WULF

1. Executive Summary

• TeraWulf accelerated its pivot to high‑margin AI/HPC hosting with materially expanded contracted backlog and long‑dated financing secured to fund buildout.
• Most recent update: WULF Compute priced a $3.2B 7.750% senior secured notes due 2030 to fund the Lake Mariner Data Center Expansion, backed by first‑priority liens and a pre‑completion Google‑pledged warrant package; expected close Oct 23, 2025.
• Contracted HPC capacity at Lake Mariner with Fluidstack increased to approximately 360 MW (CB‑3/CB‑4 plus new CB‑5 160 MW), raising total contracted revenue to approximately $6.7B (potential to $16B with extensions). Initial Core42 72.5 MW is on track, with revenue recognition beginning Q3 2025.
• Balance sheet funding stack broadened: a fully upsized $1.0B 1.00% converts due 2031 (Aug 2025) and prior $500M 2.75% converts due 2030 (Oct 2024), plus an authorized $200M share repurchase program.

Key Takeaways

• Funding Secured for Expansion: Priced $3.2B secured notes at 7.75% to finance Lake Mariner HPC buildout; includes robust collateral and TeraWulf completion guarantees.
• Backlog Step‑Up: Fluidstack expansion to ~360 MW increases contracted revenue to $6.7B; Google raised backstop to ~$3.2B and pro forma equity to ~14%.
• Revenue Mix Inflecting: HPC hosting revenue begins Q3 2025, transitioning away from bitcoin‑dependent revenue toward contracted, margin‑rich colocation.
• Scaled Growth Pipeline: Lake Mariner interconnection to 500 MW (path to 750 MW), plus Cayuga site secured (up to 400 MW, 138 MW power RFS in 2026).

2. Financial Performance

Capital Raises & Proceeds

• Oct 16, 2025 (most recent): Priced $3.2B 7.750% senior secured notes due 2030 (Rule 144A). Use: finance Lake Mariner Expansion. Security: first‑priority liens on WULF Compute/Guarantors, equity interests, a Fluidstack lockbox; pre‑completion collateral includes Google’s pledge of warrants to purchase TeraWulf common stock. TeraWulf to provide completion guarantees. Sole bookrunner: Morgan Stanley.
• Aug 22, 2025: Full greenshoe exercised; total $1.0B 1.00% Convertible Senior Notes due 2031; net proceeds ~$975.2M; $100.6M to capped calls. Use: data center expansion and GCP.
• Oct 25, 2024: $500M 2.75% Convertible Senior Notes due 2030; net ~$487.1M; $60M to capped calls; concurrent $115M stock repurchase. Board‑authorized $200M buyback (Oct 23, 2024).
• Investor sentiment: upsized and fully exercised convertibles and a large‑scale secured notes pricing indicate strong institutional demand for TeraWulf’s HPC buildout.

Early Revenue Initiatives

• Core42 (G42): >70 MW lease (72.5 MW gross) with phased delivery in 2025; TeraWulf to begin recognizing HPC revenue in Q3 2025.
• Fluidstack:
• Aug 14, 2025: Two 10‑year colocation agreements for >200 MW, anchoring ~$3.7B contracted revenues; projected 85% site NOI margin (~$315M annually implied by company).
• Aug 18, 2025: CB‑5 (160 MW) option exercised; total contracted to ~360 MW, raising total contracted revenue to ~$6.7B (potential to ~$16B with extensions); CB‑5 operations 2H 2026. Lease terms mirror CB‑3/CB‑4.

Expense Management & Cash Flow

• 2Q25: Revenue $47.6M (+34% y/y); Adjusted EBITDA $14.5M (down y/y on power costs and BTC dynamics). Management expected HPC to lift EBITDA starting in 2H25 as facilities come online.
• 1H25 net loss $79.8M (per MD&A); BTC mining unit economics compressed post‑halving.
• 2024: Adjusted EBITDA $60.4M; cash and bitcoin ~$275M (12/31/24).
• Operating expense guidance (post‑Beowulf acquisition, unchanged): SG&A $40–$45M, operating expenses $20–$25M (2025). Shareholder returns: $33M repurchased in 1Q25; program authorization up to $200M through YE25.

3. Guidance and Future Outlook

Production Ramp–Up

• 2025: Deliver 72.5 MW HPC for Core42; revenue recognition begins Q3 2025.
• 2026: Fluidstack ramp with ~40 MW expected online 1H26 and full initial deployment by YE26; CB‑5 160 MW to commence operations 2H26.
• BTC mining: energized capacity 245 MW; self‑mining hash rate ~12.8 EH/s (2Q25).

Expansion Plans

• Lake Mariner (NY): Interconnection for 500 MW (path to 750 MW). Ongoing Fluidstack discussions for further capacity.
• Cayuga (NY): 80‑year ground lease over ~183 acres, scalable to up to 400 MW; 138 MW low‑cost, predominantly zero‑carbon power ready 2026; planned 67 MW solar and 800 MWh BESS adjacent. Consideration: $95M stock + $3M cash.

Operational Targets

• Site NOI margin: projected ~85% on Fluidstack agreements.
• Cost base: SG&A and operating expense guidance unchanged post‑acquisition.
• Focus on high‑density, water‑cooled, fiber‑rich, low‑cost power campuses to sustain margins and uptime.

4. Strategic Positioning and Initiatives

Cost Management

• Vertically integrated power strategy; predominantly zero‑carbon, sub‑$0.05/kWh power at Cayuga; interconnection scale at Lake Mariner lowers unit costs.
• Corporate simplification via the Beowulf E&D acquisition supports governance, transparency, and capital access; cost guidance maintained.

Product Development

• Dedicated HPC data halls with closed‑loop water cooling, dual 345 kV lines, and ultra‑low‑latency fiber optimized for GPU clusters.
• Capped call structures on converts to mitigate dilution while preserving upside.

Market Expansion

• Anchor tenants: Core42 and Fluidstack. Google’s increased backstop (~$3.2B) and equity (~14%) deepens ecosystem credibility.
• Geographic expansion via Cayuga to augment Lake Mariner; ongoing customer pipeline for additional HPC capacity.

5. Competitive Positioning and Market Trends

Market Positioning

• Positioned as a leading U.S. AI/HPC colocation provider with one of the largest contracted HPC footprints (~360 MW at a single campus), complemented by BTC mining optionality.

Competitive Strengths

• Power advantage (scale interconnections, low cost, zero‑carbon mix).
• Speed‑to‑market with phased deliveries (72.5 MW in 2025; substantial 2026 ramp).
• Blue‑chip counterparties (Core42, Google‑supported Fluidstack) and long‑term contracts underpinning visibility and financing.

Emerging Industry Trends

• Surging demand for GPU‑dense workloads, scarcity of power and interconnects, and preference for sustainable, water‑cooled facilities drive premium pricing and high margins.
• Capital markets favor scaled, contracted platforms with credible counterparties and secured power.

6. Technology and Innovation Strategy

Technological Advancements

• Closed‑loop water cooling and Tier 3‑grade power redundancy; dual high‑voltage feeds; optimized for high‑density racks.
• Fiber connectivity designed for low‑latency access to key metro hubs.

New Product Developments

• Purpose‑built HPC buildings (CB‑3/CB‑4/CB‑5) at Lake Mariner; dedicated halls for Core42’s GPU clusters.

Alignment with Market Needs

• Infrastructure tailored to modern AI workloads: high‑density, energy‑efficient, sustainable power at scale, aligned with tenant requirements and long‑term leases.

7. Risk and Reward Analysis

Growth Catalysts

• Closing and deployment of the $3.2B secured notes enabling on‑time Lake Mariner expansion.
• Conversion of $6.7B contracted backlog into revenue and cash flow (Core42/Fluidstack).
• Cayuga site commissioning in 2026 expanding total addressable capacity.
• Potential additional Fluidstack capacity beyond ~360 MW under discussion.

Downside Risks

• Execution/Construction risk on a multi‑asset, multi‑phase build at unprecedented scale; potential delays or cost overruns.
• Leverage/Interest burden: 7.75% coupon on $3.2B adds ~$248M annual interest; plus ~$24M annual coupons on converts (1.00% of $1.0B and 2.75% of $0.5B).
• Tenant concentration (Core42/Fluidstack) and dependency on counterparties (incl. Google support pre‑completion).
• Power price volatility and regional regulatory dynamics; residual exposure to BTC mining profitability.

Valuation Metrics

• Backlog lens (most recent data supersedes prior):
• Contracted HPC revenue: ~$6.7B (Fluidstack total with CB‑5). Assuming 10‑year tenor implies ~$670M average annual revenue.
• Stated ~85% site NOI margin suggests ~$570M site NOI per annum at full run‑rate (definition differs from EBITDA; excludes corporate SG&A, maintenance, and interest).
• Capital structure cash cost (illustrative, based on disclosed coupons):
• Secured notes interest: ~$248M/yr.
• Converts interest: ~$24M/yr combined.
• Corporate SG&A guidance: $40–$45M.
• Observation: At steady state, contracted HPC site NOI could cover expected cash interest and corporate overhead with room for reinvestment, before depreciation/taxes and excluding incremental BTC mining/HPC upside. A formal P/E or EV/EBITDA analysis requires current share price, market cap, and net debt—data not provided in the documents.

8. Investment Thesis

Investment Rationale

• Rapid transition to contracted, margin‑rich HPC hosting with blue‑chip partners, supported by scaled, low‑cost, predominantly zero‑carbon power.
• Visibility: Multi‑year backlog (~$6.7B) and Google support reduce financing and execution risk.
• Operating leverage: As capacity ramps through 2026, the model shifts from BTC‑linked volatility to high‑margin, long‑duration revenues.

Price Target Justification

• Without current market/EV data, a numerical target is not supportable from the provided documents. Directionally:
• If full HPC run‑rate approaches the implied ~$570M site NOI, even after interest and SG&A, normalized EBITDA could support a re‑rating toward infrastructure‑style EV/EBITDA multiples once stabilized operations are demonstrated.
• Key valuation inflections: secured notes close, on‑time Core42 revenue in Q3 2025, and Fluidstack milestones through 2026.

Influencing Market Dynamics

• AI capex cycles, GPU availability, regional power market constraints, and sustainability mandates will influence pricing power, utilization, and multiples. Execution against 2025–2026 ramps and cost discipline will drive the equity narrative.

9. Macroeconomic and Industry Trends

Regulatory Changes

• No specific regulatory changes disclosed in the documents; operations benefit from established interconnections and long‑term ground leases in New York. Policy stability around grid access and data center development remains a watch item.

Supply Chain Dynamics

• Continued tightness in GPU supply and long lead times for high‑voltage equipment (transformers, switchgear) underscore the value of secured interconnection and pre‑developed campuses.

Technology Adoption Trends

• Accelerating AI/HPC demand favors providers with scalable, sustainable power and high‑density cooling. Enterprises and AI labs increasingly prefer long‑term, custom colocation solutions—aligning with TeraWulf’s contracted model.