Q3 2024 Earnings Summary
- Strong positioning to capitalize on the expected tripling of data center demand by 2030, particularly in high-speed compute workloads projected to grow from 40% to over 70% of total power capacity, leveraging TeraWulf's strategic assets and expertise in energy infrastructure development.
- Imminent announcement of definitive lease agreements with high-quality customers, covering initial capacity of 72.5 megawatts and enabling project financing for expansion, indicating robust demand and enhanced revenue prospects.
- **Demonstrated strong financial discipline with positive EBITDA, significant insider ownership of about 30%, and substantial share buybacks of $115 million, aligning management with shareholder interests and enhancing shareholder value.
- The company has not yet secured definitive agreements with high power compute (HPC) hosting customers, introducing uncertainty in their new business expansion plans. While management expects to announce a customer before year-end, negotiations are ongoing, and no contracts have been finalized. , ,
- TeraWulf is facing potential delays and uncertainties in obtaining an additional 250 megawatts of power capacity approvals, expected by the end of Q4 2024 or beginning of Q1 2025. This may limit their ability to scale operations and meet customer demand in a timely manner. ,
- The company's marginal cost of bitcoin production is expected to increase from approximately $54,000 in Q3 2024 to approximately $59,000 in Q4 2024, which may pressure profitability if bitcoin prices do not rise accordingly. Additionally, a planned outage at their Lake Mariner facility will impact approximately 5.2 exahash of mining capacity for about one week in mid-November.
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HPC Customer Agreement Timing
Q: When will you announce your first HPC customer?
A: We expect to announce a definitive lease agreement with one or two customers covering 72.5 megawatts before year-end. Negotiations are very advanced, and this contract will cover our initial capacity through the first half of next year. The scramble for power has intensified since the FERC ruling, and we're ensuring we secure the best deal for our shareholders. -
CapEx and Project Financing
Q: How is the capital spend progressing on CB-1 and CB-2?
A: The build cost for CB-1, a 20-megawatt building, is about $100 million, or $5 million per megawatt. CB-1 will be operationally complete at the end of the first quarter. CB-2, a 50-megawatt building costing $250 to $300 million (approximately $5.5 million per megawatt), will be operationally complete by the end of the second quarter. Capital is moving out the door quickly in the next few months. -
Demand Environment and Pricing
Q: How has demand affected pricing and terms recently?
A: Demand is robust and intensifying, especially after the recent FERC ruling. Pricing per kilowatt-hour has increased on the margins, and more parties are prepared to meet our terms. There's a greater interest in tying up as many megawatts as possible with one party. Sites like ours have moved up in the pecking order and are getting significantly more attention. -
Funding Without Additional Equity
Q: Can you fund HPC expansion without extra equity?
A: Yes, project financing is readily available and becoming more robust. We're utilizing one-year revenue prepayments and approximately 75% project financing. We have substantial unallocated cash, and if the market isn't valuing us appropriately, we've authorized a $200 million buyback and have bought back $115 million of stock. Management and insiders own about 30% of the equity, and we're focused on creating value for shareholders. -
Future Expansion Plans
Q: Should we expect further expansions like CB-3 next year?
A: Our capability to deliver is shown on Page 17, but actual expansion will depend on customer demand and factors like their progress with NVIDIA and capital raises. We'll provide 2025 guidance when we file our 10-K in February. We can scale as fast or slow as customers require, and we'll offer more details once we announce the customer contract. -
Bitcoin Mining vs. HPC Economics
Q: How do you view Bitcoin mining versus HPC economics?
A: We focus on dollars per megawatt-hour. The midpoint revenue for HPC is around $1.5 million per megawatt, equivalent to $150 per megawatt-hour, with approximately 70% margins. Bitcoin mining profitability depends on volatile factors like bitcoin price and network hash rate. Our next 500 megawatts of expansion will be in HPC and AI, likely coinciding with the next halving. We have time to decide whether to continue Bitcoin mining. -
Additional Capacity Approvals
Q: When will you request approval for more capacity?
A: Getting in the queue for the next 250 megawatts will depend on how fast our customers want to expand. We anticipate starting the process at some point next year. Regarding Cayuga Lake, it's a valuable asset similar to Lake Mariner, and we're ensuring we meet our customers' needs. -
Customer Visits to Wulf Den
Q: Have potential customers visited your Wulf Den facility?
A: Yes, customers in advanced discussions have visited the site, seen our operations, and were uniformly pleased. They are interested in securing as much capacity as they can get. -
Lease Economics and Demand Potential
Q: Can you improve lease terms due to strong demand?
A: Our projected economics of $1.3 to $1.8 million per megawatt are detailed on Page 16 and remain largely unchanged since May. While demand is strong, our focus is on securing customers with excellent credit quality to enable project financing for CB-1 and CB-2. We are confident in announcing a customer before year-end. -
Sustainability of Power Demand
Q: How sustainable is the current demand for power?
A: Significant growth is expected, with data center demand projected to triple by 2030. High-speed compute workloads are expected to grow from 40% to over 70% of total power capacity by 2030. Power demand is growing at 5% annually, highlighting a scarcity of power. We believe the demand is real and are well-positioned due to our site and team's experience.
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