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What's up, y'all? Welcome back to Blockspace Live, presented by CleanSpark, for day three of earnings week and our second day of financials to pore through.

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Today we have Galaxy Digital and TeraWulf just released their Q2 earnings this morning.

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Riot's were expected today, but they actually rescheduled their call, so we'll have that on the calendar and let y'all know on the stream once we get a time pinned down for that.

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So for today, we've just got Galaxy and TeraWulf. At the top of the show, we're gonna be going through numbers from their earnings,

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the actuals versus the expected for revenue and earnings per share, plus operational updates and some new data centers, at least from Galaxy's side of things, in terms of bumping up their gigawatt expansion pipeline.

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We will lead with those two earnings calls, recaps, and then following our TeraWulf one, second up, we have CFO of TeraWulf, Patrick Flurry, on to talk about some of the financing considerations he is juggling as he looks at massive expansion, not just across Lake Mariner, but we're also talking about Hawesville.

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We've got the Morgantown site, Lake Cayuga, which is further out, but a lot to manage, so we're gonna be grilling Patrick over just exactly how he's approaching managing the capital stack for TeraWulf right now, and what financing options will be available to the company in the future as they tackle these expansions.

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After that, we will also be covering SpaceX's most recent earnings, the first one post-IPO. Charlie's got the receipts as well as some commentary on their far-flung aspirations to put data centers in space. That's right.

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Blockspace goes live every weekday at 1:00 p.m. Eastern. We are compute's daily live show, featuring quick hits on AI data centers, markets, and emerging technology.

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With the exception of today, because we have esteemed guest Patrick Flurry, CFO of TeraWulf on, so we're bumping it up an hour. Hopefully, we didn't disrupt your daily plans too much.

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If you like the live stream but you miss it, you can catch it in podcast form shortly after we wrap up here, wherever podcasts are found.

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If that's not enough for you and you wanna get more Blockspace content, you can go to our website, blockspace.media. Written content coverage.

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Get our newsletter delivered straight to your inbox every single day with stuff on the pod and off of it. Go to newsletter.blockspacemedia.com. This show is brought to you by CleanSpark, Nasdaq listed, ticker CLSK.

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More on CleanSpark later on in the show. Today we kicked it off with two quarterly earnings from both TeraWulf and Galaxy, so you know what that means, Colin. It's time for the earnings update.

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[morse code] That's right. The majority of-- The, the remainder of this podcast will be broadcasted in Morse code- Yeah... just to let everyone know. Exactly. So, uh, have your AI transcribe Morse code.

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Shouldn't be too hard. That's a, that's a sonnet-level task. Okay, so if you weren't paying attention, this is earnings week, one of two that we're doing here at Blockspace. We're on day three, Wednesday.

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Today we had TeraWulf and Galaxy. Riot originally had their earnings scheduled for this morning. They have moved it. The new date is TBD. So we had TeraWulf and Galaxy stream this morning.

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We'll get into those in a second. But looking ahead at the week, Thursday, tomorrow in the afternoon, we have CleanSpark and Maro Holdings back to back, and then Friday, Core Scientific.

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We've been having executives from these companies on the live stream for interviews during the week.

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We had Eric Ellingson of Fortitude, Ionic Digital with Andy Stewart yesterday, Patrick Flurry of TeraWulf today, and on Friday, Ashra Ghandoot of HUT8.

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So Colin, I'm gonna toss it to you because you're the one who knows the numbers. Uh, I'm just the color. So what, what's happening with our first equity of the day? So Galaxy reporting this morning at what?

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Like 8:30 a.m. ET, bright and early for all of the early birds looking at the 10-Q. Headline here from Blockspace, quote, "Galaxy Digital reports narrower loss as Helios phase one comes online, Q2 earnings."

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Galaxy had a big quarter for their data center segment, announcing at, throughout, or during the quarter, the first commencement of phase one at Helios and continued expansion for that CoreWeave contract.

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The disappointment for Galaxy came from their cryptocurrency business, and that's, I think, largely why the stock was selling off today, Charlie. It's down, like, 15% as of the time of recording.

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We won't be covering the cryptocurrency stuff as much. We'll be focusing mainly on the data center segment. But I did wanna highlight those numbers regarding, [lips smack]

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um, r- regarding why this quarter was somewhat of a disappointment, uh, from that cryptocurrency angle.

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So digital asset revenue in Q2 2026 for Galaxy was $8.7 billion, versus $10.35 billion in Q1, so about a 16% quarter-over-quarter change to the downside.

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Their total revenue for the quarter was $8.557 billion, which just missed consensus estimates aggregated by Fact Set at $8.85 billion, so about a 3% miss.

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Again, I think largely the revenue decline from the cryptocurrency segment is what is hurting them following this earnings call with the stock price.

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That being said, that's not where the bulk of their attention is right now. They're really hammering into this data center element. That being said, their adjusted earnings per share came in with a beat, a big beat.

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The estimate was about negative twenty cents per share, came in at about negative nine cents per share. So a beat on earnings per share, a near miss on revenue and digital asset income falling quarter over quarter.

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But data center revenue is up, Charlie. Galaxy booked twenty-six million in Q2 2026 for their data center segment versus three point one million in Q1, so plus seven hundred and forty-nine percent.

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It's not a huge number obviously, but the run rate for this revenue is much greater than what the headline from what they actually earned in Q2 states, because they didn't have the full capacity online during Q2.

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And that capacity is concentrated so far in Helios. Now, as we've covered on the show before, Helios is probably the most valuable M&A in the Bitcoin mining space/data center space that we've seen to date.

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Galaxy purchased Helios from Argo Blockchain for, I believe, like sixty-five million back in, I wanna say 2022. And now- It was somewhere in the depths that everybody just forgets, but it was... Funny.

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Yeah. It was back in the prior bear market, uh, the bear market before this bear market, and now that Helios site is a multi-billion dollar asset for them.

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So phase one of Helios has been delivered, a hundred and thirty-three megawatts of critical IT load, two hundred megawatts gross load to CoreWeave by the end of the quarter under the 15-year lease.

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Rent scaled up throughout Q2 as capacity came online. Now it is fully outfitted, so rent has commenced for that phase one. Management guided that the full a hundred and thirty-three megawatts now delivered.

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Phase one should generate eighty million dollars per quarter in leasing revenue and a ninety percent-plus projected or project-level adjusted EBITDA margin starting in Q3 2026, which is a big step up from the data center revenue booked in Q2.

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The, the exact number was eighteen point nine million rounded out to twenty. And ultimately, this is the bedrock of their data center play.

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They will continue to focus on it and get the other phases online throughout the rest of the year and into 2027.

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Phase two at two hundred and sixty megawatts is under construction, and data hall deliveries are expected in Q2 2027.

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And Galaxy on July 28th, after the quarter closed, closed a three point five billion dollar private offering of senior secured notes due 2031 to fund phase two construction.

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So they have that senior secured note out there. The funding for this expansion has been secured, and that will be the focus for out- throughout the rest of the year and into Q2 2027.

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Now, that being said, there is a huge pipeline for Galaxy in addition to what they are doing with Helios, and Helios is part of that equation. They actually have more expansion at Helios to chew through.

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[lips smack] There's eight hundred and thirty megawatts of already approved capacity at Helios, but management says discussions with prospective tenants are ongoing, plus two gigawatts more under study at Helios alone.

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Now, they are going to run into potentially some hiccups. As we reported yesterday, [lips smack] Greg Abbott has mandated an audit of all data centers in the queue for Batch Zero.

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This is the first batch under ERCOT's new rules for large load interconnections, and there are a host of questions up in the air right now as to what that will do to delay the timeline for approval for those pros- projects in Batch Zero, and just how much will actually go through the queue once all these audits are conducted and measured against Texas' generating capacity and projected generating capacity over the coming years.

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Yeah. Go ahead, Charlie. So yeah, I mean, and this is kind of a story. So the ex- you know, uh, I believe it's the, uh, he-- the, the existing one point six three gigawatts of Helios is already approved.

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Uh, so that has gone through, and it should not be affected by the Batch Zero moratorium.

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But the additional load requests, I think that you mentioned, the seven hundred megawatts and it's nine hundred megawatts, uh, are entering the queue.

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So if there's a delay on this current batch, then the subsequent, uh, batches, uh, which I assume these are part of, also probably delayed.

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But at the same time, it almost kinda makes, uh, anyone with existing approved, uh, interconnection, uh, such as Galaxy already has, that much more valuable.

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So relative to the field, if you've got, you know, gigawatts in the hand versus two in the queue, then that's, uh, you know, that's a position of strength, so. Yeah, and that's a good thing to point out.

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And just to clear up the numbers there, the eight hundred and thirty I was mentioning was unleased capacity, and so Charlie said there's one point three approved at Helios.

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So Galaxy's sitting on eight hundred and thirty megawatts at Helios that they have approved. Obviously, it hasn't been built yet.

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But that will be prime real estate for any neo cloud or compute operator that's looking to move in quickly.

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I, I wouldn't be surprised if we saw an announcement for that eight hundred and thirty megawatts wi- before the year's up, given how competitive the landscape is.

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And- And we haven't seen, we, we haven't seen anyone at like a, at a top-tier operator level have trouble leasing these things yet. Right. So. Yeah. De- demand is insatiable.

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And the other thing that I will note with regards to- The Batch Zero equation.

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One thing that was pointed out by Morgan Stanley in a recent research note regarding Batch Zero and the interconnection process is that Galaxy and other peers, I think they men- listed Cipher as well, for the sites that they have operational that they're trying to tack on extra megawatts to, those could be classified as base load, which would help them ease through the process much more quickly than if they weren't considered base load, because that is load that you can curtail and add back to the grid when capacity is at a shortfall.

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So a lot of questions regarding that. We're gonna have some content over the next few weeks covering this pause in the audit in Texas with Batch Zero.

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Um, probably one of the bigger stories this year, if not the biggest story with regards to the whole AI CapEx cycle. But a, a few more notes before we move on to TeraWulf here, Charlie.

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Galaxy announced that it is scoping out two new sites called Caspian, with 700 megawatt potential, and Celine, with 900 megawatt potential in Texas.

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So also potentially hamstrung by the delays to the Batch Zero and interconnection process. But this has a-- This ups their power pipeline to 5.7 gigawatts when we also account for Merlin.

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That's the McGregor Industrial Park, 500 acres that Galaxy has purchased and is looking to roll out an initial 74 megawatts. Notably, one megawatt less than the threshold to be considered a large load in Texas.

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So Galaxy playing their cards right here, saying, "We're gonna sneak in underneath the threshold, get this thing going, and then see how we can expand from there." But 5.7 gigawatts is massive.

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That's a lot of power to deliver, and there's going to be a lot of sweat and toil between now and when that actually comes online. That'll be multi-year pro- uh, these will be multi-year projects.

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Notably, they didn't really say much about Caspian and Celine. There was no other supplementary information. It seems like they're just scoping these sites now.

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These are not sites they're actively developing, nor from what I can see in the disclosures have they actually purchased anything yet. [smacks lips] Um, so that's important to note.

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A few other things before I toss it to you for closing thoughts, Charlie, and we move on. Um, [smacks lips] looking at data center segment liability, that grew to $1.55 billion against $2.54 billion in assets.

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Just goes into the CapEx story. Leverage is building alongside these build-outs. Nothing surprising considering the debt raises.

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Uh, importantly though, data centers now represent 36% of Galaxy's $2.7 billion equity base. That's tied with digital assets, which is the not e- Saying it's the lion's share isn't even fair.

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It is the revenue for the company right now. And with their treasury and corporate at 28%. So digital assets and data centers are now tied

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with regards to their value in the equity base, and I think that more than anything kinda spells the future out for Galaxy.

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You know, there's-- they're going to hold on to the cryptocurrency, uh, financial a- uh, financial services angle, no doubt. It's what made the business it, what it is today.

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But going forward, like two, three, four years from now, I believe that the data center segment will be the bulk of the business that people care about.

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Unless something changes within Bitcoin between that time and then, you know, Galaxy is well-positioned to capitalize on another bull market, so. Yeah.

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So zooming really far out, my takeaway, uh, on this, and this is not a unique takeaway, I think this is what everyone's saying here.

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Galaxy Digital, which, uh, has been one of the prominent, like, crypto asset, digital asset trading firms and institutions, um, is not really defined by that anymore.

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And in fact, the data center component of Galaxy has, uh, now, is now tied roughly, uh, for 36% of Galaxy's $2.7 billion equity base.

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Digital assets now 36, about 36%, same amount, and then the treasury and corporate at about 28%. So, um, that, and that's because data center has grown relative to the rest of the, uh, the, the portfolio and equity.

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So Galaxy is basically, their growth is happening in data centers. Uh, and that's great because that's a very bullish place to be, and the sector for growth for pretty much the entire American economy right now.

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So, uh, that's my takeaway from the earnings, like the super high level takeaway. I think we can cap that there. And we will go on to the second earnings of this morning from TeraWulf.

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But before that, a word from our sponsor, CleanSpark. [upbeat music] We are CleanSpark, America's Bitcoin miner, a publicly traded company with the largest operating hash rate,

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Learn more about the intersection of energy and Bitcoin at cleanspark.com. All righty, Charlie. Let's hop on over to TeraWulf, see what's going on over there.

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Another big quarter for a company that we cover in terms of deal flow and expansion. Uh, but Wulf down slightly on the day.

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There was a huge pop leading up to the earnings, but it has reverted back to roughly where it was at the start of the day. Let's check the stock chart really quickly. Yeah, down just 42 basis points on the day.

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Not really anything material, and the reason for this, I think, despite a few misses on revenue and earnings per share, and there's a, an accounting quirk as to why they missed on earnings per share that we'll get to in a second.

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I think investors liked what they saw specifically with- An update on the lease for Lake Mariner. Most likely tied to Fluid Stack.

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They didn't specifically name the tenant, but given the build-out that's going on there is for Fluid Stack, I would assume that's what it is.

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Specifically, they're milking more revenue from that contract because Fluid Stack or the tenant in question has upped the capacity they are requiring from TeraWulf. We'll, we'll get to that here in a second.

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But here are the headline numbers. In terms of total revenue, 44.8 million. The consensus estimate was 46 to 49 million, so j- a slight miss there.

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And GAAP earnings per share came in at negative $1.94 versus negative 19 cents to 24 cents range, which was a big miss, but that's largely because there was a change in the value of warrants o- on its balance sheet, and specifically, these are warrants tied to the Fluid Stack and Google deal, I would imagine.

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They might have other warrants outstanding. They don't break it out, but those are the bulk 'cause Google holds, like, 14% stake in TeraWulf through these warrants. And so the change in those, 'cause,

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uh, TeraWulf stock price went up over the quarter. Those are counted as a liability based on the way that they are consolidated into the financials.

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But that's not the same as, like, a cash liability with something like debt where, you know, you, you're gonna have to pay cash out of pocket. These are warrants.

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They're shares that will be converted to equity eventually. So it's not really-- it's not fair, or it's not, um, how should we say, indicative of the c-company's financial health to look at that and discount it.

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So, uh, overall revenue by segment, Bitcoin mining came in at 12.8 million, not really a factor anymore in terms of their day-to-day operations.

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HBC lease revenue 31.9 million, which was zero a year ago and shows that TeraWulf, which was, I believe, the first company in our coverage former Bitcoin miners to actually have HBC revenue flip their mining revenue.

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We're, we're, we're-- w-we can retire the Bitcoin miner label, I think, Charlie. That for, increasingly for many of these companies, that obviously has no bearing on what they're actually trying to do day to day anymore.

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A t- a s- a tiny little violin plays- [laughs]... to, to, to play the Bitcoin miners out. Um, even the Bitcoin miners we had, uh, Eric Ellingson on Monday, uh, they're becoming Zcash miners.

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So everybody fleeing like rats from a ship. Um, who will come save us? Who will take the hat? If you needed a, another bottom indicator, you might have it, or just that we're getting closer to desperation. Yeah.

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Zettahash is, uh, both a psychological, uh, threshold and a, and an actual one as the industry rotates out, so. Yeah. It's like 100K for Bitcoin's price.

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So going back through a few other numbers, net loss was 939.9 million. Uh, this was driven entirely by the change in fair value of warrant liabilities. That was a $755.7 million non-cash change.

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Again, that's not a cash cost, but it is factored into their earnings, and so if you're seeing skewed numbers on that, that's why.

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There's also 83.9 million in stock-based comp and a 7.1 million debt ex-extinguishment loss. Adjusted EBITDA came in at 18.3 million, negative 18.3 million versus 14.5 million positive a year ago.

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Management attributes the decline to higher SG&A and operating costs as contracted HBC capacity ramps up, something that we saw with Cipher as well.

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You know, there's more-- uh, the executive compensation and stock-based compensation is going up as they try to, uh, a-as they attract personnel to lead these AI revamps. Um,

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an update on operations and moving away from the financials and looking specifically at the platform-level data center business side of things.

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TeraWulf now has a 2.1 gigawatt controlled pipeline across five sites, 27 billion-plus of total contracted revenue across the platform, and a 1.5 billion targeted average annual net operating income once that rent is stabilized.

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They are targeting 85% net operating income margin on contracted capacity, and they're targeting, like, a 4.5x leverage target. I believe that's for, well, um, the total consideration of the values of these contracts.

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Uh, they have 1.9 billion in cash. Cap-capex spend to date has been 2.3 billion, with 1.7 billion in capex remaining throughout the year, backed by 3.2 billion in senior secured notes.

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Um, roughly 90% of Wulf's compute construction capacity is now under committed purchase orders, so they've only got 10% gap there for the remaining materials for these sites.

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A few updates on those sites individually, and we will touch on the financing angle for these once Patrick joins us here shortly. Lake Mariner, 102 megawatts energized and generating lease revenue as of July 2026.

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That means the CB3 data hall is now operational. CB4 at 168 megawatts and CB5, also 168 megawatts, is progressing towards delivery in either the second half of this year or the first quarter of 2027.

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Um, this is the big one where I think-- I think this is why TeraWulf has been resilient, uh, even disregarding the sell-off after the spike before earnings or during earnings.

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Actually, this is probably why it spiked and then s- maybe sold off- Yeah... reverting to the mean.

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On July 5th, 2026, TeraWulf executed lease amendments with the Mariner tenants that shifted the rent schedule and delivery for CB3, CB4, and CB5 in exchange for 500 million of incremental revenue over the lease terms.

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TeraWulf is contributing 150 million to fund tenant fit-out costs incurred through June 30th, 2026. But any fit-out costs after July 5th are borne by the tenant. Um, i-interesting development here.

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And they didn't give a lot of information as to what was going on here, but this also coincides with CB4 and CB5 picking up six megawatts of critical IT capacity each beyond what was contracted back in February of 2026.

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This seems like a design shift from the tenant, in this case Fluid Stack. Th- th- they found a way to juice more compute, have a denser rollout, it sounds like, and they want to replicate that on the future builds.

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And what this means for TeraWolf with this scope change, the tenant is getting more capacity per building, which requires additional design and fit-out work, and this will probably push the timeline for this out a little bit.

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TeraWolf is protected against that within the amendment. [lip smack] They, uh, they

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structured it as such to where there are no penalties on delays, considering this is kind of like a ninth inning call, you know, from the pitcher here.

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But this means that they will increase the incremental revenue over this lease to $500 million for the full leasing term.

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Um, a, a pretty nice little added bonus here for TeraWolf, and no doubt was something investors looked favorably on during the earnings call. Um, a few more updates here, Charlie, before I toss it to you.

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Um, Justify- the Justified data center in Hawesville, Kentucky, this is the 480 megawatt campus in the MISO market. Again, 401 megawatts is leased to Anthropic.

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The 19 billion, 20-year term with Anthropic has, uh, five-year extensions, uh, that will put it at 33 billion delivery, uh, targeted for the second half of 2027, first half of 2028.

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And then they've also got their Muskie data center in Grayson, Kentucky, a 1,000-megawatt campus in PJM.

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Um, they're going, they're going to have an initial 500 megawatt ramp-up with a target of Q4 2028, second phase of 500 megawatts targeted in 2030.

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And the big one that we've covered recently on the pod, uh, TeraWolf having a win here with a FERC clearance, the Chesapeake data center and energy in Morgantown, Maryland. This is a net generating campus.

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It has two phases of 500 megawatt generation with 250 megawatts of battery storage and 500 megawatts of data center load totaling one gigawatt generation and 500 megawatts of storage.

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Uh, there are still some closing and regulatory appro- uh, closing contingencies and regulatory approvals for this site, but they cleared the first big hurdle with that FERC clearance as we covered on the stream recently.

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Um, that site's really interesting 'cause they are taking the, the oil plant assets that are on the site and converting them to nat gas. They have the backup power, uh, on site.

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That's-- it's going to be a big CapEx burden and something that I'm gonna grill Patrick on here in a second once we get him on, but probably one of the most exciting sites in any of these companies' portfolios.

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If, if you're looking at the potential to, like, have your own power, have the battery backup, and be able to be inter- interconnected directly to the grid to arbitrage between actually selling power when you need to and powering your data center when it makes sense.

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It's almost like, you know how, like, Riot is not real- was not like a mining company? They traded power. You know, could see a similar thing here.

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Man, I'm looking at like, you're dropping these numbers, which is wild, and I'm just thinking, 2028, so many megawatts are gonna come online.

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You'll have Vera Rubins deployed all across the world, and maybe in space after the SpaceX thing. And that's when the, I believe the, the, the next Nvidia, the Feynman, uh, GPU is expected to launch.

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My Fable 10 queries are gonna run at the speed of light by then. So very excited to have super intelligence. I, I've, I've been thinking about this recently just as a kind of a tangent and aside.

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When people talk about the compute constraints, and people can feel it sometimes when they're using their models, and Claude or ChatGPT hallucinates or, like, the context is too-- window's too big, there's not enough resources.

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You know, w- what does it look like in, in two years when we have a lot of these build outs finished?

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Does it get worse because there's [chuckles] actually just more demand, or will we actually see some of that congestion clear, right?

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That, that is- And, and these models kind of flourish in a way that they, they maybe not, have not been able to do so far under the capacity constraint environment.

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That is literally the $700 billion to $1 trillion CapEx. Question, probably more by 2028. We'll see when we get there. Um, I guess I'll pull up the, uh, the, the scoreboard really quick.

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This morning, I've just got the companies who've we've covered that released their earnings.

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Um, earnings have been kind of like a [chuckles], uh, yeah, not, not done well for the companies which have done earnings, except for Wolf, who's flat on the day. But Galaxy, Hut, Ionic, Cipher, all down since earnings.

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But, um, as you know- To be fair, they're up like double digits on the week, and I think that- Well, I think they're all up for the year too, so. Yeah.

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They're-- everything's still green, but we've rebounded heavily from the, uh, Leopold fallout, if you will. The Leopold fallout. And I wonder how much of this, you know.

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I mean, imagine if these earnings came in the, in the, in the depth of that sell-off. Yeah. I think we would be maybe telling a different story with regards to where the stocks are moving.

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But- Yeah, it feels like the market is just a little antsy and reactionary. They-- we need Ken Griffin to just come buy the entire stock market so it can go up. Well, it's, it's crazy right now, man.

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You have like hyper, you have Mag Seven companies adding like 10% in a day. Amazon, Amazon [chuckles] and Microsoft just working. Yeah. Like 250 billion added to the market cap in a single trading session, right? So.

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Okay. We we're gonna stop riffing. We have our esteemed guest, Patrick Fleury, in the wings. We'll bring him on up here in just a moment after a word from our sponsor, Luxur.

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But you can also try it free for 60 days, so if you'd like to learn more, go to luxur.tech/commander to get started. All right, we have Patrick Flurry waiting in the wings, and we will bring him up for

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interview on what's going on at Wolf, specifically from the finance side. Patrick, thank you for joining, sir. It's been, it's been a minute.

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I think you were on first, last about a year ago, so it's nice to have you back on. Good to be back.

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Thank you for joining, and congrats on what's shaped up to be a really banner quarter for y'all in terms of the operational side of things.

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I'll, I'll save most of the operational questions for your counterpart, uh, Nazair Khan.

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But for you, I've got some questions specifically regarding financing, and I would like to start with Hawesville, um, specifically the routes that y'all are, uh, weighing taking in terms of financing that site.

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Um, you know, shaping up to be one of the most exciting sites in the portfolio with Anthropic as the counterparty. On Bloomberg, you said that the financing would be a mix of leverage loans and high-yield bonds.

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Is that structured as a ring-fence project financing, um, similar to Wolf Compute or more like a corporate-level raise at this time?

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And if it's not, I'm curious about why that structure versus doing it entirely through a dedicated, um, project financing, uh, route. It, it will look a lot like Wolf Compute. That it- so it'll be a, uh,

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secured asset-level financing, uh, right first lien security on the data center, and it, it, that will be, you know, likely with a com- parent completion guarantee.

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So I think it will look very similar to Wolf Compute, which again is the IP that, you know, we developed initially with

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Morgan Stanley and Google, um, Fluid Stack and, and our, uh, uh, partners, you know, Anthropic and others at, at Lake Mariner.

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So I think w- where it could evolve, um, is, you know, the structures I think as you point out, could have some loans and maybe not be all bonds. 'Cause as you know, bonds are not...

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You typically non-call two, um, at least high-yield bonds, right? Some of my peers have done investment-grade bonds, which I, I continue to scratch my head on 'cause you can't call those for 15, 16 years.

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Um, and I, I'm not interested in doing those 'cause I think my cost of capital is gonna change a lot, um, over the next few years.

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So I think high, high-yield bonds and loans, loans, you know, tend to be more like, you know, one-on-one par call protection, so just much more flexible instrument. Um, and yeah, so I think it, it'll be like that.

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I also think the-- a lot of my peers are pushing leverage. You know, they're trying to do 95, 100% like loan-to-cost financings, right? Because you've got good counterparties standing behind the leases.

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I, I don't think we'll do that. Like I said on the call, we've-- I was saying internally, you know, just 'cause you can doesn't mean you should.

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Um, these projects are complicated, and if you have no equity layer in them, you know, you can stub your toe and a stubbed toe becomes an amputated leg, and that, that's not what we're looking to do.

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I think we will, uh, we, we'll always structure them with a healthy equity layer 'cause it gives you protection and, and, uh, the designs are moving around as you, as you all know.

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I mean, I think you saw it with our lease amendments at Lake Mariner.

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Um, the, the reality is like our customers and whe- whether it's Nvidia, uh, GPUs or Google TPUs or AMD, whatever you're using, there's just not many clusters running at size today.

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So the customers are getting data points every single day and constantly coming to us and saying, "Hey, you know, what if we did this," or, "What if we did that?"

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And so it's a really very, uh, constant dialogue around, yeah, sure, we can tweak this or we can tweak that, and a design change here or there. But all of those have typically a cost impact and a schedule impact, right?

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And so it's a sort of a combination of us working with the customers to optimize the design on the go, but then balancing, you know, what they wanna change with how does it impact cost and how does it impact schedule.

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And so some of that's accepted, some of it's not. N- nothing really underscores how fast things are moving than those amendments to the, to the Lake Mariner leases.

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It's like, oh, we unlocked six extra megawatts with this design change. And I would imagine you have to really think on your feet, not just from the op side, but from the finance side as that new information comes in.

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Uh, just a kind of a side note there. I, I have kind of two follow-up questions for this, and I think I'll tackle

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this one first, and it's o- off the cuff 'cause you just said you would rather not do, um, uh, uh, high investment, uh, grade bonds specifically because you think your cost of capital will be lower in the coming years and there's less flexibility.

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Could you unpack that for us? Is the idea that you just expect a terrible credit rating to go up, so have access to cheaper credit? Do you expect rates- Yeah... to come down over the coming years? Yeah.

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What's-- Why, why do you wanna avoid those specifically- Yeah... right now? So all-- The, the short answer is all the above. So I think a couple things are gonna happen. One,

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financing a project that's under construction versus one that is operating and has had some operating history- That's a change in cost capital, right? I was a credit debt investor for almost 20 years.

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Like, if you have something that's operating, right, and, and has reliable cash flow and doesn't have a construction ramp period or construction risk, it's generally gonna be cheaper, right, than something that has construction risk and execution risk.

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So that's number one.

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So yes, I do think, like, once all of my data centers are up and online at Wolf Compute and Google's $3.2 billion of credit backstop has kicked in and we're, you know, putting that cash flow through the income statement,

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I think those, you know, my...

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The cost of financing that longer term should be lower than it was when I was, you know, raising money to build, build them and then hadn't proven that I could do it over and over and over again. So number one, yes.

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And so that's why I like high-yield bonds, because high-yield bonds - and you can see where my Wolf Compute bonds are trading, probably around 6%.

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Well, you know, there are some of my peers that have done investment-grade bonds that are pricing 50 basis points tighter.

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So for 50 basis points, I can tell you every single day of the week I, I will want the ability and the option to call that bond out in two years or three years.

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Where if you have an investment-grade bond that you can't touch for 16 years, you can't touch it for 16 years, right? It's like refinancing your house. So I can...

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I, I would sit here and say, in 16 years you're telling me there's not gonna be a recession, rates are gonna go to zero, and you can go refinance your mortgage on your house at two, two and an eighth as opposed to 6% where it is today?

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So again, I think it's not only, um, having lived through a bunch of cycles, right, and, and seeing the great financial crisis and then COVID and other things. I mean, rates w- will have ups and downs in the economy.

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Rates will go to zero versus where they are today at some point, and you'll be able to finance that a lot tighter. So I think it's, it's a combination of multiple different factors.

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But again, the simple analogy for me is paying an extra 50 basis points a year. I mean, just do the math. Fif- fifty basis points a year on, you know, $3 billion, right, is what? 1% is 30 million. Uh, yeah, 30 million.

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So 15 basis or 50 basis points is like 15 million bucks.

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So basically I'm paying 15 million bucks more for two years to have the optionality to take that thing out whenever I wanna take it out, as opposed to being locked in a structure for 16 years, right?

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That, that clearly had some pricing day one of construction risk because the thing is under construction. So that's why. Yeah, that makes sense to me.

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It's kind of playing, like, short-term gain versus the prospect of long-term gain with regards to having a lower cost of capital over the entire span of the project financing, like you said, like those 15-year terms.

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Uh, one last question with regards to Hawesville. Um, recently y- you also mentioned that there's a...

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That Anthropic or it was you or someone on TerraWolf mentioned that Anthropic is still working through vendors for the chips on this. Will that vendor end up impacting at all the route that y'all take?

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If there's like a backstop involved, if there's one vendor that you would rather have versus the other in terms of credit worthiness, does that change the equation at all for how y'all an- anticipate financing this site?

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100%. And again, that's another example of us working with Anthropic, right? Anthropic, a- as you know, is, is choosing hardware from Nvidia, Google, Amazon, and now AMD.

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So they want competition in that to get the best price that they can get. We want competition also to get, you know, the cheapest wrap that we can get from the, the best-rated counterparty.

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So yeah, I think i- i- that was purposeful with us working with Anthropic, you know, to, to create a competitive environment that they want and also a competitive environment that we want to get the best terms for the project as a whole.

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I wanna move to, um, to Morgantown really quickly if we can. I mean, y- you've got a bunch of projects to figure out the financing puzzle for, and they're massive CapEx, uh, you know, uh, w- evolving massive CapEx.

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Morgantown to me seems like the one that would probably have the most out of all of them. There's this, uh, there's this, uh, retrofit of the actual p- plant itself into nat gas from oil.

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There's the battery backup, which is, uh, first phase 250 megawatts worth.

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Um, when you approach financing for this site, how do the power generate- generating assets change your calculus for what is, uh, most doable and also what has the lowest cost of capital for investing in this site?

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Does it change the calculus that much or not at all? Yeah. Yeah, so let me answer the first part, uh, a, a sort of p- piece of that question first and then we'll come back to Morgantown.

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So what I tried to hammer home on the call today is we are very flush. We have a lot of cash on balance sheet. And I got more cash coming in from the sale of my Abernathy JV. So I got equity to fund Hawesville. I got

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equity to, you know, possibly fund the first round at Muskie, which I think that's underappreciated by the market.

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Um, and then I got a lot of cash sitting on balance sheet that I'm gonna keep on balance sheet while we're executing these big projects so that, you know, we always have enough liquidity. Um,

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so again, I think, like, I do not have to touch the equity capital markets, I think, for quite some time. I do have to go access the debt capital markets, right, to finance Anthropic.

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Um, and I think you'll see that process evolve, uh, as we've talked about a credit backstop, you know, what the right technology is, what the full CapEx is. So you know, I...

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The nice thing is I have a lot of time, um, because we went to the equity capital markets in April, stacked a lot of cash on the balance sheet. I have runway, so I don't have a gun to my head to go to the markets.

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Um, and particularly given how choppy these markets are, um, feel really blessed to, to have that cash there so I don't have to go when I don't wanna go. Um, so that's number one. Two, on Morgantown- I think,

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you know, we have looked at a ton of behind the meter deals, um, literally somewhere between probably half a dozen and a dozen.

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Most of them have been in Texas or, you know, in the sort of Midwest or, you know, Northwest. And generally, most of them don't work for a couple reasons. Okay. The first is, you know, we come from power.

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In, in, in power, you know, reciprocating engines are called peakers, and they're called peakers for a reason because they typically run, you know, two to five percent of the year when power prices are sky high and they're inefficient, they cost a lot.

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So when you're doing behind the meter deals and, you know, you have three different OEMs putting in three different kinds of peakers to bridge you to a, you know, base load ultimate power solution in three, four, five years, that gets really tricky really quickly.

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Because having enough people, having mechanics, having spare parts for three different OEMs and then trying to run equipment at ninety-nine point nine nine percent of the time that typically was supposed to run like five to ten percent of the time, there's a lot to unpack there.

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So that's num- one of the number one reasons we haven't done one of those deals yet.

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Number two is most of those deals have different equity owners and, and construction parties involved in the power side and the data center side.

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That creates big conflicts of interest if it's just not all the same equity ownership.

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Because if the power fall, falls down, there's SLAs in the data center deals, right, where you can go with damages to the power provider.

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So it, it, it, it, it also gets really messy really quickly if all parties aren't fully aligned and rowing for the beach in the same direction.

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So our approach at Morgantown is designed to basically solve all of that, which I'll explain to you, and then also solve the political problem, and it doesn't matter if you're a Democrat or Republican, right?

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Which just is data centers, you consume a lot of power, and so you can't be a parasite on the grid.

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You have got to either, you know, contribute, and, and ideally contribute what you're pulling, and then as the approach that we wanna take at Morgantown is actually to be a net provider, right, through the battery during times of crisis.

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And so if you just try... Let's try to keep it high level, but let me unpack Morgantown for you.

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If we can build a data center for ten million to twelve million per megawatt, okay, we can add a combined cycle power plant for two and a half to three million per megawatt, and then we can add a battery for one to one and a half.

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Like, round numbers, like midpoint of that's probably around fifteen million per megawatt. Okay.

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And that compares with data centers that are being built in West Texas that have a lot of elements I just talked about behind the meter, peakers, um, but they're not providing an asset to the grid.

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That's really for their purpose only. And those are being built at, you know, twelve, thirteen, fourteen million per megawatt. So not all that different from what we're talking about.

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If you are then my lease counterparty, a hyperscaler, it's pretty simple.

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Instead of just provide e- signing a lease for the ten to twelve million per megawatt that I'm signing right now, you're signing a lease for the whole thing for fifteen. But importantly, here's what you are getting.

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Power in that part of the world is generally sp-- I'm gonna use round numbers here, and we can drill down if you want to at some other point, like into the specifics.

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Power in that part of the world is roughly a hundred bucks a megawatt hour. Okay? So if you're buying from the grid, you're paying a hundred dollars a megawatt hour.

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If you have a power plant that's selling to the grid, your marginal cost to produce that power is about a six thousand heat rate for a, a combined cycle that's buying gas at six dollars in MMBTU.

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Six times six is thirty-six bucks a megawatt hour, and then you have like about ten to fifteen bucks of, um, operations and maintenance costs. So round numbers, fifty bucks marginal cost to sell power to the grid.

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So if I'm buying at a hundred and I'm selling at fifty, I just basically netted back fifty.

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And then if I have the battery there that's selling, say, from two PM to seven PM when power is really expensive, but then at night I'm reloading that from the grid when power is really cheap and there's not much demand, and I keep doing that every ti- every day, we think that's another twenty to thirty dollars that you are netting back.

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So think about that for a moment. What we're-- If you're a hyperscaler, your power used to cost you... And by the way, for a thousand megawatt data center, simple math.

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Thousand megawatts times eight thousand seven hundred and sixty hours in a year. That's just twenty-four times three sixty-five.

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That's eight million seven hundred and sixty thousand times a hundred dollars a megawatt hour. That's eight hundred and seventy-six million dollars a year in power cost.

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But what I just told you is I think I can shrink that for that hyperscaler to twenty. And not only that, but you're do- You're, you're-- That hyperscaler is grid connected, which is what they want ten times out of ten.

257
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They're not only putting the amount of power that they're pulling from the grid back onto the grid, but they're p- being a source of incremental power to the grid during times of crisis by having the battery.

258
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That accomplishes, again, whether you're Republican or Democrat, what the Trump administration, what every governor in PJM, what PJM wants, what every independent system operator that runs power in the, in, in the US wants, right?

259
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Which is you are not-- A data center is not being a parasite to the grid. And not only that, but it doesn't matter.

260
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I don't care if you're Google, Amazon, Microsoft, Meta, NVIDIA, saving you six hundred million dollars a year in power cost is a big deal.

261
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And not only that, but you are on the right side of, of all of those ratepayer political NIMBY discussions, right? You're, you're actually being a resource to the grid.

262
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And so that's what makes that site, and I think our approach there, so exciting. Um, the other amazing thing about that site is it's basically, you know, 30 miles east of data center alley.

263
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So the amount of demand we have for that site, right, given the location and p- the likely cost that we can, you know, charge for a data center there is, is similar to, to, to what, you know, the cost is in data center alley, right, that pe- people are getting.

264
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I mean, yields in that part of the world tend to be much higher, right? 'Cause you're basically, you know,

265
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that much closer to where the, uh, certainly the inference, big inference need is, particularly from government players. That, that... You just gave the whole bull case for that site. I think the...

266
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Well-articulated, better than I could have done it, for why it's, again, one of the more unique sites in any company's portfolio for data centers for the companies we cover.

267
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Patrick, you said there that you are bl- feel blessed to have a cash cushion right now, and you don't have to tap the debt markets currently, um, to, uh, for, uh, any immediate expansion. Why, why is that specifically?

268
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Uh, kind of wanna get into how the capital markets have changed a- as we continue through the CapEx cycle. Order, uh, just a few things that kind of indicate this.

269
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Order coverage on hyperscaler bond deals have fallen from about 5X in February to under 2X in July, and Amazon also had to sweeten its July raise with a little extra yield.

270
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Um, how is the credit cycle shifting for AI operators, if at all? Yeah, look, I... It, it's a huge CapEx build. I've seen this twice in my career. Once was in telecom, late '90s, early 2000s.

271
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The other was in oil and gas in the 2010s. Um, you know, when you have these industries that, right, explode and need a lot of capital, um, you know, there's, there's gonna be winners, losers.

272
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There's gonna be, you know, a couple blowups along the way, right? So I think we're early days, and everyone's still trying to figure out,

273
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where do I wanna put my money, and who do I wanna give it to, and what's the right return on that capital? And so you have all these companies, right?

274
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I mean, t-take, like, Google, for instance, you know, who I think is one of the best companies in the world and are super privileged, you know, to be partners with them.

275
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But when, when we were negotiating, uh, the first wrap last summer, Google was a $2 trillion public company. Right now, they're four. They, at that point in time, had 32 billion, I think, of balance sheet debt.

276
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Uh, you know, I haven't looked today, but I'd bet it's closer to, like, 100, right? So still, on a $4 trillion company, like, 100 billion of debt isn't a ton.

277
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But it f- if you think about each one of the hyperscalers, right, and their free cash flow profile, their debt profile, their massive market caps, like, there's change happening.

278
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And, and to be honest, this is one of the things that we think about all the time when we're signing long-term customers. It's not, what is the credit quality today? It's, like, how durable is your business model, right?

279
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I mean, th- that's a huge factor and, and reason why we have Anthropic and, and perhaps not somebody else, 'cause they're targeting enterprise customers long term, and we think that's really sticky.

280
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Um, but back to just one thing to correct from earlier. So I, I don't need to tap the equity capital markets. That I don't need to touch. I do need...

281
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I'm gonna go to the debt capital markets for Hawesville, you know, and then likely Muskie, you know, in the next 12 months. You know, I'll be, you know, looking probably to finance both of those.

282
00:52:35.528 --> 00:52:39.837
Um, tha-thank you for the, the correction there. I wanted to... Just two more questions here, Patrick.

283
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I, I know, um, we're running up on time here, but I wanted to get a audience question here real quickly from JZS Squared. Um, Patrick, on the call you mentioned that the loan to cost of Mariner was now 70%.

284
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Is that a function of rising cost of debt? Will future deals be 70 cent- 70% LTC also? No.

285
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So what I was trying to point out there is w- when we initially financed Wolf Compute in October of last year, it was roughly 75/25 debt equity. With the agreement, lease amendments and the agreement for us to fund

286
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incremental capital of about 150 million, which again is recovered in rent,

287
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if you take, you know, that amount of capital, you know, plus, um, some additional capital that we're putting in to basically solve the labor problem, um, that I think is popping up everywhere, particularly with regard to electricians, that takes the capitalization to about 68% debt, 32% equity.

288
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So we're effectively putting more equity into the project. We're getting a return on that equity 'cause it's 500 million more of rent over the lease period.

289
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But I think what I'm trying to point out is I'm going the other way. Most of my peers are taking leverage wherever they can and levering up. That's not what I, I wanna do long term. I wanna have a healthy equity layer.

290
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I wanna have robust cash flows. I wanna have robust deleveraging, and I ultimately wanna be investment grade at my project companies and at the parent.

291
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And so that's where I'm driving long term, which I think is in stark contrast to a lot of the private data center developers in particular, but then also a lot of my peers that are doing things that are 95, you know, 100% loan, loan to cost.

292
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So I'm actually, again, again, just going the other way, where we're over-equitizing on purpose. Patrick, last question, we'll get you out of here. I wanna just briefly touch on convertible notes.

293
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I believe that y'all have, uh, notes, note tranches maturing 2030, 2031, and 2032. Equity, uh, Wolf's equity has rerated this year. So how are you thinking about addressing or, uh, those convertible notes?

294
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Repurchasing, refinancing into straight debt, or just letting the converts run? Like, how do you look at those when you approach thinking about managing the, uh, capital stack? Sure. That's a great, great question.

295
00:55:08.424 --> 00:55:19.044
So generally speaking, I'm trying to get the company to be four to five times levered on a consolidated basis. Okay? So if I... And I'll come back to the converts in a second.

296
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If you take Wolf Compute, Wolf Compute has 3.2 billion of debt, 600 million of NOI. So, like, right out of the gates, it's five and a quarter times levered, but it amortizes down by a little over 300 million a year.

297
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So it's effectively half a turn of amortization each year. Those bonds are callable next, uh, October, and then they step down to, like, a 101 call, I think, in, uh, October of '28.

298
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So my intent ultimately would be to, to, you know, refinance those bonds into a more, you know, longer term, lower cost of capital bond. If I'm investment grade, then great. If not, I'll stick with high yield. Um,

299
00:55:59.584 --> 00:56:11.544
but if you take Wolf Compute of 600 million of NOI, and then what, you know, we just signed at Hawesville with Anthropic. If you take that, um,

300
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it's, you know, another, I think, on average, uh, I think about 800 million of NOI over the life of that, of that, of that lease. Um, total parent NOI, you know, call it billion four.

301
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And then you take out some SG&A, right? 100 million of SG&A, and I'm at, you know... Again, round numbers just make math easy.

302
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Let's say, you know, it's a, a little over a billion dollars of EBITDA, more like 1.2 billion, 1.3 billion, but let's make it easy and say it's a billion.

303
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The way I think about the converts at the parent, again, if I'm trying to get to four to five times, I have two and a half billion principal amount of converts up there. My view is those will...

304
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I will always look to refinance the underlying principal amount of those. But the in-the-money portion, that's the portion that I may or may not let convert into equity.

305
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And so my first, um, convert, the 2030s, I think actually becomes callable, uh, end of next year. So I've got, you know, a bit more flexibility around what I wanna do with that.

306
00:57:15.724 --> 00:57:25.844
Um, but I'm not in a rush to take care of those. I think, y- you know, it's a cheap cost of, of financing for us. I do, again, expect I will have two and a half billion.

307
00:57:25.904 --> 00:57:33.464
So again, when I think of four to five times leverage, if it's a billion of EBITDA, two and a half turns of leverage is just through the principal amount of those converts.

308
00:57:33.824 --> 00:57:45.664
And then I've got, you know, another, call it, two, $3 billion, you know, of, of debt capacity up there where I can ultimately move, like, once Wolf Compute is up and, and has delevered over a year or two.

309
00:57:46.324 --> 00:57:56.484
Then I can move that capacity, if I wanted to, up to the parent, and that's where I'm kinda targeting that, like, four to five times consolidated leverage on a stabilized basis.

310
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Um, so again, I think the, the converts, I view it as two and a half billion. That'll kind of always be there as principal.

311
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And then the in-the-money portion is the piece that I'll try to figure out, like, "Okay, am I gonna repay that with cash? Am I gonna flush them? Am I gonna let them convert into equity? Like, what am I gonna do?"

312
00:58:14.634 --> 00:58:22.984
Um, but not in a rush to, to, to figure that out. That's a high class problem. Patrick Flurry, CFO at Terawulf, thank you so much for joining, man.

313
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Congrats on the quarter, and, uh, we'll be keeping ourselves apprised of updates throughout the year. Specifically looking at Morgantown. You really sold that one on your answer there, so thanks for joining, man.

314
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Appreciate you guys having me. Thanks. Thank you, Patrick. All right, we're gonna keep on going.

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Again, it's earnings week, so it's data centers, data centers, data centers, which means that SpaceX, which is now a data center company, is on our radar. So that's what we'll close out with.

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322
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Go to ligos.finance to learn more. All right. SpaceX.

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SpaceX earnings yesterday, their first earnings since they went public, and their earnings were decent, but the stock was, uh, stock is down.

324
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So, uh, initially rose intraday, but it fell about 8 to 10% after hours, I believe. Currently, it's sitting at down 9% on the day.

325
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But some very interesting announcements specifically regarding a NVIDIA exclusivity and their satellite.

326
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We reported on our website, you can see here, SpaceX maps, maps path forward towards 10 gigawatts of compute after signing $14.1 billion of cloud contracts.

327
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So let me go over their earnings first, and then I'll get into the data center side, specifically the fun stuff, which is compute in space. So,

328
01:00:51.684 --> 01:01:06.994
uh, their revenue hit $7.81 billion, which is up 92% year on year from $4.1 billion last year, beating estimates which were at 6.8 to 6.93 billion. That's quite an a... That's quite a beat of estimates.

329
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Net loss narrowed to $541 million from, um, one to 1.01 billion year over year Which is about negative 9% per share loss versus estimates around.23 and.26, or about 23 to 26 cents per share loss.

330
01:01:25.284 --> 01:01:41.244
Also beating estimates considerably. Where, uh, where's the revenue? Well, it come from three sectors. One, the connectivity, Starlink, um, of which it was 4.29 billion, up 66% year-on-year.

331
01:01:41.424 --> 01:01:53.574
Operating income of 1.66 billion, or plus 79% from last year, with about 38% to 39% margins. And here's the kicker. I think people aren't, like, looking at this chart enough.

332
01:01:54.104 --> 01:02:11.204
The subscribers doubled year-on-year to 12 million, and they're adding 1.7 million Starlink subscribers net each quarter. Actually, because I have this pulled up, here's the chart. Look at this chart, Colin. I mean,

333
01:02:12.124 --> 01:02:27.204
um, down from, you know, thousands to two million in August '23 to now 12 million. This is a parabolic advance and with, uh, massive growth happening in just the past year alone.

334
01:02:27.244 --> 01:02:38.954
So Starlink- Yeah, that's an impressive chart. I can remember in 2020 when the, uh, when Starlink was being hyped up. Yeah. And I mean, have you been on a United plane, uh, and used the Starlink?

335
01:02:39.004 --> 01:02:49.744
Oh, it's-- Yeah, it's incredible. It- It's, it's a game changer. It's really difficult to, to, like, not want... You know, I would take delays [both chuckling] if I get with United if I could just get that Starlink.

336
01:02:50.224 --> 01:03:01.824
Um, okay, so back- let's get back to the numbers. So the connectivity was the first sector. Um, then the, the big one, which is the one we focus on, which is AI, which includes the xAI Groq Cloud Compute Services.

337
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Revenue's 2.65- 2.56 billion, uh, which is up 247% year-on-year.

338
01:03:09.544 --> 01:03:24.863
Operating losses, uh, narrowed to down 1.6- 1.26 billion, and is driven by the deals we've covered, mostly new cloud services agreements totaling 4.- 14.1 billion in contracted sales.

339
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Of their third, uh, line, which is the smallest, which is kind of funny to me, Colin, the smallest part of SpaceX is their space line, which is their Starship line.

340
01:03:35.864 --> 01:03:50.504
Revenue, um, not quite a billion, 962 million, up 29% year-over-year. Still at an operating loss of 542 million. Um, a lot of that apparently is spent on heavy research and development on Starship.

341
01:03:51.544 --> 01:03:59.614
Um- Yeah, it's s- it's spent on sending in test, test rockets up into space and then maybe blowing up or not, and that's not a dig, right? No, no.

342
01:03:59.624 --> 01:04:08.864
You always see these videos of, like, a starship blowing up, and then all the Elon Musk haters are like, "See, bro, the tech doesn't even work." [both chuckling] Yeah, but yeah.

343
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This is really where I d- I have, I have trouble going, "Get your head out of the gutter, guys."

344
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Are, are you all of a sudden ruthless capitalists who are like, "Doesn't make sense 'cause you lost money shooting literal space, you know, stuff into space"? Anyway, um, okay.

345
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So, uh, and then we'll, we'll do this before we get... and, and I'll wrap up this earnings before we get into the fun stuff. So cash, they ended with 100 billion. That's crazy.

346
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Billion with a B, which is mainly the IPO proceeds plus the bond issuance. They have a backlog of about 47.5 billion, and they, uh, have the Cursor acquisition agreement for 60 billion.

347
01:04:47.564 --> 01:04:58.104
Still crazy to see that, um, for AI That was all stock, wasn't it? Yeah, this is all stock deal. So not r- not-- I don't think it... Well, if it was majority stock at the very least, if not all.

348
01:04:58.824 --> 01:05:05.704
Um, and of course, they do have some Bitcoin. That's down just, you know, what the proportional amount of Bitcoin, so fair value hit.

349
01:05:06.644 --> 01:05:21.454
Um, so the, the big one, this is probably why s- this is one of the reasons why the stock is probably down is their CapEx jumped six times to 18.7- 37 billion in Q2, of which 15.83 billion was AI. Uh,

350
01:05:22.504 --> 01:05:37.384
not surprised there, as every single large company with cash on hand is just j- is yeeting it into CapEx. So what to look out-- what's the, what's the look for data centers?

351
01:05:37.464 --> 01:05:48.164
Well, SpaceX expects two gigawatts of compute online by the end of 2026. Let me say that again. Two gigawatts of compute near term end of this year.

352
01:05:49.264 --> 01:06:01.184
What other companies have two gigawatts of compute in total, uh, by the end of the year? Very few. Yeah, I mean, what other company can scale up a gigawatt campus in half a year like they did with Colossus?

353
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Now, I don't think the- Yeah... the first phase wasn't a full gigawatt, but they got that plant online- Yeah, it was like 200 megawatts... so fast. Yeah, and so, um, they're-- that's Colossus One.

354
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They're rapidly expanding Colossus Two. And, um, Elon and the gang say they are scaling towards 10 gigawatts by the end of 2027. So just-- So out of n-- I mean, that will put them more...

355
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It's just, it's hard to imag- it's, like, hard to, like, say that they're a s- a rocket ship company that will be, uh, the size of multiple of the largest data center companies. I would love to see that mapped out. Yeah.

356
01:06:38.514 --> 01:06:49.164
Explain how they're gonna get there. Like, if you had the 10 gigawatt, just, like, take the 10 gigawatt target for 2027, where does that stack up against Amazon, Google, Meta- Yeah... Microsoft, right?

357
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In terms of compute under, um, in terms of power and compute under c- under, uh, management, so. Yeah. Um, and then so, uh,

358
01:07:02.384 --> 01:07:18.944
then, uh, they've contracted an additional 6.7 billion of cloud services, uh, revenue, um, uh, ramping from October, and that's, uh, just the Google and Anthropic deals alone could throw off $26 billion per year.

359
01:07:19.164 --> 01:07:28.872
Okay, so that's the earnings. Let's get- You just glossed over that though. 26 billion a year from two companies. Yeah. [laughs] I, I glossed over it because- That's crazy... there's a lot in here.

360
01:07:28.952 --> 01:07:40.852
It's, like, really difficult- There, there-- This is a lot to unpack. This is a leviathan, for sure. Yeah. It's really difficult to, uh, to, like, not be kind of a, a cheerleader for Elon here. I see why.

361
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I l- I feel like I'm catching the bug because he's the, like, this is just one of his companies, and e- he's executing these wild things. One of which, uh, so we're gonna ease into it.

362
01:07:50.952 --> 01:08:07.632
Um, big takeaway is that, uh, Elon, SpaceX is committed to, quote, "Using Nvidia GPUs exclusively," 'cause as Elon tweeted, quote, "Because they are the best." He's not wrong. Uh, so, uh, that's the first part.

363
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And they'll be shooting these Nvidia GPUs up into space. Um, they released the new renderings of the, uh, Starmine AI1 satellites.

364
01:08:22.292 --> 01:08:30.352
These are the star-- these satellites which they, uh, anticipate putting up in constellation form as orbital data center platforms.

365
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These will include the Nvidia Ruben GPUs and Vera CPUs in a kind of condensed Vera Ruben, uh, NVR 72 rack stack.

366
01:08:44.132 --> 01:09:00.732
So the Vera Ruben, which comes as a 72 GPU rack, which we've talked about previously on with Luxur, um, they're basically making a more compact space version of one of these racks to fit on one of these satellites.

367
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And it apparently, supposedly, is a little bit custom built to accommodate heat dissipation and, uh, more, being a little more, more robust, et cetera.

368
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So, uh, Elon, of course, um, doesn't stop there because, uh, this same type of,

369
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uh, Starmine V1 satellite design, the same kind of compact, uh, NVR 72, um, like rack stack won't just be deployed in space, but it'll be deployed on their terrestrial data centers,

370
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um, because ap- apparently they e- come with increased data efficienc- data center efficiency, et cetera. Um,

371
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they are planning launches for these Starmine A1 satellites in 2027. Uh, their FCC filings referenced up to one million satellites, uh, for orbital compute. That would be in 2027. Um, very- Wait, 1 million in 2027?

372
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There's no way. Yeah. Perhaps, perhaps that is a, a little bit... I, I- That has to be like a multi-year target. Up to 1 million, so maybe they're kind of covering- Okay, I see. Yeah. Yeah.

373
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I mean, that would be an in- an incredible output, right? Uh, especially for something that's not proven yet. Yeah. Well, you say that. Uh-oh. Um- Is there already one of these floating around? [laughs] So,

374
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um, here's the Nvidia site, and they say, "The final frontier of space computing has arrived," and they basically give a little, um, insight into, um, you know, this particular class of Vera Ruben, uh, like terrestrial, uh, CPU ra- or terrestrial, uh, compute stack.

375
01:10:54.752 --> 01:11:06.312
But a lot of people may have not been paying attention. Nvidia has actually launched, um, earlier versions of, uh, compute satellites into space last year.

376
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They did little test runs, um, with some, uh, other smaller, uh, companies. Uh, they did an H100, um, build

377
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back in 2025, launched on a SpaceX Falcon 9. So d- and that, apparently that test worked, worked pretty well. Um, then, uh,

378
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these are, those were slightly different modules, the Jetson Oren modules. Um, and,

379
01:11:43.592 --> 01:11:56.092
uh, apparently those are, uh, starting to implement the optical data relay satellites that we kind of covered, um, a few weeks ago during the SpaceX heyday. And, uh, this is not just SpaceX.

380
01:11:56.172 --> 01:12:06.692
There are other partners who N-Nvidia is working with. But, um, Nvidia has a few of these, I don't wanna say prototypes, they're just proof of concept, like in space, and they do in fact work.

381
01:12:06.792 --> 01:12:24.302
So, uh, at scale with what I think, uh, the, the Starmine satellite, and that it says it will be some 30 to 35 times more powerful per, you know, in, in aggre compute over an, a stack of H100s. Uh,

382
01:12:25.812 --> 01:12:43.772
this would be, uh, pretty significant. Um, the... Um, yeah, I just wanna maybe like review like the stats of the satellite for the average person because, uh, this is, you have these, what?

383
01:12:44.112 --> 01:12:59.932
Gigawatt scale terrestrial data centers that Elon Musk is supposedly building. But these satellites are roughly 120 kilowatts each, and they're arranged in a constellation almost like a grid, um, in the sky,

384
01:13:01.112 --> 01:13:20.972
uh, in low Earth orbit, and they just launch teeming hordes of these up, and they just sit in kind of static orbit around, uh, around the Earth and, uh, perform compute workloads up there with, uh, optical communication between, uh, each other and then optical communication.

385
01:13:21.092 --> 01:13:31.928
Well, don't quote me on that. Not a-- Some kind of communication between satellite and the-... that's my question, is what will these be used for? Will these be for training, or will they be for inference, or both?

386
01:13:32.628 --> 01:13:43.148
Like, is, is there not a latency problem? 'Cause we were told for years that you have to have an inference data center close to a metro hub, or else the latency is too great and it's not, the performance degrades.

387
01:13:44.228 --> 01:13:52.808
You know, that's a good question. Um, I believe I was looking at low Earth orbit latency numbers, and they were, like, 30 to 60 milliseconds.

388
01:13:53.648 --> 01:14:04.158
Um, which is fine if you're gonna play, uh, you know, I'll take that, that ping if I'm gonna play a tactical shooter. So that doesn't really worry to... [laughs] I'm not too worried about that.

389
01:14:04.968 --> 01:14:13.178
Uh- Kinda sounds like a question like, you know, like a midwit on Reddit would ask, who's like, "These data centers in space can't even work." Yeah.

390
01:14:13.188 --> 01:14:24.387
So you o- often see these takes, it's like as though, like, the company investing billions of dollars into this endeavor has not thought about all of the problems through and [laughs] you know? Yeah.

391
01:14:25.508 --> 01:14:32.328
Uh, so, uh, for me, it's unclear. I wouldn't be surprised if, if it's some kind of hybrid. But, I mean, let's just do a little bit of math here.

392
01:14:32.728 --> 01:14:50.608
Up to a million satellites in a, in a mega-constellation, as they call it, at 120 kilowatts per satellite. How much is that? It's a gigawatt? Actually, I gotta do some math here. Yeah, it should be like 1.2, right?

393
01:14:51.168 --> 01:15:03.588
Yeah, like 1.2 gigawatts of, uh, of satellites up in space. Solar powered, exclusively solar powered. But if you think about that, that's not that much. Do you know what I mean?

394
01:15:03.848 --> 01:15:09.168
Like, if you actually think about, like, okay, you need a million of these to equate to 1.2 gigawatts,

395
01:15:10.668 --> 01:15:21.148
what change in form factor do we need to have to where these are, like, a megawatt in size or something like that, right? In terms of, like, actually... Because 1.2 gigawatts is, is nothing at this point.

396
01:15:21.308 --> 01:15:29.008
I mean, obviously that's a lot of power. Yeah. Obviously it's a lot of power. It's enough to, to power a midsize city in the US.

397
01:15:29.668 --> 01:15:37.048
But, uh, in the grand scheme of things, that's not going to be that much for how much material is needed to get these off the ground.

398
01:15:37.347 --> 01:15:46.268
I'd be really curious about the total CapEx cost for getting one of these up and running. 'Cause your OpEx cost is basically the repairs for them, right?

399
01:15:46.368 --> 01:15:56.268
Like, there's no- you're not paying for power up there, so that's going to be a huge boon. But, like, how much does it cost to actually build one of these satellites and then throw it into space? Also, a million?

400
01:15:56.908 --> 01:16:08.928
How many rocket launches we talking about here? Yeah. You know? The- Obviously that's, like, the extreme end, probably over multiple years, if not a decade plus. Yeah. But even so.

401
01:16:09.908 --> 01:16:19.868
Look, if you look at SpaceX's, like, uh, cost per, like, unit of payload that it takes them to push stuff up into the stars in the low Earth orbit, it's plummeting.

402
01:16:20.348 --> 01:16:30.648
So it gets lower every year, and with their new rockets, they get in- you know, incredibly much more efficient. They already s- send satellites up into, uh, space.

403
01:16:30.708 --> 01:16:47.137
They're the primary satellite, uh, you know, launch company in the world. And, uh, so, I mean, you know, eventually the cost and benefit, uh, curves do cross. Will probably intersect at some point. Yeah. Yeah.

404
01:16:47.148 --> 01:17:05.228
And my thought is, like, Colin, if, if they are ac- actually able to get to a million satellites in space, um, on whatever timeline, whether that's next year or sometime in the next several years, um, that, that to me is a very successful not just proof of concept, but gigawatt in space of compute.

405
01:17:05.748 --> 01:17:13.568
Um, I feel like that quickly becomes 10 to, uh, more than, you know, 10 to dozens of gigawatts of compute.

406
01:17:14.028 --> 01:17:21.228
Because E- uh, Elon's looking very, very sharp, and I brought this up months ago when we first started covering this topic.

407
01:17:21.768 --> 01:17:33.748
Given the rise in anti-data center, uh, sentiment, uh, in the United States, and having, uh, power, water, uh, you know, noise, whatever,

408
01:17:34.848 --> 01:17:50.568
all be issues, um, the, the, this i- this idea that it's always sunny in space may give way to the fact that you have no NIMBYs in space. Uh, short of maybe geopolitics. Yeah, I was thinking about this.

409
01:17:50.648 --> 01:17:56.428
Like, what is the regulatory and approval process for this, right? I mean, SpaceX is kind of...

410
01:17:57.628 --> 01:18:07.948
I mean, I know grandfathered in is not the right clause, but, like, they are one of the US government's principal contractors. Like, they're the most important contractor for the final frontier.

411
01:18:08.808 --> 01:18:17.628
And so how, what do you have to go through in terms of rigmarole to get actual approval to do something like this? 'Cause like you said, there's no NIMBYism in space.

412
01:18:17.648 --> 01:18:31.108
But I will say, I would actually take the other side of this from the sense of, like, I think that Elon Musk has become so politically radioactive for so many people that anything that he did, people would find an angle to scrutinize it.

413
01:18:31.528 --> 01:18:46.888
And they may, they won't be talking about, you know, okay, rolling out data centers and sucking up resources on Earth, but they will clutch pearls over the sanctity of space and how we can't have all of this space junk in there, if people are not already freaking out about this already.

414
01:18:46.988 --> 01:18:56.728
I think most people don't even know that this is happening, and the ones that do- No... they either are gigabullish SpaceX because of it, or they think it's a pipe dream that will never come to fruition. Yeah.

415
01:18:56.788 --> 01:19:02.508
There's nobody who knows about this side of SpaceX. Um, pretty much every single person thinks that SpaceX is a rocket company.

416
01:19:03.188 --> 01:19:15.988
Um, they're a rocket r- or they're a rocket company insofar as they transport their primary business into space, which is phase, which is either just heavy load or just other fee-paying customers.

417
01:19:15.998 --> 01:19:19.688
Uh- They're a data center company. The rockets are just the cherry on top. Yeah.

418
01:19:19.758 --> 01:19:27.718
The rockets- The rockets are the seed that will eventually grow into something that is more fruitful than anything else if, if SpaceX can actually lick- Yeah...

419
01:19:27.748 --> 01:19:38.828
interplanetary travel The rockets are the trucks that haul all the GPUs and the conduit and the containers and the building materials out to the data center site.

420
01:19:38.848 --> 01:19:50.708
That's like really, it's like calling, you know, the truck company that services a, a data center build-out the primary business model, so. That is all I've got.

421
01:19:50.768 --> 01:20:04.978
Again, disclaimer, we're not telling you to buy any specific stock. We're talking enthusiastically about some fun trends happening in the space. This is earnings week, so if you haven't been paying attention,

422
01:20:08.128 --> 01:20:20.228
this is day three of two weeks of earnings here on Block Space Live. Tomorrow we've got CleanSpark and Mara. On Friday we have Core Scientific. Asher Gnutt from Hut 8 joins the show on Friday to talk through this.

423
01:20:20.348 --> 01:20:32.128
Make sure to like and subscribe. We go live every day at 1:00 PM Eastern. We are Compute's daily live show featuring quick hits on the latest in AI, data centers, markets, and emerging technology.

424
01:20:33.588 --> 01:20:49.468
If you like what you hear, you'll love all the content on our website at blockspace.media. Website blockspace.media. This show is brought to you by CleanSpark. CleanSpark is Nasdaq listed, ticker CLSK. I'm Charlie.

425
01:20:49.548 --> 01:20:56.928
I'm Colin. And one quick correction, uh, CoreSci was on July 28th, so we will not be covering CoreSci on Friday. Ooh. Yes.

426
01:20:56.968 --> 01:21:10.428
We will be covering Mara and CleanSpark's earnings on Friday morning 'cause they come out Thursday evening. So tomorrow we won't have any specific earnings to cover, but we will be back at it on Friday with

427
01:21:11.388 --> 01:21:22.708
CleanSpark and Mara. And with that, I hope y'all have a beautiful Wednesday. See you out- see you tomorrow. [upbeat music]