Ladies and gentlemen, good morning and welcome to the TeraWulf Inc. Second Quarter 2023 Earnings Conference Call. At this time, all participants are in the listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator instructions] It is now my pleasure to introduce your host Jason Assad, Director of Corporate Communications. Please go ahead, Mr. Harrison.

Thank you, operator. Good morning, and welcome to TeraWulf's second quarter 2023 earnings call. Thank you for joining us today for our call. With me on today's call are Chairman and Chief Executive Officer Paul Prager and our Chief Financial Officer; Patrick Fleury. Before we get started, I'd like to remind everyone that our prepared remarks may contain forward-looking statements, which are subject to risk and uncertainties and that we may make additional forward-looking statements during the question-and-answer session. These forward-looking statements are subject to risk and uncertainties and actual results may differ materially. When used in this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions as they relate to TeraWulf are as such a forward-looking statement. Investors are cautioned that all forward-looking statements involve risk and uncertainties which may cause actual results to differ materially from those anticipated by TeraWulf at this time. In addition, other risks are more fully described in TeraWulf's public filings with the U.S. Securities and Exchange Permission, which may be viewed at www.scc.gov and in the Investor section of our corporate website at www.therawolf.com. Finally, please note that on today's call, we will refer to certain non-GAAP financial measures. Please refer to our company's periodic reports on Form 10-K and 10-Q and to our website for a full reconciliation of these non-GAAP performance measures to the most comparable GAAP financial measures. We'll begin today's call with prepared remarks from Paul and Patrick, then we'll proceed to Q&A. It's my pleasure to now turn the call over to TeraWulf's CEO, Paul Prager. Paul?

Thank you, Jason, and good morning everyone. Thank you for joining us on our second quarter 2023 earnings call. We've accomplished quite a lot since our last formal call, and I would like to review a few key milestones that we've achieved during the first half of 2023. One, we successfully executed our rapid growth plans. We launched TeraWulf just over a year and a half ago and, as promised, achieved 5.5 exahash and 160 megawatts of power capacity by the end of Q2 2023. This past March, we began the energization and deployment of 50 megawatts of zero-carbon mining capacity at our jointly-owned, 100% nuclear-powered Nautilus facility. And in June, we completed Building 2 at our Lake Mariner facility, housing an additional 50 megawatts. To exceed the accomplishments of our peers in such an abbreviated period of time is testament to the excellence, perseverance, and professionalism of the TeraWulf team, and especially our folks on the ground. Two, we assembled one of the most efficient miner fleets in the sector and as we continue to scale, remain confident our price and efficiency per exahash metrics will prove even more impressive. Our recently announced expansion plan involving 18,500 of the latest generation S19j XP bitcoin miners will only further establish Wulf as one of the most efficient mining fleets in the sector at an efficiency of 25.7 joules per terahash. You should rest assured our development and operations teams will continue to work to differentiate Wulf as the preeminent miner. Three, we are setting the standard for financial and operational transparency. Our CFO, Patrick Fleury, a former partner, 20-year investor and lender, you will hear from him in a moment. He has significantly raised the bar on reporting financial metrics. By setting the standard for the industry with our operational…

Thank you, Paul. As Paul highlighted in the beginning of this call, TeraWulf performed exceptionally well in Q2 this year, showcasing consistent growth both year-over-year and quarter-over-quarter. Notably, our production has seen a steady increase in the first half of 2023, resulting in positive operational outcomes reflected in our Q2 financials. These results demonstrate a continued upward trend in revenue, enhanced liquidity, and free cash flow, positive momentum we're committed to sustaining moving forward. A quick reminder, there is a very key difference between our GAAP financials and the monthly operating reports and guidance presented in our July investor presentation. As a result of our 25% ownership in Nautilus, the revenue, cost of revenue, operating expenses, depreciation and amortization at Nautilus are not consolidated into our GAAP financial statements. Instead, the financial impact of the Nautilus joint venture is reflected in the equity and net loss of investee net of tax line item on the GAAP income statement. Diving into the numbers for the second quarter of 2023, we mined 506 Bitcoin at Lake Mariner, and our net share of mined Bitcoin at Nautilus was 403 Bitcoins for a total of 909 or about 10 Bitcoin per day, nearly double our Bitcoin production of 533 Bitcoins in Q1 of this year. Our revenues saw an outstanding growth of over 1,000% compared to the same period last year, reaching 15.55 million, and our revenue from hosting also saw a notable rise. Our revenue per Bitcoin this quarter averaged 27,912 for a self-mining revenue equivalent of 25.3 million, as detailed and defined in our monthly operating reports and press release. Looking now at our gross profit, we saw an increase of over 1,200% to $10.3 million compared to last year's second quarter, as well as an increase in our gross profit margin…

[Operator instructions] Our first question comes from the line of Lucas Pipes with B Riley Security. Please go ahead.

Good morning, everyone. This is Nick Giles on for Lucas. Really appreciate all the color. It would be great to just hear an updated view on organic growth opportunities that you have. How should we think about organic growth beyond these next 50 megawatts that you've outlined, maybe just from a site perspective and timing. Thank you very much.

Hey, Nick. It's Patrick and I'm here with Paul. So, good question. I think as we mentioned, this expansion, which is about 43 megawatts and then we'll also have a little bit more 43 megawatts and then we'll also be replacing the machines that we are hosting at Lake Mariner, so about 5,000 slots with the new order of the S19j XP as well. So, that's obviously right in front of us and will be done by year end. We also have an additional 50 megawatts of potential expansion at Nautilus that's shovel ready. And then obviously the Lake Mariner site can be expanded up to 500 megawatts if and when we want. So, I think we're -- as you know, we are very focused at staying at sites where we know and can control power cost. That is the number one focus of our team and these sites are very scalable. There's a lot of economies of scale in this industry, as you know, and so we're pretty pleased with the two sites that we have.

Yeah. The only thing, Nick, I'd want to add is we have the team to do that, right? Our team's been together 15 years, 20 years and we've done all sorts of M&A as well in the energy infrastructure space. So, if you look around the public miners, you kind of want to scratch your head sometimes at some of these deals that have been announced and some of the crazy valuations that people have come to on some of these stock for stock deals. That's not going to happen here. Any acquisition we do has got to be accretive. It's got to be right for the business and we have the team with the experience to negotiate those deals, value them properly, and execute on them.

Thank you both for that. Maybe just on the M&A front, it would be great to just maybe get some additional color there. Would you say you're seeing more opportunities come up as we approach to having, how would you describe the size of some of these opportunities? Thank you very much.

Yeah, sure. If I could start and then Patrick. Again, our focus is going to be on some of the internal organic because it's the low hanging fruit and it's the one where we don't have to worry about merging teams or other sites that we don't know quite as well as our own. But certainly there are going to be winners and losers coming into the halving and it's all going to be about efficiency and the cost to mine, but it's also about the thesis. We're very regulatory sensitive and therefore we built our business to be focused on zero carbon mining. So anything we do has got to be accretive and got to be consistent with our thesis. But go ahead, Patrick.

Yeah, Nick, I would just add, look, I think, as we've talked, there's 20 something public companies in the space. That's just too many and anybody that's been around commodity markets long enough has seen consolidation, whether it was in the early 2000s with the independent power producers or the 2010s with oil and gas companies, right? So I think that's a really natural, as the sector becomes more mature, there's got to be consolidation and the natural cycle we have in Bitcoin mining but having every four years, I think will drive that. So certainly a lot of discussions on that front, both public, private, but I think as Paul mentioned, there will be very natural winners and losers post-halving. And so I think that will like, our view is we're really getting our house in order and preparing for that event and trying to position the company as strongly as we can. So that's why there's an emphasis on, we're now free cash flow positive and paying down debt. So you're going to see us chip away at the debt over the next few quarters to put the company in a really strong position, I think going into the halving. And then I think just one other thing, Paul mentioned it, given again, we have such high ownership of the management board of directors and insiders, we're literally, I think over 55%. There's no other, there's one other peer that has even double digits ownership. And so we are very aligned with our shareholders. And as Paul points out, anything that we look at, it has to be accretive. So that is, the bar is set very high and I think for us right now, as Paul mentioned, the easiest low-hanging accretive route is really expansion at our existing sites.

Got it, got it, makes sense. Thanks again for those comments and congrats on the flip to free cash flow positivity here. Maybe just one last one for me, do you have any agreement in place with Bitmain for minor procurement beyond what you already have contracted? I know the relationship is strong there, but just want to get a sense for how we should think about minor purchases beyond what you've already announced.

Yeah, this is Paul. We have a great relationship with Bitmain and I really value them. I think they think of us in many respects as a partner. They've helped us come to scale here, but we don't have agreements that you don't know about. Obviously we'd have to report that, but we are constantly evaluating our fleet and how we continue to scale our mining activities and what are the right machines. But everything that we've contracted for you're aware of and anything going forward would be a new contract and we'd negotiate to the death to make sure we got the best deal for our shareholders.

Got it, got it. Well, Paul, Patrick, thank you so much for all the color and to you and the team, continue best of luck.

Thank you. Our next question comes from the line of Mike Grondahl with Northland Securities. Please go ahead.

Hey guys, congratulations on the progress. Three questions for me. I'll just ask them up front here. One, on the power costs with Lake Mariner, is there anything we should think about their sort of late summer, fall? Secondly, Paul, I'd kind of love to get your thoughts just on the halving in general, kind of if you've got a crystal ball, kind of what you think might be the best way you think may happen. And then maybe lastly for Patrick, sort of how are you feeling about the balance sheet, the debt levels, some of the warrants that go with the debt in kind of overall liquidity now that you're generating free cash and there was some thoughts that maybe you guys were in the market a couple weeks ago. If you could kind of round that out, maybe that would be helpful.

Yeah sure. So I guess let me take those in reversal or Mike just while the last one's freshest in our mind. So look, yeah, I think we got a lot of phone calls. There was some speculation. I think that we were contemplating a capital markets transaction. I think what I will say to you, and I think you guys are hearing loud and clear from Paul and I in this call, is we will not do a dilutive transaction at a big discount to the market. Those days are past us. We are now in a very strong liquidity position. You can see our cash building on our June 30 balance sheet. We are, now that we have full 160 megawatts and five and half excess, we are generating free cash flow. We've also given you that disclosure in our latest presentation, so you can see all of our unit economic costs. So we will, obviously the board and the management team will look at certainly opportunistic ways to de-risk the company, but again, that has to be accretive. And we would, like I said, just to be really clear and Paul can reiterate, we will not do a discounted deal capital markets transaction and a dilutive one. Those days are behind us, thank goodness and we are in a position of strength. So, and Mike, to your point on liquidity, we feel really good. We've come a long way as those of you that know me have been here now for about a year and a half and last year was a very tricky year that we navigated and finally got things kind of squared away in February of this year. So no, I think now everyone, there's a renewed energy and excitement as we've kind of hit our targets here and are now going on to the next phase and are paying down debt.

If I could just add to that, I think it's Patrick's job as the CFO to constantly evaluate capital markets opportunities. The problem is, if the market misreads the notion of an evaluation as opposed to doing a deal or not doing a deal, that's just classic retail gossip and it's unfortunate at times, but the answer is if it's not a creative, it ain't going to happen here. We're certainly not going to sell our stock at a discount. It's just not what we want to do, especially in the dilutive transaction. Our shareholders have been unbelievably supportive and loyal to us and I have a fiduciary duty to them, so that's the way we're going to go from here on out.

Mike, your other two questions. The second was, I think on the halving for Paul.

Yeah. Right and then power costs just late summer, Lake Mariner in the fall.

Yes. Sure. Go ahead, Paul.

I don't have a crystal ball and in fact, I don't want to have one. I think, sometimes some of our peers in the public miner sector think they're investment managers and they want to decide what, the direction of Bitcoin is going to be on any given day. I'm in the business of mining Bitcoin and in that regards, I think I need to be better than everyone else at it by doing it at the lowest possible cost, at the highest possible efficiency and at the largest possible scale. I think if I do that, this company wins. We go into the halving really strong. We come out of it on the other side, making a ton of money. Naturally, I am very constructive with respect to the long term price of Bitcoin. But I think that if we just have the most efficient outfit, we'll always make money and we'll be in a position to continue to scale up and then we win, our shareholders win. So, I think you've just got to keep your head to the grindstone and really work at it. You've got to constantly watch your costs, watch your energy costs you want to make sure that you're the most efficient guy out there and that's all we're doing.

Mike, and lastly on your power question, look, I think we're, coming out of July and August here, we had a little bit of heat in upstate New York, which is rare. So, I think for September, October, November, you'll see our costs, I think they're kind of go back to what they were in kind of March, April, May, the shoulder months. That's the beauty of Lake Mariner is we do get a couple of weeks in the summer that are warm. And so, we have elevated power costs and we get a couple of weeks in the winter that are cold. But the beauty, right, is being, 25 miles, 30 miles east of Niagara Falls, right? The river's running 24, 365. So, I think we're coming actually out of what has been some higher priced months and we'll revert kind of back to that shoulder season. So, you should see, I think our power price is going to fall meaningfully.

Got it. Hey, thanks guys.

Mike, I just want to add, we in our other lives as power investors and owners have had this facility for decades. So, we're pretty familiar with the pricing up there and we've seen the range of it. So, we're very, very excited about, what we think is our cost profile there for energy at that facility. And it's what makes it really work as a Bitcoin mining and it's what made it not work really as a power supplier because it was emitted, it was right there on the highway with all that green power coming down from Niagara. So, we're pretty bullish on that.

Well, that's it for me guys. Thank you.

Thank you. Our next question comes from the line of Josh Siegler with Cantor Fitzgerald. Please go ahead.

Yeah. Hi, thanks for taking my question today. A lot of iron is in the fire right now. So, definitely wanted to follow up on some things. First, I'd love to get some more color on the decision to purchase the latest generation rigs, the S19j. I'm curious if you've had initial tests with these rigs and how they're comparing to older legacy rigs. And also, if you could walk through a little bit around the decision around payback period for these rigs as well, that would be helpful.

Yeah, sure. So, I don't know if Nazar, are you able to answer that first part?

Some technical issues there.

Yeah. So, Josh, let us see if we can get, Nazar, one of Wulf's Co-Founders, COO, to kind of answer that first one. But yeah, on the second one, look, I think the short answer is every single investment decision we take, we're running return on invested capital calc. And look, that calc, as you know, depends on a couple of key items. One is equipment cost, right? Two is power cost and then three is Bitcoin price, right? And network cash rate. And so, I would say when we're looking at equipment now, just kind of, I would say, like any of our peers, generally speaking, you know, we want to see an equipment payback term of somewhere between nine months and kind of 18 months. And so, in addition, even given the newest generation of equipment, I think generally speaking, certainly what we use for GAAP and otherwise, but, the lives of these equipment is probably somewhere in the sort of four to six year range, right? And so, I think we feel like the average life of our equipment, given the location in a more temperate zone, and we're not obviously using immersion cooling, will be on the longer end of that spectrum, whereas a lot of, we think, equipment that's used in hotter with immersion cooling will have a lower average life. So, I would just say those are the parameters that we look at and then, Nazar, are you on or able to answer that first part? If not, Josh, we'll get back to you on that.

He was muted. Okay. Nazar? Hi, Nazar. Can you hear us?

Yeah. Can you hear me? Good morning, Josh. So, on your first question on testing of the units, the architecture of the units is similar to the S19j XP and the S19j XP, we've been running now for quite some time and the results that we've had at LMD and Nautilus both have been very strong. We've heard in the market that the XPs have been finicky and from what we understand, a lot of that comes from operations kind of in hotter, industrial environments, both our facilities in northeast and a little more moderate. So, we've had a very kind of strong performance on the XPs and that the architecture for the JXPs is similar. So, we are expecting, similar, if not better performance out of the JXPs in terms of how we're thinking about it. And as Patrick said, from a payback perspective, you look at I think the cost of the kind of the 30 joule per terahash machines, particularly as we're kind of getting closer and closer to halving, as trending, it's kind of been in that, low double-digit, high single-digit range. And we expect that to kind of continue to trend downwards the closer we get to the halving. And the big, part of that is just, again, just, it's almost a 40% to 50% difference on the efficiency and coming into halving, that's going to be extremely valuable. So, as we've thought about where the market is today, and again, I think Paul said earlier, we don't have a crystal ball and trying to think through, where exactly the market will be next year is tricky, but if, kind of the price of Bitcoin remains in the same range it's been, and we go through halving, we're expecting, somewhere in that, 12-month to 18-month period payback with XPs with that pricing. And so, to the extent that the market does better than that, that window should be shortened, but as we think about it, we're in a kind of a 12-month to 18-month payback period, rocking through the halving on that new equipment.

Yeah, absolutely. Appreciate the color. I'm looking forward to more updates as we start plugging in these rigs. For my follow-up, I'd actually like to switch gears, talk a little bit about the energy demand response programs that you've been testing to provide load relief moving forward. I was curious if you can give us an update in terms of how that's progressing and potentially what the upside to your energy costs could be.

Nazir, do you want to talk about those programs?

So, we're currently participating in two principal programs, and both of those programs depend upon a total capacity of megawatts that we bid into them. And so, this has been the first summer that we've been able to bid in a meaningful amount of capacity into those programs and there's two revenue streams that we get. One is effectively a right to be called. So, it's kind of a fixed capacity payment and the second is, we earn effectively an energy payment when we are curtailed and so, the bulk of the revenue comes from those fixed capacity payments. In this year, we're going to recognize, I would say kind of, the way we think about is an offset to a total energy cost. And that will probably come in somewhere in the low kind of single-digit per dollar per megawatt hour level. So, as we think about, there's energy cost plus our transmission distribution cost less the revenue that we earn from the demand response and so, from this summer, we think there will be an offset kind of in that low kind of single-digit figure in terms of when we think about it on a dollar per megawatt hour basis. As we kind of get into next summer and we're able to bid the entire capacity of the facility, as we've been ramping this summer, that number should be in the kind of in that mid to high single digits in terms of a dollar per megawatt hour offset to our total energy cost.

Great. Thank you very much for the color. I appreciate it.

Thank you. Our next question comes from the line of Bill Papanastasiou with Stifel. Please go ahead.

Two questions. My first question is just hoping to gain a little bit more color on the quality of the infrastructure assets held within the TeraWulf portfolio, hoping to be able to compare, the New York and Pennsylvania kind of location with other areas, other key mining areas in the United States with respect to cost and uptime. We've seen a lot of curtailment in Texas. Hoping to get some more color to that end.

Yeah, we love that question. Yeah, the first thing is I invite you to come visit our sites. I think you will walk away with absolute clarity with respect to the TeraWulf advantage. Clearly, we believe in regional diversity. Separately, we believe in zero carbon because I think that ultimately, you've got far greater volatility in fuel resource pricing when you're dealing with some of the fossil fuels. Third off, Texas is getting kind of crowded. It's really, really hot. And I think you've seen a real extreme range of what happens to the miners when the temperatures become extreme and their inability to really be as responsive to the grid and how that's driving their efficiency and ultimately their pricing. So, we're at two cent power at Nautilus and as Patrick mentioned earlier, in the summer for a very short period of time, and I mean, we're talking about a couple of weeks, we'll see pricing sensitivities due to climate or temperature, but that's it and so, we're steady at it and we're low cost and we want to continue to be that way.

Great, thank you. And then my second question is just hoping to get some more color with respect to the plans of the $200 million ATM. Do you foresee any of the proceeds being used towards paying down the term loan? My understanding is that $40 million will need to be paid down by April next year in order to continue the cash flow sweep any color you can provide there, thanks.

Yeah, great, great question, Bill. So, yes. So, the term loan has to be reduced by $40 million by April of 2024 for us to kind of keep that free cash flow sweep through the maturity. Like I said, I think given, we are now free cash flow positive, you guys will start to see that on a quarterly basis where we sweep that term loan down. So, we feel confident that around current economics today that we will achieve that and we'll continue to update you every quarter as we kind of progress on that. And with regards to the ATM, I think those that look at our financials will see we did use the ATM a little bit and we hadn't used it for quite some time before. So, it is a tool that we have, Bill, and we'll use it when we think it's accretive and our cost of capital is such, again, that it is accretive but, unlike many of our peers, you will never, ever, ever see us issue, you know, hundreds of millions of dollars on the ATM in a quarter. That is just not our game and, we're focused, as Paul mentioned, on profitability, paying down debt, maximizing shareholder value, and then, obviously, returning capital, ultimately, to shareholders, whether that's in the form of dividends or share buybacks. I think, we've all been around the energy power space for a long time, and I've seen models succeed, like the MLP model Master Limited Partnership in energy. And so, I think that's more interesting of a route for us to kind of go down.

Yeah, and I guess the low hanging fruit of this explanation is insider zone over 55% of this company. I am just not interested in diluting shareholders, unless it is for a very legitimate purpose, like expansion, or an activity that is accretive and so, I think that you can be sure that we will be responsible and judicious with our use of the ATM, as we have been.

Great, thank you. And if I could just talk in one more question, how's the company looking at kind of weighing the option of ramping and scaling the Lake Mariner facility to full capacity, I think you said 500 megawatts, versus being very concentrated in one region would TeraWulf potentially consider other areas in the United States or North America, for that matter?

Yeah, so, hey, Bill, it's Patrick. So, yeah, look, and again, I think Paul kind of alluded to it in the prior question and I don't want to pick on any of my peers but I think, we all come from, personally, I come from a 20-plus year institutional investor background, right? And so, I think Paul mentioned geographic diversity, right? When I think of commodity companies that I invested in no one, not one company not one company that I ever invested in, has all of their assets in one region, right? And that's for regulatory reasons, pricing reasons, you have to have diverse geographic diversity and so your point, I think, is a very good one, where what we see as the best strategy, and look, we may go to Texas, ultimately, and we may go to other regions, I think, you won't see us in regions of the world where there's not a definitive rule of law, and there's regime change all the time, we won't go to those regions, regardless of how cheap the power is. So I think, we kind of have found between the sort of 50 megawatts to 300-ish megawatts. It's kind of the right size to where, you don't have a bullseye on your back, because you're getting tens of millions of dollars in demand response curtailment revenues, you're not enough, really to push the grid one way or the other. That's kind of the sweet spot, as we all know when you become really big, and are having a big impact on the grid, that becomes politically untenable, particularly if it's not zero carbon, and you're utilizing fossil fuels. So those are the things that we will be very mindful of, Bill, as we look to expand beyond our sites, which is, I think, a very natural, ultimate place to go for the company, but I don't think we'll do that, certainly pre having, I think we'll kind of wait, see, pick up the pieces, I think there'll be a lot of carnage on the other side.

Yeah, and I would also add to that, but again, it's got to be consistent with their thesis, which is zero carbon mining and you got to manage the risk, or the opportunity, if you will, of geographic diversity with the knowledge of 10 years to 15 years experience in a particular site, or region. So, it all goes into our evaluation. But I think, going into the having, we're very comfortable with the sites we have. We have plenty of room to grow on them at really low cost pricing and we're scaling not just on the energy side, and on the infrastructure side, but on our people side, and their experience in building out these facilities. So, I think that's what you'll see from us through the halving.

Thank you, I appreciate the detailed responses and congrats again on the impressive margins this quarter.

Thank you. Our next question comes from the line of Mateo Lev [ph] with Parabolic Ventures Holding. Please go ahead.

Good morning, guys, and congratulations on your scale and growth this quarter. Had a question for you, would you mind opining on the key differences between what a HODL versus no HODL revenue model is in your sector as it relates to enhancing shareholder value?

Sure, Mateo. This is Paul. I want to be thoughtful in response. As an individual investor, right, who believes in Bitcoin, I think you could buy it, put it in your wallet, you could buy into an ETF, you could buy, Mike Sellers [ph] stock, you could buy into a fund where their business is all about holding Bitcoin. But I am Chairman and CEO of an operating company, and the business of Wulf is to mine Bitcoin, and we're supposed to mine it at a profit. And I think, unfortunately, this is lost on some of the other public miners, who, again, they see themselves as either investment managers, maybe they don't know how to operate, or maybe they're pioneering wizards of AI and high tech. It's not what we do. We are an operating company. We are in the business of mining Bitcoin. We make money. Our shareholders make money, when we mine at the lowest cost, highest efficiency at scale. That is our mission. We have the people to do it. We have the assets and infrastructure to do it and since I and I think every member of that management team is right there alongside our investors and shareholders, we are exclusively incentivized to do it. HODLing is, it's an investment strategy, but as a CEO with fiduciary duties to shareholders, I'm obliged to listen to my CFO, Patrick, I take guidance from the board, our advisors, and I always will try and evaluate what are the best alternatives for our Bitcoin. At this time, I'm confident our shareholders are best served by using our Bitcoin to facilitate growth and expansion, pay down debt and after that, I probably want to look at declaring a dividend or a distribution. I think all of those at this time are more compelling arguments than HODLing and I hope that's a complete response to your question.

No, that was a great response. I especially like the dividend part at the end there. So I hope you guys get there soon. And I appreciate the efforts and efficiency you're putting into this business. So thank you.

[Operator instructions] Our next question comes from the line of Lucas Pipes with P. Riley Securities. Please go ahead.

Thank you very much, operator. Good morning, everyone. Congratulations on all the progress. Sorry, I had to toggle some calls earlier, but I caught most of the call. Really appreciate all the color you've provided already. A quick follow up question for Patrick, just in terms of your targeted capital structure over time, like where do you ultimately would like to be when it comes to that equity mix? Thank you very much.

Yeah, sure, Lucas. So I think definitely, as you're hearing us say, the number one focus right now is profitability and then I think we're going to reduce that debt down as much as we can pre having. So I think the target is to get that certainly well below $100 million and then I think beyond that, look, I think the reality is there were a lot of debt providers to this space that we're doing secured financing against machines. They're all gone and I think, the reality is there's just not much debt available out there for the space. That being said, we have pretty good, pretty attractive financing terms. With the high yield market at 8.5% or 300 basis points behind that at 11.5%, which is pretty good for something deemed crypto. So, I think from a rate perspective and then, having some level of debt on the company kind of in the future. Yeah, I think that makes sense, but I think the goal right now is, again, to sort of position us to be playing offense and in a very strong position post halving to take advantage of either additional expansion at our sites or what I think will be more likely is, M&A and particularly of distressed competitors or just specific sites that we find attractive. And so I think you will see a focus over the next few quarters and pre halving and we'll update you obviously every quarter, but a very important focus on just reducing that debt down to well below $100 million.

Thank you very much, Patrick. You and the team keep up all this good work. Thank you.

Thank you. As there are no further questions, I will now hand the conference over to Paul Prager for closing comments.

Thank you very much. Again, as stated, our goal here is to mine Bitcoin at the lowest cost, highest efficiency at scale. Insiders are over 55% of the shareholders in this vehicle. We will not be looking to spend money unless it is accretive. We have no interest in diluting our own holdings unless it's accretive and we see a path for our collective success. I want to thank all of you for your invaluable trust and support as we focus on building the leading mining company. The entire team and I look forward to speaking to you on a third quarter call in November and we are always available anytime up until that time. So again, thanks for attending this morning and we appreciate your loyalty to TeraWulf. Thank you.

The conference of TeraWulf Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.