Good afternoon, ladies and gentlemen. Thank you for standing by. My name is Bow and I will be your conference operator today. At this time, I would like to welcome you to the TeraWulf Q4 and Calendar Year 2022 Results and Business Update Call. Now at this time, I'll turn things over to Mr. Sandy Harrison, Vice President, Investor Relations. Please go ahead, Mr. Harrison.

Thank you, Bow, and welcome to TeraWulf's Q4 and full year 2022 financial results and operational update call. I am Sandy Harrison, VP of IR and joining me on today's call are Paul Prager, Co-Founder and Chief Executive Officer; Nazar Khan, Co-Founder and Chief Operating Officer; Patrick Fleury, Chief Financial Officer; Kerri Langlais, Chief Strategy Officer; and Stefanie Fleischmann, General Counsel. I want to remind everyone that during today's call, we will be making forward-looking statements. Forward-looking statements are neither historical facts, nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent risks and uncertainties and changes in circumstances that are difficult to predict, many of which are outside of our control. The company's actual results and financial condition may differ significantly from those discussed during this call. Additional factors that could cause actual results to differ from forward-looking statements can be found today, in our press release, and on TeraWulf's SEC filings. Our comments are as of today and TeraWulf does not assume any obligation to publicly update any of these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law or regulation. With that, I would like to pass the call over to our CEO, Paul Prager for his opening comments. Paul?

Thank you, Sandy. Good evening, everyone. And thank you for joining us in our fourth quarter and fiscal year 2022 earnings call. There's little doubt that 2022 was a transformational year for TeraWulf and for the crypto industry as a whole. During what proved to be an increasingly volatile macro backdrop and a resultant turbulent market, TeraWulf successfully transitioned from development and construction to Bitcoin generation, by remaining steadfastly focused on achieving our goal of building a scalable, vertically integrated Bitcoin mining company that uses low-cost zero-carbon energy. We have accomplished a lot since our last formal call, and I'd like to review a few key milestones achieved during our first full year as a public company. Operationally, we commenced mining in March 2022 at our wholly owned Lake Mariner facility in New York. This sources 91% zero carbon power from the grid, primarily from locally produced and abundant hydro and nuclear power. With the completion of our building one, we exited the year with more than 60 megawatts and 2 exahash of mining capacity at Lake Mariner. At our jointly owned Nautilus facility in Pennsylvania, which sources 100% nuclear energy from the co-located 2.5 gigawatts Susquehanna nuke, we completed construction of two buildings and a lot of this facility is home to one of TeraWulf’s most valuable assets, 50 megawatts of mining capacity at a fixed power price of $0.02 per kilowatt hour for five years. Nautilus was recently energized in February, and we have since ramped TeraWulf's self-mining capacity at Nautilus to approximately 29 megawatts and 1.2 exahash to-date. Financially, we’ve successfully leveraged key relationships to make efficient use of deployed capital, complete construction of our facilities and fund the company to free cash flow positive operations. We restructured our miner purchase agreements with Bitmain, unlocking substantial deposits…

Thank you, Paul. And thanks everyone for joining. As a 23-year veteran of Wall Street, the first nine months of my tenure as Chief Financial Officer have been among the most challenging of my career. In these months, we tirelessly work to better position TeraWulf an industry winner. As I reflect 2022 and early '23, I am incredibly proud of what this team of energy, power and finance professionals have accomplished thus far. Number one, we raised over $100 million of new capital from retail and institutional investors, lenders and insiders. Number two, we've restructured our Bitmain contracts to divert all deposits, all deposits purchase orders without any further capital commitments. And number three, we restructured the Talen JV to better align our infrastructure capacity with funded miner purchases. These achievements continued into early 2023 as we took further actions to solidify our financial standing, including: number four, raising over $35 million of transformative equity capital to provide sufficient future liquidity and enable WULF to satisfy all capital commitments to achieve free capital breakeven obligations. And number five, successfully completing the restructuring of our debt from mandatory amortization of approximately $17 million per quarter to a quarterly free cash flow sweep. These latest two achievements are critical to providing the runway needed to accomplish our objectives in 2023 and beyond. We should now have the financial resources and possess the necessary infrastructure and miner to deliver 160 megawatts and 5.5 exahash of capacity which we believe installs TeraWulf solidly in the upper echelon of the public miner peer group. Speaking of our public miner peer group, as a long time energy, power and commodity institutional investor, I have to prove in my duty as CFO of TeraWulf with a responsibility to provide transparency, accountability and access to institutional and retail…

Thank you, Patrick. I appreciate the investors may have questions and the team stands ready to respond in the most constructive way. So Sandy, why don't you go ahead and start fielding them? And let's see if we could provide as much information as we can in response.

Sure. Bow, you want to go ahead and kick it off?

Certainly, Mr. Harrison. We'll take our first question this afternoon from Lucas Pipes of B. Riley.

This is Nick asking question on behalf of Lucas. And guys, thanks for the level of disclosures. These are really extremely helpful. My first question is when you think about strategic opportunities outside of current sites, would potential consolidation opportunities -- would these require rig purchases? Or do you have a preference for sites which may be unfinished obviously with no rigs?

Hi, this is Paul. I think when we think about the space, we want to do everything in the most responsible manner. And key to doing that is going to be the way that is financially efficient and also least dilutive to our shareholders. We look at consolidation in the space is not limited to the development of additional sites, just simply because it would be very difficult to find growth opportunity that is as competitive as just if we build out the existing sites, but also to include consolidation of other miners. As Patrick mentioned in his conversation, we've got a ton of M&A experience in the power space, the energy space. And I think, as we look forward, we're looking for folks that have undervalued assets, or regionally in places that provide some level of security from diversity of generation or great rule of law, and also consistent with the zero-carbon approach. The market downturn has presented just a ton of opportunities. So our primary focus right now is, again, getting to 5.5 exahash. I think that's a big statement, we'll do that in a matter of weeks. And we are looking at strategic opportunities in terms of acquisition of existing miners that have low cost production and zero-carbon.

Paul, thanks so much. Really appreciate all that color. Maybe just one follow-up there. You spoke of regions. Would you prefer to stay in the Northeast where a lot of your peers are obviously centralized in Texas? Are there any regions in particular that you have a preference for or really all are open for discussion?

We happen to really love the United States, we like rule of law. I think there’s nothing that we would sort of rule out upfront. We look where there's excess supply versus demand. And, the unique thing about energy is that it is different on a regional basis, even on state basis. And we're also looking for places that have a predictable regulatory regime and we think that's critical, ultimately, to the future of Bitcoin generation.

Very clear. Appreciate that. Maybe just one more for me. As you think about growth beyond the 5.5 exahash, apologies if I might have missed this, but which site makes most sense? I know you have expansion opportunities at both Nautilus and Mariner but is there a preference of one over the other?

Sorry, this is Kerri Langlais, the Chief Strategy Officer at TeraWulf. I'll jump in here and address that question. So yes, as you point out, we have sort of shovel-ready organic expansion opportunities at our two sites. We have another 50 megawatts that we can expand into in Pennsylvania at Nautilus. And at Lake Mariner we have near term ability to expand that facility by another 80 megawatts. So in total, we can effectively double our hash rate here as quickly as we want to pursue that. I think when we look at where -- between the two facilities, what makes the most sense, it really comes down to production cost and the cost of the infrastructure to expand. So I think what we've seen in New York is that our infrastructure cost there is more efficient than our infrastructure cost at Nautilus, and that's purely by virtue of Nautilus being co-located with a nuclear power facility that requires security and additional requirements in that regard being part sort of as you would imagine a utility framework. We have access to very low cost power in each location. So I think, for us, the benefit of being able to build something at a lower cost in New York is obviously appealing. But for us, it's really whatever is available to us in the immediate term, that's where we'll spend our time.

We go next now to Bill Papanastasiou at Stifel.

I just want to say big kudos to Patrick and really the entire team for the level of transparency and disclosure. It's a big relief to us as analysts to see. This just makes our lives easier to model. And I plan on making sure that some of your peers also report with the same amount of transparency. Without further ado, just want to -- was hoping to gain some outlook on network hash rate and the broader outlook for mining economics. Obviously, this is an important topic we're having about a year out. And TeraWulf is very well positioned with the blended average cost of power of $0.035 per kilowatt and 26 joules per terahash, but any broader general commentary that you could provide is greatly appreciated?

Thanks so much. And I'll start and, Patrick, if you have anything add, please feel free to jump in. I think our view is we expect the hash rate to continue to increase in this part of the year. Decisions -- investment decisions that were made -- there's obviously a time lag between when decisions were made and when that infrastructure actually gets into play, so we think we'll see that sort of play out as we near the halving. I think, historically, Bitcoin prices outweighed the impact of the halvening. Now, whether that will pan out in this cycle, remains to be seen. But I think, what we've benefited from -- and I think it's terrible being such a low cost producer is sort of paramount as you enter into these different cycles. And so that's how we're thinking about hash rate growth as we move forward deeper into this year. Go ahead Patrick.

Sorry, Bill, this is Patrick. I was just going to add, Bill, if you take a look at our February investor deck, Page 14 of that deck where we actually get into unit economics and detail our entire cost structure. What we've actually tried to lay out there is a comparison between TeraWulf cost of power and some other miner, a public miner that say pursuing an asset light strategy. And the intent of that page is to show you through exactly what Kerri just said, network, hash rate growth, and then the block halving adjustment, which likely occurs in April '24, what mining economics kind of look like through the cycle. And that's why I think we're trying to stress again, being the lowest cost marginal producer through cycles really matters because as you can see on that page, the cost of Bitcoin, a $0.01 power price differential. While it's a little bit immaterial today, once you go through that network hash rate, plus a block halving adjustment, it becomes incredibly material.

And yes, I've seen that slide in the deck and encourage everyone else to look at it as well to see the comparisons. My next question is just given the team's experience with energy markets, I was hoping you'd be able to provide a quick and dirty overview of the team's appetite for potentially other zero-carbon energy renewable sources. Could we see TeraWulf in the future tap into solar, wind energy? Or will you continue to focus on hydro and nuclear or any commentary on the other types of energy sources?

Sure, this is Kerri, again, I'll get started on that. Listen, we focus on hydro and nuclear because they are the most scalable, and around the clock renewable resources that exist. We certainly are interested in augmenting our facilities with solar capacity, we actually have a solar development that's in the permitting process now for our Lake Mariner facility, would be a 125 megawatt co-located solar farm there. We also look at different flare gas opportunities. I think that Bitcoin mining is the perfect solution for any stranded excess energy, but whether -- but not all, flare gas is created equal. So we haven't yet identified an opportunity that we think is consistent with our standards here at TeraWulf. But to answer your question, yes, we certainly will look to other sources of clean energy, but obviously hydro and nuclear are the most appealing from a low cost around the clock baseload perspective.

Great, really appreciate it. That's all the questions I have. Look forward to the next quarter.

And Mr. Harrison, it appears we have no further questions over the phone. I'd like to turn the call back to you.

Thank you, Bow. I will now move to questions that we may have gotten from participants on the webcast. As a reminder, you can enter your questions on the webinar portal, and we will get to as many as we potentially can. I have one here right now to the team. As a shareholder, I love that you and your team have invested millions of your own money in the company. It really aligns our goals in my mind. Can you speak to the size and financial commitment insiders have made and any reasons or drivers, why?

Patrick, do you want to address that? I mean, I think you have the most accurate capital. But, yes, as the CEO, I can tell you that we invested a significant amount in 2022 and as recently as 2023. And the bulk of managers and insider shareholding is sitting at the transfer agent and I certainly know that's the case for me now at a brokerage shop. I haven't sold a share. But Patrick, you want to give the specific numbers. And the reason why by the way we invest, it was because we believe in the mission of TeraWulf. I mean, I truly believe TeraWulf is peerless for all the reasons I enunciated earlier in my remarks. I believe in the team, and our agility to respond to increased questions from a regulatory perspective or from a fuel sourcing perspective, and from our own ability to operate both power plants and Bitcoin mining facilities. Patrick?

Yes, sure. And I don't have all these on my fingertips. So Kerri, correct me if you think I'm wrong. But I think the management team alone in the last year, including March of this year has invested I believe, $15 million to $20 million of capital alone. And then if you include management insiders, the Board and friendly investors, that group controls over 50% of the shares of the company, which is unparalleled. When you look at the public miner space, there's only one other public minor that I know of that group has -- kind of that group has double-digit percentage. So we are truly unparalleled in that regard. And I think that's why certainly as a CFO, I take it to heart when Paul in his remarks and says, we are done. I mean, we have zero interest in diluting folks further and we will run the company for profit and to maximize value and return to shareholders.

Bow, that looks like all the questions I've got on the webcast portal. Why don't you go ahead and close this out?

Certainly, Mr. Harrison. Ladies and gentlemen, we'd like to thank you so much for joining the TeraWulf Q4 and calendar year 2022 results and business update call. This will bring us to the conclusion of the call. And we wish you all a great remainder of your day. Goodbye.