TeraWulf Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed March 19, 2024. This is an annual report, not a standalone fourth-quarter report. Financial results are compared with FY2022.
Business context and operations
TeraWulf operates U.S. bitcoin-mining facilities at Lake Mariner, New York, and Nautilus, Pennsylvania, and receives some revenue from hosting third-party miners. Bitcoin is routinely sold for U.S. dollars. The company reported that 95% of facility energy use in 2023 was from zero-carbon sources; Nautilus is powered by nuclear energy, while Lake Mariner’s power mix includes both carbon and zero-carbon sources.
At year-end, the company reported 5.5 EH/s of operating capacity, including its net share of Nautilus, and approximately 48,900 miners deployed. Lake Mariner had 115 MW energized at December 31, with a third building adding 45 MW during Q1 2024; the filing elsewhere describes 160 MW as of year-end, so the capacity date should be checked. TeraWulf held a 25% equity interest in Nautilus but received bitcoin distributions based on its share of the joint venture’s hashrate. In February 2024, it elected to add 50 MW of Nautilus capacity, bringing its attributable energy allocation to 100 MW.
Financial results and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $69.2 million | $15.0 million |
| Mining revenue | $61.7 million | $10.5 million |
| Hosting revenue | $7.5 million | $4.6 million |
| Gross profit | $41.9 million | $4.0 million |
| Operating loss | $(29.4) million | $(43.7) million |
| Net loss attributable to common stockholders | $(74.5) million | $(91.6) million |
| Adjusted EBITDA (non-GAAP) | $30.7 million | $(34.2) million |
| Cash provided by operating activities | $4.3 million | $(34.1) million |
Revenue rose $54.2 million, primarily from expanded mining and hosting capacity. Gross margin was approximately 60.5% versus 26.3% in 2022; operating margin was approximately negative 42.5%. Higher depreciation ($28.4 million versus $6.7 million) and interest expense ($34.8 million versus $24.7 million) remained significant drags. Adjusted EBITDA is a company-defined non-GAAP measure; it includes $21.9 million of Nautilus distributions and excludes, among other items, interest, depreciation, stock compensation, and equity-method losses.
Reported average energy cost was $0.032/kWh in 2023. The company mined 3,343 bitcoin in the measure presented (excluding certain hosting profit-share bitcoin); reported direct cost to mine was $8,705 per bitcoin, compared with an average reported value of $29,645. These figures exclude depreciation and miner acquisition costs. Demand-response proceeds of $3.5 million reduced cost of revenue.
At December 31, cash and cash equivalents were $54.4 million, working capital deficiency was $92.1 million, stockholders’ equity was $222.5 million, and accumulated deficit was $259.9 million. Investing activities used $78.0 million, including $75.2 million for plant and equipment. Financing activities provided $119.9 million, including $135.9 million net proceeds from common-stock issuance. Shares outstanding increased from 145.5 million at year-end 2022 to 276.7 million at year-end 2023; 302.2 million were outstanding on March 15, 2024.
Term-loan principal was $139.4 million at year-end, bearing 11.5% stated interest and due December 1, 2024; it was classified largely as current. In February 2024, the company repaid $40.0 million, extending the excess-cash-flow sweep through maturity. By March 19, 2024, principal was $106.0 million. Subsequent ATM sales through that date generated $49.9 million net from 22.9 million shares.
Material changes, outlook, and risks
- Management plans to expand mining capacity and complete a fourth Lake Mariner building; an additional 35 MW there was expected to become operational in mid-2024. The company also allocated 2 MW at Lake Mariner to a pilot HPC initiative for potential AI and other compute workloads. No financial guidance or quantified HPC revenue outlook is provided.
- Management expects to fund operations and infrastructure through operating cash flows, bitcoin sales, cash on hand, and potentially equity issuance. It concluded that substantial doubt about continuing as a going concern was not present for at least the next 12 months, based on forecasts for bitcoin prices, network hashrate, and power prices. This outlook is sensitive to those assumptions.
- The next bitcoin halving was expected in April 2024, reducing the block reward from 6.25 to 3.125 bitcoin. Bitcoin price volatility, rising network difficulty, power-price exposure at Lake Mariner, and the need to keep expanding hashrate may affect mining economics.
- Other principal risks include the 2024 loan maturity and restrictive debt covenants; potential equity dilution; construction, equipment-supply, and capital-access risks; dependence on Bitmain, Foundry’s mining pool, and NYDIG custody; evolving crypto and energy regulation; and cybersecurity or power interruptions. The Nautilus venture is controlled principally by Talen, which has majority board representation.
- Related-party arrangements are material: Beowulf E&D, controlled by the CEO, received $20.3 million in 2023 under service and related arrangements. The Lake Mariner ground lease is also with a CEO-controlled entity. The filing reports no material pending legal proceedings.
- Auditors issued an unqualified opinion on the financial statements. Management concluded internal control over financial reporting was effective at year-end and said a previously identified material weakness in cash-flow classification controls had been remediated; the auditor did not opine on internal-control effectiveness.
Investor verification priorities
- Reconcile the filing’s differing descriptions of Lake Mariner year-end capacity (115 MW versus 160 MW) and confirm actual operating hashrate and energized capacity after subsequent expansions.
- Review the February 2024 $40.0 million debt repayment, subsequent ATM issuance, remaining loan principal, maturity terms, covenants, and available liquidity.
- Assess the sustainability of positive operating cash flow and Adjusted EBITDA, including the treatment and recurrence of Nautilus bitcoin distributions and the measure’s exclusions.
- Check realized mining economics after the April 2024 halving, including bitcoin price, network difficulty, power cost, curtailments, and depreciation/capital spending.
- Monitor dilution from ATM sales and outstanding warrants, and review related-party service, lease, and incentive arrangements.