TeraWulf Stock

Greetings, and welcome to the TeraWulf Third Quarter 2026 Earnings Conference Call.

[Operator Instructions]

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Larkin, Senior Vice President and Director of Investor Relations with TeraWulf. Thank you. You may begin.

Good morning, and welcome to TeraWulf's Third Quarter 2026 Earnings Call. Joining me today are our Chairman and CEO, Paul Prager, our CTO, Nazar Khan; and our CFO, Patrick Fleury.

Before we begin, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. Words such as anticipate, expect, believe, intend, estimate, project, could, should, will and similar expressions are intended to identify forward-looking statements. For a discussion of these risks, please refer to our filings with the SEC available at sec.gov. and in the Investor Relations section of our website.

We will also reference certain non-GAAP financial measures. Reconciliations to the most comparable GAAP measures are available in our earnings release and filings. With that, I'll turn the call over to our Chairman and CEO, Paul Prager.

Thanks, John, and good morning, everyone. On Wednesday, we announced 2 important milestones at justified. Google's credit support in connection with the financing of our $19 billion Anthropic lease and a definitive EPC agreement with Fluor for the development of the campus. I want to start there because those agreements directly address 2 of the biggest questions facing our sector today. How do you finance infrastructure of this scale efficiently and how do you manage the execution risk associated with building it?

There has obviously been significant volatility across AI infrastructure. Investors are focused on higher financing costs, leverage, the amount of capital being deployed across the sector and whether the returns ultimately justify that investment. Those are legitimate questions, and we are highly aware of the environment. Credit spreads have moved and there is a significant amount of infrastructure financing coming to the market.

At the same time, demand for compute remains extremely strong. Deliverable power remains scarce, and our customers continue to make very substantial long-term commitments. This brings me to our justified data campus in Hawesville. We already have the equity required to fund the project. Google's credit support materially strengthens the financing profile. And we fully expect to fund the remaining capital requirement with project-level debt with contractual protections in place to preserve our returns. We have always believed in raising capital when you can, not when you have to. We did just that.

We have the equity, we have the customer and we have the credit support and a clear path to competitive long-term debt financing. We structured this transaction from the beginning so that financing risk would not get pushed on to TeraWulf's shareholders. We protect our economics that is fundamental to how we operate.

The floor agreement addresses the other side of the equation, execution. We know firsthand how difficult these projects are to build because we are doing it at late Mariner. We understand the labor, procurement, electrical infrastructure, cooling, commissioning and customer coordination involved in delivering capacity at this scale. At Justified, we made a deliberate decision to pair that experience with 1 of engineering excellence and 1 of the strongest construction organizations in the world. The definitive EPC agreement covers all 3 data center buildings and expands Fluor's role from early engineering and preconstruction into engineering, procurement, construction, testing and commissioning. It includes defined delivery milestones, open book cost reporting, procurement oversight and contractual cost and schedule protections with guaranteed maximum pricing being established as engineering and procurement progress.

That gives us substantially greater execution capacity without trying to build a global engineering and construction organization within TeraWulf. Construction is already progressing, pilings are underway, and we continue to target phased, ready-for-service deliveries beginning in late 2027 and continuing through the second quarter of 2028. We also continue to expect project costs to remain within the approximately $10 million to $12 million per critical IT megawatt range, which we have previously discussed on a comparable basis. When you look at Justify today, we have a world-class customer in Anthropic, approximately $19 billion of contracted revenue, investment-grade credit support from Google. The equity required an experienced EPC partner in Fluor and a clear path to project level debt financing of equal import we also enjoy a fantastic regulatory framework in Kentucky.

Congressman Reck stated, this historic investment in Hancock County is a great example of what's possible with a collaborative community-first approach to data center development. I am confident this project will serve as a national model for communities looking to grow their economies, participate in the industry of the future and improve the well-being of their residents. Justified is not a theoretical development.

It is contracted infrastructure that we are building to deliver. Lake Mariner is where you can already see that model working CB-3 is online and generating revenue. CB-4 is moving into commercial operation with the remaining data halls scheduled to come online sequentially through the end of the year. CB-5 follows beginning in January with phased delivery targeted through the end of the first quarter.

By the end of Q1, we expect approximately half of our contracted critical IT capacity to be operating and generating revenue, and we expect to exit the quarter with approximately $700 million of annualized run rate leasing revenue. That is an important milestone for TeraWulf. For the last several years, Investors have largely been valuing what we were building. Increasingly, our investors will see these contracts convert into operating infrastructure, recurring revenue and cash flow.

And we continue to expect Lake Mariner to be delivered close to the midpoint of our original $8 million to $10 million per critical IT megawatt cost guidance. We told investors what we expected it to cost and we are delivering against that expectation. Nazar will give you more detail on both Lake Mariner and justified in just a moment. But the larger point is simple, contracted megawatts are becoming operating megawatts. Operating megawatts are becoming revenue, and revenue is becoming cash flow. That is execution.

It is also important to understand the business we are building. TeraWulf is not a neocloud. We are an energy infrastructure company. we controlled the land and power, develop and operate the infrastructure and lease that capacity under long-duration contracts. We do not own the GPUs, we do not take technology risk where the chip may win or may not, in the next generation of AI. Our job is to secure scarce power, build high-quality infrastructure around it, contract that capacity with strong customers, finance it efficiently and generate durable cash flow.

We have been developing and financing large-scale energy infrastructure for decades. This is what we know how to do, and we are building a business not collecting megawatts. Growth only matters if it creates cash flow and equity value for our shareholders. That discipline is particularly important in the current capital markets environment.

Higher financing costs matter, and we factor them into every new transaction. As construction costs, tariffs, financing costs have changed, our contract economics have changed with them. We are not going to absorb financing risk that belong somewhere else in the structure, and we are not going to accept a bad return simply to announce another lease. There is another side of that equation, and that's the cost of waiting.

For Frontier AI companies investing billions of dollars in compute, 6 months matter. 12 months matters enormously. When time to market is critical, the value of real deliverable power increases significantly. And that brings me to Musk. We continue to be extremely excited about Muskie. And there is no doubt this site in Kentucky is far more valuable today than it was at the beginning of the week. Muskie has scale investment-grade utility partners in Kentucky Power and AEP, front of the meter grid service, attractive power economics and a highly supportive state and local environment.

Most importantly, we now have a contracted path to the initial gigawatt of electric service. That is real deliverable power. A piece of land next to a transmission line is not a data center and a queue position is not power. The questions we care about are straightforward. When does the power actually show up? Who is responsible for building the infrastructure? What approvals are in place? What does the energy cost? And can the developer actually execute? At Muskie, we are working closely with Kentucky Power and AEP on opportunities to accelerate portions of the development schedule, including potentially pulling forward that second 500 megawatts.

At the same time, our view of the ultimate scale of Muskie continues to increase and the level of customer interest we are seeing reinforces that conviction. We are in active discussions with a number of very high-quality prospective customers. And 1 of the questions we get asked is how we think about customer diversification. Diversification is clearly valuable. We understand the benefit of adding another large, high-quality customer to the portfolio. But you cannot look at diversification in a vacuum. There can be meaningful economic differences between leasing to a hyperscaler and leasing to a frontier model company.

The credit profile may be different, the financing may be different but the rent yield and return on our invested capital can also be materially different. Team and culture matter as well. When you are entering into a long-duration relationship, alignment, speed of decision-making and the ability to work through issues together can have a significant impact on execution and, ultimately, on returns. We weigh all of it. What is the rent? Who is the credit? What does it cost us to finance? How much capital do we have to put in? What protections do we have? What's the duration of the deal? And ultimately, what is the risk-adjusted return to our shareholders?

My job is to make the decision that creates the greatest risk-adjusted value for TeraWulf shareholders. And I take that seriously. Justified is a good example. We have a frontier AI customer with very attractive long-term lease economics paired with investment grade credit support from Google. At Muskie, we have something ably valuable, scale, power and time. That gives us options. It allows us to be patient and disciplined about the selection of a customer. the terms, the credit structure and the economics rather than feeling pressure to just sign the first available tenant.

I am not going to predict when we sign the next lease or who that customer might be. But I am highly confident that Muskie will deliver highly confident in the level of customer interest and highly confident that we could structure a transaction that reflects the value of this important asset. Just as importantly, we are not going to sign a lease that forces us to issue equity at a valuation, we do not believe reflects the value of the company. The commercial structure, customer economics and financing plan, they have to work together. We will bring that home.

Our objective is to structure a financing solution that recognizes the value we've created at Muskie, preserves attractive returns and minimizes dilution to our shareholders. Development will be phased. Capital will be raised and deployed alongside contracted demand. And we will remain intensely disciplined about protecting the balance sheet as we grow.

More broadly, we remain confident in our target of contracting an incremental 250 to 500 megawatts of critical IT capacity annually. And importantly, we believe that we can achieve that target with the portfolio we control today. We do not need to buy sites simply to make our pipeline look bigger, any new opportunity has to have real power and compete for our capital and create value for our shareholders. Do we control the power, can it scale, can it be delivered when the customer needs it? Can we finance it intelligently and can we earn a compelling return. The same discipline applies to regulation and the communities where we operate.

I have said publicly for years that not every data center should be built and not every site is appropriate. We welcome clear and durable frameworks. Good regulation creates certainty, protects communities, protects our project and helps distinguish credible, well-capitalized projects from speculative ones. That is consistent with how we have been developing these many years.

So when I step back, I feel very good about TeraWulf today. At Lake Mariner, we are delivering, CB-4 is coming online this quarter, and CB-5 follows in the first quarter next year. Once the campus is fully ramped, we anticipate more than $700 million of annualized lease revenue. And we're already planning the next opportunity for growth at Lake Mariner with a path to scale to approximately 750 megawatts to accommodate CD-6.

The infrastructure is in place, fully permitted, contracts signed and the cash is flowing. We are also in a professional and established regulatory framework where our management team has been operating for well over a decade. At justified, we have a world-class customer in Anthropic and approximately $19 billion of contracted revenue. We have investment-grade credit support from Google, the equity required under our current plan and a clear path to project level debt financing with Fluor as our EPC partner and guaranteed maximum pricing in place, we have the execution platform to deliver at scale. And we are doing it in Kentucky, where we have found a highly constructive state and local environment that understands the economic and infrastructure opportunity these projects represent.

Justified is permitted, contracted, financeable and under construction. And at Muskie, we have something increasingly scarce. Scale, attractive power economics and a real path to a very large block of deliverable power. We have an investment-grade utility partner in Kentucky Power and AP. Again, a highly supportive state and local environment and most important, a contracted path to an initial gigawatt of front of the meter service.

That support is real. The Basheer administration has publicly recognized TeraWulf's commitments to pay the full cost of our power, protect ratepayers and the environment contribute significant local and school taxes and create jobs for Kentucky and has described Muskie as a project that will be positive for the community.

We expect to pair that power with a high-quality EPC partner and guaranteed maximum pricing, giving us the same cost and execution discipline we have put in place at justified. That is a very strong hand. But megawatts alone do not create shareholder value. What matters is whether the power is real, whether the capacity is contracted the credit behind those contracts, what it costs us to build and finance and the returns that accrue to our shareholders.

Demand is robust. Deliverable power remains scarce. We have the sites. We have the capital. We have the customers and the management team that has demonstrated that we can execute. We are building generational infrastructure assets designed to stand the test of time. Technology will surely evolve. Customers may change. Capital markets will move. But what we are doing today is fundamentally the same thing we were doing yesterday, and the same thing we will be doing tomorrow, securing scarce power, building critical infrastructure around it contract it intelligently and executing. That focus will never change. Our discipline will never change. And our commitment to protecting the balance sheet in creating long-term shareholder value. That will never change.

With that, I'll turn it over to Nazar.

Thank you, Paul. I'll focus on execution across Justified, Lake Mariner and Muskie. Starting with Justified, yesterday's Fluor announcement is an important step in moving the campus from development into full-scale construction. Fluor has already been working with us on early engineering and preconstruction activities. The definitive EPC agreement expands that role across engineering, procurement, construction, testing and commissioning for all 3 data center buildings. For a project of this scale, that matters.

The challenge is not simply constructing the buildings. Electrical systems, cooling infrastructure, utility systems, equipment procurement, customer hardware and commissioning all have to come together against 1 coordinated delivery schedule. Fluor brings deep engineering expertise, global procurement capabilities, access to skilled labor and extensive experience executing large complex infrastructure projects. That complements the development and power expertise we have built internally and significantly expands our ability to execute at scale. The agreement also gives us greater visibility into cost and schedule through defined milestones, open book cost reporting, procurement, oversight and contractual performance protections with guaranteed maximum pricing being established as engineering and procurement in advance.

Construction is progressing today. Pilings are underway and engineering and procurement continues to advance, and we remain on track for phase ready-for-service deliveries beginning in late 2027 and continuing through the second quarter of 2028. We also continue to expect project costs to remain within the approximately $10 million to $12 million per critical IT megawatt range we have previously discussed on a comparable basis.

Turning to Lake Mariner. This is where you can see the execution capability we have built over the last several years. CB-3 is fully online, operating and earning revenue, a milestone for our contract with Fluid stack. At CB-4, tenant equipment is fully deployed and energized in DH4 and DH3, which are the first 2 data halls of 4 data halls in the building. Commercial operation and rent commencement for those first 2 data halls in CB-4 is expected shortly.

For the remaining 2 data halls in CB-4, commissioning has already begun on DH2 and will start on DH1 in the middle of this month. These last 2 data halls are scheduled to come online in the balance of the fourth quarter. For CB-5, commissioning activities are set to start this month to support a Q1 2026 commencement across all 4 data halls. CB-4 and CB-5 are copies of each other. The final commissioning and commencement of operations at CB-4 positions us well to delever CB-5 in a similar manner in Q1 of 2026.

This phased approach is important because these buildings do not move from construction to full operation on a single date. Each data hall progresses independently through installation, startup, commissioning, customer equipment integration and final acceptance. That allows us and our customers to bring capacity on progressively as each data hall is ready. There's also significant alignment around these delivery dates. Lake Mariner represents the next major block of capacity in our end customers' deployment plan. So TeraWulf, Fluid Stack, Google and the broader project team are tightly coordinated around construction, commissioning, hardware delivery and systems integration.

From a cost perspective, we continue to expect the overall Wulf Compute Development to be delivered close to the midpoint of our original $8 million to $10 million per critical IT megawatt guidance range. At this stage, we have substantially greater visibility into the remaining labor, equipment, commissioning and construction scope, which gives us increasing confidence in both the schedule and ultimate cost outcome.

Finally, turning to Muskie. The key point from an engineering and development perspective is that the power plant is real and utility supported. We are working with Kentucky Power and AEP on a defined path to large-scale front-of-the-meter service. The utility infrastructure, service arrangements and development responsibilities are being advanced together rather than a separate work streams. We also continue to work closely with Kentucky Power and on opportunities to optimize and potentially accelerate the development sequence, including the potential to pull forward portions of the second 500 megawatts into 2029.

More broadly, we believe data center demand will increasingly become an important catalyst for investment in transmission and generation infrastructure across the country. Muskie is a good example of where our long history in developing and operating power infrastructure gives us an advantage in working with utilities to develop practical solutions for very large loads.

Across all 3 campuses, the objective is the same: take secured power and contracted customer demand, convert them into operating infrastructure safely, reliably and efficiently. Lake Mariner demonstrates that we can do it, Justified expands that execution capability to a much larger scale and Muskie provides the next major platform behind it.

With that, I'll turn it over to Patrick to review the financial results for the third quarter.

Thank you, Nazar. The third quarter results reflect an increasing contribution from HPC's revenue and disciplined execution at Lake Mariner. Following quarter end, we entered into 3 transactions of significant financial importance. First, we amended the revolving credit facility, increasing the aggregate commitments from $250 million to $400 million, with an incremental $150 million accordion feature for a total size of $550 million. Importantly, we also eliminated the $150 million LC supplement, making the entire revolver capacity available for letter of credit issuance.

Second, we secured a Google credit backstop for project financing in support of $19 billion, 20-year lease with Amope at the justified data center campus. And third, we entered into an EPC agreement with Fluor. Together, the Google credit support and Fluor EPC agreement materially advanced both the financeability and execution certainty of justified and position us well to complete the project level debt financing.

Our Wulf Compute 7-75% senior secured notes issuance was the first financing of their kind in this sector and have since been followed by a number of similar public and private transactions. The bonds have continued to perform well relative to peers, reflecting Google's credit support, TeraWulf substantial equity contribution of approximately 30% of project costs and our growing track record of execution at Lake Mariner.

I'll focus my remarks today on the third quarter results, our updated Lake Mariner capital outlook and the liquidity available to fund our contracted projects and future growth. Revenue for the third quarter was $76.2 million compared with $44.8 million in the second quarter, HPC lease revenue increased 97% quarter-over-quarter to $63.0 million from $31.9 million and represented approximately 83% of total revenue. HPC revenue consisted primarily of $46.0 million of rent, $11.3 million of tenant fit-out revenue and $5.4 million of power pass-through revenue. The CB-3 lease commenced on July 13, and our third quarter results reflect 102 critical megawatts operating and generating lease revenue at Lake Mariner.

Completion of CB-3 also satisfies the applicable conditions for $600 million of Google's credit support to become effective, further strengthening the contracted revenue profile of the late manner build-out. Turning to operating results. Cost of revenue exclusive of depreciation increased to $25.2 million from $12.4 million in the second quarter, primarily reflecting higher power costs and $10.1 million of tenant fit-out costs.

Demand response proceeds, which are reported as a reduction in cost of revenue, increased to $3.2 million from $2.8 million in the second quarter. Operating expenses increased to $39.5 million from $23.4 million as we continued scaling the platform ahead of additional HPC capacity entering service.

The increase primarily reflected $4.7 million of additional site level expenses, including security, labor and pre-revenue operating costs. million of site preparation and demolition costs associated with future development and $1.3 million of amortization of deferred charges partially offset by $2.6 million of lower minor equipment repair costs. Reported HPC Leasing segment profit margin was approximately 17% during the quarter compared with our long-term target of approximately 85%.

Importantly, the reported margin includes $11.3 million of tenant fit-out revenue and associated costs, $11.1 million of free revenue and noncash operating costs at Wolf Compute and $18.0 million of development costs across our portfolio. Adjusting for those items and excluding approximately $5.3 million of power costs from both revenue and expense, HPC Leasing segment profit margin was approximately 83%. We expect reported margins to move toward our long-term target as additional contracted capacity enter service, pre-revenue cost decline and mature HPC lease revenue becomes a larger portion of the overall mix.

SG&A expense decreased to $57.1 million from $126.9 million in the second quarter. Excluding stock-based compensation, adjusted SG&A was $27.1 million compared with $28.6 million in the prior quarter.

Depreciation increased to $29.6 million from $21.2 million in the second quarter, primarily reflecting additional HPC infrastructure placed into service at Lake Mariner. Interest expense was $53.6 million compared with $56.4 million in the second quarter, and we recognized interest income of $28.6 million in Q3 compared to $28.9 million in Q2.

Cash interest paid was $5.0 million compared with $125.7 million in the second quarter. GAAP net income attributable to TeraWulf was $709.9 million compared with a net loss of $939.9 million in the second quarter. The increase was primarily driven by the noncash fair value adjustment associated with the Google warrants and the gain on sale of equity interest in the Abernathy joint venture. Non-GAAP adjusted EBITDA was negative $12.8 million compared with negative $18.3 million in the second quarter.

Turning to the balance sheet. Cash and restricted cash totaled approximately $2.4 billion as of September 30. At the parent level, we held approximately $1.1 billion of cash and restricted cash at quarter end with approximately $300 million of this cash used to collateralize LCs for the Muskie data campus.

We expect this cash collateral to be replaced with LCs from our revolving credit facility in December when the CB-4 lease commences and our revolving credit facility capacity increases from $150 million to $400 million. We also expect to receive an incremental $150 million from the sale of the Abernathy JV on or before December 31, 2026, and another approximately $130 million on or before April 30, 2027, subject to the terms of the transaction.

At Wolf Compute, we had approximately $1.2 billion of gross cash at quarter end or approximately $800 million after accounting for debt service reserves and interest during construction accounts. Approximately $2.9 billion of project capital expenditures have been completed with approximately $1 billion remaining.

Approximately 2/3 of the remaining capital expenditures are committed, providing increased visibility into the remaining capital requirements. Our original cost guidance for Wulf compute was $8 million to $10 million per critical IT megawatts. We currently estimate total project cost at approximately $8.9 million per megawatt, well within that original guidance range. At the justified data campus, we have contributed approximately $550 million of equity as of September 30, representing a substantial portion of the equity contribution contemplated under our current project financing plan.

Our near-term liquidity remains robust, over $1 billion of cash at TeraWulf parent and up to $400 million of revolving credit facility and LC capacity. Based on our current plans and assumptions, our existing liquidity and expected Abernathy sale proceeds provide the capacity to fund our remaining Lake Mariner commitments, our remaining equity investment at justified interim letter of credit requirements at Muskie, all without accessing the equity capital markets.

And as all contracted leases at Wulf Compute commenced through the first quarter of 2027, we expect the project to generate significant cash flow, rapidly repay debt and operate at moderate leverage. That creates another important source of capital for TeraWulf. Unlocking equity from stabilized assets and recycling that capital back to the parent for future contracted growth will be a priority in 2027. Our financial approach for existing and future projects remains simple. Sign a lease with an investment-grade tenant or backstop provider, walk in our build cost and finance the spread. This is how large scale long-duration energy infrastructure has been contracted, built and financed for decades. As the cost of capital increases, preserving that spread becomes even more important.

We will remain disciplined about the relationship between our weighted average cost of capital and the yield on our leases with the objective of ensuring that each incremental megawatt we contract creates value for shareholders. In summary, the third quarter results reflect a financial profile increasingly driven by long-term contracted HPC revenue.

The fourth quarter will accelerate that trend as CB-4 begins phased lease commencement adding up to 168 critical megawatts of contracted capacity at Lake Mariner, followed by CD-5 in the first quarter. Cash flow is ramping. Approximately 3/4 of Wulf compute capital expenditures were already behind us as of September 30. We -- we have substantially greater visibility into the remaining capital requirement, and we have the liquidity to complete our contracted developments and fund the next phase of growth while remaining disciplined about the balance sheet. With that, operator, we are ready to take questions.

[Operator Instructions]

Our first question comes from Mike Grondahl with Northland Securities.

A competitor earlier this week announced kind of a capital-light lease, very robust development yield in kind of a modular construction approach, is that something that might be on the table or possibility for the Muskie site?

Mike, listen, it looks like a great deal on a return basis, but I don't really have the full picture on all the details. In our deals, we believe we are a strategic partner to our end user. We like to work closely with the end user and deliver creative ideas around delivery speed, design, financing, uptime flexibility. Given capital requirements, we would fully expect to see an evolution of our deliverable. We've spoken to hundreds of our investors in the past 3 months, and I consistently hear about terminal value. We have a very strong view that our sites have strong terminal value, given a roughly 5-year upgrade cycle, attractive power prices and locations that allow for reference.

Certainly, the structure that Ryan did is interesting, but it's not currently our primary focus.

And if I can add -- this is another here, Mike. If I can add a few things. If you just -- if we look at the space, right? It's kind of a function of what are you spending and what are you earning a return on. And so just from the outside looking in on that structure, -- they're spending $2 million on kind of a powered land structure for 910 megawatts since they're getting that. It's not clear on how much of the next kind of $4 million bucket kind of their earning. And then if you compare that to a colo model, as we mentioned earlier, we're in that $10 million to $12 million range per critical IT megawatt for delivering kind of a turnkey building at Muskie.

So we're looking to kind of earn a return on that full $10 million to $12 million. So I think it's a function of both how much capital are you putting up what is the cost of that capital? And what's the spread you're earning on it. We remain of the view that the model that we have kind of value -- creates the most value per megawatt of power that we have available. And so kind of providing that full stack. And on a risk-adjusted basis, we think we kind of generate kind of the most equity value per megawatt with the turnkey colo solutions that we're going after.

Got it. That's helpful, guys. And then maybe just as a follow-up, how did you decide at the end of the day to use the Google backstop versus maybe just going direct with Anthropic. Can you talk about kind of what you think you're going to benefit there from the Google backstop?

Yes. Mike, it's Patrick. So as you know, credit has been from day 1 and remains our #1 focus. Obviously, Entropic is a terrific client, and we're working across multiple sites in partnership with them. but they are not public, and they're not investment grade yet. And as you know, that is -- has been our #1 focus. We have to have investment-grade support so that the cost of capital is efficient for us and that we create durable equity value when we sign leases. So that will be always first and foremost in our minds as we create value here.

Perfect. Good luck this fall and winter, guys.

Our next question comes from Stephen Galgoe with KBW.

Nazar, you hit on this a bit in the prepared remarks, but can you just walk us through more what gives you confidence in the $10 million to $12 million per megawatt CapEx estimate for Hawesville particularly given recent cost overruns across the industry? And how far along is the design for and how much of the cost is fixed today and who ultimately bears the risk of any overruns?

Sure. So great question. On CB-3 buildings at Justified. And so -- and this is kind on the Justified side or the Muskie side, Stephen.

This is -- I mean this was on the Justified side, but Yes, yes.

So on the justified side, we're kind of at 90% on the engineering and the drawings, and we expect to be at 100% by December 1. So that then leads into the procurement. We are at over 80% today kind of on the long lead equipment and we'll be at 100% by year-end.

So between the engineering, which we'll have locked down here, by the first of December on the long lead equipment which we will have locked down by the end of the year. We feel like we're in pretty good shape. Overall, kind of 80% of the scope under the floor agreement, so that would be all the construction and the long lead equipment will also kind of be buttoned down kind of by that pipe early December.

So that's what gives us kind of good visibility into both from what are we building and what is the cost of what we're building. So that's where we sit today. And if you look at just where we are on total cost overall compared to Lake Mariner, you can see kind of a fairly meaningful change in what our cost per megawatt was there versus what we're seeing kind of real time on justified here. So hopefully that gives a sense of the confidence around both kind of what we're building through kind of completion of the design engineering as well as kind of procurement of all the long-lead equipment required to support the project. In terms of -- and then just kind of the last piece you had there in terms of just kind of who kind of bears cost overruns? There -- we mentioned in the prepared remarks, -- this is kind of a GMP gross max price structure. And so there are components that either subcontractors bear with respect to work that they're doing or kind of the combination of all that floor bears together. So have worked closely with Florida ensure that we are very well defined on what it is we're building so that there's clarity on the responsibility for the cost. And so through that G&P structure, that's another layer of protection that we have as we roll forward.

Our next question comes from Eric Luebchow with Wells Fargo.

Patrick, I just wanted to explore, you talked about kind of protecting your spreads if you see a change in the cost of capital after you sign a lease. So maybe you can talk a little bit about mechanisms in the contracts to potentially rentalize if you do have to raise at a higher cost of capital what protections you put in place both for the hospital site and then maybe on a go-forward basis?

Yes. Look, the terms of our leases are confidential, so I can't give you the details, but what I can tell you is a couple of times. First, similar to our structure of Wulf compute, Google has entered into agreements to back stop Anthropic's obligations under the lease. Upon the lease commencing, Google's credit support then protects against Anthropic default through, one, a mandatory lease assumption or to a debt reducing termination payment. So that's the same structure as well compute,

Unlike our structure at Wulf compute and that evident in all of our disclosures, TeraWulf is not advancing Google any incremental upfront equity here. and the cost of Google's credit support is recoverable from the tenant under the lease. In addition, Google's credit support falls away when entropic achieved certain investment-grade credit ratings. So those are all the details I can give you today. The rest of the details will be public when we kick off the financing. But I think, as Paul has said publicly, when we negotiate these leases, we seek to preserve our economics. And so there are a number of ways to effectively do that -- and I can assure you that we will keep doing that in future leases as well.

Great. And just a follow-up. As you look at the range of options for Muskie, so far, you guys have the deals with noninvestment-grade companies with backstops. I mean does the attractiveness of a direct IG lease is currently in the current market. Is that more attractive today? Or how are you kind of thinking about the range outcomes for kind of credit for Muskie?

Yes. Again, I think reiterating what I said particularly in a market like this, but I want to go back because we have put this front and center since day 1. Right? We are a capital markets business. We cannot be dependent on another company that is a capital markets dependent business without an investment-grade credit rating. So all of our leases will be either backed by investment-grade tenants, or have investment-grade tenants as the primary lessee because that is the only way to effectively finance these projects. In addition, our projects will have a healthy equity layer. I would point out, again, Wulf Compute was the first of its kind in the space. And there's about 25 bonds on my Bloomberg screen and Wulf compute other than 1 bond trades the absolute best.

And that's a combination of the fact that we have an investment-grade tenant and that TeraWulf has put in a significant -- very significant close to 30% equity check into that business. and that we are executing. So again, I think those are the themes that you will see time and time again from us. We are not going to deviate from that.

Our next question comes from Jed Dorsheimer with William Blair.

I guess first one, maybe a complement. I mean you guys have kind of forged a pathway that historically actually looks like 1 of the few that's kind of narrowly avoided some of the pitfalls of or challenges in the market. And Meta actually put out an interesting post last night that kind of differentiated the difference between -- or differentiated between campaigning and governing.

And so my first question to Paul, I'm just curious, there's a lot of fear and rhetoric in the markets right now. I'm just curious how you see things playing in terms of governing functions associated with around data center and a lot of the noise that's in the market? And then I have a follow-up.

If you take a look at the markets where we're active, right? In New York, Lake Mariner, again, fully permitted. We're familiar with the regulatory framework there. We operate a call-fred power plant there for 20 years. We shut that down, mitigated it in partnership with the state, put up a data center that's very well received, brought a lot of jobs, tax revenue to the state. What the governor did there, I thought was sensible. She didn't look at sort of at coming up with a ban on data center. She looked up with coming with the framework on how we could work with future data centers.

And we weren't impacted by that, as you know, we're already permitted, and we weren't interacting with the DEC for that site. But she put it in the hands of her professionals, and I think they'll come back with something that's very sensible. As I said in my prepared remarks, good regulation is a very good thing and protect our investment. And it shows the projects that make sense from the ones that probably don't. In Kentucky, there's a state where, again, it's a democratic state. Governor Basheer has got real national prominence. Loves the facility in my prepared remarks. We quoted this office on how he thinks about Terra Wolf. He thinks we're the model for how data centers ought to be developed on a nationwide basis.

Listen, I think there are some states that haven't thought about how data center should proceed to the level that people in, for instance, Kentucky and what Virginia have. And I think that it may take a little bit of time, but data centers can be developed really in concert in partnership with the community. They are big drivers for the economy. They are of utmost importance from a national security perspective. And it affects everyday quality of but a really positive and constructive way.

So I think there's -- as CEO, I'm not supposed to comment on the markets, but Certainly, there's a lot of concern and fear out there. And -- but I think when you really get down to it, you got to be located in the right places. They have to have clarity on what permitting is like they have clarity on -- they have to have a skilled labor force. They have to have good energy policies.

And that's been the focus for us. We didn't focus on Kentucky by accident. It was all a really thoughtful and well considered development effort. And that's what you'll continue to see in our development efforts in our pipeline.

That's helpful. And then Patrick, just as my follow-up. I look at the same Bloomberg screen in terms of the debt in you and 1 other are the only 2 green on that. I am curious as you do have I know you guys are not at Neo cloud. But as you look at the debt that's trading of some of the NeoCloubs and others in the stack, they've gone into that junk range. And I'm curious whether or not you think that a clearing event would be -- is a necessary evil to kind of reset here or what your thoughts are on the credit side?

Yes. Look, I think there's a lot of clearing events in the market right now, right? The election was 1 of them, Anthropic's IPO was another one. So yes, I think -- but as a 20-year credit distressed analysts on the buy side, I mean this is natural for the markets, right? They -- and not only that, but you have a lot of issuance all competing, whether it's the hyperscalers, the U.S. treasury. So I think what you're seeing in the credit markets is pretty natural. They haven't frozen up, they have just moved spreads higher because you have to induce new capital to come into that market.

And to do that, you got to move spreads higher. So that's, again, why we come back to it is absolutely critical to have an investment-grade tenant so that we preserve that spread between our WACC and our yield on cost. And again, that is something that is fundamental to our business. If you look again, as I said in my remarks, every single piece of long-lived, long-term energy infrastructure in this country has been built -- that's how it's been done, whether it's nukes, refineries, gas plants, LNG facilities, and so we will continue to kind of prosecute that as we move forward.

Next question comes from Stephen Byrd with Morgan Stanley.

Lots have been addressed. I just wanted to hit on, I think, a misconception that we sometimes hear, which relates to equity overhang in the event of signing really attractive deals and I know you all have thought about many options, and I think maybe the market doesn't fully appreciate just how many options there are to think about funding your overall capital needs. So I just wanted to go back to that topic and make sure we really address that.

Yes. Stephen, it's Patrick. I'll take a cut at that and then Paul or Nazar can bat cleanup here. But Look, there's a lot of options in this playbook for equity, right? There is a prepayment from a customer. There is customers buying equity at higher prices. There is leverage in the system, which I mentioned in my remarks, right? I mean, Wolf compute when it comes online is significantly underlevered vis-a-vis other public and private companies out there. there -- so there's also, as I think you pointed out in a recent research report, right? There are infrastructure funds that are chomping at the bit to buy equity in stabilized assets at the project level at significantly higher multiples than where any of us trade today. So there are a lot of tools in our toolbox.

And as Paul said in his remarks, we will not sign 1 of the biggest leases that the company has ever signed and be forced to dilute our shareholders at these levels. We just will not do it. And so my job is to make sure that every single tool in the toolbox is available to us that we are looking at all of them and that's what we're doing.

Paul and Nazar I don't know if you want to add anything.

I would only want to add. And our customers are entirely sensitive to that. and they work with us when we're negotiating with them to ensure we could preserve our economics and preserve the spread for shareholder value. It's really that simple.

Yes. Just -- and Stephen, just to add to what Paul just said. If you look at the customers, right, there -- and you can see this in the public companies, and you can see it now in Anthropic interest on they are making tremendous amounts of profit. So it's easy for us to have a logical discussion with them on an open book basis as to -- here is our cost of capital. Here's my cost of equity. Here's my cost of debt depending upon what the lease looks like and who the investment-grade support is on the lease. And then the simple discussion we have is, look, we're just trying to keep a spread between the yield on cost on the lease and our WACC.

And I think when you go with that open book to any hyperscaler or any frontier AI lab, it's a very easy logical discussion to explain to them that you want to preserve that, that you don't want that to be at risk. So that is the approach we take with every single 1 of our customers. whether it's hyperscalers that we're talking with or Frontier labs or otherwise, that's our goal. That's how we create double equity value, and we will look to preserve that, and we will get lease protections that allow us to preserve that.

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

You talked about working with Kentucky Power to potentially pull forward the second 500 megawatts. So I was just curious if there's any upfront investment that may be required on Terawatt what's ultimately being contemplated there? Is it something from a generating perspective or infrastructure upgrades? Just more color would be great.

It's Nazar here. So we have a 500-megawatt ESA signed under an existing tariff of Kentucky Power. So the first 500 megawatts starts delivering in 2028. We then went back to Kentucky Power to say, "Hey, we're building substation here that has the capacity for a gigawatt, how do we get our hands on the next 500 and that next 500 megawatts requires new generation." And as time goes on here, I think more broadly, if you look across the country, power that's going to be available at 29, 30 and beyond will likely require some sort of new generation and transmission to support that.

And so they have -- Kentucky Power has a project called Big Sandy. It's a 760-megawatt CCGT that they've been working to try to figure out how to get into their system. So we work an arrangement with them where we're going -- we will be filing here with the Kentucky PSC in the next few weeks to get approval for the construction of that 760-megawatt CCGT. The load that we will have will be a gigawatt will be greater than the total capacity of that plant. And so that's kind of the second 500 megawatts. That will be a filing in front of the PSC here shortly. We're expecting approval on that by mid-2027. And importantly, within that structure, it is a clear line between what Kentucky Power is going to be spending and what we're going to be paying to use that power.

And so included within that structure are kind of 2 important components. One is, is there an incremental $100 million residential credit embedded within the agreement that will kind of be paid out over 10 years of the contract. And the second is that the interest during construction for the power plant, which will kind of go from 2027 once the approval comes in through the delivery of the power generation facility in 2031, there's kind of interest that accrues during construction. And so that will be factored into our rates.

And if you think about our load profile, we're ramping up in 2029 for that second 500 megawatts, 2028 for the first 500 megawatts, so that -- there's an overlap between us taking power mix from the grid and then kind of bridging to the 760-megawatt CCGT on the back end.

So I think it, again, it illustrates our ability to understand how to be catalyst to bring this generation on. We think we've structured a very reasonable and fair agreement with Kentucky Power that allows Kentucky Power to draw a straight line from the costs that they're incurring versus what we are paying. And therefore, that's going to give us this full gigawatt of power prior to the end of 2029 in the market that's tight on power availability.

That's super clear. Just a quick follow-up separately. What should we be modeling just from a number of megawatts billing kind of as we look to Q4 here and then as we kind of exit the first quarter.

Yes. So Nick, it's Patrick. I think what you're asking is with regard to CB-4 and CB-5. So I think exiting fourth quarter, we'll have CB-4 online. So that's an incremental 168 megawatts. We have 102 critical megawatts running there today, earning rent, so exiting fourth quarter, another 168, exiting first quarter next year, CB-5 online, so another $168 million and then Hawesville starts to come online late '27 into '28. And I think you can kind of think about that as ratable megawatts kind of CB-1, CB-2, CB-3, again, late Q4 and then CB-2, CB-3 first half of '28.

Our next question comes from Michael Rollins with Citi.

Curious if you could speak more to the current pricing environment? And as there's all these cross currents on constraints in certain markets, what are you seeing in terms of just the overall yields you can achieve, how sensitive those yields or spreads are to changes in the rate environment. And if there's anything else in terms of escalators or other pricing dynamics that are evolving that we should all be mindful of?

I appreciate try not to focus on where the current market pricing is and focus on building shareholder value. we're doing just that. And in fact, as Patrick said, we're able to, as we move forward, protect the economics of our deals in our contract with our customer so that the only risk we're really taking is on execution. I talked about it in my remarks, how we mitigate that risk by being on top of it. Separately in the new project, Hawesville, we signed for as our EPC with the GMP. We would expect to do the same thing at Muskie we'll have an EPC contract with the GMP, highly credible folks. And then on the debt side, as Patrick has indicated, we absolutely require investment-grade support. Otherwise, that customer is not going to be a real interest to us. This is a business about financing efficiently and so between the terms of the deal where we protect our economic spread and our execution skill set and the investment-grade support on the debt we think we have a lock on creating shareholder value. And that's what we do. It's really that simple.

We do it every single day that is our exclusive focus.

Our next question comes from Michael Funk with Bank of America.

Thank you for the question. So your comment on the call that unlocking value from stabilized assets that come online, I think I understand your point there, but there's also a lot of vehicles in market today looking to buy stabilized assets. Would you consider selling stabilized assets to recycle that capital back in a new development?

Yes. Look, that's -- it's Patrick. Thanks for the question. Look, our business is to build and own these long term. But as I've seen in other infrastructure assets throughout the country. I mean, for example, 1 that resonates with me was when Blackstone bought into FirstEnergy's transmission business. the classic example, right, of an infrastructure fund, buying into an operating business at a significant multiple that proved out equity value at the parent.

So that has been done time and time again throughout different energy infrastructure businesses in the U.S., both public and private. So yes, is that a possibility, right, if the market continues to trade, all of us that are building data centers for NVIDIA, AMD, Amazon, Google, Microsoft others to put their chips in, Yes. But I think, first and foremost, our #1 priority, again, is getting -- executing, getting the buildings up and running, getting them online, converting that into cash flow and then repeating that process in a financially efficient way.

And then 1 more if I could, quickly, going back to the sort of previous question about cost and build costs. Presumably, there is greater demand for developers, hyperscalers to contribute to cost of incremental power contribute back to communities, either through tax base or other areas. Who do you see bearing that cost? And how does it affect development yields in the future in your deal?

I mean we're fortunate to have Anthropic and such a great customer. They're very socially conscious. They want to participate and contribute to the community. We do to in many respects. These are communities where our employees live and work and will be living and working in operating facilities for the next 20 years.

So I think the answer is both parties should look at this. We have always looked at it. We have historically looked at it. We have focused on teachers, kids, education, first responders. I think Anthropic as a customer because it's a very profound focus for them. I think it is for many of the hyperscalers as well. So I think you'll see the opportunity to come up with contribute post arrangements or post agreements throughout, but I know when we went to Kentucky, without having to sort of commit to anything in particular, we were already there in Hawesville, we got we should post it. We got a great -- we gave the fire department great new engine.

Biotie called me personally, was all excited about how much that helped his community and his team. And so I think the answer is we should all be responsible to participate in the communities where we live, our employees live, and we're establishing businesses that we think are going to be legacy assets for generations. So that's the way we approach it.

Our next question comes from Brett Knoblauch with Cantor Fitzgerald.

Kind of on the backstop nature of this market. Congrats on getting the Google back stop. I'm curious what your guys' sense is for -- it feels like every data center project out there needs to backstop by 1 of the hyperscalers. What is their appetite to continuing to do this? And at what point does that appetite slowed down? And how are you guys thinking about a market in which an IG backstop won't be there?

Yes. Brett, it's Patrick. Good question. So look, I mean, as you hear from everybody, not just TeraWulf, but semiconductor companies, hyperscale demand is robust, right? And adoption continues -- so look, I think what you're seeing from us again is version 2.0 of the wrap shows that hyperscalers are willing to put their balance sheet to work. But at some point, it's like whether you're learning to ride a bike with training wheels or you're raising your kids. When they get 18, they got to leave the nest and fly, right? And so that's -- you look at version 2.0 of our wrap, right, in the details, Google is there. And then once Anthropic achieves a certain investment-grade rating, that wrap falls away.

So I think you'll see that more commonly through all of the hypers because again, their job is to help the ecosystem grow. But then once it gets to a point where those companies can stand on their own and their strong investment grade, then that support should fall away and their balance sheet is left for their own use because they all need it.

So I think that's the way at least we're seeing the space mature, which is very logical and is something that we welcome.

Our next question comes from Darren Aftahi with Lucid Capital Markets.

First, just could we give an update on Chesapeake and where the regulatory approvals stand?

.

Sure. Chesapeake, as you know, is under our purchase and sale agreement. We have most of the regulatory approvals in hand. I think there are a couple of outstanding, 1 of which is the Seco. But there are conditions precedent to close there that have yet to be fulfilled by the seller, and those conditions are important to us. And if those conditions are met, great. And if not, that would be a bummer. But we're not going to bring in any anything into our pipeline that we don't think will make a lot of sense, be able to be absolutely accretive and be a promising data center development.

So we love the state Governor Westmoore has put out some pretty, I think, progressive notions on how data centers can contribute. It's also in the middle of a transmission super highway. -- but there are conditions precedent to close. And when they're fulfilled, we'll be ready to roll. And if they are not fulfilled, well, we'll have to rethink that.

Great. And then just 1 more. Just kind of given the changes in the political landscape and who knows what assets were available and maybe a bit frozen in the future? Like what's your kind of view on the shape of lease rental rates over the next coming, call it, 12, 24 months?

Listen, I got to focus on what's in my portfolio. And as I said in my prepared remarks, what we have today is a lot more valuable than it was last week. And I think 1 of the reasons for that is the tremendous demand there is in the market for partner now, for prompt power. So I could speak to the fact that the phone has been ringing off the hook with respect to what we have at Muskie. And so I think I don't know if leverage is the right word, but I feel really good about our side of the table in negotiations with potential customers with respect to where we will end up on that facility.

Equally, I think, 1 has to be thoughtful about where they develop. We always have, as you know, we've built energy infrastructure for the last 25 years. So we've always gone to places where we thought we could navigate the politics and the regulatory framework. That hasn't changed. And so I think you'll continue to see us do just that in the areas as we build out our pipeline.

We have reached the end of our question-and-answer session, which now concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the TeraWulf Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded. I will now turn the call over to John Larkin, Senior Vice President and Director of Investor Relations with TeraWulf. Please go ahead.

Good morning, and welcome to TeraWulf's Second Quarter 2026 Earnings Call. Joining me today are Chairman and CEO, Paul Prager, our CTO, Nazar Khan; and our CFO, Patrick Fleury.

Before we begin, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. Words such as anticipate, expect, believe, intend, estimate, project, could, should, will and similar expressions are intended to identify forward-looking statements. For a discussion of these risks, please refer to our filings with the SEC available at sec.gov and in the Investor Relations section of our website. We will also reference certain non-GAAP financial measures. Reconciliations to the most comparable GAAP measures are available in our earnings release and filings.

With that, I will turn the call over to our Chairman and CEO, Paul Prager.

Thanks, John, and good morning, everyone. The second quarter was defined by execution and expansion. At Lake Mariner, we converted additional contracted capacity into operating infrastructure and recurring lease revenue. At the same time, we expanded the platform through the acquisition of [indiscernible]. Following quarter end, we executed a 401-megawatt lease with Anthropic at the justified data campus and entered into an agreement to monetize our interest in the Abrenathe joint venture. Taken together, these developments demonstrate the model we've been building, which is to secure power advantaged infrastructure, contract with high-quality customers, deliver capacity in phases and selectively recycle capital into the next generation of growth.

Our #1 priority remains execution. You see that most clearly at Lake Mariner. CB-3 was fully delivered and generating lease revenue in early July, bringing total revenue generating critical IT capacity at the campus to 102 megawatts. That delivery also satisfied the applicable conditions for $600 million of Google's credit support for fluid stacks obligations to become effective. CB-3, therefore, represents more than just the construction milestones. It is another building delivered, another contracted revenue stream online and a significant portion of the credit support behind the project now effective.

Following quarter end, we also amended certain fluid stack leases. Those amendments increased contracted capacity added rent associated with tenant requested scope changes and established updated delivery schedules on a data hall by data hall basis. Nazar will cover construction and commissioning in greater detail, but the key milestones are straightforward. At CB-4, we remain on track to begin energizing the first data hall in late September. At CB-5, we expect to begin energizing the First Data hole in very early January. The first data hall at CB-4 is already in commissioning, and we continue to work closely with Fluid Stack, Google and the broader project team to align infrastructure readiness with hardware deployment. The important point here is that CB-3 is online and generating revenue, CB-4 is in commissioning and CD-5 is advancing against the updated customer aligned schedule. That is execution. And it is increasingly visible in our financial profile with high-power compute leasing representing the majority of our revenue during the quarter.

While Lake Mariner continues to deliver, the second major theme is expansion. Nowhere is this more evident than in Kentucky. Following quarter end, we executed a long-term lease within Anthropic for approximately 401 megawatts of critical IT capacity at our justified data campus in [indiscernible]. The agreement expands our relationship with Anthropic and represents approximately $19 billion of contracted revenue over the initial 20-year lease term. The economics are highly attractive for our shareholders and reflect the value of controlling large-scale power secured infrastructure in a market where capacity is increasingly scarce, but the significance of the agreement goes well beyond its size. Lake Mariner demonstrates that we can take a legacy industrial power site and convert it into a large-scale operating high-power compute campus. Justified demonstrates that we can repeat the model in the new region. We secured the site, control the power infrastructure and converted that position into long-duration contract with one of the leading companies in artificial intelligence. That is our model; control the infrastructure, contract capacity, finance it against long-duration revenue and deliberate in phases.

We also expanded our Kentucky platform through the acquisition of the Muskie Data campus in Eastern Kentucky. Muskie is a gigawatt-scale development site and a prime example of the utility partnership path to Tower that we discussed on our last earnings call. The campus is located within an established industrial park and is being developed in partnership with investment-grade Kentucky Power, an AEP company. Our electric service arrangements were entered into under a data center tariff approved by the Kentucky Public Service Commission, which provides for 1 gigawatt of electric service. Kentucky Power is expected to construct a new 345-kilovolt substation connected to AEP's existing 765 KV transmission network with initial electric service expected in the fourth quarter of 2028. This is not simply land with a Q position, it is utility supported development pathway with contracted electric service, defined infrastructure obligations and a state-approved framework for large-scale data center development.

The market too often treats a Q position or inclusion in a back study as equivalent to available power. It is not. The relevant and important questions are, when can the power be actually delivered, under what contract or commercial framework and with what degree of infrastructure certainty? Muskie provides considerably greater visibility for each of these points.

Muskie also builds on the substantial momentum and relationships we've developed in Kentucky. The Commonwealth is increasingly attractive to prospective tenants because of its power infrastructure, business environment and the constructive engagement we have seen from state, utility and local stakeholders.

Justified provides our near-term contracted delivery opportunity in Kentucky, Muskie provides the next gigawatt scale platform in our pipeline, and we are actively advancing commercialization discussions for the site. Given its near-term tower availability, we are increasingly optimistic about the potential to expand the Muskie campus to as much as 2 gigawatts and accelerate portions of the current development time line.

In addition to Muskie, our pipeline includes additional expansion opportunities at Lake Mariner and Lake Hawkeye in New York, Chesapeake and Maryland and there are many other sites we are actively evaluating, each is at a different stage, but collectively, they provide multiple pads to power, customer contracting and phased delivery rather than dependence on a single market or an interconnection process.

As we expand the platform, we are also being disciplined about where we spend our time and capital. That's what drove our decision on Abernathy. Following quarter end, we entered into an agreement to sell our entire interest in the Abernathy joint venture for approximately $530 million. Abernathy is a great project. But at this point, interest development is simply not the right project or the best project for us to continue to own. Our strategy is increasingly focused on large-scale opportunities where we control the site, control the power infrastructure, the development process and the customer relationship, all that drives long-term economics. The Abernathy transaction allows us to focus our management resources and capital on those opportunities. It also demonstrates our ability to create value through development and selectively recycle capital into larger scale projects that we directly control.

The Anthropic lease demonstrates our ability to create long duration contracted value. The Abernathy transaction demonstrated our ability to realize value and redeploy that capital into the next generation of growth.

We've also recently cleared an important milestone at Chesapeake. On July 29, the Federal Energy Regulatory Commission, FERC, authorized our proposed acquisition of the Morgantown site. That approval clears a significant regulatory condition towards closing. The site includes approximately 210 megawatts of existing grid-connected generation, substantial electrical infrastructure and meaningful long-term expansion potential in one of the most power constrained regions in the country. Subject to the remaining closing conditions required consents, Chesapeake offers the potential to develop an integrated generation, storage and data center campus capable of supporting up to 1 gigawatt of data center capacity while serving large-scale compute demand in the most competitive region while supporting regional grid reliability.

We have developed our pipeline this way deliberately. Regional diversity gives us access to different power markets and utility partners, but it also provides greater operational and security resilience. We do not want the platform dependent on 1 grid, 1 regulatory regime or 1 source of generation. Our portfolio includes utility supported grid connected campuses, sites with existing generation infrastructure and locations capable of integrating generation and storage or supporting additional generation on the broader grid. We view behind-the-meter power primarily as a bridge to utility supported grid connected campus. Over time, we believe the most reliable, resilient and economically sustainable tower solutions will be those interconnected with a larger utility system. That concept is becoming increasingly important. The constraint on AI infrastructure is not demand, it is power, transmission, interconnection and the ability to bring new infrastructure online responsibly.

We have consistently said that data center infrastructure should be an asset to the grid not a burden to it. And that is how we view Governor Hocol's recent executive auditor in New York. We do not believe the executive order will disrupt our development timing at either Lake Mariner or Lake Hawkeye. The Wulf compute build-out at Lake Marine is already permitted, and Lake Hawkeyes is in the early stage of development, and it has not been impacted. Importantly, the Governor has described the order as an effort to establish a framework not a permanent ban on future data center development. We welcome such a framework. Responsible development at this scale necessarily requires careful consideration of environmental impact, grid reliability, cost allocation and community priorities.

We do not view those considerations as a binary choice between development and responsibility. Instead, we work constructively with regulators, utilities and local communities to address legitimate concerns to operate responsibly and be an active and valuable long-term member and neighbor within the communities in which we operate. A clear framework should establish the rules of the road around reliability, cost allocation, resource use, generation, storage and community impact so that credible projects can move forward responsibly.

We believe increasingly formal requirements for large load development are inevitable across all major power markets, not only in New York. The better approach is to prepare for reasonable standards now rather than assume projects can avoid them indefinitely. That means developing sites that can demonstrate credible and redundant power delivery, assume appropriate cost responsibility and, where required, support additional nameplate generation capacity or otherwise help bring incremental generation and grid resources online.

Many of the principles outlined by the governor are entirely consistent with how TeraWulf already approaches development. We understand power markets, generation, transmission and believe clear standards will ultimately favor experienced, well-capitalized developers with credible infrastructure solutions and the demonstrated ability to execute. Increasingly, data center demand is also serving as a catalyst to long overdue investment in the nation's transmission and generation infrastructure. That is where TeraWulf is positioned.

So when you step back, the progress is clear. We've delivered CB-3 and brought another contracted revenue stream online. CB-4 and CB-5 are advancing against updated customer line schedules. We've expanded our Kentucky platform through the Anthropic lease Justified and the acquisition of Muskie, we've agreed to monetize Abernathy so we can focus our capital and management attention on larger scale opportunities that we directly control, and we've cleared an important regulatory milestone at Chesapeake. Together, these developments reinforce both the consistency and the depth of out strategy: build a regionally diversified pipeline with credible path to power, contract with high-quality customers, deliver capacity in phases and recycle capital where doing so creates long-term value for our shareholders.

Based on the strength of the platform and the customer engagement we continue to see, we reaffirm our target of contracting an incremental 250 to 500 megawatts of critical IT capacity annually. We will pursue that growth with discipline and remain focused on power control, customer quality, execution certainty and shareholder returns. We have the sites, the capital, the people and the customer demand. Now it is about delivering.

With that, I'll turn it over to Nazar to discuss construction, commissioning and the updated Lake Mariner delivery schedule.

Thank you, Paul. I'll focus my remarks on construction, commissioning and delivery at Lake Mariner. As Paul noted, CB-3 is fully online and generating lease revenue. With that building complete, our focus is now on executing against the updated delivery schedules for CB-4 and CB-5, which were developed in close coordination with our tenant.

From an execution standpoint, the 2 most significant variables have been electrical labor availability and ongoing design optimization for our customer. Electrical labor remains highly constrained across the data center industry. As the design and electrical scopes became more fully defined, we added a second electrical contractor and scaled the workforce to support approximately 1,000 electricians at peak. That additional capacity is important to maintaining the targeted delivery schedule.

At the same time, working closely with FluidStack, we continue to optimize the electrical, cooling and operational requirements while design, procurement and construction were already underway. Although this added complexity to execution, it enabled our customers to establish the deployment standard tailored to the latest generation hardware.

With those resources and updated requirements now incorporated into the plan, we have greater visibility into the remaining work and remain confident in the revised delivery schedules.

Let me now turn to commissioning and explain where CB-4 stands today. Commissioning generally progresses through 6 levels from Level 0 through Level 5. Level 0 covers design and planning, while Level 1 involves factory acceptance testing of major equipment before it's ship to the site. Our current focus is on levels 2 through 4. Level 2 or installation verification confirms the major electrical, mechanical and cooling equipment has been properly installed, connected and configured. This is also when the tenant begins installing and tuning its cooling distribution equipment. Level 3 or start-up and pre-functional testing is when individual systems are powered and tested under operating conditions. The customer also begins bringing server racks into the data hall and integrating them with the building's power, cooling and control systems. In practical terms, Level 3 marks the transition from construction into live systems commissioning.

Level 4 or functional performance testing is the contractual delivery milestone. Once testing is complete, the data hall is turned over to operations and begins generating the revenue.

The first data hall at CB-4 is currently in Level 2 commissioning. We expect to begin Level 3 in mid-August with the customer server rack scheduled to arrive shortly thereafter. We remain on track to reach level for and begin generating lease revenue from the first data hall in late September.

CB-5 is also progressing against the revised schedule with the first data hall expected to begin energizing in very early January. Across the project, we continue to have a highly constructive working relationship with FluidStack, Google and the broader project team. The revised schedules were developed collaboratively to align infrastructure readiness with customer hardware deployment. That coordination is critical on a project of this scale where construction, commissioning, equipment delivery and systems integration must all progress together.

In summary, CB-3 is operating and generating revenue. CB-4 has been commissioning and remains on track for initial delivery in late September. CB-5 is advancing towards initial energization in very early January. We remain confident in the revised delivery schedules and focused on converting the remaining contracted capacity at Lake Mariner into operating infrastructure and recurring revenue.

With that, I'll turn it over to Patrick to review the financial results for the second quarter.

Thank you, Nazar. As Paul outlined, the quarter demonstrated both sides of our capital model, creating long duration contracted value and selectively recycling capital into larger scale opportunities that we directly control. Following quarter end, we entered into 2 transactions of significant financial importance. First, we executed a direct 20-year lease with Anthropic at the Justified data campus representing approximately $19 billion of contracted revenue over the initial term. Second, we entered into an agreement to sell our 50.1% interest in the Abernathy joint venture for approximately $530 million, representing a 20% internal rate of return on our initial investment. I'll focus my remarks today on our second quarter results, the financial impact of the FluidStack lease amendments, our updated Lake Mariner capital outlook and the liquidity available to fund our growth.

Revenue for the second quarter was $44.8 million compared with $34.0 million in the first quarter, primarily reflecting additional HPC capacity coming online. HPC lease revenue increased 52% quarter-over-quarter to $31.9 million from $21.0 million and represented approximately 71% of total revenue. As Nazar described, the first data hall at CB-3 achieved ready-for-service status in late June and the second data hall followed in mid-July. As a result, the second quarter included only a partial revenue contribution from CB-3, while we entered the third quarter with 102 critical megawatts operating and generating lease revenue at Lake Mariner.

Importantly, completion of CB-3 also satisfied the applicable conditions for $600 million of Google's credit support for FluidStacks lease obligations to become effective. This represents an important credit milestone and further strengthens the contracted revenue profile of the Lake Mariner build-out.

The FluidStack lease amendments executed in early July also have several important financial implications. The revised commencement dates were mutually agreed with our tenant, and we remain on schedule with the revised time line. TeraWulf will contribute approximately $150 million to address tenant fit-out costs incurred through June 30, 2026. In return, Wulf Compute expects to receive more than $300 million of incremental lease revenue over the initial 10-year lease term. Together with the previously announced increase in contracted capacity from 162 to 168 critical megawatts at each of CB-4 and CB-5, the amendments are expected to generate more than $500 million of incremental lease revenue for Wulf Compute over the initial lease terms.

Turning to operating results. Cost of revenue, exclusive of depreciation, increased to $12.4 million from $2.4 million in the first quarter. The increase primarily reflects lower demand response proceeds, which are recorded as a reduction in cost of revenue and declined to $2.8 million in the second quarter from $14.1 million in the first quarter.

Operating expenses increased to $23.4 million from $11.2 million as we continued scaling the platform ahead of additional HPC capacity entering service. The increase primarily included $5.8 million of additional site level expenses, including security, labor and pre-revenue operating costs, $3.3 million of site preparation and demolition costs associated with future development and $2.2 million of minor equipment repair costs related to assets expected to be returned to service or sold.

Reported HPC Leasing segment profit margin was approximately 28% during the quarter compared with our long-term target of approximately 85%. The reported margin includes approximately $2.8 million of tenant fit-out revenue and associated costs, $6.8 million of pre-revenue operating costs at Wulf Compute and $6.0 million of development costs across our portfolio of uncontracted development sites. Adjusting for these 3 items, HPC Leasing segment profit margin was approximately 80%. We expect margins to progress toward our long-term target as additional contracted capacity enter service, for revenue operating costs decline and the contribution from mature HPC lease revenue increases.

SG&A expense decreased slightly to $126.9 million from $127.8 million in the first quarter. Excluding stock-based compensation and charitable contributions, adjusted SG&A was $28.6 million compared with $26.3 million in the prior quarter. We continue to expect full year adjusted SG&A to remain within our previously disclosed guidance range of $75 million to $100 million.

Depreciation decreased to $21.2 million from $28.5 million in the first quarter. The first quarter included $11.9 million of accelerated depreciation associated with Bitcoin mining assets, whose useful lives were shortened as portions of the Lake Mariner Campus transitioned primarily to HPC use, compared with $2.6 million in Q2.

Interest expense was $56.4 million compared with $67.1 million in the first quarter, and we recognized interest income of $28.9 million in Q2 compared to $29.4 million in Q1.

Cash interest paid was $125.7 million compared with $5.3 million in the first quarter, reflecting the first semiannual interest payment on the Wulf Compute senior secured notes in April.

We recorded a $755.7 million noncash loss from the change in fair value of the Google warrants compared with a $216.3 million noncash loss in the first quarter. The change was primarily driven by the increase in TeraWulf stock price and had no impact on our liquidity.

Equity in the net loss of the Abernathy joint venture was $11.1 million, generally consistent with the $11.5 million in the first quarter.

GAAP net loss attributable to TeraWulf was $939.9 million compared with $427.6 million in the first quarter. The increase was primarily driven by the noncash fair value adjustment associated with the Google warrants.

Non-GAAP adjusted EBITDA was negative $18.3 million compared with negative $4.1 million in the first quarter, reflecting continued pre-revenue operating and development costs incurred ahead of additional contracted HPC capacity entering service.

Now turning to the balance sheet. Cash and restricted cash totaled approximately $3.0 billion as of June 30. At the parent level, we held approximately $1.2 billion of unrestricted cash at quarter end. Including the initial $250 million payment received under the Abernathy transaction in July, unrestricted parent liquidity increased to approximately $1.45 billion. We expect to receive an additional $150 million on or before December 31, 2026, and approximately $130 million on or before April 30, 2027, subject to the terms of the transaction.

At Wulf Compute, we had approximately $1.9 billion of gross cash at quarter end or approximately $1.5 billion after accounting for debt service reserves and interest during construction accounts. Approximately $2.3 billion of project capital expenditures have been completed with approximately $1.7 billion remaining. Approximately 2/3 of the remaining expenditures are committed, providing increased visibility into the remaining capital requirements. As a reminder, our original cost guidance for the Wulf Compute financing and deployment was $8 million to $10 million per critical IT megawatt. We currently estimate total project costs at approximately $9.1 million per megawatt within that original guidance range and modestly above the approximately $8.6 million per megawatt financed in October 2025.

The execution factors Nazar discussed, including electrical labor constraints and evolving customer equipment and operating requirements are reflected in this updated estimate.

Following the FluidStack lease amendments and TeraWulf's additional capital contributions, we expect the project's pro forma capitalization to be approximately 32% equity and 68% debt compared with approximately 26% equity and 74% debt at the time of financing.

At the Justified Data campus, we have contributed approximately $353 million of equity as of June 30, including the $200 million site acquisition cost. These investments have funded the acquisition and early development work supporting the Anthropic lease and the planned project level financing.

Based on our current plans and assumptions, our existing liquidity and expected Abernathy proceeds provide the capacity to fund our remaining like Mariner commitments, planned equity investment as justified, interim letter of credit requirements at Muskie, the proposed Chesapeake acquisition and other new sites we are actively pursuing without accessing the equity capital markets. Importantly, this plan also preserves a substantial liquidity reserve during the construction and delivery of these large complex projects.

We remain focused on matching capital deployment with contracted customer demand, maintaining financial flexibility and selectively recycling capital when doing so improves control, scale and long-term shareholder returns. Over time, we also continue to target investment-grade credit profiles at the TeraWulf parent and each of our finance subsidiaries.

In summary, the second quarter reflects a financial profile increasingly driven by long-term contracted HPC revenue. We entered the third quarter with 102 critical megawatts operating at Lake Mariner, greater visibility into our remaining Wulf Compute capital requirements and substantial liquidity to complete our contracted developments and fund the next phase of growth.

With that, operator, we are ready to take questions.

[Operator Instructions] And our first question comes from Nick Giles of B. Riley Securities.

It's good to see the electric service agents for Kentucky Power. I was hoping you could speak to potential partnerships with utilities, what kind of framework should we have in mind? Should we expect that utilities are willing to share the economics of the project? Or would you kind of start at what we're seeing here in [indiscernible]?

Nick, it's Nazer here. So with the utilities, I think we're seeing a couple of different flavors come about. With the integrated utilities, Kentucky Power being an example and AEP being an example, I think they are independently solving for contracting for the load. So they've signed up [indiscernible] a lot of capacity with us under an LOA transmission agreement and then they go find the generation to support that. And so whether that comes from their existing resources, they contract for it. They recently acquired a power plant or they build more power plants. They're independently solving for that. And so what they're looking for us to do is to kind of commit to both whatever the transmission build-out is for that project. And so that will be project-dependent depending upon the location of that and where that sits within their grid. And then a backstop for the energy. And so part of the credit that we posted to EP was for the energy for the initial 500 megawatt allocation as well.

And so again, the projects really depend upon the location, which will drive the cost of the transmission required to support it. And then it will be a market -- generally a market price on the cost of energy. When you put those 2 things together, that's where you see the credit that we've posted to Kentucky Power and AEP.

That's so helpful. I appreciate it. Maybe switching gears, Wulf has not done a deal direct with one of the HighIG hyperscalers. And so was curious if whether this is by design or what some of the key differences you see between the deals that you've done to date and one that would be with HighIG?

Yes Nick, it's Patrick. Florian for the question. So as I think you've heard from us many times, we are highly focused on credit quality of the tenant that's paramount to us. And so we have terrific tenants, both at Lake Mariner and at Hawesville. I think you saw us buy Hawesville in February and lease it less than 6 months later. That process was very robust and Anthropic was the winner of that. It's very strong economics to us, but there were a bunch of other competitors for that capacity in that process that we have moved over to Eastern Kentucky at Muskie.

So I think, I would just say to you, we are extremely happy with our existing partners. They are very strong credits. We -- as you heard from us, we have the first slug of Google's backstop at Lake Mariner now effective. So I think it's a combination of credit quality of the counterparty and that's not just today, Nick, that's us thinking about the business model today, the competitiveness of that business model and then the credit, not necessarily immediately today, but also 3, 4, 5 years down the road, these are 20-year leases, right? So you have to be front foot forward, forward thinking.

So as an example, as you've seen all the hyperscalers take on more debt, their balance sheets today are not going to be their balance sheets in 5, 6 years. So I think there's an element of us solving for all of those things as we're looking at tenants. But I think, stay tuned. And I think as we grow our site portfolio, naturally, the tenants will diversify.

And it's Paul here. It's the same from an operation and execution perspective just moving upstream to be closer to the ultimate customer. That enables precision and that enables us to be a better service provider to our customers. So we get to deal direct now with our customer Anthropic, and it just makes things that much more efficient in how we build out our facilities for them and how we operate the facilities for them.

The next question comes from Darren Aftahi of Lucid Capital Markets.

Just 2, if I may. So can you maybe balance just the appetite for executing on more sites versus kind of digesting what you have. I guess, said another way, how kind of full do you feel you are? Or are there limitations in kind of expanding the portfolio?

And then maybe secondly, you talked a little bit about this, but you guys are operating in a few different geographies. Can you kind of talk about the calculus of what you look at from a sort of community and governmental risk perspective when you're thinking about entering into new or existing markets? And maybe if you had to characterize it, are there any markets where you feel more partial to versus others.

Darren, it's Nazar here. I'll take your questions in reverse order. First, with respect to just sites and locations and geographies, we've expanded into Kentucky. We received clearance from FERC in Maryland. And so we're traditionally looking for jurisdictions sites where there's been some activity previously. And so we've had a number of brownfield sites, which we think are well situated for further development. There's likely some significant electrical activity that occurred at that site, which bodes well for the future of the site with respect to kind of repositioning that. And so we're looking for areas where some activity has occurred, the local communities understand what that means and can see the vision of what that transformation or repositioning of that asset could look like.

And so fortunately, us in Kentucky, whether it's in Hawesville, West of Louisville or in Muskie the eastern side of the state. We have very strong local support in both of those communities with respect to bringing those projects forward.

And the other piece is, is that the team spends a tremendous amount of time engaging with the various local stakeholders and informing them of what we're up to. A lot of times we find that it's a lack of information that is a challenge more than just kind of what the information is. And so the team spends quite a bit of time in each of those local jurisdictions, ensuring that we're properly kind of conveying what we're seeking to do with respect to the projects.

With respect to kind of just the overall portfolio, the guidance we've been giving is 250 to 500 megawatts per year of critical IT. We provide that guidance for a couple of different reasons. One is there's kind of just an operational capacity. Each of these projects at the upper end of the range is still nearly $5 billion of total capital. We have to fund that with both equity and debt. We've got to hire a number of contractors, electricians at our site in Lake Mariner. We peaked at over 1,000 electricians at the site. And so as you scale up the ability to kind of procure the requisite labor gets more challenging. So that's 1 kind of component to it.

The second is, I think we've seen in the market especially here over the past couple of weeks and months is that these large-scale infrastructure projects may not just work on a linear scale. So a lot of times, we all look and say, okay, what's happening in this quarter, that quarter and try to roll it out 3 or 4 years. And given the size of these projects, we think there's going to be more fits and starts to it. And so trying to make sure that we pick our spots properly, have a good understanding. And I think as Paul alluded to in his intro comments is just a position in the Q does not represent access to power. So we really try to spend time ensuring that the projects that we're bringing forth have true -- the ability to really kind of deliver on that power, and we can capture it. And so therefore, we can go to our underlying customers and tenants and give them very clear visibility with respect to their ability to start using that.

So I think there are a number of things that we're looking at that could increase that. But for now, we remain focused on the 250 million to 500 per year. With that, I think Paul has some of those thoughts as well to add.

Yes. This is Paul. Thanks, Nazar. I would only want to add to that, that I think regional diversity is a foundational principle in the development of our portfolio. I don't want to be reliant on 1 grid. I don't want to be reliant on 1 regulatory perspective or horizon. I don't want to be reliant on 1 political mindset. I think our customers will become increasingly sensitive to the notion of security. I'm a navy guy. And I remember back in the day when we were looking at submarine design versus what the Russians were doing, the Russians would put all their major equipment machinery in 1 part of the boat. So if you hit that part of the boat, they were dead in water. American submarine design was we would put major machine and readthrough out our boats so that we have the ability to sort of sustain ourselves in a conflict even if we took hits in 1 area of the boat. I think security is critical.

Our customers don't want to be vulnerable to something that happens in 1 grid, 1 region, 1 fuel source. Labor sourcing, as Nazar mentioned, is important. And lastly, as you think about the move towards inference, I think folks want to move to the market as opposed to be in 1 place. Inference is more of a local consideration. So that's the reason why we're trying to build the portfolio as we have, and we'll continue to focus on regional diversity as a fundamental to what we do.

The next question comes from Michael Rollins of Citi.

So just building off of the last questions. I'm curious, if you take all that together, are you able to size what the incremental pipeline opportunity could be, maybe kind of thinking about it over the next decade? Currently, you've got 2.9 gigawatts of call it, line of sight of lease capacity and pipeline. Just curious what the TAM is, or how big that can get to?

And then second, with certain regions seeing some new headwinds on timing, for example, recent developments in Texas or you mentioned and discussed earlier the implications of the New York Governor's actions. How is that affecting the conversation, demand, the interest to pre-lease with your portfolio?

Yes. This is Patrick Fleury. So we are a long-time power team, as you know. And so I think just -- maybe I'll kick it off and then Paul can clean up here. But we always try to frame for investors the power demand and power challenges, right, that the market is dealing with today. So if you step back and think about different power regions as an example, the state of California is, on a stand-alone basis, the fifth largest economy in the world. It has an 85 gigawatt installed grid. The Texas market has a roughly 95 gigawatt installed grid and probably average demand of around 65 to 67 megawatts because it's a peak year market and the system has to be designed for the highest draw day.

The backlog in Texas, as we all know, as an example, is now over 400 gigawatts and Batch 0 is roughly 60 gigawatts. So just, again, to frame that, you basically have to build another California in the Texas grid to meet all of the Batch 0 projects. Combined cycles are 500 megawatts each roughly and take 3 years on average to build. So you got to build hundreds of combined cycles. So just I think it's important to kind of step back and frame that for folks because that's how we look at and approach each market or utility partnership or otherwise that we are in. And it's power first. Like is the transmission grid set up to accommodate our load, is the local generating system set up to accommodate our load? Can we get front-of-meter generation expansion at our sites as opposed to behind-the-meter and work with the local utility partners, right, to increase our capacity over time, not by limiting our customers to behind-the-meter single or double point of failure, but connected to the grid that has thousands of points of failure, but also not being a parasite on the grid and providing additional generation and even backup power during times of grid duress.

So I think that's our -- in general, how we approach each of these sites, each of these markets from a power-first position.

Yes. And it's Paul. It's why I said in my remarks, it's nice to know that you're somewhere in the Q or that you're in Batch 0 versus some the batch. But we're all about available contracted power, and that's where we focus.

You asked first about how big could this go? I don't have an answer for you. Demand is extremely strong at our Muskie site. We have the most active data room we've ever had and with world-class credits as potential customers. But I don't focus on that. I'm trying to -- I'm trying to focus on execution. And the simple response is, as long as we do what we have contracted right, then the customers will continue to come, and that is why Anthropic is a multiple repeat customer.

We have guided the markets to 250 to 500 megawatts because that's what we're built for at this time, and we have reaffirmed that in my comments. Can we do more? Maybe with the right EPC contractor, somebody like Floor, with the right region where the labor is available, with the right mature and sophisticated regulatory framework and policy, absolutely. That's why Lake Mariner and Cayuga, Lake Hawkeye worth so much more money today as a result of some of the things that Governor Hocol is talking about. But we're focused on execution. And as long as we could eat what we have on our plate, then we can ask for more in the next round of service.

In terms of dialogue, what's changed? For us, not a whole lot. We think about dialogue in these projects in 2 primary ways. One is with the community in the region that we're at. We've always -- because we are power folks we've always developed power plants with a great level of sensitivity to the region, to the local community and sensibility towards what the regulatory framework is. Likewise, we're talking to our customers about it. These customers are really, really smart. They know the difference between a Q position and a batch position versus a contract with an investment-grade credit to supply GigaPower. That is where they are focused, and that's how they're prioritizing their time.

So I think it's one reason why Muskie is seeing the kind of action it is in the data room today is because people recognize when that project could come online and that it's a very credible project.

So we're excited about where the market is today, and we look forward to continue to participate in its growth.

The next question comes from Tim Horan of Oppenheimer.

A question on execution, really. Obviously, the demand is incredibly strong and it's relative to execution as a question. But I mean, where are you guys or the industry? Where are we getting more electricians and HVAC trades been, et cetera? And you have the cost kind of locked down for them. I guess, especially on the Anthropic contract, do you have the construction contracts locked down at this point.

And one of the reasons I mentioned, I mean, Elon Musk last night from SpaceX is talking about building up 10 gigawatts a year of capacity. I mean, how does the industry find the people to do this? And how do you compete against others looking for the same workers?

If it's okay, I'll start. One of the things that we're very excited about is our relationship with Fluor and the Kentucky project, they're top quality world-class EPC that we have a history with on the power side. And one of their -- the reason why we like them so much is because they've been really good at bringing in top-quality talent and locking them down in contract for the performance of EPC duties on site. So I think that's one driver.

Second thing is experience. We grew up in the trades building power plants. So we just have a lot of experience in working with the right subs and contractors. And we like -- again, we're sort of risk-averse here. We like to sleep at night. We like to lock down pricing so that we could get comfortable. Early on, I think that was tougher in the space because it wasn't, if you will, a reference design so both -- everyone needed to figure out how much man hours and how much work needed to sort of go into delivering a data hall. We have that reference design now. So we could help our subs better understand the scope and the project, and therefore, get them to take more risk with us and give us a fixed price contract.

NAzar, did you want to add something?

Sure. And just as another here just to add to what Paul said, and this gets back a little bit to the guidance that we have around the 250 million to 500 million per year. To the extent that we want -- the demand is there, and we wanted to do significantly more than that, finding those folks, as you correctly point out, is a challenge. And so as Paul mentioned, working with the Floors of the world, working -- building off the relationships that we have, both in jurisdictions that we're operating in. but also kind of properly sizing the opportunity is critical to the execution and that feeds into the discussions with the tenants and customers that we have as well. As you noted in the kind of the relative execution matters, if you have the power, you have the site, but also the follow-through on being able to point to both the procurement of the equipment as well as the procurement of the labor required to support these projects is critical. And again, therefore, there is some bound that we got to work within as we think about kind of our guidance as well, and that's part of the reason we have this 250 million to 500 million per year that we've been guiding towards.

The next question comes from Mike Grondahl of Northland.

This is Logan on for Mike. First and kind of building off an earlier question. Can you provide some additional insight into the demand and discussions for the now potential 2 gigawatt Muskie site relative to Hawesville. And then second, for Patrick, can you touch on how we should think about financing that development.

It's Nazar here. The discussions are pretty robust. We are engaged with all of the usual suspects with respect to that capacity. They are interested in not just kind of the initial tranche, but the total site over time as well. We're working through with them the iterations on hardware and design and deployment given that this could be kind of a multiyear process for the full sight as well. And so we're deep in that. We are working through that heavily as we speak. And so I think, as Paul mentioned earlier, demand remains very strong. That '28 power, we think, is becoming more and more kind of what's left on the table. Most of that '27 capacity is either sold or pretty close to being sold. And so therefore, there is a heavy emphasis on '28, and we're finding a very strong demand. And again, where all of the usual suspects are working hard with us in working on that site. Patrick?

Yes. It's Patrick. Yes. Regarding the second question, look, I think you'll see us follow the model that we opened up the markets to last October, which is something that kind of looks like project financing that can be a bond, that's amortizing or a term loan. I think our approach there is very different than the rest of the market, and that is on purpose. So our projects are not levered 95% or 100%. They are conservatively levered with a healthy equity layer.

As I mentioned in my remarks, the Wulf Compute project was 75-25 debt equity. It's now being equitized even more closer to 68-32. So again, I think for the debt markets to continue to take all this paper, you really have to distinguish yourselves. And I think our approach is that we are not levered to the eyeballs like a lot of our peers. We have conservative leverage, and we generate a very significant amount of deleveraging and amortization during the period, and that is something I think you'll continue to see us do at the Hawesville site, and you'll continue to see us follow through on that at Muskie as well.

And again, I do think, importantly, as I mentioned in my remarks, we have a flush balance sheet. We have enough liquidity to do pretty much almost everything that's in our near-term order book today without returning to the equity capital markets. So we will be back in the debt capital markets to finance Hawesville. And then I expect likely sometime probably first half of next year for Muskie.

The next question comes from Stephen Glagola of KBW.

Paul, can you provide any more color on the 3 to 5 sites currently in active pursuit and final due diligence, particularly around power capacity under evaluation, geography and maybe energization timing as well? And then Patrick, can you just provide any updates on where you stand with securing credit support on the Anthropic lease at Hawesville and who that counterparty is?

Yes. This is Patrick, Stephen. I'll take the last one. I would just reiterate what we've said in that the Hawesville lease will be supported by an investment-grade credit. The fortunate position we are in, right, as we went to the market, did a large equity financing in April. We just sold the JV. We have $1.5 billion of cash on balance sheet today. That's plenty of runway. We don't need to rush to the market. That was done on purpose, as we've talked about because each time we had announced the deal in 2025, we had to run to the market to finance it right away. So here, right, we went front foot forward, playing offense. We have all that cash on our balance sheet. We don't need to run to the markets anytime soon, so we're going to prepare. And then we'll go when we're ready to go and when we think the markets are open to it. So that's our approach.

I don't know if you want -- Paul, you want to take...

In terms of the pipeline, you know what we actively are developing. And I guess your question is with respect to in Slide 16, the Phase 4, the 3 to 5 pursued sites. If that's the case, you should know that the same principle of regional diversity is driving those discussions. We have a team actively led by Kerri Langlais, which looks at dozens of sites real time. I think one of the sites of the 3 to 5 is certainly going to be our first effort at international data center development. We've had tremendous success developing power plants in a number of countries outside of the U.S. We think that we have the skill set to bring home a data center for customers that want to move to some of the better opportunities in Northern Europe. We're very excited about that, but we're not there yet.

So when we get there, we will let you know. But we are talking real time to potential customers for that facility. We like as well. We like the Midwest quite a bit. We like the Southeast quite a bit. So we're looking at sites, talking to our customers, asking what their needs are, where they think they want to be. But again, for us, it's all about available power and our ability to quickly contract that power.

The whole process of development isn't one where you sort of pick a site and you say, let's think about -- let's go there and you spend a lot of money. It's a tremendous diligence effort that includes talking to the local community, talking to the political leadership and speaking to customers about their relative interest in it before we sort of go further down the road. So that's sort of what we do and the opportunity set is pretty significant.

I think, by the way, as a result of what's happening in Texas and in New York, there's a lot of projects and everywhere else, by the way. A lot of projects are going to fall away because they won't -- they're not going to be credible, or they won't have the requisite experience to develop it or they won't have the cash to sort of post the collateral to get surety of power. And I think there'll be some additional opportunities for companies that are well positioned like TeraWulf as a result of that.

The next question comes from Chris Brendler of Rosenblatt Securities.

Congrats on the results. I was just going to ask on the fluid stack lease modifications. It wasn't quite as sure sort of what drove the changes early, I feel like it's coming from the client, but was it increased costs that were you're running into? Or is it just modifications of design that caused those changes? And the increase in equity, was that -- did that sound that did not fall out of these changes, it was actually intentional to increase the equity, assuming to make the project more palatable for debt investors. Just wanted to get a clarification there.

Chris, it's Patrick. I'll address that. So as we mentioned, these projects are complex and the designs are evolving. As you know, we came up and I tip my hat to our operations team that worked with FluidStack, Google and the customers, we came up with the reference national design that has been rolled out to other folks at our site at Lake Mariner last summer. That design has changed over time, particularly as our clients get more experience running the hardware. And so as Paul mentioned, it is a true partnership with them on site, and there's a constant dialogue of, "hey, can we tweak this or that?" And so many of those are design changes or what's called tenant fit out, right?

So to give you an idea, at CB-3, think we had about 3 tenant fit out requests that were design changes and each of those has a cost impact and has a schedule impact. So there's an active dialogue around all of those that candidly ripples through the entire ecosystem, not just TeraWulf's project. And so those -- what you're hearing from us is those impacts were about $150 million at Lake Mariner that TeraWulf, in a series of negotiations, agreed to fund that is being recovered over the 10-year lease term. That recovery, just for those items, is over $300 million of rent. So we're effectively receiving a mid-teens return in line with the yield on cost on the lease on those items.

As you point out, we very easily could have debt finance those. We specifically chose not to. The resulting impact is, again, if you take those changes along with the move from 162 to 168 critical megawatts, it's over $500 million of additional revenue over the initial lease term. That is extremely powerful from a debt deleveraging perspective. So not only are we adding additional equity layer into the project, but the amortization and deleveraging profile of the project and cash flow profile of the project has significantly increased.

So again, I think that's a different approach that our team is taking as opposed -- I sort of have a saying internally, just because you can doesn't mean you should. Leverage is great, but I think we want to be very balanced with it, particularly as we build and operate brand-new projects.

That's fantastic color. One quick follow-up. I may a quick, but we've seen governor take action in both New York and Texas now, very recently, very rapid sort of change in political tone here in those states. How do you feel about the local situation in West Virginia and Maryland at this point in Kentucky?

Yes. I don't think we've seen anything that we should be surprised about. We have stated all along that ultimately -- listen, data centers are very, very important. But it's also important that they've done right. And so I think everyone is sort of getting there. And that's why in my remarks, I said, I'd rather -- we don't want to pretend that, that stock going to happen, we're quite confident it's going to happen, and therefore, we develop our projects so we could be in front of that and proactive and be able to affirm to the regulators and the political leadership and the local communities that we are the responsible, credible folks doing this.

Listen, you will always have people who can be particularly loud who don't want progress, who don't want power plants, who don't want data centers. But the reality is, we need power in our country, we're very short, and we need data centers. And the contribution of both power and data, it's what made America such a great country. And so I think, in Maryland, we've gone to an industrial site. It's an existing power facility down from a much larger coal facility. We're going to work with the state to clean that up. That's a benefit to the state. We're going to bring jobs. That's a benefit to the state. Maryland is desperately short power. So it will be a surplus generator to the grid. That's a tremendous benefit to the state. And we have a close relationship with both the local community and the leadership in the state to enable us to move ahead there, and we're very excited about it.

Maryland also happens to be one of the most important from a value perspective territories in terms of data center use, particularly the Washington, D.C. corridor.

So I think Maryland, we feel great about it. Kentucky, I mean, it's like when in the lottery to work with Governor Bashir and his team in Kentucky. We have never felt as so welcome as we do in the local communities. Again, this is brownfield sites that we are bringing jobs, we're cleaning them up and we're generating important tax revenue, which supports school systems and supports highways. It's just fantastic. So Kentucky and Maryland, we're very excited about.

You mentioned West Virginia. It's an area that we study a lot. We like it a lot. We think, again, they want to win and create an opportunity in a business environment where we could do a win-win. So as I mentioned, when we talked about development, the regulatory framework, the political horizons, these were all things that we contemplate. And remember, we're building power and data centers that are going to be around for 20 to 30 years. So we try not to worry too much about moment-to-moment areas of people exercising their voices sometimes in the most aggressive way. And we think about what is the state and local community want and need and how could we be responsive to it and create a win-win for everyone. And we have not been deterred in any of our sites that are currently active or in the pipeline in any real material way.

Our last question comes from Michael Funk of Bank of America.

Maybe just quickly, you touched a few times on some of the constraints with labor, particularly electrical labor. Also highlighted estimate for cost per megawatt. So just wondering what protections do you have in your contracts for rising costs? And then maybe how those costs are impacting development yields or returns projected? Love to hear any comments there.

Sure. This is Nazar here. So when we are in the middle of negotiating a lease as we just did with Anthropic for the justified site, on the front end, the 2 large components of costs are really the labor component and then the second is the equipment component. So on the equipment side, usually, we have these 12-month rolling forecast with our various vendors. And so we've got a pretty good sense of where those costs are. And so those costs from an equipment perspective when we're signing up that lease are usually, we've got deposits down and have firmed up those prices or we're about to. And so we've got decent visibility with respect to the equipment side of things.

On the labor side, there's, I'd say, kind of the 2 levers there are just the number of labor hours required to complete the job and then the cost per hour of that labor. What we've been seeing is on a cost per hour basis, that's been generally moving up. And so as more and more projects are moving forward, the scale is increasing, the per hour cost of that has been creeping up. And so it's difficult to kind of pin that down exactly, especially for a construction cycle, that's 12 to 15 months long. What we do is working with Floor and other vendors that we have is we try to put some parameters around that and awarding it to subcontractors and kind of locking in some sort of range with respect to that price?

And then finally, just on the number of hours that are required as we deliver more and more projects, particularly for customers that have a similar design or using the same hardware, our ability to kind of map out the specific number of hours that are needed gets tighter over time as well. So the yields that we've been targeting have kind of been in that mid-teens range. If you looked at what we've done with Anthropic and Fluids prior to that, we've been in that range. We've been able to maintain that. We've likely been able to kind of have some pricing benefit on our side with each successive contract as well.

And again, from a cost management perspective than the equipment, we usually have a pretty good handle on when we signed that agreement. And with labor, we've got some balance around it. But again, as we mentioned earlier, the challenge that we have on the labor piece is just that per hour labor cost.

Again, we've got a view on what that creep could look like, but but that's where I think we have the most work to work to do. So it's not a perfect science, but working with Floor and others gives us a chance to kind of control that.

And this is Patrick. Let me just address the yield question because that's the right one. But as I mentioned earlier, like the most important part, right, is getting an adequate return on your capital. And so as I mentioned, the changes that we have processed are generating over $500 million of revenue over the lease term. So we are recovering the incremental cost. I think that is the very important point, right? And as Nazar just mentioned, we are very open with our customers that we need a mid-teens return. That is simply because if your WACC is not below your yield on cost, by definition, there is no equity value. So if you take the way we finance projects, call it at roughly 80-20, just to make math simple, if your debt costs that's 6.5% points of WACC. If your equity cost 25%, right, that's another 5 points of WACC. So your WACC is 10% in that example.

So for us to have sign a deal that is accretive to our equity, the yield on cost has to be greater than the WACC. So I've sort of seen some folks in our market signing deals that appear where their WACC is actually in excess of the yield they're earning on the lease, like that doesn't work. That's kind of called real estate where you buy something and you pray and hope that in 10 or 20 years, it's worth more. That's not the game we're in. We are creating tangible real equity value for our shareholders day 1.

This concludes our question-and-answer session. The conference has now also concluded. Thank you for attending today's presentation, and you may now disconnect.

Greetings, and welcome to the TeraWulf 2026 First Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, John Larkin, Senior Vice President, Director of Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning, and welcome to TeraWulf's First Quarter 2026 Earnings Call. Joining me today are Chairman and CEO, Paul Prager; CTO, Nazar Khan; and CFO, Patrick Fleury.

Before we begin, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. Words such as anticipate, expect, believe, intend, estimate, project, could, should, will and similar expressions are intended to identify forward-looking statements. For a discussion of these risks, please refer to our filings with the SEC available at sec.gov and in the Investor Relations section of our website. We will also reference certain non-GAAP financial measures. Reconciliations to the most comparable GAAP measures are available in our earnings release and filings.

With that, I'll turn the call over to our Chairman and CEO, Paul Prager.

Thanks, John, and good morning, everyone. The first quarter of 2026 was about execution. We exited 2025 with an established platform, including sites, contracts, capital and strategy. And what you are seeing in Q1 is the early conversion of that foundation into operating performance and recurring revenue. That strategy continues to guide everything we do, controlling energy advantage sites, engineering infrastructure around power and contracting long-term credit-backed AI capacity. At this point, we are moving from formation to delivery. You can see that most clearly in our operations.

During this quarter, we continued scaling our HPC platform at Lake Mariner with 60 megawatts of critical IT capacity energized and generating revenue as of March 31. Importantly, this is the first period, where HPC leasing is meaningfully reflected in our financials, contributing $21 million of lease revenue during the quarter. At the same time, we are transitioning portions of our legacy mining footprint to support higher-value HPC workloads. That transition is deliberate. Mining served its purpose. It enabled us to build infrastructure, monetize power and develop operational expertise. But the future of this platform is contracted long-duration compute infrastructure. That same focus on execution carries through to development.

We continued advancing construction for Fluidstack and Google at Lake Mariner, while incorporating customer-driven design refinements. These are not disruptions. They reflect the reality of building infrastructure for sophisticated counterparties. We are building to evolving hardware and tenant requirements, not in anticipation of them, and that discipline reduces execution risk and improves long-term outcomes.

CB-3 at Lake Mariner remains on schedule, and we are working closely with Fluidstack and Google to coordinate energization with hardware deployment. Execution at this scale requires tight alignment between infrastructure readiness and customer deployment, and that coordination continues to progress well. At the same time, we are expanding our platform. Since year-end, we have added meaningful new power-backed capacity, including the Hawesville, Kentucky site, a large-scale campus with immediate power availability and significant expansion potential.

In parallel, we're progressing the Morgantown acquisition in Maryland, which remains subject to regulatory approval. We currently expect a FERC decision in the mid-summer time frame. Strategically, Morgantown is a highly attractive asset in one of the most power-constrained regions in the country. And that ties directly to how we think about power. We are not pursuing power as an input cost. We are structuring power as a core asset.

If you step back, the broader AI build-out is accelerating, but it is increasingly constrained by power, including interconnection delays, transmission limitations, the need for new generation and transmission and the capital and credit required to bring these assets online. The constraint is not GPUs. It is power. And in that environment, the industry is moving toward integrated campuses, where generation, storage and compute are designed together. That's exactly how TeraWulf operates.

We are fundamentally a power company that builds digital infrastructure, not the other way around. We understand how to source and control power, how to permit, operate generation, how the grid behaves and how to integrate these systems at scale. There are very few teams that can do all of that credibly, and that continues to differentiate TeraWulf. Against that backdrop, demand remains very strong. We continue to see active engagement from hyperscalers and AI compute platforms across that portfolio. At Lake Mariner, we are executing against existing contracts. And in Kentucky, we are engaged in advanced negotiations.

More broadly, when you look at the pipeline, the opportunity set continues to evolve. Given the state of interconnection queues, we believe there will be an increasing opportunity over time to partner directly with utilities to develop new sites and aggressively advance existing sites. Utilities are going to be looking for partners with the experience and credibility and the capital required to actually deliver on these projects, and we believe that TeraWulf is very well positioned.

We also believe that the market is moving towards a higher bar for execution certainty around grid access itself. Securing queue position alone is no longer enough. Utilities and regulators increasingly require confidence that projects can deliver the infrastructure, equipment and financial support needed to come online at scale. Over time, factors like procurement capability, delivery credibility, financial assurance become increasingly important differentiators. That dynamic favors scaled, well-capitalized operators with real development and power experience.

Our platform is designed to operate across all three paths to power, immediate access as we have in Hawesville, bring your own generation as we are pursuing in Morgantown and increasingly, utility partnerships as interconnection queues are rationalized and prioritized. That is a structural shift in how this market will develop, and it plays directly to TeraWulf's strengths.

Now let me spend a moment on Kentucky. I have said that we expect to have a customer in place in the second quarter, and I remain highly confident. We are in late-stage negotiations. The process has been extremely competitive and engagement is exactly where we want it to be. At the same time, we recognize that projects like these raise real questions around environmental impact and power costs. We take those seriously. Our approach is to engage early and transparently and to help communities understand how these facilities serve as long-term economic engines through jobs, investment and infrastructure, while being thoughtful and responsible to their impact. That is core to how we execute.

And importantly, even with that confidence, our approach remains disciplined. We do not build on speculation. We contract first, deploy capital second. That discipline shows up in how we evaluate opportunities, focusing on durable power control, scalable development, credit-backed counterparties and capital efficiency. We review a significant number of opportunities, but only a small subset meets that high bar. And that same discipline applies to capital.

We entered 2026 with substantial liquidity and a fully funded development pipeline with $3.1 billion of cash and restricted cash on the balance sheet at quarter end. That capital is being deployed into contracted or actively commercializing assets, not speculative builds, and our financing strategy continues to align capital with long-term cash flows. You can see the transition of the business model clearly in our financials. In the quarter, digital asset revenue was about $13 million, while HPC leasing contributed $21 million. That shift will continue, and the business will be increasingly driven by stable, contracted, high-quality credit-backed revenue. That is the end state we have been building toward.

So when you step back, the TeraWulf story is consistent. The strategy is unchanged. The platform is in place. The sites are secured. Demand is strong. Capital is in place. We are locked and loaded. From here, it is about execution, delivering capacity, energizing megawatts and converting contracts into durable recurring cash flow. That is what will define 2026.

I'll now turn it over to Nazar to provide an update on construction and delivery.

Thank you. As Paul mentioned, execution across the platform continues to progress well. Let me provide a brief operational update. Starting at Lake Mariner, execution continues to progress well. During the quarter, the second data hall in CB-2 came online, bringing all Core42 capacity into service and generating revenue as of the end of the first quarter.

Turning to the Fluidstack deployment, including CB-3, CB-4 and CB-5, all major project time lines remain unchanged from our prior update and execution across the campus continues to track well against schedule. For CB-3, we are on track to complete our defined scope by the end of May and are actively coordinating with Fluidstack and Google on final energization and lease commencement. CB-4 and CB-5 remain on track for delivery in the third and fourth quarters of 2026, respectively.

In parallel, we continue to advance development and construction activities across the broader platform, including our joint venture in Abernathy, Texas. As a reminder, the Abernathy joint venture project is being delivered under a lump sum EPC agreement with Hypertec with Fluidstack leading development and construction. While execution remains on track relative to our scope commitments, we are working closely with Hypertech and Fluidstack alongside the ultimate compute end user to finalize deployment sequencing and delivery timing. As those milestones are finalized, we will update the market accordingly.

More broadly, these are large-scale infrastructure deployments that require an immense amount of integration. Success depends on maintaining tight coordination across the power infrastructure, equipment procurement, construction delivery and customer hardware deployment. As these campuses scale, execution certainty increasingly matters just as much as site selection or interconnection access. And that is an area, where we believe our team is highly differentiated.

With that, I'll turn it over to Patrick to review the financial results for the first quarter.

Thank you, Nazar. The first quarter 2026 results reflect a business in transition with a meaningful contribution from the rapidly growing HPC lease segment and strong operating profit at the Digital Asset Mining segment due to its flexible load profile and demand response participation. In the first quarter of 2026, revenue was $34 million, down from $35.8 million in 4Q '25, primarily driven by lower Bitcoin production. Importantly, HPC lease revenue increased to $21 million in Q1, up 117% from $9.7 million in Q4. In March, CB-2 achieved RFS or Ready for Service and the lease with Core42 commenced. We have now delivered all 60 critical megawatts of capacity to Core42.

As additional buildings come online in 2Q, 3Q and 4Q, revenue mix will continue shifting towards stable contracted HPC revenue. Cost of revenue, exclusive of depreciation, decreased 88% from $18.9 million in Q4 to $2.4 million in Q1. Demand response proceeds recorded as a reduction in the cost of revenue increased to $14.1 million in Q1 from $4.4 million in Q4. Operating expenses increased as we scaled the platform to support HPC deployment. Quarter-over-quarter operating expenses rose to $11.2 million from $8.8 million.

Regarding the HPC leasing segment profitability, as presented in Note 17 of our 10-Q, the as-reported quarterly segment profit margin is approximately 50% versus our long-term guidance of approximately 85%. That difference is driven by three factors: first, $2.1 million of tenant fit-out revenue and associated costs during 1Q. TFO carries a modest margin as provided for under the HPC leases. Second, $3.5 million of pre-revenue operating costs at WULF Compute. And third, $2.1 million of development costs across our 1.75 gigawatt portfolio of uncontracted development sites.

Adjusting for those factors yields approximately 85% segment profit margin in 1Q. SG&A expenses also increased as we scaled the platform to support HPC deployment. Quarter-over-quarter, SG&A expense rose to $127.8 million from $66.6 million. After adjusting for stock-based compensation, SG&A decreased from $60.1 million in Q4 to $26.3 million in Q1, in line with our prior guidance of $75 million to $100 million for 2026. Depreciation was flat at $28.5 million in Q1 versus $27.7 million in Q4. Impairment of PP&E in 1Q was $25.7 million, $8.9 million of which was driven by the shutdown of a mining facility and cessation of Bitcoin mining operations to support the HPC operations and $16.8 million related to acquired assets of Hawesville, Kentucky associated with asset retirement obligations.

Interest expense in Q1 was $67.1 million compared to $62.4 million in Q4, and we recognized interest income of $29.4 million in Q1 compared to $31.5 million in Q4. The increase in net interest expense was expected following our capital raises at TeraWulf and WULF Compute in the second half of 2025. Actual interest paid during Q1 was $5.3 million compared to $6.9 million in Q4. Change in fair value of warrant liabilities in 1Q and 4Q was losses of $216.3 million and $5.2 million, respectively, related to the Google warrants. This is a noncash loss and does not affect our liquidity.

Equity in net loss of investee, net of tax for 1Q was $11.5 million compared to a net loss of $4.1 million in 4Q, which represents TeraWulf's 50.1% share of the net loss of the Abernathy joint venture, which was formed in October 2025 and has not yet commenced operations. Our GAAP net loss in 1Q was $427.6 million compared to a net loss of $126.6 million in 4Q, with the increase primarily driven by noncash fair value adjustments related to the Google warrants and noncash stock-based compensation. Our non-GAAP adjusted EBITDA in Q1 was a negative $4.1 million, an improvement from negative $50.9 million in Q4.

Turning to the balance sheet and liquidity. As of March 31, 2026, cash and restricted cash totaled $3.1 billion. Total assets amounted to $7 billion with total liabilities of $7.1 billion. Regarding liquidity, as detailed in our 1Q investor presentation on the slide titled Capital Structure, as of March 31, the TeraWulf parent entity held approximately $300 million of available unrestricted cash. This figure increased to approximately $1.5 billion when incorporating the impact of the equity we raised in April. As of March 31, 2026, WULF Compute remains on budget and had approximately $2.8 billion of gross cash or $2.3 billion net of debt service reserve and interest during construction accounts, with $1.5 billion of CapEx spend complete and $2.2 billion remaining.

With regard to the Abernathy JV, as of March 31, 2026, the JV had approximately $1.4 billion of gross cash or $1 billion net of debt service reserve, interest during construction, letter of credit and HoldCo LockBox accounts with $0.4 billion of CapEx spend complete and $0.9 billion remaining.

With respect to Kentucky, subsequent to the quarter, we repaid the $100 million draw on the bridge credit facility and terminated the facility. We expect a portion of the approximately $1.2 billion of equity raised year-to-date will fund TeraWulf's equity contribution to the Kentucky project. Demand for near-term power remains strong, and we are targeting 480 megawatts online in the second half of 2027.

In summary, 1Q reflects a business in transition from volatile Bitcoin mining revenue to stable contracted HPC revenue. Mining continues to strategically support this transition. Contracted HPC revenue is ramping. Liquidity at the parent and its subsidiaries remains strong.

With that, operator, we are ready to take questions.

[Operator Instructions] The first question is from Mike Grondahl from Northland Securities.

Two questions. One, Paul, could you talk a little bit post Kentucky, what sites are you most excited about? And then secondly, kind of getting at a pipeline of new sites, would you expect to add any new sites in '26, '27, like you've added Kentucky and Maryland so far?

Mike, thanks very much. Yes, I'm very excited about Kentucky, not only for what we've been talking about and the customer that we'll be signing, but it has expansion possibilities as well, working very well with the utility there, Big Rivers. And so I think there's great opportunity for expansion. I think that Kerri Langlais run our development and M&A teams. I think we indicated last year, we looked at hundreds of possible sites and selected a few just to move on with. One of those was Morgantown. We're really excited about it. We anticipate mid-summer FERC decision. It's a very exciting site because of its location for data center use, but also because they need generation. Power is really constrained there.

So we're going to be doing something that's really good for the grid, really good for state ratepayers and really good for our next data center customer at that site. So I think we're really, really constructive with respect to it. We're going to continue to perform on Lake Mariner and build that out. And then, yes, Kerri's team has worked hard. I think there's a couple of things that they like a lot. It would be premature to talk about them right now, Mike. But again, I think Kerri's experienced teams -- their capabilities will be demonstrated in our ability to add a couple of more pretty compelling sites to the queue. I think we're very, very excited about building out Kentucky right now. And our focus has to continue to be on execution because you're only as good as your last job, and we need to perform for our customers. So that's my primary focus. But yes, I'm very excited about what we have in the pipeline.

The next question is from Stephen Glagola from KBW.

Can you elaborate on the opportunity to partner directly with utilities on future sites? And are there specific markets or power types, where you see the greatest opportunity? And what could this mean for -- whether it's project economics, development time lines and scalability?

Stephen, it's Nazar here. So with respect to where we see things going, more and more so, you want certainty throughout the chain. So that's whether you need new transmission or generation, who's going to fund, who's going to bring the customer and who's going to fund that build-out. So what we're seeing is utilities may have sites that used to have generation or interesting sites within their territories or their jurisdictions. They want load and they may need generation to kind of come with that load. And some of the utilities can do that on their own.

You're seeing more and more so of the integrated utilities, I think, taking a more aggressive approach to trying to bring load in and say, "Hey, we're a one-stop shop, come here." And there are other folks who may not have those tools or may not be in the financial position to support all of that generation on the front end. And so they're looking to work with partners like us, who can help bridge that. So there are a number of discussions that we're having kind of across the country with respect to those. Again, it's how do we bring generation into a territory so that we can both bring the supply that's needed as well as bring the load that would use that generation as well. And can we be either the bridge solution to get that generation going or can we be the solution to get that generation going.

Okay. Great. And then if I could just ask one more follow-up on Cayuga Lake. Just an update on the site plan review process there across both Phase 1 and Phase 2, including maybe expected timing for the initial power availability for the 150 megawatts and then the path to expanding to 300 megawatts?

Yes. Cayuga, we're in the planning permit process. We have another meeting coming up that we will be preparing for. The first planning meeting was, I think, really good. They were asking a lot of constructive questions. They're really getting into the details of what we plan to do on site. I can't give you a window into their approval process beyond that it seems to be, in my opinion, going according to the rules. We're engaged. They are engaged. We have homework to do to get back to them with all the responses to the questions they've asked. They're asking good questions. They're asking about noise. They're asking about security. They're asking about fire security measures. They're asking about traffic on the roads. They're asking about all the things that they should in the best interest of their community, and we're trying to be responsive to that.

We're still very, very excited about that site. It's pretty great. There are a couple of other things that are going on at that site. There's also going to be a solar facility from AES. A battery storage group is interested in that. So I think the town is -- the Town Planning Board is trying to sort of integrate all those groups in terms of what they're trying to do at their various locations on the lakefront. But I think at the end of the day, we're making good progress. They're being a good partner, and we are excited about our progress there.

The next question is from Brett Knoblauch from Cantor Fitzgerald.

Paul, on, I guess, both Lake Mariner and the Maryland site, maybe just starting with Lake Mariner, I think the slide deck shows kind of 750 megawatts. I guess, is there an update to the additional power that you guys were in queue? Have you received that yet? Or when should we expect to receive that?

And then on Maryland, maybe just the cadence of what that progress looks like. Would you look to sign a contract before procuring the generation equipment? Would you look to maybe partner with an IPP at that site or kind of do everything yourself? How should we think about just the cadence of that site, which obviously can be very big?

Yes. Maybe I'll start Naz, and then I'll turn it over to you. In terms of Maryland, we haven't received FERC approval yet, right? So we are receiving a lot of inquiries from customers with respect to the site just simply because of the sheer scale of it. And again, its location in that Washington, D.C., Northern Virginia that Maryland corridor is very exciting for data center use. And it's rare to find it in a brownfield site as opposed to some farm field out in Virginia. This is an industrial site that's going to be reused. And so the county is really excited about it as well about the jobs and the idea that, that site is going to be mitigated and reused.

So the answer is, we got -- we have to wait on FERC approval. We're not going to spend a whole lot of money until we have that. We're not speculators. We're highly confident that FERC approval will come. And at that point, our first focus will be on ensuring that we're in compliance with our grid obligations because she is a generator into the grid with her existing units. And our intention is, as you know, to build a much larger gas facility at that site, so we could be a surplus generator.

Naz, do you want to take it from here?

Sure. Brett, on Lake Mariner, the incremental 250-megawatt interconnect, we're expecting feedback from the ISO here midyear. So we haven't received anything yet, but we've been told from the ISO as recently as last week that we should be getting that feedback on schedule. So as soon as we have that, that will then drive timing on when that incremental 250-megawatt will be available. And pretty soon thereafter, we'd be looking to market that capacity as well.

The next question is from Nick Giles from B. Riley Securities.

Just wanted to ask on Justified. What are really the key items still being determined there? I mean, should we expect that the customer could be determined at this stage and you're just negotiating terms? Or would it be that you still have multiple customers kind of in the mix that are fighting for that capacity? Just kind of any more color on where things stand would be really helpful.

Yes. I want to be careful here. We've run a very competitive process. And as you know, the space is all about immediately available power, prompt power. And so that's what excited people about the site, plus it's mid-country location. I think that the result of a very competitive process are some terms that we're excited about that we think you will find competitive in the market today. And now we're working through the details of what that looks like in terms -- from the customer side. I remain highly confident that we're there, as I said we would be before the end of the second quarter.

But these deals are constantly evolving. There's a lot of disruption in the space, and we want to make sure that we get the absolute best contract terms for our investors and shareholders. On the development side, we're in great shape. We -- our team turned to and we got that agreement with the utility, and so we're all set to go. We've, as you know, initiated limited notice to proceed to Fluor. That relationship continues to grow in the most constructive way. So we're really, really excited about what we have going on at Hawesville.

The next question is from Tim Horan from Oppenheimer & Company.

Are there any terms you'd rather get in the new contracts that maybe you didn't get in the past? Maybe just how you're thinking about how the terms change? And then Justified, if you get everything you need here in the next few months, when do you start construction? When do you think that comes online? And then just lastly, it sounds like there's more locations or power in that area. I mean, just any more color on that.

Tim, it's Nazar here. With respect to just the contracts themselves, I think we've -- the initial contracts we had were 10 years. We were some of the earlier contracts that were signed. More recently, the term has been 15 years. And so that's been, I think, a term that's become pretty well accepted within the market. When we look at the kind of the construct of this, we have a customer that's going to be there for 15 years. Inevitably, there will be some hardware changes that occur during the course of that time. And so making sure that there's an alignment on how that transition will occur and again, whether it happens halfway through it, 5 years through it or 10 years through it, is not the point. It's more of how do we manage that.

So when we look at these things, it's really putting together both on the front-end scope. And as Paul mentioned earlier, I mean, things change on that side month-to-month as well. The hardware that's being deployed here depending upon when you're coming online is going to be different if it's 6 months sooner or later. And so that's one thing that feeds into the overall basis of design. And given, again, just how quickly things are moving, we thought we had a final design that was going to work for a number of years, and we did it with Fluidstack and Google towards the end of last year. Again, there's been a couple of iterations on hardware from vendors, and we work with all of the vendors, right?

We've got AMD, NVIDIA, Google TPUs. And so we have a number of different OEM hardware equipment. And again, each one of those vendors have an evolution in the hardware they're delivering. So that's another piece that works through it. And then underlying it all is ensuring that the creditworthiness of the counterparty that we have is paramount. And so that's the final piece that we look to in putting these things together is to ensure that, that counterparty credit is aligned with what we've done in the past. And so those are some of the things that go into it. But hopefully, that gives you a sense of just some of the changes and nuances we've had here over the past couple quarters.

The next question is from Chris Brendler from Rosenblatt.

Just wanted to ask from zooming out a little bit, sort of thinking about the demand environment and certainly seems to continue to get stronger and stronger. As you look to the next several years, do you think that we're in a window of opportunity here for sort of higher profitability on these contracts that will dissipate over time? Or do you think that we'll see continued upward pressure on yields, cost and lease rates and terms given the lack of power that's available for this massive AI build-out?

This is Paul. I appreciate the question. Demand is real. I mean the customers are pushing hard to get more prompt power, but they're willing to contract for longer periods of time. I think that the disruption in the space will be in the technology, but it won't be in the fact that they require energy use. Some units may end up being more efficient, but that will just enable more compute time on the same amount of energy. So I think at the end of the day, what we are anticipating is continued pressure from customers based on the strong demand for quality energy. And they're focusing on sites where they think they could be sustainable. They want to know that they're going to places where the regulatory framework is going to be stable, where the energy costs are going to be okay and not in excess of where they anticipate the market is going.

I think for us, what we need to do is continue to ensure that we provide low-cost energy, great regulatory framework in our sites, sustainability in terms of the energy mix and stability of the energy price. And then some sort of regional diversification for a lot of our customers so that they're not all focused just in one place like West Texas, but they had places where they could do their high-power compute throughout the country. I think that the market will continue to improve for some time because you just can't bring power online that quickly.

We have a lot of hopes in our country for continued power development, but it takes time. It takes time to permit. It takes time to refine the energy mix for the customer. I just think it all takes time. So I don't think the window is too narrow. I think Steve Byrd's talked about the shortage of electricity in this country for a couple of years now being pretty significant. I don't see that shortage. I don't see supply coming online fast enough to meet the demand. And so the need is not abating. So we're pretty constructive.

But that doesn't drive our strategy. Our strategy is more driven on what we know we can do. And that's why we've told the world we're out there to put 250 megawatts to 500 megawatts in the ground in any given year. We're highly constructive and confident about our abilities to do that. And if there are some larger projects that come along and customers want to participate in that, then we'll work with them, and we will. But we think slow and steady is going to win this race. We anticipate to be doing exactly what we're doing several years from now.

That's very helpful, Paul. I appreciate that. And a question for Patrick, kind of a similar question, certainly seeing increasing acceptance and demand from debt investors for companies who have pivoted from Bitcoin mining, which was not that financeable to HPC. And I think at first, it was a little tougher to get debt deals done, and now it seems like it's getting easier, terms getting better, spreads are tightening. Just wanted to hear Patrick's perspective on the financing outlook and how things have improved.

Chris, it's exciting, right? I mean come a long way in a very short period of time. And now all of us are starting to look more like traditional S&P 500 companies, right, with project finance debt, real revolvers. I think one thing we put in the release today that I think our whole team is really proud of is $250 million revolver from 8 different banks, that a group of global leaders and financial institutions. That's a big accomplishment.

And I know some of our peers are doing that, too. So yes, I think as a whole, the entire space is just becoming more legitimized. And not only that, what's exciting for me, I mean you've seen us use a bridge, a revolver, high yield bonds, right? Project finance bonds. I think you'll see us, one of our peers just opened up the loan market. So, yes, I think it's becoming more common place with the rating agencies, with high yield investors, with IG investors.

And, I constantly come back to, for us, like, where we are trying to go is, I want flexible debt structures, meaning structures that I can call in a couple years because where I -- ultimately I'm trying to drive things and us as a team are trying to drive things is we want to be an investment grade company. And, I had a front row seat early in my career to watching, Cheniere go through the capital raising process and ultimately, financing projects at the project level is very efficient when you're first getting started. But then once the projects are up and running, right, the way the massive unlock for the equity happens is you take out those project financings with long-term bullet investment-grade debt.

And that's where I think we are trying to drive our bus. And I think the space will follow because there's a lot of cash flow that comes out of these projects. And once you've amortized the debt down to a comfortable level, there is a massive unlock in free cash flow that happens for the equity, and that's only a couple of years away for us.

The next question is from Brian Dobson from Clear Street.

So as you're in conversations with new clients, how would you characterize potential contract terms compared with, call it, similar conversations last year? Have your hurdle rates changed? And what do you view as the biggest constraints on future development at this point?

Brian, it's Nazar here. So there's a handful of customers that we all want at these sites. And so in the near term, assuming you have access to the power, right, that's where the discussion starts. I mean there's one constraint is just people's time. The 6 customers, 8 customers everyone wants are doing a number of different things. For us, we have one site that we're focused on at one time. And so that one site is 100% of what we're doing and it's probably not 100% of the customers that we want of what they're doing. So one is just, again, finding that alignment between the customer and where they're at, what they're looking for and where we're at.

And I would say that's a more meaningful part of the art of getting this stuff done than people think. And so that's one is just, again, kind of the timing alignment on where you are. The other piece is these larger customers are looking to build zones of capacity. So it's not just a site in isolation that they look at in a state, but it's really once they go into a place, they're looking to have a footprint. And so they also want to have a view to -- can in those locations, can they continue to expand. And so whether that's with you or with others, but in those areas, can they kind of expand a footprint. So it's not just a single site that they're at, but it's multiple sites that they're at. So that's another piece that gets back to this overall alignment is, different folks are in different phases in different parts of the country. And so one group may be ramping up in the Southwest, another may be ramping up in Kentucky.

And so that's where part of our work is really to kind of find that overlap as well with what we have and what we're bringing to market and where those folks are. So those are some of the things I just think from a market and demand perspective that we're working through. I think as Paul mentioned earlier, the 250 megawatts to 500 megawatts that we have guided the market to is well in line with what we can deliver. And again, I think across the 6 or 8 customers that we want, it's also meaningful enough but not so large portion of what they want as well. And so there's ample room for us to be able to deliver that with the capacity that we have.

And so -- and the other piece that I'd just kind of to finally add in is in trying to build a model with a couple of folks, where we can maybe even kind of be ahead of the game in understanding where their growth plans are. And so again, as I was saying before, if there's a group, one of the folks is looking to build out a zone in one part of the country, can we be the resource for them to kind of identify the next site within that zone versus us just coming to them when we have something in hand. And so that's another kind of discussion that's ongoing with counterparties that we have is not just kind of focused on what's in front of us right now and negotiating a lease agreement, but it's also a little bit more strategic and saying, "Hey, in this zone, should we be looking for other things for you as well."

And Brian, it's Patrick. Just to follow up on your economic question. It's the same. We've kept the same sort of discipline and principle from day 1, which really, again, is yield, right? And that's just your NOI yield effectively over your cost to build. That's what we try to target. But I think the added element, right, is that has to align with also the credit support that you're getting from the counterparty, right? Is it direct on balance sheet? Is it credit sleeved? How does that look? But that's really the focus because as Nazar mentioned, I think a lot of the other lease terms have moved to a market rate across multiple providers, multiple sites, others, but that's, I think, still the economic focus for us.

The next question is from John Todaro from Needham & Company.

Congrats on the progress so far. I guess just on Kentucky, can we say if there's kind of a frontrunner at that site and if we're thinking direct IG hyperscaler there? And then I have a follow-up.

Yes, we like somebody a lot for that site. It was a very competitive process, and I would assume it's going to be investment-grade, super high-quality customer.

Okay. Great. And then just housekeeping modeling item. Can you remind us on the cadence of the Bitcoin mining ramp down maybe on a hash rate basis?

Yes. John, it's Patrick. I think I'll get back to you on the specifics, but I think today, we're somewhere probably between 5 and 6 exahash. And we won't be putting any significant amount of money into that business. So as some of the miners kind of come offline because we're repositioning buildings or power feeds for the HPC leasing segment, we'll kind of slowly eat into that capacity. I think generally speaking, for the year, though, we're going to try to be in that sort of 5 to 6 exahash range.

And then I think beyond this year, it's kind of wait and see. But I think we will likely be out of that business certainly by the next halving. But it is -- this quarter is a great example. I mean it does provide a very significant service to the grid and provided us with some nice cash flows this service -- excuse me, this quarter as well, and we'll continue to do that in the future. So yes, that's kind of what I would use for the modeling.

The next question is from Martin Toner from ATB Cormark.

Congrats on a great quarter. The political risk of the AI data center build-out seems to be like slowly but surely picking up. And just can you talk a little bit about how you guys are mitigating that sort of like NIMBY development risk that comes from the political risk related to concern over AI buildup?

Sure. Appreciate the question. Listen, people are concerned when somebody comes into their community and wants to put up a big building, and there's a lot of misinformation out there about whether or not they're going to take water from a lake or they're going to be radiating or they're going to drive up electricity prices in the community. So the first thing to do is to help educate the community. And we're very focused on that. We've been developing power plants for over 25 years.

So before data centers were the big ugly, power plants were the big ugly. And then people realized Holy cow, we really do need energy. So we need to be thoughtful and responsible about the energy that we build, but we do need it. We can't just be in denial about that. Likewise, data centers, they're really important. They serve an important goal for humanity. And I think that they do use electricity. And so the market has started to evolve to this notion of you got to bring your own generation or in order to be connected to the grid, we want you to show us your nameplate capacity or we want you to be a surplus generator.

And so the answer is that different communities are going to define what their needs are. We're never going to solve the problem for the person that's just an absolute -- we don't want any progress, we don't want a data center. But what we can do is educate the community on what the data center will bring from a constructive perspective in terms of jobs, economics, what it won't do in terms of -- it's not going to harm the environment, it's not going to drive up electricity prices. And once we work on that education, then we work that all the way through from the everyday citizen in the town hall to their local representatives in government.

I think that it's important for folks to appreciate that we're not all the same. Not every site is equal, not every developer will bring the same degree of thoughtfulness or responsibility or responsiveness to these developments. But that's TeraWulf's mission. We are -- we have customers that are world-class and socially very, very conscious and want to contribute to the benefit of the communities. And that's what we're all about. So I think that you got to pick your spots, you have to understand what you're walking into, and you have to be -- lead with transparency because in that transparency, people will ultimately get very comfortable because we're doing the right thing.

So we're dealing with it in Maryland, where, as an example, it's a very -- it's a state that wiped out its generation, unfortunately, and now it's paying the price for it. So they've come back and they've been very supportive. Governor and the state, the MDE, they're very supportive of building new generation that is thoughtful and responsible and clean. And they're excited about bringing jobs to a county, where -- there was a former plant and now people miss those jobs. So I think you could work with it, but it requires work. It's nuanced, and it will be -- the teams that win here are going to be the teams that have gone about this in a mature and thoughtful and constructive way.

That's great. What caused you to -- what caused EBITDA to be a bit lower than the given range?

Yes. Martin, it's Patrick. So closing out the books on our business has gotten increasingly complicated as we get a lot bigger. And so when we gave that guidance in April, we weren't done as far as inputs into the general ledger and other things. So there were two specific items. One is tenant fit out and the other is there are costs that we incur up at WULF Compute that have to get split between PP&E, meaning like a capitalizable cost and an operating expense, right, as OpEx.

And so in my remarks, as you saw, there was about, I think, $3.5 million or $3.2 million of operating expense at WULF Compute that when we were putting together the preliminary guidance effectively was in PP&E. And as we kind of went through and closed out the final books, that kind of came out of the CapEx basket and went into the OpEx basket. So a lot of that stuff, honestly, will normalize, Martin, as we bring operations up and online, right? We don't -- we won't have to kind of keep going through those buckets carefully every quarter, but that was what drove it.

The last question is from Michael Donovan from Compass Point.

For Maryland, my understanding is that the site currently has live peaker plant capacity and that the independent Market Monitor has raised questions on that front. Obviously, your planned battery capacity appears to more than address that issue once completed. But can you walk us through how you expect to manage the existing capacity during the build-out and what steps you're taking to address regulatory concerns?

Sure. The existing capacity will continue to operate. So there is no plan to do any -- make any changes whatsoever to the existing capacity that's there. So as a part of our plan, all of the things that we've been discussing with respect to battery storage, gas generation are incremental to that. So that's an important point to note that existing 210 megawatts or so of operating capacity will continue to be bidding into the PJM market as a peaker. And incremental to that, we'll be looking to add battery storage capacity, efficient gas-fired generation capacity and load.

So that's kind of the setup there. And so both in discussions with -- if you have read through the filings that we did at FERC, we've kind of reiterated that point. And also with the various discussions we've been having with the local utilities as we've been discussing the potential for adding capacity there, both on the generation side as well as the load side, we've highlighted to them that, that capacity is staying.

This concludes the question-and-answer session as well as today's call. You may disconnect your lines at this time. Thank you for your participation.

Thank you, operator. Good morning, and welcome to TeraWulf Wulf Compute Lender Update Call. Joining me today are CFO, Patrick Fleury; CTO, Nazar Khan; and COO, Sean Farrell.

Before we begin, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. Words such as anticipate, expect, believe, intend, estimate, project, could, should, will and similar expressions are intended to identify forward-looking statements. For a discussion of these risks, please refer to our filings with the SEC available at sec.gov and in the Investor Relations section of our website.

We will also reference certain non-GAAP financial measures Reconciliations to the most comparable GAAP measures are available in our earnings release and filings. This update is intended to provide transparency on construction progress, liquidity and schedule relative to our Wulf Compute financing.

With that, I'll turn the call over to our CFO, Patrick Fleury.

Thank you, John. As of January 31, 2026, Wulf Compute had approximately $3 billion of gross cash or $2.6 billion net of debt service reserve and interest during construction accounts, with $850 million of CapEx spend complete and $2.38 billion remaining. That leaves approximately $200 million of cash cushion, which is incremental to the substantial contingency embedded in the financing structure.

Schedule sequencing adjustments have shifted approximately $16 million of projected revenue in years 2025 and 2026 into later periods. Importantly, design optimization has increased critical capacity from 162 to 168 megawatts across both CB4 and CB5 generating approximately $200 million of incremental revenue over the initial lease term.

The net effect of these adjustments improves projected cash flows and reduces expected debt outstanding at maturity of the senior secured notes by approximately $45 million versus prior projections. I will now turn the call over to our CTO, Nazar Khan.

Thanks, Patrick. Wulf Den and CB1 were delivered in the third quarter and generated revenue throughout the fourth quarter. CB2A is operational and CB2B is expected online in March. By the end of the first quarter, all CORE42 capacity will be energized and revenue producing. .

Following contract execution, Core42 requested certain fit-out refinements typical for hyperscale developments. These were incorporated into the existing construction envelope with a revision to the monthly recurring charge. No penalties are triggered and revenue commencement remains aligned with the customers' deployment schedule. Regarding the fluid stack buildings, CB3 is expected to be delivered in May. After signing tenant-driven layout refinements, typical of late-stage deployment planning were incorporated without changing building footprint or lease economics. The associated revenue timing impact has been fully reflected in the updated financial model.

Importantly, CB4 and CB5 were designed collaboratively with the tenant from inception. These buildings reflect a fully standardized, repeatable design and represent the majority of contracted Wulf Compute capacity.

Several structural improvements materially reduce execution risk. First, electrical redundancy has been optimized and standardized. Second, trade stacking and sequencing have been refined to minimize rework Third, long lead equipment was procured after final design alignment; and fourth, mechanical and electrical systems now follow a repeatable installation model. Execution risk declines as the design standardizes and CB4 and CB5 reflect a mature optimized build. Both buildings remain on schedule with targeted lease commencement dates of the third quarter and fourth quarter, respectively.

Through design optimization, we increased critical IT capacity from 162 megawatts to 168 megawatts per building without impacting the base construction budget. The incremental 12 megawatts across the campus is expected to generate approximately $200 million of additional lease revenue over the initial term.

I will now turn the call over to our COO, Sean Farrell, who will provide more details on each specific building.

Thank you, Nazar. From an execution standpoint, each successive building has incorporated lessons learned and increasing standardization. CB2 transitioned from structural elements to a pre-engineered metal building reducing both scheduled duration and labor variability while maintaining data center performance requirements. Electrical distribution was simplified, lowering capital intensity and improving constructability.

CB3 further standardized UPS architecture and run time parameters, delivering electrical cost efficiencies while maintaining required redundancy and tenant specifications. Integrated skid-based systems improve installation sequencing and schedule certainty.

CB4 reflects full tenant collaboration at the engineering stage. Layout optimization, reduced conduit and piping runs, minimize underground work and shifted redundancy to higher voltage distribution levels, reducing equipment melt and field labor. Containerized UPS systems provide plug-and-play installation further accelerating execution.

CD5 replicates the CD4 design an execution model and benefits from procurement scale, labor familiarity and established sequencing. As a result, we expect continued improvements in schedule predictability and cost control.

Overall, the project has transitioned into a standardized and repeatable development program, materially reducing variability relative to early phase builds.

Thank you, Sean. This ends our call. Thank you for your continued partnership and support.

Greetings, and welcome to TeraWulf Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. John Larkin Senior Vice President, Director of Investor Relations. Thank you. You may begin.

Thank you, operator. Good afternoon, and welcome to TeraWulf's fourth quarter and full year 2025 earnings call. Joining me today are Chairman and CEO, Paul Prager, CTO, Nazar Khan, and CFO, Patrick Fleury.

Before we begin, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. During this call, we may use words like anticipate anticipate, expect, believe, intend, estimate, project, could, should, will and similar expressions are intended to identify forward-looking statements. For a discussion of these risks, please refer to our filings with the SEC available at sec.gov and in the Investor Relations section of our website.

We will also reference certain non-GAAP financial measures. Reconciliations to the most comparable GAAP measures are available in our earnings release and filings. With that, I'll turn the call over to our Chairman and CEO, Paul Prager.

Thank you, John, and good afternoon, everyone. 2025 was a defining year for TeraWulf. We said we would transition this company into a scaled, power backed AI infrastructure platform and we did it. Our strategy is simple and disciplined. Control energy advantaged sites, engineer infrastructure around power and contract long-term credit-backed AI capacity. Everything we did in 2025 supports that strategy.

First, we acquired 100% of [indiscernible] electricity and data, eliminating related party complexity and fully integrating power generation expertise into our platform. In today's market, power is the gating factor. If you don't control power, you don't control your destiny. We do.

Second, we secured long-duration site control at Cayuga, up to 400 megawatts at a retired coal facility with real grid infrastructure already in place, brownfield, power backed, scalable. That's our model.

Third, we signed a 450-megawatt lease with Fluidstack supported by Google's credit. That was a platform-defining deal. It validated our model, our execution capability and ability to contract at scale. With Google's warrants, it will be our largest shareholder. That alignment speaks for itself.

Fourth, we replicated the model in Texas through the Abernathy joint venture, proving portability across power markets.

And fifth, we executed the WULF Compute and Flash Compute Financings. These transactions demonstrated that contracted credit-enhanced AI infrastructure supports scalable and repeatable capital structure.

Operationally, we delivered WULF Den and CB-1, began recording HPC revenue and have now delivered CB-2A for Core42. We are building delivering and contracting simultaneously. And since year-end, we added approximately 1.5 gigawatts of additional power back capacity in Kentucky and Maryland. Now let's talk about what actually differentiates us. Power and execution.

The AI build-out is not constrained by GPUs. It is constrained by power, interconnection transmission and increasingly new generation. That's why Morgantown matters. Morgantown is not just another data center site. It is a former coal generation facility in the Washington, D.C., Northern Virginia corridor, one of the most power-constrained data center markets in the world. Our Phase 1 vision includes approximately 500 megawatts of new dispatchable generation, 250 megawatts of battery storage and 500 megawatts of data center load, followed by a similar Phase II. Critically, the site is being engineered to operate as a net generator to the state. We are not just consuming capacity. We are adding it in constrained markets that is the only sustainable model at scale. This industry is moving towards integrated bring-your-own generation campuses. We are well ahead of that curve because we are fundamentally a power company that builds and operates digital infrastructure, not the other way around.

We know how to permit generation. We know how to build generation. We know how to operate generation. We understand grid behavior, and we know how to integrate generation, storage and compute in a way that works for customers and regulators. There are very few teams that can do that credibly and at speed. We are premier among them.

Turning to Kentucky. Demand is extremely strong. We are engaged with every major hyperscaler and several large AI compute platforms, and data room is open, diligence is active, conversations are robust and substantive. This week, we met directly with Governor Beshear and state leadership. The alignment at the state and local level is clear and constructive. Kentucky understands the economic and strategic import of power backed AI infrastructure. This is 480 megawatts, a campus with immediate power availability, expansion potential and strong state support. We are excited and highly confident in the long-term value of this asset.

While we execute on the platform, we are consistently evaluating a constant pipeline of additional opportunities. We review hundreds of sites and most do not meet our standards. We are disciplined around four key elements: power control and durability, scalability in 250 to 500-megawatt phases, signed credit-backed contracts, we do not speculate, and fourth, capital efficiency. We turn sites away all time. But when we do find one that meets these criteria, we move decisively.

Importantly, we already control the sites necessary to deliver our targeted 250 to 500 megawatts of contracted capacity annually through the end of the decade. The runway is in place. Growth from here is execution.

Finally, we are building the team to match the ambition of the platform. We recently added a senior data center construction lead for Meta and have strengthened origination, project management, commissioning and cybersecurity capabilities. This business is one in the trenches of engineering detail, construction discipline and operational rigor, we are staffed accordingly.

So in summary, the strategy is clear. The sites are secured. The capital is in place. Customer demand is strong. The team is built. Now it is about disciplined delivery. Turning contracted megawatts into energized capacity and durable recurring cash flow. With that, I'll turn it over to Nazar.

Thank you, Paul. Let me start with delivery and risk compression. WULF Den and CB-1 were delivered in the third quarter and generated revenue throughout the fourth quarter. CB-2A is operational and CB-2B is expected to be fully online in March. By the end of the first quarter, all Core42 capacity will be energized and revenue producing. Following contract execution, Core42 requested incremental fit-out enhancements. We adjusted sequencing accordingly. The monthly recurring charge was revised, no penalties were triggered and revenue commencement remains aligned with the customers' deployment schedule.

Turning to the Fluidstack buildings. CB-3 is expected to deliver in mid-May. After signing the tenant finalized certain design optimizations, which we incorporated without changing building footprint or [indiscernible] economics. The associated revenue timing impact has been incorporated into the financial model. Importantly, DB-4 and CB-5 were designed collaboratively with the tenant from inception. These buildings reflect a fully standardized, repeatable design and represent the majority of contracted WULF compute capacity. Several structural improvements materially reduce execution risk.

First, electrical redundancy has been optimized and standardized. Second, trade stacking and sequencing have been refined to minimize rework. Third, long lead equipment was procured after final design alignment; and fourth, mechanical and electrical systems now follow a repeatable installation model. Execution risk declines as designed standardizes and CB-4 and CB-5 reflect the mature optimized build. Both buildings remain on schedule with targeted lease commencement dates of third quarter and fourth quarter of 2026, respectively. Through design optimization, we increased critical IT capacity from 162 megawatts to 168 megawatts per building, without impacting the base construction budget, that incremental 12 megawatts across the camp is expected to generate approximately $200 million of additional lease revenue over the initial term.

Finally, Abernathy, our joint venture remains aligned with its fourth quarter 2026 lease commencement and continues progressing under fixed EPC structure, which further limits construction cost variability. Execution requires managing scope, timing and cost in real time. We have incorporated adjustments transparently and remain focused on disciplined delivery. Large-scale AI infrastructure requires active management of scope, schedule and cost. We have incorporated refinements transparently, preserved economics, increased capacity and maintain budget integrity. Execution remains disciplined and on track. With that, I'll turn it over to Patrick.

Thank you, Nazar. The second half of 2025 was transformational for the company. We secured over $12.8 billion of HPC lease agreement, executed $6.5 billion of debt and equity-linked financing and materially strengthened our balance sheet liquidity while carefully managing and minimizing dilution.

Let's begin at a high level before diving into financial details. We are a business in transition and executing on rapid growth. The 2025 results still reflect a meaningful contribution from Bitcoin mining and its inherent volatility, including commodity pricing and complex network difficulty dynamics. Over time, that volatility will decline as long-term credit-enhanced HPC revenues become the dominant driver of results. Importantly, while mining introduces revenue volatility, its flexible load profile has been strategically valuable at Lake Mariner, supporting demand response participation and power cost management. Mining is not a long-term growth focus, but it has enabled the transition. The 2025 results of operations reflect that transition in motion and the balance sheet reflects that we have the capital structure to execute.

In the fourth quarter of 2025, revenue was $35.8 million, down from $50.6 million in 3Q '25, primarily driven by lower Bitcoin production. Importantly, HPC lease revenue increased to $9.7 million in Q4, up 35% from $7.2 million in Q3. For the full year, revenue increased 20% to $168.5 million from $140.1 million in 2024. With Digital Asset revenue of $151.6 million and HPC lease revenue of $16.9 million. We commenced HPC leasing in July 2025 and had energized 18 megawatts of critical IT capacity as of year-end. As additional buildings come online, revenue mix will continue shifting towards stable contracted HPC revenue.

Cost of revenue, exclusive of depreciation, increased 10% from $17.1 million in Q3 to $18.9 million in Q4. Demand response proceeds [indiscernible] reduction in cost of revenue decreased $4.4 million [Audio Gap] prices. Demand response proceeds also increased year-over-year from $8.6 million in 2024 to $17.7 million in 2025. Operating expenses increased as we scaled the platform to support HPC deployment. Quarter-over-quarter operating expenses rose to $8.8 million from $4.5 million. Full year operating expenses increased to $19.7 million in 2025 from $7.6 million in 2024, reflecting staffing and operational readiness.

For context, TeraWulf finished 2024 with under 100 full-time employees and will exit 2026 with close to 300 full-time employees. Let me address the HPC Leasing segment profitability as presented in Note 19 of our 10-K.

The as reported annual segment profit margin is approximately 42%, versus our long-term guidance of approximately 85%. That difference is driven by three factors: First, $1.2 million of tenant bid-out revenue and associated costs during 2025. [indiscernible] carries a modest margin as provided for under the HPC leases.

Second, $4.1 million of development in pre-revenue operating costs. And third, partial period revenue contribution as building [indiscernible]. Adjusting for those factors, yield approximately 77% segment profit margin in 2025, which is consistent with ramp expectations and converging towards our 85% steady-state margin guidance as utilization stabilizes.

SG&A expense also increased as we scaled the platform to support HPC deployments. Quarter-over-quarter SG&A expense rose to $66.6 million from $16.7 million. Full year SG&A accounts for 2025 totaled $147.8 million from $70.6 million in 2024. After adjusting for stock-based compensation, SG&A increased from $39.7 million in 2024 to $94.5 million in 2025. This increase is primarily attributable to an incremental $47.5 million of new hires, strategic growth performance and milestone-based employee compensation in 2025, reflecting the notable scale of execution achieved during calendar 2025. Adjusting for this item results in total SG&A of approximately $47 million in 2025 in line with our prior guidance of $50 million to $55 million.

Depreciation increased to $88.6 million in 2025 from $59.8 million in 2024, reflecting infrastructure placed into service, an accelerated depreciation of $19.6 million associated with certain mining assets transitioning to HPC use. Interest expense in Q4 was $62.4 million compared to $9.8 million in Q3, and we recognized interest income of $31.5 million in Q4 compared to $4.1 million in Q3. Annual interest expense for 2025 and 2024, was $80.2 million and $19.8 million, and we recognized interest income of $39 million and $3.9 million, respectively. The increases in net interest expense were expected following our capital raises at TeraWulf and WULF Compute in the second half of 2025. Actual cash interest paid during Q4 and calendar year 2025 was $6.9 million and $13.9 million, respectively.

Change in fair value of warrant and derivative liabilities in 2025 was a loss of $429.8 million, primarily related to the Google warrants. This is a noncash loss and therefore, does not affect our liquidity. Equity and net loss of [ investee ] net of tax for 2025 was $4.1 million, which represents TeraWulf's 50.1% share of the net loss of the Abernathy joint venture, which was formed in October 2025 and has not yet commenced operations. Our GAAP net loss in 2025 was $661.4 million compared to a net loss of $72.4 million in 2024, with the increase primarily driven by noncash fair value adjustments related to the Google warrants and noncash depreciation.

Our non-GAAP adjusted EBITDA in 2025 was negative $23.1 million, down from positive $60.4 million in 2024. As a reminder, these results are inclusive of significant increases in SG&A and operating expense over the past 12 months as we invest heavily in our HPC business.

Turning to the balance sheet and liquidity. As of December 31, 2025, cash and restricted cash totaled $3.7 billion. Total assets amounted to $6.6 billion, with total liabilities of $6.4 billion. Regarding liquidity. As detailed in our fiscal year-end 2025 investor presentation on the slide titled Capital Structure as of January 31, 2026, and the HoldCo parent entity had approximately $500 million of available cash or approximately $300 million pro forma for the Kentucky acquisition announced on February 2. Regarding project-level capital positions and construction [indiscernible]. Both WULF Compute and Abernathy are fully funded through substantial completion with long-term fixed rate financing, eliminating construction funding uncertainty and reducing reliance on near-term capital markets access. Importantly, we do not anticipate the need for additional equity to fund our currently contracted development.

As of January 31, 2026, WULF Compute had approximately $3 billion of gross cash, or $2.6 billion net of debt service reserve and interest during construction accounts, with $850 million of CapEx spend complete and $2.38 billion remaining. That leaves approximately $200 million of cash cushion, which is incremental to the substantial contingencies embedded in the financing structure. As Nazar noted, schedule adjustments resulted in approximately $16 million less projected revenue in years 2025 through 2026. However, design optimization has increased capacity from 162 to 168 critical megawatts across CB-4 and CB-5, generating approximately $200 million of incremental revenue over the initial lease term. The net effect improves projected cash flows and reduces expected debt and maturity by approximately $45 million versus prior projections.

Finally, with regard to the Abernathy JV, as of January 31, 2026, the JV had approximately $1.5 billion of gross cash, or $1.2 billion net of debt service reserve, interest-bearing construction, letter of credit and HoldCo lockbox accounts, with $268 million of CapEx spend complete and $1.1 billion remaining. That leaves approximately $70 million of cash cushion at Flash Compute with a further $100 million liquidity reserve at the parent JV supported by a $1.35 billion lump-sum CPC contracts with Hypertech.

With respect to Kentucky, we have proposals in hand for secured loan facilities to fund pre-leased development to preserve HoldCo parent liquidity. Demand for near-term power remains strong, and we are targeting 480 megawatts online in the second half of 2027. We do not build on speculation.

In summary, 2025 reflects a business transitioning from volatile Bitcoin mining revenue to stable contracted HPC revenue. Mining has strategically supported that transition. Contracted HPC revenue is ramping, liquidity and contingency are strong. With that, operator, we are ready to take questions.

[Operator Instructions] Our first question comes from Mike Grondahl with Northland Securities.

First, I just wanted to start with Kentucky. That site sounds like the reception has been strong. Could you give us a few more details on the site? And what an ideal customer or lease would look like there?

Mike, this is Paul Prager. Its a fantastic site. This was the site of a former smelter. It's at a transmission superhighway, multiple utilities can service the property. What was most compelling about it was its central location and the immediate availability of power and scale. Demand for the site is extremely strong. Our data room is open, every major hyperscaler and several large AI compute platforms are doing diligence. The conversations to date have been substantive with some written term sheets already coming over to the desk. Earlier this week, I was down in Kentucky. I met with Governor Beshear and state leadership. The alignment at the state and local level is clear, very constructive, very, very, very pro business.

The importance of this project for the local community, particularly the public schools, which Kentuckyians are super proud of is massive. We held a community info session 2 nights ago, we had a job fair yesterday. We filled the auditorium and then some. We're extremely excited and confident in the long-term value of the asset.

As Patrick has said from day 1, we're all focused on the best financial credits to be our long-term customers. I think we've operated that way in the past, and that's the message going forward. I think you'll see a world-class credit as our next customer, for what we're hoping to be a 10- or 15-year deal. I think we'll see that deal happen pretty soon. I don't want to give you a drop dead date, but we're in very, very active and substantive discussions.

Great. And then secondly, the Maryland site. Seems like a lot of potential up to 1-plus gigawatts but a little bit more complex and kind of playing into what you guys have talked about bring your own power. How does that play into some of TeraWulf strength?

Sure. Just to be clear, Chesapeake data, it's about the power and load differentiation to gig site, certainly a gig data center load capability, 500 megawatts of battery storage capability. It's a former coal generation campus. It's in the Northern Virginia corridor, which means prices are exceedingly competitive. It's designed to be a net contributor to the Maryland grid. It's very well supported by Governor Moore and MTE. Again, both Maryland and Kentucky, by the way, a very sophisticated brownfield programs, which make it really easy for a guy like us who's been around the block and owned and operated coal-fired power plant, shut them down, mitigated them, did everything the right way. These two states have very, very progressive programs on how we do that at commercial feasibility.

Listen, the market is moving to bring your own generation. We said that a year ago. In December, Alphabet bought [ Intersec ] for almost $5 billion. In January, Microsoft raised dedicated generation as part of their 5-point infrastructure strategy. President Trump in January floated the notion that PJM emergency auctions needed to incentivize new generation, new generation projects would go to the top of the queue for interconnect. And then just the other night in the state of the union, the President stated data centers need to build and fund their own generation. So that's where the world is going. We have a real and growing power shortfall. Morgan Stanley says potentially 47 gigawatts, 2025 to '28. The hyperscalers are openly stating that power is the mining constrain.

Look at anything, recent public commentary by Collete Kress, NVIDIA's CFO, Sundar, Alphabet CEO, certainly Jensen Huang, NVIDIA's CEO, I mean it's all about we need power. So delivering generation alongside that load solves the problem. We could bring incremental megawatts to the grid or the system, dispatchable generation using CCGTs, not just bridging power, and we have a history of partnering with grid operators to solve reliability and adequacy challenges. What's our core competency.

We've been talking about this. This is the only team out there. For 25 years, we have been developing, building, renovating, rescuing generation. 6 gigs of power generation experience on this team together on this team and it's been over 25 years. We have deep expertise in siding, interconnection, generation development and -- and that's why we could go and take on a project like Morgantown and have the support that we can from both the local and state communities as we pursue this. We're really excited about Morgantown. It's a big job, but it fits into our schedule. And again, we've told the world, we're 250 to 500 incremental megawatts of data center load every year, and this fits right in.

Our next question comes from Tim Horan with Oppenheimer.

Do you think the pricing in terms and conditions in Kentucky can be materially better than what you've done in the past? And the construction schedule seems pretty ambitious. Do you have the labor and all the equipment you think you'll need in, I guess, the permits to get it done?

So I think I'll go first and maybe Naz, you can go second. In terms of the labor, yes, Kentucky is a fantastic, it's just a fantastic place. You have not only the construction expertise and the trade expertise, but you've got people that really want to work. We brought on for that job floor, which I consider to be a world-class contract party. We've dealt with them in the power space for a long time. They have relationships along in our C-suite for many, many years at every level. We are already ahead of the curve and sort of procurement. We have a proven design that our hyperscaler customers really like. And we think because it's immediate available power.

Well, we don't think we know because we've got this very robust conversation going on right now with folks that want to come in and be our customers there, for competitive pricing. Naz?

Yes. And just to add to what Paul said. As Paul said, we brought in floor on the EPC side. So we're already hitting the ground running with respect to the overall development of the project. And so the time lines that you see for the second half of '27 are reflective of ongoing and meaningful discussions already with the EPC. So that's -- so we feel pretty good about the overall time line. The other big component is gathering the labor that's going to support the project as well. And so there have been efforts already underway for both the mechanical, electrical and civil scopes, to get the requisite labor to support the project as well. So that data is informed by quite a bit of discussion that we've had with floor, who is our EPC as well as the work that we've done on site since the acquisition.

In terms of just the overall economics, I think we've said this on prior calls, we really think about these projects on an un-levered yield basis. And so if you look at where we've been historically, we think we'll be in that ZIP code or maybe better over time. But again, as we think about the overall economics of the project, we're always kind of zeroing in on what's the un-levered yield that we're developing at and pushing to kind of maintain and continue to increase that as well.

Our next question comes from Chris Brendler with Rosenblatt Securities.

And congratulations on the progress here. I wanted to ask on a couple -- on the power side. First, I noticed that the PUE across all these sites is right in line with the initial deals at [ 1.25 ]. And you mentioned in the slides that that's best-in-class. My understanding was there were certain aspects of Lake Mariner and Cayuga that drove that 1.25, but maybe I'm mistaken, it seems like it's standard for TeraWulf to operate that incredible efficiency. Can you just give us a little color there on why you're able to sort of run circles around your competitors when it comes from a PUE standpoint?

Sure. Chris, it's Nazar here. So there's a couple of factors in that. As you noted, one is just the geographic location. And again, as we are more in the northern half of the country versus the southern half of the country there are benefits that we get from ambient conditions perspective with respect to the design and being able to meet that peak PUE. You'll see the Abernathy site is at a 1.4 PUE, again, which is reflective of just the geographic location.

In addition to that, we have invested heavily kind of on the cooling side well. And so we're giving ourselves extra room on the design that we have on cooling as well to maintain that lower PUE. So general, as we think about where we are for generally kind of in the northern half of the country where we have these off seasons during kind of the winter and the spring and where the summer isn't sustained heat, we think we can kind of maintain that 1.25 PUE.

Okay. Was there also a redundancy aspect to it? Are you still not using big diesel generators in these sites?

That's correct. And again, that gets back to the brownfield sites. So typically, you're seeing us play at brownfield industrial sites. And the way to think about it is when the smelter was there, there was a significant investment to design and build a smelter at that site. The last thing that Century wanted was a single point of failure on power coming into the site. No different than a data center, right? So there's 5 different lines coming into that site, which provides a considerable amount of kind of redundancy. So when we look at sites like that, we see that there are multiple independent pathways for the delivery of power. -- obviate the need for on-site kind of backup generation.

So again, Morgantown, similar. It used to be a former coal-fired power plant. That 1.5 gigawatt coal-fired power plant did not want to have a single point of failure in getting power out. We will utilize that same system now to kind of bring power back in. So the big benefit with these industrial -- former industrial brownfield sites is that usually, they have that built in redundancy that data centers want as well.

I just wanted to thank for that question regarding PUE because we put a page in the deck called critical IT capacity, the metric that matters. And what we're going to be trying to do and really sort of ensure that The Street and our retail shareholders understand, gross megawatts measure scale, but it's critical IT megawatts that measure monetized execution. And we think of TeraWulf as an execution story. So we're really going to be reporting more in the context of critical IT as opposed to just gross megawatt capacity. We think it's far more...

Great. And one more quick question is the how big of battery power -- sure caught my eye. Can you just give us a little color on why and what that means?

So as we're adding these large loads and if you see in the statements that we've made, do we want the site to be overall a net supplier of energy back to the grid into the state. So having that battery storage allows the load at the site to operate in a way we're really impacting peak demand. And so it's kind of a critical peak demand shaver, which we think again, provides makes the loads out of there, passes back to the grid rather than burn it. So we think the right composition is about 0.5 megawatt of storage per megawatt of load. And so that's why you see in each of the phases at Morgantown for every megawatt of load, there's about half a megawatt of battery storage.

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

Guys, I want to congratulate you for the progress across all fronts. Maybe just following up on that last one. Nazar, you mentioned the battery storage, there just appears to be some different moving parts at Chesapeake. So can you just give us a sense for how CapEx could differ from Mariner and what you're doing to really de-risk that development?

Sure. So when we think about -- as we think about the composition of Morgantown, as you noted, there's a few different legs here versus what we're doing at Lake Mariner or other sites. On the data center side, we're in that $8 million to $10 million per megawatt range for CapEx. And so that's what we've done at Lake Mariner, Abernathy, and as we look to contract Kentucky, we're in that same range. In Morgantown, now we're adding two incremental legs. One is the power generation side and the second is the battery storage. On the power gen side, we're in that we're going to be somewhere in the $2 million to $3 million per megawatt range for the fully delivered power plant. Part of that will be time. Part of that will be the type of turbines that we are deploying, and we're working on a number of different alternatives for that site as we speak. But that will be around $2 million to $3 million per megawatt for that capacity.

And there's about another $1 million or so kind of dollars per megawatt on the critical IT load. So kind of the battery storage is usually kind of priced in a megawatt hour basis. But when we translate it back to just kind of the overall load, that's around another $1 million. And so when we think about what we're offering back to our customer, it's the data center that they're already paying for, in other deals that we have, the $8 million to $10 million per megawatt range. In addition to that now, it's the components on the generation side, the $2 million to $3 million per megawatt on the the dispatchable gas-fired generation and then another $1 million or so in the battery storage. So all in around $13 million to $14 million per megawatt on a fully loaded basis.

What that does kind of embedded within that, we will be seeking to kind of charge that full cost back in the capacity payment, back to the underlying customer. So they'll effectively now be long, the value of the generation as well as long the capacity in the data center. With the grid connectivity, we will have now kind of the ability to both bring the power in from the grid as well as generate more than enough power to offset that load kind of going out. And so on a net basis, we think over time, the net cost of power that the tenant will realize will be meaningfully lower than just a grid solution only. So kind of on the ins and outs, again, they'll be kind of paying a capacity payment for all of the CapEx, both on the gen side as well as the data center, but they'll [indiscernible] long kind of the value of that gen, the value of that energy, and that will be offset by whatever they pay for the power coming in. So net-net-net, we think it's a very strong position that gives the tenant a, A, quicker path to scale up in scale that gigawatts, a large amount. And, B, we think over time, their net cost of power will be meaningfully lower than a solution that's relying on the grid only.

Nazar, I really appreciate all that detail. I'm sure others will have follow-ups. I just wanted to squeeze one in on the regulatory side. I think you still need approvals from FERC at Morgantown. Can you just walk us through what the timing looks like there and how we should think about what you ultimately need to get across the finish line for a third-party perspective?

Yes, it's pretty pro forma approval process that we've done countless times. It happens anytime you transfer an existing power facility to another party. We're certainly they tend to look for things like are you a monopoly in the area? Stuff like that, we are not. We consider this to be just pretty routine. We would expect FERC approval within 3 to 6 months.

Our next question is from Stephen [indiscernible] with KBW.

Can you update us on any remaining zoning requirements or state and local approvals needed to move forward with the [indiscernible] data center campus? That's one. And then two, separately, while Cayuga already received zoning approval? Are there any additional permitting or regulatory steps still outstanding for that site?

We'll go backwards. I'll start with Cayuga. And in Cayuga we had our first informal session with the planning Board a couple of nights ago, it went very well. They were engaged. They asked good questions. And so that process is one where we go ahead and finalize their application. That will take another month or so. They then meet on it. They review it. We come to an agreement together on what that permit should look like. They'll be solving for certain conditions like are you drawing water from the lake? What will noise levels be, in the midst of operation? What are you doing for the site in terms of beautification? Things like that. These are all reasonable things. It's what we do. It's what any company in redeveloping a former power plant or industrial complex does. The Cayuga process, as you know, first was had to go through a zoning board of approval to ensure that it was consistent with the definition required to achieve a permit. It did winded down that, and so we're just ordinary course routine working together with the planning board of town to move forward.

With respect to Kentucky Naz?

Yes. So on Kentucky, Stephen, from a permit perspective, we have to obtain the requisite building permits. That being said, we had a town hall this week in Hawesville. We had a workforce session for potential employees. And so the entire Judge Executive, Economic Development Director in Hawesville are all kind of fully onboard and very eager to kind of get us going. As Paul mentioned earlier, it's an extremely supportive environment. And so while we don't have the permits in hand, everyone is fully aware of what we're doing. We briefed them on both the scope, size and scale of the buildings that we're bringing.

Importantly, as a part of what we're doing at Hawesville, we're also decommissioning and taking down the old aluminum smelter. So there's a big cleanup that's happening at the site as well, which the town is very eager to have happened. So we got to do all that, but that's, I think, going to come in time. We're expecting as soon as we can get this lease signed up, we'll be in a position to kind of submit all those things. We have previewed a number of those things, and we're hopeful that it should be a pretty smooth process to kind of get approvals around that.

Just two more things. One is with respect to both of these projects, there's not just one permit you get. There's a principal notion of a permit for a facility. But all along the way, whether it's a specific demolition permit or a building permit for a particular structure, you need to get local permits.

The second thing I just wanted to mention about Cayuga which is kind of interesting, as the state has become really a popular place for people and they look forward to doing more data centers. They are starting to come with this notion of what about power. The beautiful thing about the Cayuga site is, it was a former power site. It can be, again, we have the ability both in terms of the landlords, huge site, which is 400 acres. We have the ability to sort of bring in our own power generation, if that was ever something important to state or local constituents. So Cayuga, I think, really a much better site than just -- any other one in terms of that part of the world because of its ability to have a power plant on it if it's needed.

Next question is from Darren Aftahi with ROTH.

First one, if I may, could you kind of characterize the maybe competitive process at Hawesville, maybe comparing that to Lake Mariner. And are we talking about one entity taken, three, four, or is it going to be multiple entities? And then I've got a follow-up.

I'll start maybe just by giving you -- in the environment that we were contracting for Lake Mariner, I think we were very confident we had a really special site. But I think the hyperscalers were on the growth curve in terms of education. They were on the growth curve in terms of figuring out design when we started Lake Mariner, I think people were not as rock solid in their design notions or in terms of how it would fill out the customers, their customers ledger. So I think we're in a very different environment now.

We're in an environment where the hyperscalers are -- I mean, this is a [indiscernible] I've been in over the course of the last 45 years. I mean you've got Meta is very aggressive. Google's got a great program, Amazon's got a great program. Microsoft come back into the market. They're extremely competitive. You've got some of the Neos that are really seeking larger and larger facilities. So we're in a much more competitive environment where the customers actually have much more definition to what it is they want.

The second thing is when we started out with Lake Mariner, we had already built some buildings a little bit. And so we had to sort of work with our customers for instance, in WULF Den and CB-1 and 2 on sort of figuring out the design elements that they wanted, even in CB-3, whereas 4 and 5, we built these buildings from the ground up with the customer, which made the whole procurement and build process that much more efficient. So I would tell you, we have a much more committed and sophisticated customer right now, who knows the design needs that he or she wants, and we're in a much more competitive environment. So we're pretty excited about -- that was what -- the beautiful thing about Kentucky is its immediate availability has just enabled a very robust dialogue for us in terms of filling out our customers. But Naz, do you want to add something?

Yes. The only thing to add, Darren, is we're targeting one, maybe two customers for the entire site.

That's helpful. And then just as a follow-up. I mean, so you've given -- you've kind of raised your bogey and given this 250 to 500 megawatts range. I guess, what are the one or two deterministic factors that kind of drive that range? And given your background in Power as a team. I mean, is there any reason we could think maybe there's upside to that range? I'm just trying to get an understanding of what that context really means.

I can start here, and then Paul can jump in. The 250 to 500 megawatt is a very kind of calibrated range that we're giving you. It factors in the operational and just deployment capabilities. Again, this is getting hundreds of people on site across multiple trades. It's a procurement process around equipment and ensuring that we're not the last buyer, but we have quite a bit of room between what we need and where the market has availability. And then from a financing perspective, it's what the company can bear from an accretive perspective. So when we talk about 250 to 500 megawatts per year, that's $2.5 billion to $5 billion of incremental capital per year that we are guiding the market that we're going to spend every year for the next few years.

And so when we talk about the 250 to 500 megawatts, really is a calibrated guidance around all of the various facets that are required to properly execute and deliver upon capacity. So that's where we are. That's what we see is available. 1.5 years or so ago, we were guiding at 100 to 150 megawatts as we've been able to now deploy capacity and understand the needs of customers. We've opted that guidance to 250 to 500 megawatts. We remain to be confident that every year for the next few years, we will continue to sign up another 250 to 500 megawatts of critical IT load, with customers, deliver that 12 to 18 months hence, and do that year-over-year and continue to kind of grow shareholder value as we're doing that.

Yes, I would want to add a few things. Number one is we selected floor to be our contractor in Kentucky. Why? Because we think they're the most skilled contractors in the country, they're particularly good on the front end projects so that the execution side goes flawlessly. I think -- as we move forward, the notion of the selection of [ Floor ] was scalable growth so that we could work with them on additional projects on a national level. The second thing is we're all about execution. Again, whether it's on the development side or the execution side, we could talk as much about our pipeline as you want. We could talk as much about all the projects that we're reviewing before we decide to make a move. But at the end of the day, if we don't deliver for our customers, we are out of business, and we have failed our investors.

So we need to be conservative here because we're still on the -- we're still a nascent business. I mean, we've seen changes in the design of our facilities just between CB2A, B, 3, then 4 and 5. And so I think as we're learning and growing in partnership with our customers and now our leading contractor in Kentucky, we will continue to enhance our execution capabilities, and if there is an opportunity to grow beyond what we've said is 250 to 500 megawatts incremental critical IT load, then we will. But for right now, we have to keep our eye on the ball. If the table is full of lots of cookies and cakes and candies, but we have to stay focused on the meat and potatoes and deliver for our customers.

Our next question comes from Brett Knoblauch with Cantor Fitzgerald.

Paul, I guess you have multiple attractive sites that you could see really kind of go and lease out now. I guess I'm talking to prospective customers. Is there a reason why they would want maybe the Kentucky site over like Cayuga or maybe the mega campus that you're building in Maryland? And has in your mind, what maybe site is next up for grabs change, as kind of Kentucky jumped to the top of the list?

Listen, I -- so first off, -- the answer is the demand is so significant. I think that a party would be happy to take everything off the table at any one time. But it's about time to power, and that's why Kentucky has become so important to the customers that we're in discussion with. The ability to have that kind of scale within this short period of time where [indiscernible], if you will, just makes it one of the most exciting sites in the country.

The one thing that we've been pushing, Brett, is we like regional diversity. We think hyperscaler customers are getting focused on that, too. We think -- they've seen now. They've experienced what happens now first in Ohio and then now down in Ercot. When you get everybody all in one place, it's a question of security, but it's also a question of what can the grid really handle. And so I think having regional diversity is something that our customers find compelling. And that's a good reason for them to really focus on Kentucky, that and the immediacy of its power.

Awesome. Then I think in the prepared remarks, you said that Kentucky could potentially expand beyond the 480 megawatt, I guess to what extent have you guys looked into that? And how much do you think it could expand down 480 megawatts.

I think -- listen, we've talked to our power suppliers there. We understand the grid there. I think that -- and again, I was just with the governor a couple of days ago, and he's really terrific. He runs DGA he's very commercial. He's very pro business for the state. I think that we will have opportunities to expand our footprint both in the generation side and on the customer side in Kentucky. But again, I have to stay focused, right? My job is execution. I've got to deliver these facilities to our customers, and we're doing that at Lake Mariner. And Kentucky is going to be a very prompt bit. We've already issued a limited notice to proceed to [ Floor ] just because our customers really want to get on to that property. So we're doing everything we can to facilitate that. Just got to really focus on execute.

Our next question comes from Michael Donovan with Compass Point.

To follow up on what you're talking about Paul, on sizing and design plans. For Maryland and Kentucky phase build-outs, what is the target critical IT megawatt per building or hall you're thinking about today? Should we think about repeatable modules similar to Fluidstack? And what drives that sizing decision?

This is Nazar here. So in the Fluidstack context that 168 megawatts of critical IT load is the base design that we worked closely with them on developing. You've seen that in the number pop up subsequently with other of our peers as well. But in that context, that's kind of the base design. That puts you a little over kind of 200 megawatts of gross capacity. And so in general, as we're having discussions with various customers, we typically look at that 200-megawatt gross 160-megawatt net, as kind of a building block that we're building off of. And so the design that we're working on with [ Floor ] really kind of incorporate that, again, roughly 200 megawatts, plus or minus gross 160 plus or minus net critical IT megawatts as the base building block from which we're kind of deploying that.

And so when we talked about Kentucky, for example, in that 380 megawatts of net, that's a couple of those buildings would kind of consume that capacity.

Our next question is from John Todaro with Needham & Company.

First one is more high-level political regulatory. It sounds like really good conversations with the governors in Kentucky and Maryland. Just wondering more at a broader level, how you are viewing some of the pushback at the state level to data center builds. Just any commentary there, whether sort of the media articles might be overblown or if there is some risk there it?

It all requires, I would say, thoughtful and careful engagement. How you bring your load on is critical to how you're perceived and what impacts you have. And so if you have been listening to us for the last year when we talk about Bitcoin mining, we've said from the beginning, there is a way to do Bitcoin mining that's accretive and an asset back to the grid, and there's a way to do it, where you're not. And so -- we have been very engaging with -- I mean, for example, in Kentucky, we spent a tremendous amount of time with the energy supplier there, big Rivers and have developed a very close and strong working relationship with them, where we are kind of aware of the challenges they have on committing to supporting a large load, and if it's there, it's great. And then when it's gone, it's not so great. That's A. And so kind of ensuring that our interests are aligned with them, and they have clear visibility on where we are.

And then B, just in terms of the overall load profile and when you're consuming power and what happens at those kind of peak demand hours. And so we've been very, again, thoughtful in thinking through how does our load and where we're locating these loads tie back to what's happening in the grid around it. And how do we ensure that, again, that our loads can be overall assets and kind of a beneficial back to the grid and to the local communities versus just kind of coming in and being burdens. And so I think the articles, the news is news and kind of it comes out, how it comes out. But we pride ourselves in trying to be very thoughtful around the issues that we think are pertinent and properly addressing them. And so hopefully, over time, you'll see even in Kentucky, based upon how we're structuring things with the local utility down there, that it hopefully becomes a model for how things should be done. An example of how data centers should be integrated back to grids.

Great. And then second one is just on kind of where we are in the head count growth for Kentucky and Maryland and just, I guess, your [indiscernible] of the G&A guardrails around there.

So we are in the early stages on both. We have kind of ramped up the Kentucky team to half a dozen or so folks over time, including the on-site personnel, where that's going to be over 100 people for Kentucky by itself. Each of our sites, we are targeting somewhere in that 100 to 120 people range for fully loaded staffing, once the site is fully operational. And we're probably a couple of people in Maryland right now.

As was noted earlier, we're pending kind of FERC approval to take over the site. There's existing generation at the site. And so we're ramping that team up to kind of support the operations as well. So I'd say we're in a couple of dozen people between the two sites now, but that's quickly increasing. And again, we should be hitting towards the end of the year, early next year, we should be hitting pretty sizable numbers in Kentucky and we'll kind of be in that 100 people range at Kentucky by this time next year I guess.

We've also, of course, added at the corporate level so that we can manage the much larger portfolio and stay on top of everything from procurement. And so it's legal, it's accounting, it's IT. It's everything that you need at the corporate level to manage projects of this scale.

Our final question is from Martin Toner with ATB Cormark.

When do you think Phase 1 of Morgantown might be able to be turned on?

We're working through that as we speak. So at Morgantown, in addition to the 3 legs we mentioned earlier, just kind of around the load, the data center, the gas gen and the battery storage. There's also a remediation that goes along with that. We were with MDE just this afternoon and kind of scoping that out. And so once we get definition around the timing and scope of that remediation plan, that will then kind of feed into, just the timing.

If you look at what we said kind of in the deck, we've kind of positioned this as kind of end of '28 kind of in '29 and beyond. So generally, that's where we are. But over the next, I'd say, a couple of quarters here, we'll have greater definition to provide around the specific timing on Morgantown.

Coming at it from 10,000 feet. The State of Maryland had some challenges because they've shut down a lot of their great generation. They were -- they weren't really as pro generation as -- or as prescient to what would happen as a lot of other states, which have been very, very supportive, like Pennsylvania next door. So the Governor has really changed policy. We've received written commitments for expedited permitting for our site. So I don't think this is going to be business as usual. I think they're really keen to have us come there, create jobs both at the county level and the state level. The reception has been amazing, but they have literally given us sort of an office to work with, to expedite all sorts of permitting from the repowering to the remediation.

We have reached the end of the question-and-answer session, and this concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Greetings, and welcome to the TeraWulf 2025 Third Quarter Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I will now turn the conference over to John Larkin, Senior Vice President, Director of Investor Relations. Thank you, Mr. Larkin. You may begin.

Good afternoon, and welcome to TeraWulf's 2025 Third Quarter Earnings Call. Joining me today are Chairman and CEO, Paul Prager; and CFO, Patrick Fleury.

Before we get started, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. During this call, we may use words like anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions, which indicate forward-looking statements. For a more comprehensive discussion of these and other risks, please refer to our filings with the SEC available at sec.gov and in the Investors section of our website at terawulf.com. We will also reference certain non-GAAP financial measures today. Please refer to our 10-K and 10-Q filings on our website for a full reconciliation of these non-GAAP measures to the most comparable GAAP measures.

We will start today's call with prepared remarks from Paul and Patrick, followed by a Q&A session. Now I'd like to turn the call over to our CEO, Paul Prager.

Good afternoon, and thank you for joining us today. The third quarter was truly transformational for TeraWulf, both operationally and financially. During the quarter, we executed one of the most significant steps in our company's evolution, signing approximately 360 megawatts of critical IT load with Fluidstack backstopped by Google at our Lake Mariner campus in Upstate New York. This 10-year agreement representing average annual revenue of approximately $670 million and average annual net operating income of more than $565 million before extensions, firmly validates our high-performance computing hosting strategy and establishes TeraWulf as a leader in designing, building and operating low-carbon enterprise scale compute infrastructure.

In October, we reinforced that leadership by closing $3.2 billion in senior secured financing backed by the Google credit enhancement to fully fund the Lake Mariner high-power compute build-out. This transaction is a milestone for the broader industry, demonstrating a repeatable end-to-end development model that begins with design and site control, extends through customer contracting and construction and culminates in long-term credit-enhanced lease revenue.

The third quarter also marked an operational inflection point for TeraWulf as we recorded our first HPC revenues with lease commencement at WULF Den and CB-1. We remain on track to deliver CB-2 near year-end, subject, of course, to tenant fit-out requests, which will complete our delivery of 60 megawatts of critical IT for Core42. Across our platform, these early deployments are proof points that our strategy is working and our execution is disciplined.

At Lake Mariner, our team continues to perform exceptionally well. In terms of executing for Fluidstack in Google, the majority of long lead items have been contracted through CB-5 and construction progress is both visible and measurable. CB-3 is more than 50% directed. The final concrete pour is scheduled within two weeks, and the structure will be fully enclosed before year-end. CB-4 and CB-5 are already well underway with underground work beginning next week, field deliveries arriving in early December and building erection expected to begin before Christmas.

The progress our construction and operations teams have achieved and with rigorous quality standards reflects TeraWulf's deep experience in developing and delivering large-scale energy and data infrastructure. We also continue to expand our geographic footprint and customer base. Just two weeks ago, we expanded our partnership with Fluidstack and Google, announcing our joint venture to develop and operate the Abernathy HPC campus in Texas within the Southwest Power Pool market. This project adds 168 megawatts of new HPC capacity with expansion potential up to 600 megawatts and replicates the same credit-enhanced structure proven at Lake Mariner. This joint venture with Fluidstack and Google leverages our collective expertise, incorporates Hypertech as EPC partner and includes two additional options to expand the joint venture, one for future phases at Abernathy and another for a separate site elsewhere in the United States. This partnership represents the next evolution of our growth model, scalable, capital efficient and backed by world-class partners.

And while we've made tremendous progress executing the business we have, what's equally important is how we're positioning TeraWulf for the next wave of growth. Our approach remains disciplined, expanding only where we have clear structural advantages in power, permitting and partnership and our opportunity set continues to broaden.

In August, we signed an 80-year lease at the Cayuga site in New York, laying the groundwork for large-scale high-power compute deployment beginning in 2027. As just mentioned, the Abernathy joint venture offers meaningful embedded expansion potential, both on campus and across future projects with Fluidstack and Google. Meanwhile, our in-house development pipeline continues to mature with several high-quality opportunities now approaching realization. Together, these initiatives form the very foundation for TeraWulf's next phase of growth, executing today while methodically building the platform for tomorrow, scalable, low carbon and designed to meet the accelerating demand for high-performance compute.

Reflecting that confidence, we recently increased our annual target for new HPC signings from 100 to 150 megawatts per year to 250 to 500 megawatts per year. We did not make this decision lightly. It reflects the tangible progress we've made in advancing our development pipeline and the strength of customer demand. Over the past year, we've evaluated over 150 potential sites, narrowing that list to a select group that meets our strict criteria, grid redundancy, minimum power thresholds, attractive geographies for end customers and time to power.

To support this next phase, we've expanded our site acquisition and development teams, strengthening what is already the most capable organization in the sector. Our deep understanding of what hyperscale and AI customers need, combined with our access to scalable, low-cost power, positions TeraWulf at the forefront of the infrastructure transformation now underway. We are proud of what our team accomplished this quarter, but we are even more excited about what lies ahead.

With that, I'll turn the call over to our CFO, Patrick Fleury, to discuss our financial results in more detail.

Thank you, Paul. The 3Q 2025 results reflect a strong contribution from our legacy Bitcoin mining operations and more importantly, the start of HPC Leasing segment revenues. On our 2Q 2025 earnings call, we discussed a series of capital markets initiatives in the second half of 2025. I'm proud to report that with the benefit of our new financial support from Google and help of our partners, including Morgan Stanley and Paul, Weiss, we've executed beyond our expectations, raising over $5.2 billion at incredibly attractive rates, creating durable equity value for our shareholders.

Now let me turn to the results. In the third quarter of 2025, GAAP revenues increased 6% quarter-over-quarter to $50.6 million from $47.6 million in 2Q '25. We recognized $7.2 million of HPC lease revenue at WULF Den and CB-1 with intra-quarter lease commencement resulting in 22.5 megawatts of energized hosting capacity. Continuing with our long-term commitment to financial transparency, we've added a page in our investor presentation detailing lease accounting nuances, which we hope you find helpful. We self-mined 377 Bitcoin at Lake Mariner or approximately four Bitcoin per day, a 22% decrease compared to the 485 Bitcoin mined in 2Q '25.

Our GAAP cost of revenue, exclusive of depreciation, decreased by 22%, $22.1 million in 2Q '25 to $17.1 million in 3Q '25. Power prices in Upstate New York normalized in 2Q '25 and continued to decline in 3Q '25 to $0.047 per kilowatt hour, in line with historical levels and our previous guidance of $0.05 per kilowatt hour for the second half of 2025.

Proceeds from participation in demand response programs, which are recorded as a reduction in cost of revenue during the period in which the underlying program occurs, increased to $7.4 million in 3Q '25 from $3.1 million in 2Q '25.

Operating expenses increased 28% quarter-over-quarter to $4.5 million in 3Q '25 from $3.5 million in 2Q '25. This trend higher throughout 2025 is primarily the result of increased staffing levels at Lake Mariner necessary to support our entry into HPC leasing.

SG&A expense for 3Q '25 was $16.7 million, a 17% increase from $14.3 million in 2Q '25. After adjusting for stock-based compensation, SG&A increased quarter-over-quarter from $10.6 million in 2Q '25 to $12.3 million in 3Q '25.

Depreciation increased quarter-over-quarter from $18.8 million in 2Q '25 to $26.5 million in 3Q '25. The company recorded accelerated depreciation expense of $7.8 million related to a certain minor building and related miners, of which the company shortened its useful life based on expected shutdown of operations for purposes of supporting the HPC operations.

Change in fair value of contingent consideration was $8.8 million in 3Q '25 related to fair value remeasurement of contingent consideration liabilities based on milestones achieved during the quarter related to the acquisition of Beowulf E&D.

Loss on disposals of property, plant and equipment net was $2 million in 3Q '25, down from $3.8 million in 2Q '25. These losses related to the sale of 8,900 and 2,900 miners, which were sold or otherwise disposed of for proceeds of $6.9 million and $1.9 million in 3Q '25 and 2Q '25, respectively.

GAAP interest expense in 3Q '25 was $9.8 million compared to $4.0 million in 2Q '25, and we recognized interest income of $4.1 million in 3Q '25 compared to $1.2 million in 2Q '25. Cash interest paid during 3Q '25 was negligible compared to $7.1 million in 2Q '25 as the 2.75% interest on our $500 million convertible notes is accrued and payable in 2Q and 4Q of each year.

Change in fair value of warrant and derivative liabilities in 3Q '25 was a loss of $424.6 million related to the Google warrants and the conversion feature of the 2031 convertible notes, which was originally accounted for separately as a derivative liability.

Our GAAP net loss in 3Q '25 was $455 million compared to a net loss of $18.4 million in 2Q '25.

Our non-GAAP adjusted EBITDA improved 25% quarter-over-quarter, totaling $18.1 million from $14.5 million in 2Q.

As a reminder, these results are inclusive of significant increases in operating expenses and SG&A over the past 12 months as we invested heavily in our HPC business. These incremental costs have been entirely borne by our legacy mining business until now.

Turning our attention to the balance sheet. As of September 30, we held $712.8 million in cash and restricted cash with total assets amounting to $2.5 billion and total liabilities of $2.2 billion. In October, we closed over $4.2 billion in capital markets transactions, including $3.2 billion of 7.75% BB-rated senior secured notes due 2030 and $1.025 billion of 0% convertible notes due 2032.

As seen on Page 14 of our 3Q '25 investor presentation, with these financings complete and the La Lupa and Akela data center construction projects at Lake Mariner fully funded, our pro forma liquidity totals over $1 billion, which provides cash for three important initiatives: one, TeraWulf's cash equity contribution to the Abernathy JV with Fluidstack; two, the acquisition of key sites in our pipeline that have advanced to the final stages of diligence and negotiation; and three, excess cash to create a fortress balance sheet to weather any storm.

With regard to the Abernathy JV, we anticipate coming to market before year-end with a senior secured notes financing similar in all respects to the offering we recently completed at WULF Compute. As a reminder, the Abernathy JV benefits from $1.3 billion of Google credit support over a 10-year period.

The second half of 2025 has been nothing less than extraordinary for TeraWulf and its stakeholders. We have secured over $16 billion of HPC lease agreements and executed over $5.2 billion of financings at incredibly attractive rates, added significant liquidity to the balance sheet and shown we have a deep multifaceted pipeline to grow the business at 250 to 500 megawatts annually in the future.

With that, I'll turn it back over to the operator, and we look forward to answering your questions.

[Operator Instructions] Our first question comes from Mike Grondahl with Northland Securities.

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

No. Good question, Mike. There are at least two sites that we're very, very close to sorting out. We're going for some regional diversity where we think our customers are inclined to enter into long-term agreements.

We've built out our team on the front end here to focus. We've looked at over 150 opportunities. I would not be surprised if by year-end, we announced at least one, possibly two additional sites.

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

Yes. Yes, sure. Thanks, Mike. Yes, I think you'll see when we file the Q, full detail on the segments, obviously, which we're really proud of given the start of HPC leasing revenue. But yes, if you -- the actual margin was about 72%. There -- in the operating expenses, there's about $700,000 of expense development expense at Cayuga. So if you back that out, you'll see that gets you to about an 82% margin for the quarter. So obviously, much closer to that 85%. And then the quarter is a little off just because we didn't have full revenue. It was a stub period for CB-1 in particular. So I think you'll see that normalize here very quickly in the fourth quarter to right around that 85% that we've guided to.

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

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

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

Sure. As you know, we have two/other world-class credits as our customers, Core42 backed by G42 and then the Fluidstack Google deal and those that may be associated in that deal, if you've taken a look at the recognition agreements, you're aware of that. And so I could not be happier with the credit quality of our customers, which is the critical element here and something Patrick pounds the table on because, obviously, we want to be able to get ideal credit terms for our transactions and the result in financing.

So the answer is I would expect we'll continue to grow with the customers that we have. And certainly, we're continuing to have dialogue with a couple of others. But again, the key for us is credit quality. And so it's a little bit of a smaller universe as we move forward.

But yes, the sites that we have and the sites that we are anticipating bringing home, all would be very compelling to a great quality credit in addition to, of course, the ones that we already currently have on the books.

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

I'll start, maybe Naz or Patrick can take it from there. We have built a great working relationship with the Fluidstack Google team. And if you think about it, there's no sort of reference models for what we're building. These are design build opportunities so that the teams -- listen, you're either going to succeed because you work together or it's going to be a disaster. So we like succeeding. So we work hard with the Fluidstack Google teams. They're on site. We meet constantly. I would tell you that they're part of our team now as we look to how we want to consider financing Abernathy.

So it is in the course of that dialogue that they indicated that they had the site, they had the credit quality and that they were thinking about using an EPC, but that they recognized given our experience in energy infrastructure and financing energy infrastructure that it would be additive to the endeavor. And so everybody decided this made a lot of sense.

Our primary strategy as we move ahead is to continue to do what we've done, which is have great sites and look for the right customer. But certainly, we're delighted to partner again with Fluidstack Google. And like I tell everybody, when Google says, "Hey, we'd like you to come into this project with us, you say, yes. You find a way to say yes, so that it makes sense for them and that it is a rewarding experience as well for your shareholders. That's what we did here in Abernathy.

And I -- in the Abernathy deal, there's room to grow at Abernathy itself. But separately, as you are aware, we have a going-forward relationship on the next project of similar credit quality. So yes, that will be a project that we continue to evolve into, but our primary focus is additional sites and additional high-quality credit customers for those sites.

I think Naz or Patrick, you may want to respond to how do we think about it from a financial perspective?

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

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

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

Again congrats on the transformational quarter. Keep it up.

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

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

So we have an active dialogue with our customer base. And this is a very competitive market. So we sort of -- we're constantly discussing with them what their needs are, what it is they're seeking at the same time that we're trying to complete our diligence and negotiation over some additional sites. If you remember, we've just got one quarter of a century in energy infrastructure development and operation. It's been very helpful in identifying sites that we think will be in the next wave of data center development for these hyperscalers and high-quality credits. I think in the case of Abernathy in the Fluidstack Google relationship, I think as we look at sites with them, we're obligated, obviously, to work with the customer.

In the case of TeraWulf identifying and determining that another site makes a lot of sense for us. We're going to want to make sure that it's a competitive process that we end up with a great quality credit, but that we also get rewarded for the unique and wonderful qualities of that site and that we get the most return we can for the shareholders. So it's a little bit of both.

Great. And as a follow-up, how are you guys seeing the market in terms of build costs of -- like the sites you've been building so far have been at existing sites where you've had redundant power and then the Fluidstack Abernathy site, you're not building a substation, so the CapEx per megawatt is a little bit cheaper. And then you're talking about you've got long lead items procured for -- through CB-5. But how do you see sort of the market in general maybe beyond Lake Mariner?

Naz?

Dillon, this is Nazar. Generally, what we try to do is be able to deliver capacity or the bulk of the capacity within 12 months of signing the customer. And so that often requires engaging with folks kind of on the electrical gear and the coolers and chillers in advance of that. And we've developed relationships with a number of different vendors where we have a rolling 12-month projected schedule with them, which gives us positions in queues. And then we can -- depending upon which -- how many megawatts of capacity we sign up, then we take those down.

So we've tried to be ahead in being able to procure the equipment, which allows certainty to our customer when we engage with them on discussions. So that's been going well. And given the capacity that we've signed up and procured, we've been good partners for the vendors and vendors have been good partners for us as well on that equipment procurement side. So that's generally how we're approaching things. And as we look forward, I think the forecast and guidance we provided for that $250 million to $500 million, that general procurement strategy covers that capacity as well.

Our next question comes from Chris Brendler with Rosenblatt.

Thanks and also congratulations, amazing amount of progress and looking forward to more. I wanted to ask on the -- actually a Bitcoin question. I noticed the operating hash rate was sort of 70%, I guess, of the nameplate hash rate this quarter and expect it to go down even further next quarter. Can you just give us a little color on what's going on there?

Yes. Chris, it's Patrick. So we're running our sites for our HPC clients now. And as we get closer to bringing all of Core42's capacity online, there are some things electrically that we have to do at the site. So you noticed in my remarks, I talked about accelerated depreciation on one of our minor buildings of $7.8 million this quarter and sales of miners.

So as we sort of reposition the site, particularly for two lines of power and redundancy for the HPC buildings, we're making some changes on the Bitcoin mining side. And that's reflected in those numbers. It's a combination of kind of calling our fleet to be more efficient. And then again, just operating the site really for HPC. So you'll see -- I mean, obviously, site is still very profitable. We had a great quarter from a Bitcoin mining perspective. But I think going forward, that's our approach. Hence, the sales of miners, calling the fleet and then the accelerated depreciation on the minor building.

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

Yes, I think so. I think like we said we kind of gave you some guidance in the deck for what we thought we'd have here in the fourth quarter. And then, look, I think beyond that depends on market conditions.

But yes, I think our intent is to keep mining Bitcoin through certainly the end of 2026 and then dependent upon when the next 250 megawatts that we've requested from the New York ISO comes, I think we could -- you could see us operate beyond there until the next halving. But again, I think that will be a function of additional megawatts at the site as well as just Bitcoin profitability itself.

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

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

So I think as Paul mentioned, we're getting very close on a handful of sites that hit on Page 9, the development pipeline of a gigawatt.

Our next question comes from Stephen Glagola with Jones.

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

This is Paul. I'll start. The answer is yes. I mean, I think we've always tried to emphasize here a focus on our ability to execute. And I think that we're more than capable of meeting that goal of 250 to 500 megs. But it takes a lot of time to really get to the bottom of these sites. it's a very competitive market. You need to sort of look near and far afield. You have to make determinations on site suitability for the customer, but also what's power like at the node, what are the environmental and regulatory considerations. It's just a lot. So we're very confident we could do what we now say, which is an increase from where we're at.

I'm not terribly worried about the EPC side. I feel pretty good about that and procurement capability and supply lines aren't what they were. I feel very good about that. I think that the key is going to be our ability to meet schedule and price. That's what the Street is looking for. That's what our customer wants. That's what we promised to our shareholders. So I'm very comfortable at 250 to 500. And as we grow, listen, we're building, as Patrick used to say, serial model # 6. As we get down to 10 or 11 and we find more efficacious ways to do this and needer ways to scale, then we could grow from there. But I think 250 to 500 is the right way to think about us for the coming year.

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

Yes. Yes. Demand is real, and it's a constant. And I think that -- listen, I think there was a site out in Ohio the other day. They got a letter from AEP saying they were in the queue and they were in the queue for '26. And now you should probably not think about that power in '26, but you should think about it for like '29 and '30. And that is a way of saying that you've got to pick your sites really carefully. You have to understand what the grid is capable of. Are you in an area where the whole grid is only X and the demand is 3x that.

So it goes to the notion that you've got to have a very good handle where you cite these things. But that then -- when you go back to the customer and you say, hey, how do you want to think about it if you want to be in this region, you're okay moving from '26 to '27. The answer has been yes, universally. The answer from '27 to '28 is yes. I don't think you get the power problem solved by then. You've got hyperscalers now looking at island generation, which means they're going to bring their own power to the table, and that's at least four to five years away.

If you look at the deal that was signed with NextEra for bringing back the nuc, they looked at a 30-year transaction, which doesn't come online until '29, and I don't think there's any way that nuc is back online in '29. So the demand, I think, is just increasing. And it took a little while to get here. I think everyone was waiting to see who was going to make that first move. But now that we hear, the demand from the hyperscalers and the cloud companies is very, very significant.

Our next question comes from Justin Pan with Clear Street.

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

I'm happy to start, maybe you could follow up. But as I just said, we're looking -- we've been asked by customers to look at opportunities where we have to bring our own generation to the table. And you have to assume that if you're bringing your own generation to the table, you're at least four years out. And so when you have those kinds of questions coming in from world-class credits, that just speaks to just massive amounts of demand.

I think the shortfall in energy is real. It's greater than I think originally forecast and the demand for energy by users like these high load data centers is more significant than was originally forecast. So we we've been getting calls since -- certainly since May, and they haven't abated. Every time we come up with a site, we have at least 5 phone calls that we could go to ask, would this kind of be something that is of interest to you.

So I think if you just look at the hyperscalers and two or three of the big leading cloud players, they're being very, very aggressive in how they're looking at further locations and sites. And again, a lot of these sites wouldn't have any availability for electrification for two, three years out. So I don't know what to say other than to tell you the phones ringing, they show massive demand. And -- we don't see that abating anytime in the near future.

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

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

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

No, go ahead, Patrick.

Yes. So, John, just with regard to penalties, I'm not going to tell you the specific ones because that's confidential to the lease. But I would tell you, given the accelerated build time lines and all the work we've done with our customers here, there are pretty significant grace periods. So the leases cannot be terminated until we're over 180 days late. Obviously, as Paul said, we're meeting weekly, daily, monthly, like both in person and via teleconference with our customers. So there's no surprises. So folks are well aware of budgets, time lines, et cetera.

In general, we have very minimal penalties for the first 30 to 90 days. Generally, there's a penalty for the 30 days, then there's another one for 60, another one for 90, and then the penalties start to accelerate from day 90 to 180. But those are relatively de minimis for us through 90 days and then scaled from 90 to 180.

Great. That's super helpful. And then second question, if we do just take a step back, I guess, how are you guys able to add more of the power pipeline? Like some of the stuff was procured pretty quickly like Abernathy. I would just have to think major hyperscalers, Neo cloud, maybe private equity, everyone is competing now. Just, I guess, give us -- frame it up a little bit more for how you guys are able to win that.

Yes. I'm not sure I understand the question. I mean -- Abernathy didn't -- I wouldn't look at that as came on real quickly. I would -- again, we've had a long-term relationship now with Google and Fluidstack. And so we are aware of the strategy here, and they decided that bringing us alongside would be additive to the overall effort. But I'm not sure I understand the balance of your question.

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

Yes. I think the answer is -- so some of them are looking at island generation where they bring their own power. Some of them are looking at high electrification sites that had former industrial uses and they're looking at repositioning them into data centers. And some of them are talking to utilities about figuring out if there's a way that they could work out a deal like the NextEra transaction.

I think they're following multiple strategies to get to the answer of they have long-term demand, and it's near term in terms of its immediate urgency, but they're looking at the 25- and 30-year deals. If you take a look at the Abernathy deal, it's 25 years.

So I'm -- I can't tell you or opine to what the long-term answer is other than United States needs to build more generation. But I think everyone's figured that one out. The question is, are there sites that one can discover in the right regulatory frame set and from an environmental perspective, not too injurious to a customer that could enable a high-quality credit to come along and be a customer. And I think the answer is yes, but you got to know where to look.

I guess I should emphasize TeraWulf where to look, which is why I think prior to year-end, we'll be bringing on at least one, maybe two other sites.

Our next question comes from Tim Horan with Oppenheimer.

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

Is that you Naz?

Maybe I can start, Paul, you can jump in. Yes, I think there's a few things, right? So one is if you go back a year ago, we hadn't gone through the full cycle, right? As we have laid out in the deck, there's not just the site, there's not the design, there's the engineering, there's a financing and then there's a construction. So we've been through that full cycle now. And so sitting 18 months ago, looking forward, there was pieces of that process that we had not completed. Pending this quarter, through this quarter, we've completed all of those cycles. And so now we have a much better nuanced understanding of what's required for each one of those phases, what we can get done. There was a question earlier on capacity.

So all of that is factored into that 250 to 500-megawatt forecast, which, again, 1.5 years ago, we didn't have that visibility. So I think that is a reflection both of our capacity capability to get each of those phases done as well as the size of the demand that's coming from the customers.

Yes. I would just want to add two more things. One is, obviously, after we had 42 online, that enabled us to sort of do show and tell to other customers. So I think the level of credible incomings to us just -- it was multiples of what it was prior to that. Secondly, Patrick, who was the architect of our financing strategy from day one, we didn't want to sort of have an arrangement where our customer was also financing our CapEx. He wanted to go about it in the way which we have, which was to say we would do it, and we would require credit support to enable good financing. In our case, Patrick has been able to get absolutely great financing.

So once we went through that, that also opened up the doors to our ability to sort of get the capital we needed to build these things out and also showed customers, hey, this is how we do this. And Patrick led the way. I mean everyone's followed suit since then, but we were the first through that door and it was on the back of Patrick's original vision for that.

So, I think, both what Nazar and Patrick sort of were prescient in thinking about once we were able to execute on both those visions, I think that just led to increased demand that we -- you're correct, we hadn't quite anticipated.

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

Yes, I'll answer the first question. So, on Abernathy, we've given you guidance of $8 million to $10 million per critical megawatt. If you do that quick math and again, take the wide end of the range, it's roughly $1.7 billion, and there's a $1.3 billion Google backstop.

So, again, you can kind of do that quick math. And I would, again, just say stay tuned. We're kind of sorting out the details with Morgan Stanley and our partners right now, and we'll be in the market as soon as we can be.

And then the construction item critical path.

Nazar, do you want to take that?

Sure. On the second question on critical path, there are -- from an equipment perspective, we are on schedule or ahead of schedule for all of the long lead time pieces. So those -- mostly on site, CB-4 and CB-5 are on schedule for construction. We are currently ramping up labor at the site. We're going to peak probably sometime in the month of March. And so ramping that labor up is probably the near term, the biggest item that we're focused on.

And so that's, again, we've got a number of different things ongoing to accomplish that, but that's the big driver, I think, over the next couple of months is getting that ramp up as CB-4 and CB-5 get through civil and get into kind of full swing on mechanical and electrical.

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

Listen, everybody. I really appreciate you joining us today. I think if there's one takeaway from the quarter is that TeraWulf is executing. We're methodical, we're consistent, and we're doing this at scale. We are building a differentiated platform at the very intersection of AI, power and infrastructure, supported by long-term contracts, strong partners and a proven ability to deliver.

I'm convinced we have the right strategy, the right team and the right assets to continue this momentum well into '26 and beyond. My focus and our focus remains disciplined execution, thoughtful expansion and creating sustainable long-term value for both our shareholders and partners. I want to thank you for your continued support and confidence in TeraWulf. Thank you again.

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