Michael Grondahl

Michael Grondahl inquired about the Kentucky site, seeking more details on its characteristics, the ideal customer profile, and potential lease structures. He also asked how the Maryland site's 1+ gigawatt potential and 'bring your own power' strategy align with TeraWulf's strengths.

Answer

Paul Prager, Co-Founder, Chairman, and CEO, described the Kentucky site as a fantastic former smelter location with immediate power availability and strong demand from hyperscalers and AI compute platforms, expecting a 10-15 year deal with a world-class credit. For Maryland (Morgantown), Mr. Prager highlighted its gigawatt capacity, 500 MW battery storage, and former coal generation status in the power-constrained Northern Virginia corridor, emphasizing TeraWulf's 25 years of power generation expertise and the industry's shift towards integrated generation campuses.

Michael Grondahl asked for more details on the Kentucky site, including what an ideal customer or lease would entail, and inquired about the Maryland site's (Morgantown) potential, complexity, and how it leverages TeraWulf's 'bring your own power' strengths.

Answer

Paul Prager (Co-Founder, Chairman, and CEO, TeraWulf) described the Kentucky site as a 'fantastic site' with immediate power availability and scale, attracting strong demand from major hyperscalers. He highlighted positive engagement with state leadership and the goal of securing a world-class credit for a long-term deal. For Maryland (Morgantown), Mr. Prager emphasized TeraWulf's core competency in power generation development and operation, aligning with the industry's shift towards integrated generation campuses. Nazar Khan (Co-Founder and Chief Technology Officer, TeraWulf) added that Fluor has been engaged as an EPC for Kentucky, with procurement ahead of schedule.

Michael Grondahl, Senior Research Analyst at Northland Capital Markets, inquired about the current M&A pipeline's robustness compared to the past 6-12 months, the structure and significance of the M&A team, the typical sales cycle length for recent acquisitions, and the pipeline's composition regarding practice sizes.

Answer

CEO Pete Swenson noted good momentum in the M&A pipeline, particularly with expansion into Arizona. He detailed that Jason Halupnick leads the M&A effort, supported by an analyst and the broader leadership team. Swenson explained that the sales cycle varies from a few months to years for larger opportunities, and confirmed that the company continues to pursue opportunities across all practice sizes.

Michael Grondahl asked CEO Aydin Kilic why HIVE signs two-year GPU deals when OEM financing is for three years. He also asked CFO Darcy Daubaras for guidance on depreciation expense for the next couple of quarters.

Answer

CEO Aydin Kilic explained that longer OEM financing terms (3 years) lead to lower payments and better cash flow, while 2-year client contracts offer optionality to sell or re-rent GPUs for a gain due to their strong residual value. CFO Darcy Daubaras advised using the Q3 depreciation figure as a forward-looking estimate, noting that all ASIC equipment in Paraguay was fully operational during that quarter, making it a reliable driver.

Michael Grondahl questioned the rationale behind HIVE signing two-year GPU deals when OEM financing terms are for three years, creating a potential mismatch. He also asked CFO Darcy Daubaras for insights into the expected depreciation expense for the upcoming quarters.

Answer

CEO Aydin Kilic clarified that longer OEM financing terms result in lower payments, improving cash flow. He added that GPUs retain significant residual value, providing optionality to sell or re-rent after the two-year contract. CFO Darcy Daubaras advised using the Q3 depreciation figures as a forward-looking driver, noting that all ASIC equipment in Paraguay was fully operational during that quarter, which included some catch-up depreciation.

Michael Grondahl from Northland Securities asked for guidance on calculating normalized earnings by adjusting for one-time items, the timing and potential premium on the sale of loans held for sale, details on the strategic partnership program's loan categories and fees, and the outlook for net interest margin and total loan growth. He also requested clarification on the net charge-off figures for the recreation loan portfolio.

Answer

CFO Anthony Cutrone provided a path to normalized earnings, suggesting the $0.50 EPS would adjust to approximately $0.35 after removing the equity gain and considering non-recurring provisions and costs. He confirmed a loan sale is expected in Q2 at a ~2.5% gain, with another to follow in Q3 or Q4. Executive Andrew Murstein added that a $53 million sale had just closed. Murstein described the strategic partnerships as durable and growing, with fees ranging from 15 to 65 basis points. Cutrone projected that the net interest margin would remain stable and guided for 5-7% total loan growth for the year, contingent on economic conditions. He also clarified the recreation portfolio's net charge-offs were $16.4 million, or 4.67%.

Michael Grondahl from Northland Securities questioned the breakeven timeline for the newer campuses, the company's commitment to all its locations, and sought to reconcile reports of robust nursing demand with Aspen's declining enrollments.

Answer

CEO Michael Mathews estimated that campuses need a revenue run-rate of approximately $1.5 million to break even, with Austin approaching that milestone soon and others expected to follow in fiscal 2024 and 2025. He confirmed commitment to all current markets but noted marketing spend has been shifted away from the slower Tampa market. Mathews attributed the enrollment decline to a deliberate strategic shift to cut spending and prioritize generating positive cash flow, rather than a loss of market share.