TeraWulf - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 revenue rose 34% YoY to $47.6M and 38% QoQ, driven by higher BTC price and expanded mining capacity, while cost of revenue fell sequentially as power prices normalized; non-GAAP Adjusted EBITDA improved to $14.5M from a Q1 loss, marking operational stabilization.
• Management announced a 10-year, ~200+ MW hyperscale AI hosting lease with FluidStack, backed by a $1.8B Google support agreement, implying ~$3.7B contracted revenue and ~85% site-level NOI margins; WULF also secured an 80-year Cayuga ground lease for up to 400 MW capacity, reinforcing a >1 GW platform.
• HPC hosting revenue has begun with WULF Den in July and is set to ramp in Q3/Q4 (CB-1/CB-2), shifting the financial profile to include high-margin hosting; SG&A guidance was raised to $50–$55M for 2025 to support accelerated HPC growth.
• Street estimates via S&P Global were unavailable for Q2 2025; narrative catalysts include the FluidStack/Google structure lowering financing costs, HPC revenue commencement, and execution milestones at Lake Mariner and Cayuga (potentially positive for medium-term re-rating); S&P Global estimates unavailable.

What Went Well and What Went Wrong

What Went Well

• Signed FluidStack AI hosting lease (~200+ MW) with Google backing ($1.8B credit support, warrants ~8%), adding ~$3.7B contracted revenue potential and ~85% site-level NOI margins; management: “extraordinary vote of confidence” from Google.
• QoQ operational recovery: GAAP revenue +38% QoQ to $47.6M, cost of revenue exclusive of depreciation fell ~10% QoQ as NY power normalized; Adjusted EBITDA improved to $14.5M from -$4.7M in Q1.
• Platform expansion: 80-year Cayuga lease (up to 400 MW, 138 MW expected ready 2026) with strong zero-carbon power/fiber, broadening multi-site capacity for hyperscale/enterprise demand.

What Went Wrong

• YoY mining metrics reflected halving headwinds: self-mined BTC fell to 485 from 699 YoY; power cost per BTC rose to $45,555 from $22,954 given halving, higher network difficulty, and power volatility.
• Adjusted EBITDA declined YoY to $14.5M from $19.5M due to halving/difficulty and elevated operating costs as HPC investments ramped pre-revenue.
• Hosting timing shifted: WULF Den revenue began in July (Q3), and CB-1/CB-2 revenue expected Q3/Q4, versus earlier target for initial revenue in Q2; SG&A guidance raised to support growth (near-term cost pressure).

Transcript

Speaker 2

Greetings. Welcome to the TeraWulf 2025 second quarter earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to John Larkin, Senior Vice President, Director of Investor Relations. Thank you. You may begin.

Speaker 5

Good morning and welcome to TeraWulf's 2025 second quarter earnings call. Joining me today are Chairman and CEO Paul Prager and CFO Patrick Fleury, and for Q&A, we will be joined by Co-Founder and CTO Nazar Khan, CSO Kerri Langlais, and COO Sean Farrell. Before we get started, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. During this call, we may use words like anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions which indicate forward-looking statements. For a more comprehensive discussion of these and other risks, please refer to our filings with the SEC, available on sec.gov, and in the 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 and 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 Q&A with the full management team. I will now turn the call over to our CEO, Paul Prager.

Speaker 2

Good morning and thank you for joining us. We moved this call from Friday to this morning so we could share a complete update. Over the past few days, we finalized transformative agreements that meaningfully advance TeraWulf's strategy and reinforce our position as a leader in next-generation digital infrastructure. This morning, we announced two major transactions. First, we have a new tenant at Lake Mariner. We signed a 10-year 200-plus megawatt hyperscale AI hosting agreement with FluidStack, a premier AI cloud platform that builds and operates GPU clusters for some of the world's most innovative companies. This agreement represents approximately $3.7 billion in contracted revenue, with the potential to exceed $8.7 billion if lease extensions are exercised. FluidStack will utilize more than 200 megawatts of critical IT load, about 250 megawatts of gross site capacity.

We also granted FluidStack a 30-day exclusivity on CB5, which would add another 160 megawatts of critical IT load on similar terms, including Google's participation. Deployment will be phased, with the first 40 megawatts expected online in the first half of 2026 and the full deployment by year-end. The lease is expected to bring in over $350 million a year in revenue, with site-level net operating margins of roughly 85%. Importantly, Google is providing a $1.8 billion backstop for FluidStack's lease obligations in exchange for warrants representing about 8% of TeraWulf's equity, an extraordinary vote of confidence from one of the most influential players in AI. Second, we brought in Cayuga. We executed an 80-year ground lease with a purchase option, securing exclusive rights to develop up to 400 megawatts of digital infrastructure on a fully equipped site with high-capacity transmission, industrial water intake, and redundant fiber.

We expect to bring more than 130 megawatts online in 2027, with substantial expansion potential beyond that. Together, these transactions increase our total platform capacity to over 1 gigawatt, firmly positioning Lake Mariner and Cayuga as cornerstone assets for the future of AI infrastructure. Our first HPC tenant, Core 42, continues to be an outstanding partner, and we anticipate growing that relationship. The Wolf Den is fully operational and generating revenue. CB1 begins generating revenue within the next week, and CB2 is on track for Q4. We are hitting our milestones on time and on budget. For months, I've highlighted three key priorities: execute for Core 42, secure our next tenant, and expand capacity. These announcements deliver on all three. Looking ahead, our focus is on financing the HPC build-out efficiently and in a shareholder-friendly manner.

With this new customer and the $1.8 billion Google backstop, our credit profile is significantly enhanced, enabling us to pursue low-cost, scalable capital solutions that align with our growth trajectory. Therefore, my immediate focus is execution, execution, execution. Finally, I want to thank my team, our partners at FluidStack and Google, and our advisors, Morgan Stanley, Paul Weiss, and Noah Hansford at Stutzman Bromberg, for their exceptional work in making these milestones possible. With that, I'll turn it over to Patrick for a quick look at our second quarter results.

Speaker 7

Thank you, Paul. I'll briefly cover the financial highlights for the second quarter before diving into the transactions in partnership with FluidStack and Google, announced this morning, and our objectives for the second half of 2025. In the second quarter of 2025, we self-mined 485 Bitcoin at Lake Mariner, or approximately 5 Bitcoin per day, a 30% increase over the 372 Bitcoin mined in 1Q25. Our GAAP revenues were up 38% quarter over quarter at $47.6 million in 2Q25, from $34.4 million in 1Q25. Meanwhile, our GAAP cost of revenue, exclusive of depreciation, decreased by 10% from $24.5 million in 1Q25 to $22.1 million in 2Q25. Power prices in upstate New York normalized in 2Q, and we expect pricing to remain in line with historical levels for the rest of 2025, guiding at $0.05 per kilowatt-hour for the second half of the year. SG&A expense for 2Q25 was $14.3 million.

After adjusting for stock-based compensation, SG&A decreased quarter over quarter from $11.5 million in 1Q25 to $10.7 million in 2Q25. I'm also pleased to report our non-GAAP adjusted EBITDA showed significant improvement in Q2, totaling $14.5 million, up from a negative $4.7 million in 1Q. As a reminder, these results are inclusive of significant increases in SG&A and operating expenses over the past 12 months as we've invested heavily in our high performance compute business. These incremental costs have been entirely borne by our mining business until now. As Paul mentioned, we're on track for the Wolf Den and CB1 leases with Core 42 to start generating revenue in Q3. We remain on schedule and on budget for the delivery of this capacity. Looking ahead to the second half of 2025, we've updated our guidance in our investor presentation.

At current Bitcoin prices and network hash rate, we expect our mining operations to contribute positively to EBITDA in the second half of the year. We've also slightly adjusted our annual SG&A guidance to $50 to $55 million from $40 to $45 million, reflecting the accelerated growth in our high performance compute business. Now, moving to the transactions announced today, these are truly a game changer for TeraWulf, and I want to highlight some of the financial implications. As Paul noted, the FluidStack lease and Google support agreement are carefully structured to enhance our credit profile and position us to scale quickly. Google's partnership and support is multifaceted. First, Google is backing FluidStack's lease obligations, which include early termination protections for the first six years. Second, Google is providing $1.8 billion of credit support over a 10-year period.

Third, Google is pledging its equity stake in TeraWulf to support the construction phase of our data centers. Given the expected improvement in our credit profile, we've refined our financing strategy to focus on a series of capital markets initiatives in the second half of 2025, with the benefit of our new financial support from Google and our updated lease agreements. Additionally, the long-term ground lease at the Cayuga site adds significant future capacity and upside value for TeraWulf shareholders. We plan to develop up to 400 megawatts of high performance compute hosting at Cayuga, a site with many of the same advantages as Lake Mariner, including low cost, predominantly zero carbon power, and strong existing infrastructure. This acquisition and the structuring of these transactions were designed with careful consideration of shareholder alignment. As Paul mentioned, we have structured the terms with long-term shareholder value in mind.

The acquisition of BayWulf Electricity and Data in Q2 further streamlines our structure and consolidates expertise in power generation. This acquisition not only simplifies our corporate structure but also strengthens our ability to execute on future projects. As part of the acquisition, 94 employees from BayWulf, including key personnel from Lake Mariner and corporate support functions, have transitioned to TeraWulf. Finally, regarding our growth pipeline, we are constantly evaluating additional sites to add to the TeraWulf portfolio and maintain an extremely rigorous approach to this process. In 2025, we have evaluated over 75 potential expansion sites, and from that, we have a handful progressing through negotiations. Given our high performance compute customer base and electrical infrastructure experience, we will maintain discipline as we evaluate future expansions. With that, I'll turn it back over to the operator, and we look forward to answering your questions.

Speaker 2

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, for your first questions. Our first questions come from the line of Michael John Grondahl with Northland Capital Markets. Please proceed with your questions.

Hey, guys. Congratulations. A couple of questions. If you could maybe talk about why FluidStack, kind of the pros and cons there, and the demand for that power, and then how are you thinking about the 30-day exclusivity?

Nazar, you want to get that?

Speaker 6

Sure. Good morning, Mike. It's Nazar here. Why FluidStack? FluidStack, as Paul had mentioned, delivers compute clusters to some of the largest companies in the world, and they have been active with a number of different customers, both domestically in the United States as well as in Europe. They made a couple of announcements in Europe earlier in the year. They are very active and are in deep and detailed discussions with a number of different counterparties in delivering optimized compute. As we thought about our trajectory and our ability to grow, adding somebody like FluidStack to Core 42, who also has grand ambitions in building a large platform around compute, made a ton of sense. I think, as we've mentioned on prior calls, having more than one customer at the site has been a goal of ours, and this accomplishes that.

On the exclusivity, today we signed up a deal for CB3, which is 42 megawatts of net critical IT capacity, and CB4, which is 162 megawatts of net critical IT capacity. The discussions that we have ongoing are for a copy of CB4, which would be CB5. Given the discussions that we've had, given the intense amount of effort that's been put into customizing this design for FluidStack, we have a relatively tight window here. We are hopeful, but again, there's work to do there. That tight window should give an indication of how much work is left.

Yeah, that's really tight.

Speaker 0

Mike, I'll just add to that. This is Kerri, Mike, the terms on the additional building, CB5, are on the exact same basis of the terms that we just signed. We'll include the same guarantee from Google and the same economics between TeraWulf and FluidStack.

Great. Maybe just one more. The $1.8 billion backstop from Google, how was that number sort of decided on? Is that basically a six-year protection?

Speaker 7

Hey, Mike, it's Patrick Fleury. Yes, the backstop amount is roughly 50% of the payments over the lease term. Yes, it's approximately six years, and that support, Mike, is actually in place for up to the 10-year term of the lease. It declines from the beginning over time.

Congratulations, guys. Great progress.

Thanks, Mike.

Speaker 2

Thank you. Our next questions come from the line of Brett Anthony Knoblauch with Cantor Fitzgerald & Co. Please proceed with your questions.

Hey, guys. Congrats on both of the announcements today. Really excited about those. Maybe first, on Lake Mariner, the 200-some-odd megawatts we have allocated towards Bitcoin mining, does the Core 42 plus the new deal announced today kind of impact the electrical capacity for Bitcoin mining? Would you envision shutting Bitcoin mining down for FluidStack, or is that something you don't really have to do quite yet?

Speaker 0

Hey, Brett, it's Kerri. As you know, right now we've got about 200 megawatts of near-term power available at Lake Mariner. If you look out over the next 18 months, we're optimistic that we can bring another 250 online there. I think that your question here leads us to the other transaction that was announced today, which is the Cayuga deal. That's why moving on that so quickly was very important to us to keep the momentum in our customer conversations and have that capacity available across multiple sites. As you think about it, once we sign a deal, we're typically delivering the facilities within a year. We're already thinking ahead to meet that timeline.

Okay. No, that's very helpful. If on the Core 42 build-out, could you maybe just remind us of how much CapEx is remaining for that first deal?

Yes. Yeah. Hey, Brett, it's Patrick. I think the precise, I might be off by a million here, but I think through the second quarter, we had spent approximately $200 million. That, you know, I think if you looked at our presentations in quarters prior, that total spend was about $430 million. I think you might say, that doesn't seem right, but a lot of that spend is very back-ended. For example, things like UPS, which is a very large number there, is really back-ended spend that we'll be spending here in the sort of late third quarter and fourth quarter.

Awesome. That's very helpful. Maybe if I could just add one more, the new CapEx for FluidStack, $8 to $10 million range, is a bit higher than the Core 42 range. Could you maybe just talk about the difference in the build-out and cost for that versus what they did with the Core 42?

Speaker 6

Sure. There are a couple of factors here. One is scale and the time associated with that scale. For the Core 42 discussions, we're delivering 60 megawatts of total critical IT capacity, and with this announcement here, we're delivering over 200. The timelines that we're doing still are relatively similar. There is a need for significantly more labor, which is requiring us to pull from further and further away, which has an impact on our overall cost. That is one component to it. Second is, as we mentioned earlier, we spent quite a bit of time with the FluidStack team in coming up with a design that really was customized to what they were looking to deploy. Within those design considerations were tweaks off of what we've built in CB1 and CB2.

When you put those things together, as you noted, we're a little bit higher than what our CapEx was going into Core 42.

Awesome. Thanks, Matt. Really appreciate it, guys. Congrats on the deals.

Speaker 2

Thank you. Our next questions come from the line of Darren Aftahi with ROTH Capital Partners. Please proceed with your questions.

Speaker 1

Hi. Dylan Heslin for Darren. Thanks for taking my questions. The first one, it seems like the yield or the unlevered yield to cost on the build is roughly in the same range of Core 42. When you start to look at other sites within Lake Mariner and then Cayuga and people you're at the negotiating table with, how much room do you think there is to either expand or maintain that yield to cost?

Speaker 7

Yeah. Hey, it's Patrick Fleury. I'll answer that question. I mean, look, I think we've been pretty transparent about what we're targeting in the past. I think we will maintain that discipline going forward. We think Paul can talk to market demand, but I would say it's very, very strong. I think you'll, as Kerri mentioned and Nazar, and on the expansion capacity that we're talking about, it's on the same terms. I think we will, we feel very strongly that we'll be able to maintain that discipline and keep achieving positive economic results for the shareholders.

Speaker 2

I would just add to that that since early May, demand has felt almost urgent. We're not chasing yield on cost deals. We just think we can get better returns. Seeing very strong enterprise and hyperscale demand in several formats with more enterprise direct talks, especially in financial services. On pricing, we're very happy with the economics from Core 42 and the FluidStack Google deal, and think shareholders will be rewarded if we just keep replicating them. I think there's a good argument that the market might even be tighter in 2026 than in 2025, given ongoing power constraints and rising hyperscaler CapEx.

Speaker 1

Thank you. As a follow-up, is there a way to earmark potentially how much capital you might need from the capital markets?

Speaker 7

Hey, this is Patrick. We're really excited about the structure of this deal and the partnership here. I think given the expected improvement in our credit profile, we've really refined our financing strategy with our advisors at Morgan Stanley to focus on a series of capital markets initiatives in the second half of this year. Those initiatives are going to really benefit from the new financial support from our partner at Google and the updated lease agreements. We think that strategy will really afford us a lower cost of funds going forward and increased flexibility going forward. We're just excited as we feel like we've cracked the code. As you know, one of the hardest things about these deals is financing them. Our strategic alignment with Google supporting us both on the debt and as one of the largest shareholders in our equity going forward, we think is incredibly novel.

We're really excited about continuing to grow that partnership as we move forward.

Speaker 2

Yeah. Just to put a finer point on it or to underscore what Patrick said, this is going to lower the cost of financing that we do. It enables us to really approach things from a very shareholder-friendly perspective.

Speaker 1

Great. Thank you.

Speaker 2

Thank you. Our next questions come from the line of Nicholas Giles with B. Riley Securities. Please proceed with your questions.

Thank you, operator. Good morning, everyone. Guys, congratulations here. This is really great to see. I think the $3.7 billion implies average revenue per megawatt of around $1.9 million. At what level does the contract start and what's the annual escalator?

Speaker 7

Hey, Nick, it's Patrick. Those details are confidential. I think we gave you enough information that you're a real smart guy. I think you can probably back into it. The data that we gave you is the data. As we move forward and get bigger as a company, we've been incredibly transparent in the past. This is a really competitive space both for us and for our customers. I think you will continue to see transparency from us, but the data we gave you today is the data that we're going to give you.

Fair enough. Appreciate that. Just back to the project financing, should we expect to see something announced for the Core 42 and FluidStack in one single announcement, or are those separate conversations? Appreciate any color on what we should be looking for.

Yeah, Nick, like I said, I think it's going to be a series of transactions. Obviously, this transaction fundamentally changes the credit profile of our company in a very positive way. I think you will see a series of transactions that we're working on with our advisors at Morgan Stanley here in the second half.

Got it. One more for me. Just on the 30-day exclusivity, do you feel that Google would presumably backstop this capacity as well if executed?

Yeah.

Okay, guys, congrats again. Keep up the good work.

Speaker 2

Thank you. Our next questions come from the line of Brian H. Dobson with Clear Street LLC. Please proceed with your questions.

Speaker 6

Hey, thanks so much for taking my question. Just on the Google partnership, do you think you could maybe opine a little bit on how you think that that's going to change discussions with future clients? Do you see this as a net long-term strategic positive? If so, what kind of synergies do you think this agreement will yield in terms of generating new business further down the road?

Speaker 2

Nazar, do you want to start and I'll follow up?

Speaker 6

Sure. I think the hyperscalers and Google in particular have put out pretty significant forecasts both for the balance of the year as well as looking into next year. If you look at the structure of this arrangement, it is, I think as Patrick mentioned earlier, unique and novel. What we have found is the demand for capacity from hyperscalers exists, as Paul had mentioned. How they take that capacity down will take a number of different forms. This is an example of that. As we think about it, there is the demand of who's going to use it, and then there is the how do you pay for it and the financing piece of it. This construct that we developed with our partners at FluidStack and Google really addressed both of those things.

I think the long and short of it is that there's demand out there, and the contracting for that demand will take a number of different structures, including what we announced this morning.

Yeah, thanks very much. Do you think that new potential clients will see this as an endorsement from a marquee player in the space?

Speaker 2

I hope so. I would expect. I mean, FluidStack and Google, you know, probably looked at a ton of sites. I think they found it compelling in terms of the attractiveness of the site, our installed energy infrastructure, redundant grid connections, the land, the water, fiber latency, 89% zero carbon power source, availability of power. They were able to see the progress we've made on the Core 42 buildings, the partnership that we've developed there, the way we work with our customer. I think these high-power density, all liquid cooled data centers are pretty early in terms of industry development, and FluidStack, Google saw the value in partnering with a team that's already navigating that complexity.

Finally, our team, I would encourage folks to work out when they can get up to the site, but we've got an amazing team up there led by Sean Farrell, our Chief Operating Officer, our management team together with Sean. We've been together over 15 years. We've got decades of experience executing complex energy infrastructure projects, and I don't think that's something you can replicate overnight. I think it was all of that. I think new customers or potential new customers will look at our appreciation for electricity and electrical infrastructure and their needs and realize that it's a good match.

Speaker 6

To underscore what Paul said, we had very detailed discussions with our customer around the design and configuration of what we're building for them. We had a base design, and through that they got to see our chops and see what we do, how we work. I do think, to your question, it should absolutely be an endorsement of our team and our ability to really work with some of the largest companies in the world in building the next generation of data centers.

Yeah, thanks very much, and congratulations. It's a big win.

Thank you.

Speaker 2

Thank you. Our next questions come from the line of Chris Brenner with Rosenblatt Securities. Please proceed with your questions.

Hi, thanks, and good morning. I have to add my congratulations as well. This is fantastic. I just wanted to see if we could potentially get some color. I would think you would, on the public financing side, I would think you had made significant progress down that path before these transactions. I just was wondering, is there any way to quantify the benefit and the lift you may receive in the financing terms or the rate from the significant changes in your credit profile that are taking place, and how quickly can those transactions come together? The second question I had was on the expansion. I think you were targeting 150 megawatts per year, and I think it now says 150 to 200.

I just want to make sure that's true, that you're going to try to maybe accelerate your expansion plans in this space now that you have these transactions under your belt, as well as what's the future look like? Did that go up again higher as you expand your portfolio? Thanks.

Speaker 7

Yeah. Hey, Chris. It's Patrick. I'll take the first part, and then maybe Paul, Nazar, Kerri can take the second. Chris, I think, you know, it's pretty obvious. You look at Google as a financial partner here working with us, a multi-trillion dollar market cap, you know, one of the largest companies in the U.S., and with a measly $30 billion, I think, of debt or so. Absolutely pristine AA+ company partnering with us, now one of the largest shareholders. I think you can imagine that whatever course we were on before, right, with regard to our financing for Core 42, this is a game changer for that. I think we will look to finance the site in totality under this new credit regime and new support regime. That's, you know, the obvious and clear takeaway.

I'm not prepared on this call to precisely quantify that for you, other than to say, like, we view it, and I think our financing partners also view it as a game changer. I think now, as Paul mentioned, we are positioned, I think, perfectly to go get the most cost-effective and efficient capital structure in place. Look, before, you know, we were talking to you about project financing. That can create, you know, siloed entities, which is not the best long-term financing outcome. I think here, you know, we now have the time and the support to figure out what is absolutely right for the company long term.

Speaker 6

In terms of your second question, Chris, around growth and future capacity, you know, we put out this target of 150 to 200 megawatts, and that was by design. That really is a function of both the capacity we have available, but also what we think we can efficiently finance and pay for. With this transaction, one would think we should be able to maybe increase the pace of that. As Patrick said, we're going to work through that here very shortly. At the back end of that, maybe that could be a possibility. I think, you know, that 150 to 200 megawatts of guidance that we have really is, you know, within both the capacity we have available as well as our ability to finance it and pay for that construction in a timely way.

Okay, great. Just one more on that financing side. Are you still anticipating a 70% LTV, or is that potentially having the ability to increase with these transactions?

Speaker 7

Yeah, Chris, I think all of that is out the door. It's no longer relevant. I think you'll again see us attack the market. I think in a very significant position of strength now with our partners. I think all of those prior discussions and targets are off the table.

Fantastic. Back to you again.

Speaker 2

Thank you. Our next questions come from the line of Martin Toner with ATB Capital Markets Inc. Please proceed with your questions.

Congrats, folks, and thanks for taking these questions. The EBITDA per megawatt of this deal is a little bit higher than what you've given us for Core 42. Can you just kind of talk us through, like, what's different?

Speaker 7

Yeah, Martin, I think as you'll see in our disclosures, and I think this is just natural as we get bigger, right? Before, when we just had Core 42 as our customer, we were telling you EBITDA because that was our only customer. I think now what you'll see us do going forward is, you know, for Core 42 and for this deal, we're kind of looking at it from a net operating income at the project level, which I think is a more appropriate way to look at it. You'll see that in our guidance for Bitcoin mining, we're looking at that as segment operating income as well, right? I think the way we think about it is there's profitability at the project entities, and then there's SG&A that we've had to take on at the parent, which we gave you updated guidance on today.

I think when you combine the specific project entities and the Bitcoin mining, that would then kind of roll up into a total, and then you can subtract the SG&A from the top to get down to your EBITDA. Does that make sense?

Yeah, I think so. Thanks. Does Google have a significant contract with FluidStack, kind of like Microsoft and OpenAI have with CoreWeave? I'm just wondering, does FluidStack have like a CoreWeave-like backlog?

Speaker 6

I don't think we're in a position to disclose FluidStack's customer base. I think, as we mentioned earlier, FluidStack works with some of the largest companies in the world in delivering customized compute solutions.

Got it. Yeah, I appreciate that. Last one from me. Can you kind of talk us through why, like, 95 million shares was the right price for Cayuga? Were there some competing bids? Any detail you can give us there would be appreciated.

Speaker 0

Sure. Hey, Martin, it's Kerri. I think we probably first brought up the Cayuga process back in our first call in February, or at least that's when Paul had begun a process, a competitive process for Cayuga. That process quickly attracted multiple third-party bids. Because it was a related party transaction, the board then formed an independent committee, which brought in its own financial and legal advisors to sort of evaluate the opportunity for TeraWulf. Ultimately, in terms of pricing, the committee approved moving forward at a discount to those third-party bids. We agreed that equity rather than cash was the right way to structure the deal to keep, you know, everybody aligned. We're thrilled now to have Cayuga as our second site.

Much like Lake Mariner, it's a former site of a coal plant and has all that amazing infrastructure, you know, redundant grid, water, fiber, and mostly zero carbon power. That's the process that we ran. It was a competitive process. We got third-party bids, and ultimately the transaction was done at a discount to where those bids came in.

That's great. Thank you very much. That's all for me.

Speaker 2

Thank you. Our next questions come from the line of Stephen William Glagola with JonesTrading Institutional Services. Please proceed with your questions.

Thanks for the questions. Just wanted to clarify in that prior Q&A, when you include the extra non-project level SG&A, is the margin then more comparable to that 75% level at Core 42?

Speaker 7

No. No, Steven. I think I was just trying to make the point that we've kind of changed how we're guiding you, right? Because before we literally just had one customer, so it was easy to kind of just give you an EBITDA margin. Now what I'm saying is, I expect the net project operating income margin for each project to be its own. I think we're saying, I think 85% on that. If you were to apply that to, let's say, each of the projects and then take our SG&A guidance, that would get you to EBITDA. Is that helpful?

Yeah, no, that's really helpful, Patrick. Appreciate it. I just have one more. It seems like the successful delivery of CB1 and CB2 are pivotal for showcasing your capabilities and establishing credibility for tier three or four data center development. I was hoping maybe you could share any key learnings your team has gained during the build-out process, any processes that you maybe expect will be more efficient or streamlined with the FluidStack build-out or future projects, etc. Thank you.

Speaker 2

Nazar, do you want to start and let maybe Sean talk a little bit as well?

Speaker 6

Sure. Hey, Steven. I think there's a couple of things that are important. One is we've been in construction at our site for the last four years straight. We've been building Bitcoin mining buildings, and we had civil, electrical, mechanical contractors on site. Some of those folks that showed up four years ago are still at the site because they're rolling from one building and one project to the next. Momentum and being able to deliver on a schedule is important. Part of the diligence process that all of our customers have is really, hey, if there's this timeline and schedule out there, what's your ability to meet it? Given that we've got quite a bit of activity at the site and there's a lot of momentum, it's easier to see how the existing folks there can roll into the next.

As we scale up and are delivering greater sizes of capacity, it's really a question of can we augment and add to that kind of labor force. That's one thing that I think is important. We've been able to convey and articulate to customers, everyone that comes on is being able to show them these schedules are really grounded in being able to point to who's going to do the work. That's one. Second is the design of these things. As Paul had mentioned earlier, we are in the very early stages here. We are at our site deploying multiple different OEM GPU equipment, and each one of those comes with its own set of unique attributes and needs and desires.

Having the experience of going through that design process, understanding what those different configurations look like, what they need, and being able to deliver solutions to our customers kind of comes through as well. We've been through this process now both with Core 42 as well as with FluidStack and Google now. I think people see that as they're thinking through and figuring out how to deploy various types of technology. We are a very good partner to work with, especially on the electrical side, delivering back-to-back capacity. Sean probably has a few other things to add.

Speaker 1

Yeah, good morning. I would just add to what Nazar was saying, a lot of the contractors we've had on site have been there for four years. Maintaining the workforce at Lake Mariner has been a huge benefit for our deployment at this site. Rolling them from CB1, CB2, CB3, and so on has really been the momentum that we've kept at the site. We've also had huge lessons learned from CB1 and CB2. As Nazar said, we've been in detailed technical discussions with FluidStack for the past several months on CB3. Instead of building a very wide envelope for FluidStack's deployments, we've really narrowed down on the design that meets their needs. By doing that design and level-setting us up front, it allows us to further accelerate our construction schedules.

Speaker 2

The only thing I'd want to add to that is the beauty of our bias regionally right now is that all those contractors and many of the same folks on the ground who are employees at Lake Mariner, they move right over to Cayuga when that's ready to roll. We are taking advantage of all those lessons learned and working with the same people as we continue to refine our efforts here. It made Cayuga far more compelling to us than just any other site.

Great. Thank you, everyone. Really helpful.

Thank you. Our next questions come from the line of Edward Lee Engel with Compass Point Research & Trading. Please proceed with your questions.

Hi. Thanks for taking the questions and congrats on all the announcements. You just mentioned that you've been interacting with FluidStack over the past couple of months. I was wondering what the involvement was with Google, Inc. kind of during that whole process. Were they involved early in those negotiations, or were they a bit more later in the process? I'm just kind of curious whether, I guess, GCP themselves has expressed any interest in any of their sites in your pipeline. Thanks.

Yeah. We've been involved with Google as part of the FluidStack effort since very early on. It takes a while to get these things over the finish line. The deal took three to four months from beginning to end, and we've established great working relationships amongst the parties at every level of their respective organizations. Having to sign deals is more than simply having land and access to power. You have to finance a transaction. It's critical to the magnitude of spend. That's why it was so important to have Google involved pretty much from the start. I think Google taking 8% of our company is not simply about doing a deal, but they want to be a part of where we are going, given their natural need for compute. It was complicated, and we've been talking about it for a long time.

Anyone who's listened to Google's Q2 call is aware they have substantial data center needs, given the size of their large growing cloud business. They have a $106 billion backlog. They have acquired substantial quantities of third-party data center space. Their backstopping in the transaction provides Google with a lower expected cost than a guaranteed value. Since in the unlikely event that Google steps in for FluidStack due to the backstop, Google would likely add the facilities to the data center portfolio. They were instrumental in helping us get this deal done and very welcome partners.

That's great color. Thanks. You also mentioned that there are early termination protections with Google. Can you talk about some of those conditions, just assuming that they're performance-related? Just one quick follow-up. If there's a 30-day option that's still to be considered, would that also include more warrants to Google as well, or is that just a one-time thing?

Maybe I'll start, and then we'll go to you, Nazar, on the walk-away concerns, which we don't really have. I would expect that I have a high degree of hopes with respect to the option and the extension of additional capacity. All parties have worked in good faith to come to the realization that that's a good thing. I would imagine that the terms will be very similar, as Kerri pointed out earlier, and that Google's backstop and equity participation would be part and parcel of that. I feel pretty good about that. Nazar, do you want to address the notion of SLA penalties or walk-away considerations?

Speaker 6

Sure. I mean, the terms are, the specific terms are fairly confidential. That being said, the arrangement has what I would call usual SLAs around, you know, performance and delivery. We have worked very closely with the FluidStack and Google teams to ensure that both of those items from, you know, on the performance side, the design really incorporates the number of things that they're looking for. The window of operational ranges is fairly tight. On the delivery, there is a fairly robust schedule kind of supporting that. If you look at what we've done with Core 42, we had similar provisions within that agreement. We have an obligation to deliver capacity on a certain timeline, and we've been doing that on schedule and on budget.

Great. Thanks for the color, and congrats again, everyone.

Thank you.

Speaker 2

Thank you. Our last questions will come from the line of Bill Papanastasiou with KBW. Please proceed with your questions.

Good morning. Thanks for taking my questions, and congrats on this deal. I think most of the analysts went through a lot of the questions, but with respect to the Cayuga site, it appears capacity will be coming online in the second half of 2026. Curious to hear your thoughts on how management is thinking about diversifying the tenant base, if that's a consideration, or now that you have the two partners in your pocket, will you continue to scale hand in hand? Thanks.

Yeah, hi. It's Paul. I've been telling everybody for the last three to six months, I mean, we need to land a new customer and expand our capacity. We've done that. In doing so, we've seen a tremendous amount of demand from multiple parties. I think we ended up in a great transaction here with world-class partners. We want to grow with them and meet their needs. We have had significant real interest expressed by other quality customers. We're going to continue to engage with all those parties as we look to grow. We think that's prudent. At this point, we're really grateful for the confidence and trust FluidStack and Google have demonstrated in us right now and really want to get going on that and then focus on CB5. We could see who the right customer is for Cayuga. Demand is real. It's unbelievably powerful right now.

We're excited about the opportunity, but we're most grateful for the contracts that we've announced today and the future of this partnership.

Appreciate that color and look forward to seeing you guys execute in the road ahead. Thanks.

Thank you, ladies and gentlemen. That does conclude the question and answer session. With that, this does bring this call to a close. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.