 million in 2,224. Adjusting for stock-based comp, SVNA decreased 11% quarter over quarter from 8 million in 1,224 to 7.1 million in 2,224. As I've indicated previously, this decline is expected, as SVNA spend is more heavily weighted to the first quarter of the year versus following quarters.

Speaker Change: And again, on the, you know, as we talked about buying these GPUs, and you can see as we've kind of laid out on page 15, that is not our core business, but it is

Speaker Change: A.

Speaker Change: you know, show me story.

Speaker Change: And, you know, some of the folks that we're in negotiations with want to come on site, want to see that we can run.

Patrick Fleury: And so that's, you know, our commitment there. But again, these are single digit millions of dollars, right, that we're spending on that business, on the sort of GPU as a service business, if you will. And our major and main focus remains, Great. And then there's one more. I noticed in the release, you guys talked about building flyers. Is that an optionality for either BTC or HBC?

Speaker Change: the greatest and latest technology, and so that's our commitment there. But again, these are single-digit millions of dollars that we're spending on that business, on the sort of GPU as a service business, if you will, and our major and main focus remains co-location.

Patrick Fleury: With our entry into HPC and AI and need for more staff, we are updating our 2024 SVNA guidance from 27.5 million to 30 million of SVNA in 2024, as indicated on page 14 of our August investor presentation available on our website. Depreciation decreased quarter over quarter from 15.1 million in 1,224 to 14.1 million in 2,224, which was the result of a quarter over quarter decrease of 2.5 million in accelerated depreciation related to certain minors of which the company shortened their estimated useful lives based on expected replacement by April 30, 2024, partially offset by increased assets placed into service and depreciated as the result of our continued infrastructure building.

Speaker Change: folks.

Speaker Change: Great, and then just one more. I noticed in the release you guys talked about building five as having optionality for either BTC or HBC. I guess, like, when it's complete, what's the calculus from your perspective that determines which way you go there? Thanks.

Darren Aftahi: I guess when it's complete, what's the calculus from your perspective that determines which way you go there? Thanks. Yeah, look, I think, as we've said before, [inaudible] You know, there's other options. Right, it's not just...

Speaker Change: Yeah, look, I think, as we've said before, you know, there's other...

Patrick Fleury: Thank you. This is a capital allocation decision for us. So, you know, we have contractors and subs that have been on this site for three years, right? And they've built Building 1, Building 2, Building 3, Building 4. Now they're moving to Building 5.

Speaker Change: Right, it's not just...

Speaker Change: You know a capital allocation decision for us. So, you know, we have

Speaker Change: contractors and subs that have been on this site for three years, right, and they've built Building 1, Building 2, Building 3, Building 4. Now they're moving to Building 5. So, you know, part of that is we're competing with Buffalo Bill Stadium, for example, so we need to keep those contractors and subs on-site working.

Patrick Fleury: So, you know, part of that is we're competing with Buffalo Bill Stadium, for example. So, we need to keep those contractors and subs on site working. So, we're moving ahead with Building 5. Yes, Building 5 does have some optionality, should we land a customer very, very soon, where we could pivot that building, but just by order of magnitude, right, we're talking about, call it around $25 million to build that whole building.

Speaker Change: So we're moving ahead with building five.

Speaker Change: Yeah, Building 5 does have some optionality.

Patrick Fleury: Dain or loss on fair value of digital currency is a new income statement line item for us in 2024 given our early adoption of the new FASB accounting rule which marks the company's Bitcoin holding to the fair market value as of the filing date with changes in fair value recorded in that income. In 2Q24 we incurred a loss of 0.7 million compared with a gain of 1.3 million in 1Q24. It's critically important to note the 6th month 2024 net gain of 0.6 million is substantially all realized meaning it's a realized cash in our bank account not theoretical mark to market gains on paper which many of our peers that hold all have reported.

Speaker Change: should we land a customer very, very soon where we could pivot that building, but just order of magnitude, right, we're talking about, call it around $25 million to build that whole building, and, you know, roughly...

Speaker Change: 50% of that can be repositioned as

Speaker Change: you know, high-power compute AI infrastructure, so Darren, it's small dollars to kind of

Darren Aftahi: Keep our people at the site, keep them working, so that we've got runway for the next...

Darren Aftahi: you know, two, three years to build out hundreds of megawatts. So that kind of comes into the calculus as well, but, and again, to kind of pivot, you know, you're talking about sort of 50% of that capex that's reusable, if that makes sense.

Patrick Fleury: And roughly, 50% of that can be repositioned as, you know, high-power compute AI infrastructure. So, Darren, it's small dollars to kind of keep our people at the site, keep them working so that we've got runway for the next, you know, two, three years to build out hundreds of megawatts. So, that kind of comes into the calculus as well. And again, to kind of pivot, you're talking about sort of 50% of that CapEx that's reusable. That makes sense. That's helpful. Thank you. The next question is from Lucas Pipes from B. Riley Securities. Please go ahead. Thanks, Operator. Good afternoon, everyone. This is Nick Giles on for Lucas.

Speaker Change: That's helpful. Thank you.

Patrick Fleury: DAP interest expense in 2Q24 in 1Q24 was 5.3 million and 11 million respectively which includes cash interest expense and amortization of debt issuance cost and debt discount related to the term loans advancements. However cash interest paid during 2Q24 was 2.5 million down over 33% from 3.7 million in 1Q24. This decrease is the result of repayment of 30.2 million of debt in 2Q24 and 33.4 million in 1Q24. As detailed in our press release on July 9 and debt footnote of our 10Q we repaid the remaining 75.8 million of debt with approximately 19.8 million of excess cash flow sweep as defined in our credit agreement and 56 million of equity proceeds from our ATM facility.

Speaker Change: The next question is from Lucas Pipes from B. Riley Securities. Please go ahead.

Speaker Change: Thanks, Operator. Good afternoon, everyone. This is Nick Giles on for Lucas.

Nick Giles: Guys, I appreciate all the colors so far. Your CapEx on the CB1, I believe it implies a CapEx per megawatt of 5 million. Should we think about this as a good go-forward target? And, you know, what levels of redundancy could influence this figure? I mean, Paul, you said it earlier that each customer has different needs. So, just trying to think about how that figure could potentially flex.

Speaker Change: Um...

Nick Giles: Guys, I appreciate all the colors so far. Your CapEx on the CB1, I believe it implies a CapEx per megawatt of 5 million.

Speaker Change: Should we think about this as a good go-forward target? And, you know, what levels of redundancy could influence this figure? I mean, Paul, you said it earlier that each customer has different needs, so just trying to think about how that figure could potentially flex.

Patrick Fleury: Yes, hi next. So it's a good question. So yeah, it's roughly five million. As you can see on page 15, we did update our build costs for a megawatt to six to eight million. Generally speaking, that's specific to our site, and what I mean by that is... If you were to add, for example, backup diesel reciprocating generators, which we're not planning to do, that would cost you at least another $2 million per megawatt. And so... Again, our site is very unique in that it's a former coal plant, right, retired, and reclaimed. So, we have grid infrastructure in place that you typically would not build for a data center. For example, we have two 345 kV lines that come into our substation and multiple transformers, right?

Speaker Change: Yeah, hi Nick. So, it's a good question. So yeah, it's roughly $5 million. As you can see on page 15, you know, we did update our build cost per megawatt to $6 to $8 million.

Speaker Change: Generally speaking, that's specific for our site, and what I mean by that is...

Patrick Fleury: In connection with the voluntary propanement of 56 million of debt in July a third quarter 2020 for event the company incurred propanement fees of 0.9 million rolled off unamortized discount of 3.3 million associated with the principal repaid and recorded a loss on the establishment of debt of 4.2 million. In 2Q24 we reported 0.8 million in equity and net income of investing net of tax as compared to 5.3 million in 1Q24. These amounts represent terrible proportional share of net income of the Nautilus joint venture.

Speaker Change: If you were to add, for example, backup diesel reciprocating generators, which we're not planning to do, that would cost you at least another $2 million per megawatt.

Speaker Change: and so...

Speaker Change: Again, our site is very unique in that it's a former

Speaker Change: poll plan, right, retired and reclamated. So we have grid infrastructure in place that you typically would not build for a data center. For example...

Speaker Change: We have two 345KV lines that come into our substations.

Patrick Fleury: So, what that means is, unlike a sort of typical data center that has one line coming in, if we lose one of those lines because a transformer goes down, we just move to the other line. And so, when you think about that redundancy, I mean, really, you're talking about you're only going down in a blackout, which happened once in kind of the last 60 years, right? And so, that again makes our site very unique and our build cost unique to this specific location.

Speaker Change: and multiple transformers. So what that means is, unlike a sort of typical data center that has one line coming in,

Speaker Change: If we lose one of those lines because a transformer goes down, we just move to the other line.

Patrick Fleury: Let's take a moment to review in detail how Nautilus impacts our gap financial statements and non-gap adjusted EBITDA. Please refer to the hypothetical quarter on the Nautilus, the lustred of P&L and financial statement impact page 10 of our August investor deck to follow along. We run approximately 1.8 5X- of total capacity at Nautilus and paid 2 cents for 50 megawatts of power, assuming 98% uptime, a 610 network cash rate, and 50 thousand Bitcoin price, this results in quarterly revenue of 7.4 million.

Speaker Change: And so when you think about...

Speaker Change: that redundancy, I mean, really, you're talking about you're only going down in a blackout which happened once in some of the last 60 years, right? And so that, again, makes our site very unique and our build cost unique to this specific location.

Patrick Fleury: Patrick, that's super helpful. My next question... Obviously, the team has really deep experience in power and infrastructure, Terrewolf and even Beowulf included. It's good to hear that potential customers are recognizing this. As it relates to data center design, are you using any third parties today, or is there any appetite to bring in any partners on either the data center design or operations side? Yeah. So, Nick, we, and I'm the wrong guy to answer that question, and I know my team is spread out all over the place, so I'm not exactly sure who's online, nor am I sure what we're willing to disclose, but the short answer is yes, yes, and yes.

Speaker Change: Patrick, that's super helpful. My next question...

Speaker Change: Obviously the team has has really deep experience in power and infrastructure Terrewolf and even Beowulf included in that. Good to hear that potential customers are recognizing this.

Speaker Change: As it relates to data center design, are you using any third parties today or is there any appetite to bring in any partners on either the data center design or operations side?

Patrick Fleury: Ross of revenue, excluding depreciation of 2.2 million, and therefore gross profit of 5.2 million. Subtracting quarterly and other operating expenses of 1.7 million, which as discussed previously, is approximately 6.75 million annually, results in operating profit of 3.5 million. This would effectively be the net distribution of Bitcoin to both from Nautilus and the figure we add back in the non-gap adjusted EBITDA calculations. Including quarterly depreciation of 5.6 million, results in equity and net loss of investing, net of tax, of negative 2.1 million.

Speaker Change: Yeah, so Nick, we, and I'm the wrong guy to answer that question, and I know my team is spread out all over the place, so I'm not exactly sure who's online, nor am I sure what we're willing to disclose, but the short answer is...

Patrick Fleury: You know, we are partnered with a variety of different partners on all aspects of the HPC AI, or what I would call, like, the data center of the future build, and literally, that's everyone from, you know, NVIDIA, Supermicro, Dell, HP, like, all the way down the line. So, yes, that is a collective effort led by Sean Farrell, SVP of operations on our team, and Nazar Khan, COO and co-founder, and their whole teams, and augmented by multiple outside parties. So, yeah, that is a big team effort, and like I said, I've been really, really impressed with the team that Nazar and Paul have assembled.

Speaker Change: Yes, yes, and yes. We are partnered with...

Speaker Change: a variety of different partners on all aspects.

Speaker Change: of the HPC-AI, or what I would call the data center of the future build. And literally, that's everyone from NVIDIA, Supermicro, Dell, HP, all the way down the line. So, yes, that is a...

Patrick Fleury: Which is what would appear on our gap income statement and be stripped out of our non-gap adjusted EBITDA calculations. Our gap net loss for the second quarter was 11.2 million, compared to a net loss of 9.9 million in 1.224. Our non-gap adjusted EBITDA for 2.224 was 19.5 million, compared to 32 million in 1.224.

Speaker Change: Collective efforts led by Sean Farrell, SVP of Operations on our team, and Nazar Khan, COO and co-founder, and their whole team, and augmented by multiple outside parties. So yeah, that is a big team effort, and like I said...

Speaker Change: been just really, really impressed with the team that Nazar and Paul have assembled there.

Speaker Change: Got it, got it. Well, appreciate all the detail and Patrick, to you and the team, continue best of luck.

Patrick Fleury: Got it, got it. Well, I appreciate all the detail, and Patrick, to you and the team, continue, best of luck. Thank you. The next question is from Brett Knoblauch from Cantor Fitzgerald. Please go ahead. Hi guys, thanks for taking my question, and thanks for all the color you guys have shared. Maybe to start... For Lake Mariner, I know you guys have talked about that facility being able to go to 770 if you do an additional interconnect. Would that occur before you guys consider dropping down additional assets into TeraWolf from Beowulf?

Patrick Fleury: Now, returning our attention to the balance sheet, as of June 30th, we held 104 million in cash, with total assets amounting to 480 million, and total liabilities of 93 million. Pro forma for our debt repayment on July 9th, our adjusted cash in Bitcoin balance was 28.4 million. Our net working capital as of June 30th was a positive 18.5 million. As it flows on pace 14 of our August investor debt, we achieved a marginal cost of production, including every single cost in the company, of 41,587 per Bitcoin in 2.224, and expect to achieve approximately 40,000 per Bitcoin in second half 24.

Nick Giles: Thanks, Nick.

Speaker Change: The next question is from Brett Knobloch from Cantor Fitzgerald. Please go ahead.

Brett Knobloch: Hi guys thanks for taking my question and thanks for all the color you guys have shared. Maybe to start

Brett Knobloch: or Lake Mariner. I know you guys have talked about that facility being able to go to 770 if you do an additional interconnect. Would that occur before you guys consider to drop down additional assets into Terawolf from Beowulf?

Brett Knoblauch: I guess it just helps us understand the timing and what would happen between the two. Yeah, that's a good question. I don't, I don't know if Paul wants to address that, but my answer is not necessarily Brett. You know, some of the customers we're talking to, you know, have demand. I mean, if you think about what we have, we have close to a gigawatt of low cost, predominantly zero carbon power, and that is extremely rare.

Speaker Change: I guess, can you just help us understand, like, the timing and what would happen between the two?

Patrick Fleury: Right. And that's, by the way, what's sitting, you know, effectively in the public company and what we have access to also in the private company. But I don't know, Paul, if you want to add any color.

Speaker Change: Yeah, that's a good question. I don't know if Paul wants to address that, but my answer is not necessarily, Brett. You know, some of the customers we're talking to.

Patrick Fleury: Regarding our capital position and growth plans for the remainder of 2024, we are fully funded. On page 12 of the August investor debt, you'll find that capital sources and uses bridge for 2.224, as well as our expectations for second half 24 on page 13.

Speaker Change: you know, have demand. I mean, if you think about what we have, we have close to a gigawatt.

Paul Prager: of low-cost, predominantly zero-carbon power. And that is extremely rare, right? And that's, by the way, what's sitting, you know, effectively in the public company and what we have access to also in the private company. But I don't know, Paul, if you want to add any color to that.

Paul Prager: Yeah, I think we've discussed this before, Brett. You know, the priority is absolutely terrible and they have a call on, on, on, on, on, you know, the opportunity to expand and obviously, processes are involved, right? You got to figure out what's fair, you got to go to your audit committee, you got to get a fairness opinion, you got to do all this stuff.

Paul Prager: Yeah, I think we've discussed this before, Brad. You know, the priority is absolutely TeraWolf, and they have a call on...

Patrick Fleury: We are now debt-free and in pole position to maximize the value of our assets as we diversify into HPC and AL. Let me take a moment to point out a few key items in the second half 24 capital budget on page 13. We expect the following approximate capital expenditures in second half 24. Number 1, 8 million on wolf compute 2 megawatt HPC AI wolf debt, which includes the purchase of 128 in Vidia H100 GPUs, consisting of direct liquid to chip cooling with backbone of a full cluster of which approximately 50% of the purchase price is being financed by a large OEM partner.

Paul Prager: you know, the opportunity to expand.

Patrick Fleury: 14 million on LMD site electrical to allow expansion to 500 megawatts, 3. 23 million on construction of building 5, a 54 megawatt Bitcoin mining building expected to be substantially complete by year end 2024. And 4. 30 million on construction of wolf compute, CB1, a liquid cool, redundant and high-powered density 20 megawatt HPPI infrastructure expected to be substantially complete by year end. The 30 million spend constitutes wolf equity contribution for the 20 megawatt building, and we expect to finance the remaining 70% in the project finance market.

Paul Prager: figure out what's fair, you've got to go to your audit committee, you've got to get a fairness opinion, you've got to do all this stuff.

Paul Prager: But at the end of the day, we're going to be most responsive to customer demand and not assume. We don't want to assume a whole lot of risk here until we've decided the customer path. But we're not going to run out of opportunities to access power any time in the very near future or further out. I mean, Terre Wolf has what it needs, and obviously, to take that site and to continue on at it makes sense because of scale, familiarity with the site, and familiarity with the stakeholders there, which includes some state agencies. So we're most excited about Lake Mariner and our build costs there and our continuing ability to grow the usefulness of that site. Perfect, I appreciate it. And then maybe just one follow-up on...

Paul Prager: But at the end of the day, we're going to be most responsive to customer demand and not assume...

Paul Prager: We don't want to assume a whole lot of risk here until we've decided the customer path.

Paul Prager: But we're not going to run out of the opportunity to access power anytime in the very near future or further out.

Terri Wolf: Terri Wolf has what it needs and obviously to to take that site and to continue on at it makes sense because of scale familiarity with the site and familiar familiarity with the stakeholders there which includes

Terri Wolf: you know some state agencies. So we're most excited about Lake Mariner and our build costs there and I continue continuing ability to

Terri Wolf: to grow the usefulness of that site.

Brett Knoblauch: I guess just how we should be thinking about the AI HVC capacity coming online. I think I'm reading in the fine print on one of the slides that you expect the 20-megawatt building to be substantially complete by the end of the year. First, should we expect by the end of this year GPUs to be plugged in there?

Speaker Change: Perfect, appreciate it. And then maybe just one follow-up on.

Speaker Change: I guess that's how we should be thinking about the AI HPC capacity coming online. I think I'm reading in the fine print on one of the slides that you expect.

Speaker Change: the 20-megawatt building to be substantially complete by the end of the year. I guess, first...

Brett Knoblauch: And then secondly, I'm also seeing that you guys are expecting to have, call it, 150 megawatts of gross power capacity for AI HVC in 2025, which is, I guess, a bit more than I was expecting or thinking about before this call. So, does that kind of assume that you'll have a couple additional, maybe, 50-megawatt buildings that you would look to construct in the back half of next year? Thank you, guys. I really appreciate it. Yeah. Hey, Brett.

Patrick Fleury: As discussed on our 1Q24 earnings call, updated on page 15 of our August investor deck, and as a peer public co-location company has announced, we are targeting a customer contract with a 1-year revenue prepay which would return wolf 30 million equity contribution. Given the quality and quantity of customer interest in our assets, we are providing additional rapid growth in 2025.

Speaker Change: should we expect, by the end of this year, GPUs to be plugged in there? And then secondly, I'm also seeing that you guys are expecting to have, call it, 150 megawatts of gross power capacity for AIHBC in 2025.

Speaker Change: which is, I guess, a bit more than I was expecting or thinking about before this call. So, does that kind of assume that you'll have a couple additional maybe 50-megawatt buildings that you would look to construct in the back half of next year?

Patrick Fleury: So, you know, I hate to do this, but I was persuaded by... both our team and investors and analysts, but if you look at our deck on page 16, you know, we did put together an illustrative development timeline to address exactly that question. And so I just want to point out, though, that that timeline can be pushed up if we need to based on customer demand, or it can be slowed down, so you know it's not absolute, but I think, generally speaking, we feel pretty comfortable with what we put on page 16 from a timing perspective, but again, like I said, it's very dependent on customer demand. Perfect. I appreciate it, guys. Have a good one!

Speaker Change: Thank you guys, really appreciate it. Yeah, hey Brett, so, you know, I hate to do this, but I was persuaded by

Speaker Change: both our team and investors and analysts, but if you look in our deck on page 16, we did put together an illustrative development timeline to address exactly that question. And so I just wanna point out though that

Patrick Fleury: At wolf, our financial objectives remain clear and simple. Maximize profits, secure long-term high-quality customers in HPC and I to minimize wolf future equity needs, and with ton value to shareholders while providing investors access through transparency and accountability.

Speaker Change: That timeline can be...

Speaker Change: set up if we if we need to based on customer demand or it can be slowed down. So, you know, it's not absolute but I think generally speaking if we feel pretty comfortable with what we put on page 16 from a timing perspective.

Operator: With that, I'll hand it over to the operator and look forward to answering your questions. Thank you.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your questions in the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: But, again, like I said, it's very dependent on customer demand.

Operator: One moment, please well be pulled for questions.

Speaker Change: Perfect, appreciate it guys. Have a good one.

Brett Knoblauch: Thanks, bud. As a reminder, it is star number one to ask a question. The next question is from Bill Papanastasiou from Stiefel. Just go ahead.

Brett Knobloch: Thanks, Brett.

Speaker Change: As a reminder, it is star 1 to ask a question.

Speaker Change: The next question is from Bill Papanastassou from Stifel. Please go ahead.

Bill Papanastasiou: Good afternoon, Paul and Patrick. Congratulations on another quarter of solid unit economics. For my first question, I just wanted to touch on that 150 megawatts of growth in 2025, part of your Wolf Compute business. Can you give a breakdown in terms of the makeup of that 150 megawatts, how much of that could potentially be coming from Wolf Den operations versus your CB-1?

Bill Papanastassou: Good afternoon, Paul and Patrick. Congrats on another quarter of solid unit economics.

Michael Grondahl: The first question is from Mike Grandall from Northland Securities. Please go ahead. Hey guys, thank you. How would you characterize the demand environment for the two megawatts, the 20 megawatts, and then sort of 50 plus going forward? Could you just give us a little bit of flavor of who you're talking to and what you're hearing? Paul, I think you're aligned with the meters. You want to take that or you want me to?

Bill Papanastassou: For my first question, I just wanted to touch on that 150 megawatts of growth in 2025, part of your Wolf Compute business. Can you give a breakdown in terms of

Speaker Change: the makeup of that 150 megawatts, how much of that could potentially be coming from Wolf Den operations versus your CB-1? Thanks.

Bill Papanastasiou: Thank you. Yeah, Bill, so good question. Again, I'll point you to page 16 where we kind of laid it out in Wolf Den, co-location building 1, which is what we referred to as CB1, CB2, and then sort of additional co-location capacity. So, you know, it's all kind of laid out there in black and white.

Speaker Change: Yeah, Bill, so good question. Again, I'll point you to page 16 where we kind of laid it out in...

Michael Grondahl: Sure. Mike, we're very active. Mr. Meg, I can tell you that we're talking to a range of customers and a variety of customer class, if you will. We're talking to a couple of the hyperscalers. We're talking to end users. We're talking to enterprise customers of our OEM. I think that what's exciting to people is the immediacy that we're able to meet their goals. As you know, we've advertised that we'll have megawatts available by your end and we've given a very, very programmatic schedule for folks in 25.

Speaker Change: Wolf Den, Co-location Building 1, which is what we referred to as CB1, CB2, and then sort of additional, you know, co-location capacity, so you know, it's all kind of laid out there in black and white. Take a look at it. I think if you have questions, again,

Patrick Fleury: Take a look at it. I think if you have questions, again, holler at us, but it's meant to at least provide a guideline of what we think is very, very achievable. And then, like I said, that could kind of be sped up or slowed down depending on, Okay, awesome.

Speaker Change: holler at us, but it's meant to at least provide a guideline of what we think is very, very achievable and then, like I said, that could kind of be sped up or slowed down depending upon demand.

Bill Papanastasiou: I see that now. Now that the terminal has been extinguished, how should we think about dilution going forward to fund Bitcoin mining? and their aggressive HPCAI growth strategy. Thanks. Yeah, look, Paul, do you want me to answer that, and then you can chime in afterward? Sure. I mean, look, Bill, I think, you know. There are a lot of different places to take that question, but as you know, I think we have among the largest, you know, insider board management team ownerships of the stock. So we've always been very conscious about dilution.

Speaker Change: Okay, awesome. I see that now. And secondly, now that the term loan has been extinguished, how should we think about dilution going forward to fund Bitcoin mining and their aggressive HPCAI growth strategy? Thanks.

Speaker Change: Yeah, look, Paul, do you want me to answer that and then you can chime in after? Sure.

Paul Prager: I mean, look, Bill, I think...

Paul Prager: you know, there's a lot of different places to take that question, but as you know, I think we have among the largest

Michael Grondahl: So I think interest is at the beginning, at the tip of the iceberg, not even close to sort of the end of it. I think that the market's continuing to evolve and a lot of folks are talking to the other scalers about what their needs are and a lot of people don't want to be working with type scalers, so they want direct access. But we are engaged daily on this and for us, I think it's very, very important that we make the right decision and have a customer that's the right credit quality.

Paul Prager: you know, insider, board, management, team, ownerships of the stock. So we've always been very conscious about dilution.

Patrick Fleury: We're also willing to use it when it makes sense. And so I think, staying down the debt and then positioning us to really expand into high-power compute and AI, you know, our team's view was that was a very productive and creative use of dilution. But I think now, right, if we can get the financial engineering correct with the right customer... Then we have a free cash flow positive Bitcoin mining business, which, by the way, if you look on page 11, is among the most It's not the size of the dog in the fight that matters. It's the size of the fight in the dog.

Paul Prager: We've also been willing to use it when it makes sense. And so I think

Paul Prager: paying down the debt.

Paul Prager: and then positioning us to really expand into high-power compute and AI.

Paul Prager: You know, our team's view was that is a very productive and accretive use.

Paul Prager: of dilution, but I think now, right, if we can get the financial engineering correct with the right customer.

Michael Grondahl: You know, we don't want to go out there with if you will, somebody that isn't somebody that we could scale with over time or that we think won't be around any year or two. So I can only tell you that we're very excited about the prospects, we're very excited about the potential customers we're speaking to, but they're coming in all shapes and sizes and again, our primary concern is credit quality and value ultimately to our shareholders in the deal that we strike. I think most of all that should be indicated by the fact that we're funding this 30 million bucks here, I think that should indicate to you real confidence on our part. No, that's great.

Paul Prager: Then we have a free cash flow positive Bitcoin mining business Which by the way, if you look on page 11 is among the most profitable of any of our peers

Patrick Fleury: I mean, we're, you know, small compared to these other folks that are, you know, trying to build access to the moon, and we're generating more profit. And that's important because if we can get the financial engineering correct, like one of our peers has done in the high-power compute and AI business, and we have a business that generates positive free cash flow while we build out a massive high-power compute and AI business. So that is the goal. And if you're going to read between the lines, that would mean very little incremental delusion.

Paul Prager: And, you know, put a nice quote in there, it's not the size of the dog in the fight, it's the size of the fight in the dog.

Paul Prager: I mean, we're, you know, small compared to these other folks that are, you know, trying to build Exahast to the moon.

Paul Prager: and we're generating more profit. And that's important because if we can get the financial engineering correct...

Paul Prager: like one of our peers has done in the high-power compute and AI business, then we have a business that's generating positive free cash flow while we build out a massive high-power compute and AI business. So that is the goal, and if you kind of read between the lines, that would mean very little incremental dilution.

Michael Grondahl: And then just maybe as a follow up to that in the last 90 days, as you've taken part in a lot of these discussions, what have you maybe learned the most or what's been surprising or interesting to you, Paul? Patrick, I'm going to let you start and I'll give my sort of closing remark on that. Yeah, look, Mike, as you know, I always send the answer things too honestly, so I would just say, you know, look, I'm the CFO, right?

Paul Prager: So that's what we're trying to achieve, whether we get there or not and how quickly, you know, I can't answer that today, but that is the goal. Paul, do you want to add anything?

Paul Prager: So that's what we're trying to achieve, whether we get there or not, and how quickly, you know, I can't answer that today, but that is the goal. Paul, do you want to add anything? Yeah, just two things. Listen, we made the decision to issue equity to pay down the debt, you know, on the back of two things. One, we were uncomfortable how having the debt would affect our flexibility if we wanted to make a deal in the HPC-AI space.

Paul Prager: Yeah, just two things. Listen, we made the decision...

Paul Prager: to issue equity to pay down the debt, you know, on the back of two things. One, we were uncomfortable how having the debt would affect our flexibility if we wanted to make a deal in the HPC AI space.

Paul Prager: And we didn't want the tail to be wagging the dog. I mean, the value proposition from HPC-AI is, you know, it's just a whole different magnitude. So we felt it was critical to pay off the debt.

Paul Prager: And we didn't want the tail to be wagging the dog. I mean, the value proposition from HPCAA is, you know, it's just a whole different magnitude. So we felt it was critical to pay off the debt. In retrospect, we're delighted that we paid off the debt.

Michael Grondahl: My job is to get the numbers right and get things financed and financially engineered. I think for me, we have a, you know, I won't use word, but we have a kick bot team and I got to tell you being on the phone with some of the largest and most accomplished data center folks in the world and having our team impress those people, I mean, that to me has honestly surprised me the most because again, I mean, we're really good at what we do, but, you know, we're getting into a bit of a new lane here and we've been studying it extremely hard.

Paul Prager: In retrospect, we're delighted that we paid off the debt, given the volatility that the mining space has gone through, but more importantly, given the opportunity set that we've become aware of in the HPCAI world, and to have the time to thoroughly review each one of the HPCAI customer candidates, to review the credit, to be thoughtful about how long they would be in the business and what commitments we should expect from them and that they could honor. I think that's a luxury that we would not have had, and we still have the lenders sitting on the sidelines now. So I understand it. We had to dilute it a little bit, but it was acquisitive, it was conscious, it was intentional.

Paul Prager: given the volatility that the mining space has gone through, but more importantly, given the opportunity set that we've become aware of in the HPC-AI world and

Paul Prager: and to have the time

Paul Prager: to thoroughly review each one of the HPC AI customer candidates.

Michael Grondahl: So I think, you know, to add some fuel to Paul's fire and the customer side, I mean, the customer conversations are red hot, you know, our phones are raining off the hook. And I think our team is really doing an incredible job. I guess for me what I've learned most in terms of over the course of the last 90 days is how different the requirements are for each one of these customers and yet the one uniform thing that's missing as sophisticated as these customers are is a lack of familiarity with power and energy infrastructure and as we have these discussions and they've advanced it's been great to watch these potential customers appreciate how important solving the energy infrastructure problem is and the value of partnership in getting that endeavor completed so I think we're we're spending a lot of time educating these folks about energy infrastructure how we do it how we suggest they do it and they're teaching us a lot about their requirements and so I think it's pretty fascinating and for me it's far more than you know it's not fascinating because oh it's interesting it's fascinating because I believe that it will jettison tarot wolf to be an important company I think as we as we continue to expand into HPCI given given the backbone of the energy infrastructure that we have sure hey thanks a lot guys the next question is from Jo Flynn from Compass point research and trading please go ahead I thanks the question and to kind of piggyback off the earlier question I was wondering if would you expect to have a 20-megawatt cost of a year and and with the Ford guidance on you know the building build of co-location building to in future capacity is this you know kind of a you know build it and they will come situation or would you expect to have customers cared before and thanks yeah look right there's Patrick I'll answer that I mean look I would just say you know we we put a slide in the deck that updates on timing and you know we we have we're having constant discussions where you know folks are looking for hundreds and hundreds of megawatts of capacity so I would just say as Paul echoed um we are really every day everyone on the team focused on making sure we've got the right customer or group of customers to achieve the maximum valuation multiple and so you know if that takes a little bit longer than expected then it does but I think you know there's a balance here of we know power is in short supply we have it and then we also know folks are scrambling you know for it so I think I'm not going to answer directly your timing question um but you know there's kind of a sweet spot as we all know you know then the coming months um and that's what we're trying to align with uh thanks that that's helpful and then I guess as as we look like into the future in 2026 and 2027 and you talked about like you know with hundreds of megawatt type deals.

Paul Prager: to review their credit, to be thoughtful about how long will they be in the business and what commitments we should expect from them and they could honor. I think that's a luxury that we would not have had

Paul Prager: I think I'm so proud of the team for being committed to doing that because I think having a company that's debt-free and the opportunity to have free cash flow at the levels that we do and having the time to be able to come up with the right HPCAI customer conclusion as opposed to just raise and marry the first girl who asked to go on a date; we ended up in a whole different place. So that was our thinking, and I believe, ultimately, it was in the absolute best interest of our shareholders. I appreciate the color.

Paul Prager: and we still had the lenders sitting out there.

Paul Prager: So,

Speaker Change: I get it, you know, we had to dilute a little bit, but it was accretive, it was conscious, it was intentional. I think, you know, I'm so proud of the team for being committed to do that because I think...

Speaker Change: Having a company that's debt-free and the opportunity to have free cash flow at the levels that we do and having the time to be able to

Speaker Change: come up with the right HPC AI customer conclusion as opposed to sort of just race and you know marry the first girl who asks us out on a date, you know, we ended up in a whole different place.

Speaker Change: So that was our thinking and I believe ultimately it was in the absolute best interest of our shareholders

Speaker Change: Appreciate the color. Congrats again on the quarter.

Bill Papanastasiou: Congratulations again on the quarter. The next question is from Kevin Cassidy from Rosenblatt Securities. Please go ahead. Thanks for letting me ask you a question. Just a question around as you're building out the HPC AI business with lead times on these GPUs stretched out quite a bit. Do you have secure, Deliveries are some of your co-location, your customer is going to help you bring in the equipment.

Speaker Change: Thank you.

Speaker Change: The next question is from Kevin Cassidy from Rosenblatt Securities. Please go ahead.

Kevin Cassidy: Thanks for letting me ask a question. Just a question around, as you're building out the HPC AI business, with lead times on these GPUs are stretched out quite a bit. Do you have secure

Speaker Change: Deliveries are some of your co-location. Your customer is going to help you bring in the equipment.

Kevin Cassidy: Yeah, good question, Kevin. It's Patrick, and thanks for joining the call. Again, that's part of the customer, you know, as Paul likes to say, the sort of get-to-know-you process, right? I mean, a lot of customers, as you know, are very well-funded, but if they're not in the right queue with NVIDIA, then it doesn't matter.

Speaker Change: Yeah, good question, Kevin. It's Patrick, and thanks for joining the call.

Speaker Change: you know, as Paul likes to say, this sort of get-to-know-you process, right? I mean, a lot of customers, as you know, are very well funded, but if they're not in the right queue with NVIDIA, then it doesn't matter. So I think as part of that diligence process...

Patrick Fleury: So, I think as part of that diligence process, you know, we are, for example, like, we are in touch with NVIDIA regularly because you think about, again, what's in the public company? What's in the private company? Some other stuff we look at, like we have close to a thousand gigawatts of power. So excuse me, thousand megawatts of power. So from a GPU perspective, I mean that it moved the needle for Nvidia.

Patrick Fleury: I mean, that's $30 billion in GPUs. Yeah, I think that is certainly one very important aspect of the diligence process that you know, we are in touch with when we're talking to customers. Yeah, I would like to add just a little bit to that. I can't speak for NVIDIA, but it would appear to us, talking to them and to their customers, that they are keen to have allocations to customers other than, you know, the hyperscalers, and as such, and therefore diversify their customer base, right? So it makes sense. So I think that it won't be an issue to have a customer if it's not a hyperscaler that you will have an allocation.

Speaker Change: For example, we are in touch with NVIDIA regularly

Speaker Change: what's in the public company, what's in the private company, some some other stuff we look at like I mean we have close to a thousand gigawatts of power.

Speaker Change: So, excuse me, 1,000 megawatts of power. So, from a GPU perspective, I mean, that moves the needle for NVIDIA. I mean, that's $30 billion of GPUs.

Speaker Change: So, yeah, I think that is certainly one very important aspect of the diligence process that we are in touch with when we're talking to customers.

Speaker Change: talking to them and to their customers it appears to us that they are keen to have allocations.

Speaker Change: to customers other than, you know, the hyperscalers. And as such, and therefore diversify their customer base, right? So it makes sense. So I think that it won't be an issue.

Speaker Change: to have a customer, if it's not a hyperscaler, that, if you will, has an allocation. I think the second thing is, and this is great for the team here, is that I think NVIDIA's...

Paul Prager: I think the second thing is, and this is great for the team here, is that I think videos... Basically telling people, hey, if you want your allocation, show me where you're going to put them. Show me that you have the power. You know, and so that's creating some real energy on the part of potential customers to strike a deal because they move up, if you will, in their supply queue on their side of the equation when they have access to Megawatt.

Speaker Change: basically telling people, hey if you want your allocation, show me where you're going to put them, show me that you have the power.

Michael Grondahl: What kind of margin profile should we expect as the time moves out next? Yeah, look, I think you can see on page 15, we did update that page around the edges if you compare it to our page from the last deck. I think we've kind of stuck with 65-75% margins on a co-location business. I know some of our public, like one of our public peers has put out a higher number. You know, we're going to stick with that sort of 70% for now. And once we have some operations under our belt, you know, we'll update that, but that's kind of that's what we're sticking with for today. All right, thanks.

Speaker Change: You know, and so that's creating some real energy on the part of potential customers to...

Speaker Change: to strike a deal because they move up, if you will, in their supply queue on their side of the equation when they have access to megawatts.

Paul Prager: So I think that is a good, healthy pressure that we can be the beneficiaries of, as long as we think they're the right partner, have the right culture, and could ultimately scale with us. Great. Yeah, I understand that. That's good for diversification. I'm sure NVIDIA doesn't want to have all of their GPUs going to companies that are just competing with each other.

Speaker Change: So, I think that is a good, healthy pressure that we can be the beneficiaries of as long as we think they're the right partner, have the right culture, and could ultimately scale with us.

Speaker Change: Right, yeah, I understand that. That's good for the diversification. I'm sure NVIDIA doesn't want to have all of their GPUs going to companies that are just competing with each other.

Darren Aftahi: The next question is from Darren Aftahi from Ross Capital Partners.

Kevin Cassidy: So, great, thanks for that answer. There are no further questions at this time. I would like to turn the floor back over to Paul Prager, CEO, for closing. Paul, you can go ahead. Sorry, I'm figuring out my mute button. In closing, I want to thank you all for joining us today. Terrewolf continues to lead the industry with best-in-class assets, lowest-unit economics, and unmatched scalability of our owned infrastructure. We remain committed to consistent growth and profitability that aligns with investor interest.

Darren Aftahi: Please go ahead. Thanks, guys. Take it to questions. Can you talk about how the Wolfson for the role of plays relative to the 20 megawatt facility you're building? I guess that's another way is it's something that you would showcase for clients that are potentially interested in the big capacity? Yeah, that's exactly right, Darren. I think it's, and again, on the, you know, as we talked about buying these GPUs and you can see as we've kind of laid out on page 15, that is not our core business, but it is a, you know, show me story.

Speaker Change: So, great. Thanks for that answer.

Speaker Change: There are no further questions at this time. I would like to turn the floor back over to Paul Prager, CEO, for closing comments.

Paul Prager: Thank you for watching!

Paul Prager: [inaudible]

Speaker Change: Paul, you can go ahead.

Paul Prager: Sorry, figuring out my mute button. In closing, I want to thank you all for joining us today. Terrewolf continues to lead the industry with best-in-class assets, lowest unit economics, unmatched scalability of our owned infrastructure.

Paul Prager: We remain committed to consistent growth and profitability that aligns with investor interests.

Darren Aftahi: And, you know, some of the folks that were in negotiations with want to come on site, want to see that we can run the, you know, greatest and latest technology. And so that that's, you know, our commitment there. But again, these are single digit millions of dollars, right, that we're spending on that business on the sort of GPU service business, if you will, and our major and main focus remains collocation.

Paul Prager: I am personally, and as a company, we are entirely optimistic about the future and confident in our ability to deliver sustainable growth and value. I want to thank you all again for your time, and we look forward to continuing to respond to you as you think about Terrel Wolf's investment and any questions you may have. Thank you. This concludes today's teleconference. You may disconnect your lines at this time.

Paul Prager: I am personally, and as a company, we are entirely optimistic about the future and confident in our ability to deliver sustainable growth and value.

Paul Prager: I want to thank you all again for your time, and we look forward to continuing to respond to you as you think about Terrel Wolf as an investment and any questions you may have.

Paul Prager: Thank you.

Darren Aftahi: Great, and then there's one more. I noticed in the release, you guys talked about building cloud. Is that an optionality for either BTC or HBC? I guess, like, when it's complete, is it, what's the calculus from your perspective that determines which way you go there? Thanks. Yeah, look, I think as we've said before, you know, there's other, right, there's, it's not just, you know, a capital allocation decisions for us. So, you know, we have contractors and subs that have been on this site for three years when they build, building one, building two, building three, building four.

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

Operator: Thank you for your participation. [inaudible] L.O.E.C. Ken Unbelievable, Matt Ruggiero, and Seth Rollins. [inaudible] Bye!

Speaker Change: Post-apocalyptic Empire Part 2 Coming Soon

Speaker Change: [music]

Unnamed Speaker: .. .. .. .. .. .. .. D.O.T. [inaudible] Uh uh uh uh uh uh uh uh uh David, [inaudible] OOOOOOOOOOOOO OOOOOOOOOOOOOOOOOOO, Bill Thomas, David Grohl, Ron Schreiber, Bill Asgard [inaudible] And before you watch this video, click like an Since then only!

Darren Aftahi: Now they're moving to building five. So, you know, part of that is we're competing with Buffalo Bill Stadium, for example. So we need to keep those contractors and subs on site working. So we're moving ahead with building five. Yeah, building five does have some optionality, you know, should we land a customer very, very soon, where we could pivot that building. But just what our magnitude, right, we're talking about, call it around $25 million to build that whole building and, you know, roughly 50% of that can be repositioned as, you know, as high power compute AI infrastructure.

Speaker Change: and Grisha for a wonderful, thoughtful reading. Hope you like it. Hope you enjoy it.

Darren Aftahi: So, Darren, it's small dollars to kind of keep our people at the site, keep them working so that we've got runways for the next two, three years to build out hundreds of megawatts. So, that kind of comes into the calculus as well, and again, to kind of pivot, you know, you're talking about, for 50% of that cap access, that's reusable. That makes sense. That's awful.

Darren Aftahi: Thank you.

Unnamed Speaker: .. .. .. .. ... [inaudible] [music] [inaudible] The F**k! and Paul Papanastasiou. Alas, Alas.

Lucas Pipes: The next question is from Lucas Pipes, from Be Riley Securities. Please go ahead. Thanks operator. Good afternoon everyone. This is Nick Giles on on for Lucas. As I appreciate all the color so far. Your good go forward target. What levels of redundancy could influence this figure? I mean Paul you said it earlier that each customer has different needs. So just trying to think about how that figure could potentially flex. Yes, hi Nick.

Speaker Change: with original composed by William Ross Steve Martin Dave Rudy Diane Blank Gates

Lucas Pipes: So it's a good question. So yeah it's roughly five million. As you generally speaking, that's specific for our site. And what I mean by that is if you were to add, for example, backup diesel, reciprocating generators which we're not planning to do that would cost you at least another two million per megawatt. And so again our site is very unique in that it's a former poll plan, right, retired and reclimated. So we have grid infrastructure in place that you typically would not build for a data center.

Lucas Pipes: For example, we have two three forty five KV lines that come into our substation and multiple transformers, right. So what that means is unlike a sort of typical data center that has one line coming in. If we lose one of those lines because a transformer goes down, we just move to the other line. And so when you think about that redundancy, mean really you're talking about you're only going down in that blackout which happened once in the last 60 years, right. And so that again makes our site very unique and our build cost unique to this specific location.

Lucas Pipes: Patrick, that's super helpful. My next question obviously the team has has really deep experience in power and infrastructure, tarot wolf and even bail wolf included in that. But good to hear that potential customers are recognizing this as it relates to data center design. Are you using any third parties today or is there any appetite to bring in any partners on either the data center design or operation side? Yeah, so Nick, we and I'm the wrong guy to answer that question.

Lucas Pipes: And I know my team has spread out all over the place. So I'm not exactly sure who's online nor am I sure what we're willing to disclose. But the short answer is yes, yes and yes. You know, we are partnered with a variety of different partners on all aspects of the HPC AI or what I would call like the data center of the future build. And literally that's everyone from, you know, Nvidia super micro Dell HP like all the way down the line.

Lucas Pipes: So yes, that is a collective efforts led by Sean Farrell SVP of operations on our team and and Nazar comm COO and co founder and their whole team and augmented by multiple outside parties. So yeah, that is a big team effort. And like I said, been just really, really impressed with the team that Nazar and Paul have assembled there. Got it, got it. I appreciate all the detail on Patrick Tew and the team. I'll continue best to block. Thank you.

Brett Knoblauch: The next question is from Brett Knoblauch from Cantor Fritz Gerald. Please go ahead. Hi guys, thanks for taking my question and thanks for all the color you guys have shared.

Brett Knoblauch: Maybe to start, we're like Marin. I know you guys have talked about that facility being able to go to 770 if you do an additional interconnect. Would that occur before you guys consider to drop down additional assets in the tarot from Beowulf? I guess to just help us understand the timing and what would happen between the two. That's a good question. I don't know if Paul wants to dress up, but my answer is not necessarily Brett.

Brett Knoblauch: Some of the customers were talking to you have demand. If you think about what we have, we have close to a gig a lot of low cost predominantly zero carbon power. That is extremely rare. That's, by the way, in what's sitting effectively in the public company and what we have access to also in the private company. But I don't know, Paul, if you want to add any color to that. I think we've discussed this before, Brett.

Brett Knoblauch: The priority is absolutely terrible and they have a call on the opportunity to expand and obviously processes are involved, right? You got to figure out what's fair, you got to go to your audit committee, you got to get a fair and a spend and you got to do all stuff. But at the end of the day, we're going to be most responsive to customer demand and not assume we don't want to assume a whole lot of risk here until we've decided the customer path.

Brett Knoblauch: But we're not going to run out of the opportunity to access power any time in the very near future or further out. I mean, Terrible has what it needs and obviously to take that site and to continue on on it makes sense because of scale familiarity with the site and familiar familiarity with the stakeholders there which includes some state agencies. So we're most excited about Lake Mariner and our build costs there and I continue continuing the ability to grow the usefulness of that site. I appreciate it.

Brett Knoblauch: And then I just want to follow up on, I guess, just how we should be thinking about that because AI, HPC capacity coming online. I think I'm reading in the fine print on one of the slides that you expect the 20 megawatt building to be substantially complete by end of the year. I guess first, should we expect by the end of this year GPUs to be plugged in there? And then secondly, I'm also seeing that you guys are expecting to have called 150 megawatts of maybe gross power capacity for AISBC in 2025, which is, I guess, a bit more than I was expecting or thinking about before this call.

Brett Knoblauch: So does that kind of assume that you'll have a couple additional maybe 50 megawatt buildings that you would look to construct in the back half of next year? Thank you guys really appreciate it. Yeah, hey, hey, Brad. So, you know, I hate to do this but I was persuaded by both, you know, our team and investors and analysts. But if you look in our deck on page 16, you know, we did put together an illustrative development timeline to address exactly that question.

Brett Knoblauch: And so, I just want to point out though that that timeline can be fed up if we need to based on customer demand or it can be flowed down. So, you know, it's not absolute, but I think generally speaking, you know, we feel pretty comfortable with what we put on page 16 from a timing perspective. But again, like I said, it's very dependent on customer demand. Perfect. Appreciate it guys. Have a good one. Thanks, but as a reminder, it is star one to ask a question.

Bill Papanastasiou: The next question is from Bill Papanastasiou from Stiefel. Please go ahead. Good afternoon, Paul and Patrick. Congrats on another quarter of solid unit economics. For my first question, just want to touch on that 150 megawatts of growth in 2025, part of your wolf compute business. Can you give a breakdown in terms of the makeup of that 150 megawatts? How much of that could potentially be coming from wolf den operations versus your CB1?

Bill Papanastasiou: Thanks. Yeah, so good question again. I'll point you to page 16 where we kind of laid it out. In wolf den, co-location building one, which is what we refer to as CB1, CB2, and then sort of additional co-location capacity. So it's all kind of laid out there in black and white. Take a look at it. I think if you have questions again, holler at us, but it's meant to at least provide a guideline of what we think is very, very achievable. And then like I said, that could kind of be sped up or slow down depending upon demand. Okay, awesome. I see that now.

Bill Papanastasiou: And just secondly, now that the term loans have been extinguished, how should we think about dilution going forward to fund Bitcoin mining and their address, HPCI growth strategy? Thanks. Yeah, look Paul, do you want me to answer that and then you can chime in after? Sure. I mean, look Bill, I think, you know, there's a lot of different places to take that question, but as you know, I think we have among the largest, you know, insider board management team ownerships of this stock.

Bill Papanastasiou: So we've always been very conscious about dilution. We've also been willing to use it when it makes sense. And so I think paying down the debt and then positioning us to really expand into high power compute and AI, you know, our keen view with that was that is a very productive and accretive use of dilution. But I think now, right, if we can get the financial engineering correct with the right customer, then we have a free cash role positive Bitcoin mining business, which by the way, if you look on page 11, is among the most profitable of any of our peers.

Bill Papanastasiou: And, you know, put a nice quote in there, it's not the size of the dog in the fight, it's the size of the fight in the dog. I mean, we're, you know, small compared to these other folks that are, you know, trying to build X, the hash to the moon, and we're generating more profit. And that's important because if we can get the financial engineering correct, like one of our peers has done in the high power compute and AI business, and we have a business that's generating positive free cash flow while we build out a massive high power compute and AI business.

Bill Papanastasiou: So that is the goal. And if you kind of read between the lines, that would mean very little incremental dilution. So that's what we're trying to achieve, whether we get there or not, and how quickly, you know, I can't answer that today, but that is the goal. Paul, do you want to add anything? Yeah, just two things. Listen, we made the decision to issue equity to pay down debt, you know, on the back of two things.

Bill Papanastasiou: One, we were uncomfortable how having the debt would affect our flexibility if we wanted to make a deal in the HPCAI space, and we didn't want the tail to be wagging the dog. I mean, the value proposition from HPCAI is, you know, it's just a whole different magnitude. So, we felt it was critical to pay off the debt. In retrospect, we're delighted that we paid off the debt, given the volatility that the mining space has gone through, but more importantly, given the opportunity set that we've become aware of in the HPCAI world, and to have the time to thoroughly review each one of the HPCAI customer candidates, to review the credit, to be thoughtful about how long will they be in the business, and what commitments we should expect from them, and they could honor.

Bill Papanastasiou: I think that's a luxury that we would not have had, and we still had the lender sitting out there. So, I get it, you know, we had to dilute a little bit, but it was accretive, it was conscious, it was intentional. I think, you know, I'm so proud of the team for being committed to do that, because I think having, you know, having a company that's debt-free, and the opportunity to have free cash flow at the levels that we do, and having the time to be able to come up with the right HPCAI customer conclusion, as opposed to sort of just race, and, you know, marry the first girl who asks to set on a date, you know, we ended up in a whole different place. So, that was our thinking, and I believe ultimately it was in the absolute best interest of our shareholders.

Bill Papanastasiou: Appreciate the color, congrats to get on the quarter. Thank you.

Kevin Cassidy: The next question is from Kevin Cassidy from Rosenblatt Securities. Please go ahead. All right, yeah, thanks for letting me ask your question.

Kevin Cassidy: Just a question around as you're building secure deliveries or some of your co-location, your customer is going to help you bring in the equipment. Yeah, good question, Kevin, it's Patrick, and thanks for joining the call. So, again, that's part of the customer, you know, as Paul likes to say, this sort of get to know your process, right? I mean, a lot of customers, as you know, are very well funded, but if they're not in the right queue with NVIDIA, then it doesn't matter.

Kevin Cassidy: So, I think as part of that diligence process, you know, we are, for example, we are in touch with NVIDIA regularly, because you think about, again, What's in the public company? What's in the private company? Some other stuff we look at, we have close to a thousand gigawatts of power. So, excuse me, a thousand megawatts of power. So, from a GPU perspective, I mean, that moved the needle for NVIDIA. That's $30 billion of GPUs. So, yeah, I think that is certainly one very important aspect of the diligence process that we are in touch with when we're talking to customers.

Kevin Cassidy: Yeah, I would like to add just a little bit to that. I can't speak for NVIDIA, but it would appear to us talking to them and to their customers. It appears to us that they are keen to have allocations to customers other than, you know, the hyperscalers. And as such, and therefore, diversify their customer base, right? So, it makes sense. So, I think that it won't be an issue to have a customer if it's not a hyperscaler that if you will has an allocation.

Kevin Cassidy: I think the second thing is, and this is great for the team here, is that I think NVIDIA is basically telling people, hey, if you want your allocation, show me where you're going to put them. Show me that you have the power, you know? And so, that's creating some real energy on the part of potential customers to strike a deal. Because they move up, if you will, in their supply queue on their side of the equation when they have access to megawatts.

Kevin Cassidy: So, I think that is a good, healthy pressure that we can be the beneficiaries of as long as we think that the right partner have the right culture and could ultimately scale with us. Great, yeah. I understand that. That's good for the diversification. I'm sure NVIDIA doesn't want to have all of their GPUs going to companies that are just competing with each other. So, great. Thanks for that answer.

Operator: There are no further questions at this time.

Paul Prager: I would like to turn the floor back over to Paul Quaker, CEO for closing comments. Paul, you can go ahead. Sorry, figuring out my mute button.

Paul Prager: In closing, I want to thank you all for joining us today. Terrible continues to lead the industry with best-in-class assets, lowest-unit economics, unmatched scalability of our owned infrastructure. We remain committed to consistent growth and profitability that aligns with investor interests.

Paul Prager: I am personally and as a company, we are entirely optimistic about the future and confidence in our ability to deliver sustainable growth and value.

Paul Prager: I want to thank you all again for your time and we look forward to continuing to respond to you as you think about Terrible's investment and any questions you may have. Thank you.

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