TeraWulf 2026 Third Quarter Earnings Call - TERAWULF INC

Explicit Guidance:

• Lake Mariner (Wolf Compute) Cost: Project costs expected to remain near the midpoint of the original $8–10 million per critical IT megawatt range; current estimate is approximately $8.9 million per megawatt.
• Justified (Hawesville) Cost: Project costs expected to remain within the $10–12 million per critical IT megawatt range.
• Revenue Milestones: Exited Q3 2026 with ~$700 million annualized run rate leasing revenue; target of ~$700 million annualized run rate upon full ramp of Lake Mariner.
• CapEx: Approximately $1 billion remaining on Lake Mariner (two-thirds committed); ~$550 million equity contributed to Justified as of Sept 30, 2026.
• Capital Recycling: Expect to unlock equity from stabilized assets and recycle capital to the parent for growth in 2027.
• Revenue Mix: HPC lease revenue represented ~83% of total Q3 2026 revenue ($63.0 million); target to move reported margins toward long-term target of ~85% as pre-revenue costs decline.
• Liquidity: Exited Q3 2026 with ~$2.4 billion total cash/restricted cash; expects to receive incremental $150 million from Abernathy JV sale by Dec 31, 2026, and ~$130 million by April 30, 2027.
• Debt: Revolver capacity increasing from $250 million to $400 million (with $150 million accordion feature up to $550 million) effective after Q4 2026.

Business-Segment Outlook:

• Lake Mariner (Wolf Compute):
  • CB3 is fully online and generating revenue.
  • CB4: Remaining two data halls scheduled to come online in the balance of Q4 2026; target ~168 MW added for Q4 exit.
  • CB5: Target commencement of commercial operation in Q1 2027; adds another ~168 MW.
  • By end of Q1 2027, expect ~50% of contracted critical IT capacity to be operating.
  • Long-term path to scale Lake Mariner to ~750 MW to accommodate CV6.
• Justified (Hawesville):
  • Construction progressing with pilings underway.
  • Phased ready-for-service deliveries targeting late 2027 through Q2 2028.
  • EPC partner "Floor" expanding role to full engineering, procurement, construction, testing, and commissioning under a Guaranteed Maximum Price (GMP).
  • Engineering and procurement drawings targeting 100% completion by Dec 1, 2026; long-lead equipment 100% by end of 2026.
• Muskie:
  • Targeting delivery of initial 500 MW in 2028; second 500 MW potentially accelerated to 2029.
  • Exploring acceleration of the second 500 MW segment via a new 760 MW CCGT power plant ("Big Sandy"), with PSC filing expected soon and approval targeted by mid-2027.
  • Power delivery for the full gigawatt block targeted prior to end of 2029.

Market and Competitive Outlook:

• Demand: Demand for compute remains "extremely strong"; "deliverable power remains scarce."
• Pricing & Yields: Management confident in negotiation leverage for Muskie due to high customer interest; will not sign leases that require dilutive equity issuance.
• Competitive Positioning: Differentiates from "neocloud" models by controlling land, power, and infrastructure; focuses on turnkey COLO solutions with investment-grade credit support.
• Tenant Strategy: Prioritizes investment-grade credit support (direct or via backstop) to ensure efficient financing; not pursuing "capital light" or modular structures that do not align with value creation per megawatt.
• Backstop Evolution: Anticipates hyperscaler credit backstops (e.g., Google) will be temporary "training wheels" until frontier AI clients (e.g., Anthropic) achieve investment-grade status, at which point support is expected to fall away.

Macro / Industry Outlook:

• Capital Markets: Acknowledges higher financing costs, credit spread volatility, and increased infrastructure debt issuance.
• Interest Rates: Factors higher cost of capital into every new transaction; emphasizes preserving the spread between lease yield and weighted average cost of capital (WACC).
• Regulation: Views clear, durable regulatory frameworks as beneficial for distinguishing credible projects from speculative ones; cites Kentucky as a model of constructive state/local support.
• Industry Trends: Predicts data center demand will increasingly catalyze investment in transmission and generation infrastructure; expects a "clearing event" in credit markets as natural market correction before stabilizing.
• Power Economics: Notes that power costs and tariffs are embedded in contract economics; expects future power availability (2029–2030) to require new generation and transmission build-out.

Strategic Initiatives:

• Justified Data Center: Definitive EPC agreement with Floor; secured $19 billion 20-year lease with Anthropic backed by Google credit support; targeting $10–12M/MW capex.
• Muskie Development: Working with Kentucky Power and AEP on a "front-of-the-meter" grid service path; filing for 760 MW CCGT plant to support second 500 MW; targeting a "high-quality" tenant with investment-grade backing.
• Lake Mariner Expansion: Planning for CV6 to scale campus to ~750 MW; accelerating CB4/CB5 commissioning.
• Financial Structure: Eliminated $150M LC supplement on revolver to increase liquidity; utilizing project-level debt financing to preserve equity value.
• Capital Recycling: Planning to unlock equity from stabilized assets (e.g., potential sale of stabilized assets to infrastructure funds) in 2027 to fund growth.
• Community Relations: Committed to contributing to local tax bases and infrastructure (e.g., fire department equipment, education).

Risks and Headwinds to Outlook:

• Financing Risk: Excludes financing risk for shareholders by securing investment-grade credit support; no commitment to absorb financing risk.
• Execution Risk: Mitigated via EPC partners with GMP structures; risk of cost overruns largely transferred to EPC/subcontractors.
• Regulatory/Permitting: Specific sites like Chesapeake have outstanding conditions precedent (e.g., SECO) that could delay closure.
• Credit Risk: Reliance on Anthropic achieving investment-grade status to remove Google backstop; risk of credit spread widening impacting cost of capital.
• Market Volatility: Potential for "clearing events" in credit markets and fluctuating lease pricing environments.

Management Tone on the Future:

• Confidence: Highly confident in execution capabilities, the value of contracted megawatts, and the ability to deliver power.
• Discipline: Repeated emphasis on "not absorbing financing risk," "not issuing equity at unfavorable valuations," and "preserving spreads."
• Long-term View: Focuses on "generational infrastructure assets" and "risk-adjusted returns" rather than rapid growth for growth's sake.
• Differentiation: Positions company as an "energy infrastructure company" rather than a "neocloud," emphasizing control over power and land.

Miscellaneous:

• Valuation Methodology: Management explicitly rejects "neocloud" valuation multiples, preferring infrastructure-style valuation based on stabilized cash flows and yield spreads.
• Geographic Focus: Highly concentrated in Kentucky (Hawesville, Muskie, Lake Mariner) due to favorable regulatory and power economics; previously active in New York (Abernathy).
• Customer Diversification: Acknowledges value of diversification but prioritizes credit quality and economics over adding volume for volume's sake.
• Equity Options: Lists prepayments, customer equity investments, project-level leverage, and secondary sales to infrastructure funds as tools to avoid dilutive equity issuance at the parent level.