Terawulf Inc.
11/10/2025 | Press release | Distributed by Public on 11/10/2025 16:12
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with a review of the other Items included in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. All figures presented below represent results from continuing operations, unless otherwise specified. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the consolidated financial statements. Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the "Company," "TeraWulf," "we," "us" or "our" refers to TeraWulf Inc. and its consolidated subsidiaries, unless otherwise indicated. Certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations may be deemed forward-looking statements. See "Forward-Looking Statements."
Overview
We are a vertically integrated owner and operator of digital infrastructure assets in the United States, purpose-built to support high-performance computing ("HPC") workloads. We develop, own, and operate large-scale, low-carbon datacenter campuses anchored by long-duration, cost-efficient power resources. Our strategy is predicated on controlling infrastructure at utility scale, enabling us to serve Tier-1 counterparties through long-term hosting arrangements.
Our primary operations are centered at the Lake Mariner Campus, strategically located on the shores of Lake Ontario. Developed on the site of a decommissioned coal-fired power plant, this expansive facility is designed for scalable growth, with 500 MW and up to 750 MW with targeted transmission upgrades. Purpose-built to support both bitcoin mining and GPU-driven HPC workloads, the Lake Mariner Campus is well-positioned to meet the rising demand for compute-intensive applications. This dual-purpose strategy enhances operational efficiency, diversifies revenue streams, and strengthens our position in the evolving digital economy.
As of the date of this Quarterly Report, the Lake Mariner Campus has 245 MW of energized capacity supporting bitcoin mining infrastructure and has energized 22.5 MW of HPC leasing capacity. TeraWulf remains on track to deliver an additional 50 MW of HPC leasing capacity under its datacenter lease agreements with Core42 Holding US LLC ("Core42"), a G42 company specializing in sovereign cloud, AI infrastructure, and digital services.
On May 21, 2025 (the "Acquisition Date"), the Company acquired 100% of the membership interests in Beowulf Electricity & Data LLC, Beowulf E&D (MD) LLC, and Beowulf E&D (NY) LLC (collectively, "Beowulf E&D"). The fair value of total consideration for the transaction was approximately $54.6 million, including $3.0 million in cash and 5.0 million shares of Common Stock issued on the Acquisition Date. The purchase agreement also includes up to $19.0 million in contingent cash payments and up to $13.0 million in additional Common Stock, subject to the achievement of key milestones related to the expansion of the Company's datacenter business and project financing initiative. As part of the acquisition, 94 employees of Beowulf E&D, including site staff at the Lake Mariner Campus and corporate personnel, were transitioned to TeraWulf. In addition, the existing Administrative and Infrastructure Services Agreement (the "Services Agreement") with Beowulf E&D was terminated on the Acquisition Date.
On August 12, 2025, the Company entered into a long term ground lease for approximately 183 acres in Lansing, New York (the "Cayuga Site"). The Cayuga Site, which, upon completion of permitting and site development, has the potential to support up to 400 MW of incremental capacity. The Cayuga Site provides a second anchor location in a low-carbon region with existing interconnection and supporting infrastructure, supporting the Company's forward pipeline for growth.
On October 27, 2025, the Company entered into an amended and restated limited liability company agreement (the "Abernathy Joint Venture Agreement") with Fluidstack CS I Inc. (the "Fluidstack Member"), an affiliate of Fluidstack USA I Inc., to govern the terms of operation of FS CS I LLC (the "Abernathy Joint Venture"), which will develop and operate an HPC datacenter located in Abernathy, Texas (the "Abernathy HPC Campus"). The Abernathy HPC Campus has been engineered for phased, large-scale deployments of liquid-cooled hyperscale compute and is supported by investment-grade credit enhancement. Pursuant to the terms of the Abernathy Joint Venture Agreement, the TeraWulf Member and the Fluidstack Member will be the sole initial members of the Abernathy Joint Venture, with the TeraWulf Member owning 50.1% of the equity interests and the Fluidstack Member owning 49.9% of the equity interests as of the date of the Abernathy Joint Venture Agreement.
As of the date of this Quarterly Report, TeraWulf derives the majority of its revenue by providing hash computation services to a mining pool operator, facilitating transaction validation of transactions on the global bitcoin network using the Company's fleet of application-specific integrated circuit ("ASIC") miners. While capable of mining other digital assets, the Company has no current plans to do so.
Bitcoin, introduced in 2008, revolutionized digital finance by enabling a decentralized system for exchanging and storing value without reliance on traditional financial institutions. It operates on a public ledger known as the "blockchain," which records every transaction transparently and securely. This decentralized structure eliminates the need for intermediaries, enhancing transaction efficiency while making the network resilient to censorship and fraud. Unlike fiat currencies, bitcoin is not controlled by any government or central bank, reinforcing its role as a scarce, independent store of value.
Bitcoin mining is the process of validating transactions and securing the network through proof-of-work consensus, where miners solve complex cryptographic puzzles to add new blocks to the blockchain. The network is maintained by a global pool of distributed nodes, ensuring transaction integrity and preventing double-spending. Key factors influencing mining economics include computing power, energy costs, and network difficulty, with miners competing to maximize their share of the total computational power (hashrate) deployed on the bitcoin network. As more miners participate, the network difficulty adjusts dynamically every 2,016 blocks (approximately every two weeks) to maintain a consistent block creation rate.
Bitcoin Reward Halving
Bitcoin's supply issuance follows a predefined halving schedule, reducing the block reward by 50% approximately every four years. This mechanism enforces a controlled supply of bitcoin, contributing to its scarcity and long-term value proposition. The total bitcoin supply is capped at 21 million coins, and halvings will continue until this limit is reached.
The most recent halving occurred on April 19, 2024, reducing the block reward from 6.25 to 3.125 bitcoin per block. While the halving decreases the direct mining subsidy, transaction fees remain an additional source of miner revenue. This built-in supply constraint influences mining economics and often plays a role in bitcoin's long-term price dynamics.
The April 2024, halving intensified competition among miners and underscores the importance of our access to low-cost power and vertically integrated business model. These advantages are increasingly critical to sustaining profitability in the post-halving environment.
Business Strategy
TeraWulf's business strategy centers on the development, ownership, and operation of large-scale, power-advantaged digital infrastructure serving hyperscale and enterprise HPC workloads. Our approach is differentiated by (i) majority ownership and direct control of infrastructure, (ii) development in markets with low-cost, low-carbon, long-duration power, and (iii) contracting long-term revenue streams with Tier-1 counterparties supported by investment-grade balance sheets or guarantees.
The strategy has three foundational elements:
Platform Control and Vertical Integration - We own and control the critical infrastructure necessary to deliver HPC leasing capacity, including land (via long-term ground leases), interconnection rights, and cooling and electrical infrastructure. Vertical control allows us to capture infrastructure returns and maintain governance authority through development and early operations.
Long-Duration, Credit Enhanced Contracting - Our HPC arrangements are structured as long-term datacenter leases with 10 to 25-year base terms and extension and contraction options. In both of the New York Independent System Operator ('NYISO') (Lake Mariner) and Southwest Power Pool ("SPP") (Abernathy) campuses, contracted revenues are further supported by Google financial backstops in support of project debt, materially strengthening the credit profile of contracted revenues.
Scalable Multi-Phase Buildout - Each campus is designed for modular, sequential expansion. Initial phases deliver near-term contracted capacity, while additional phases are added in line with tenant deployment schedules. This allows us to convert advantaged infrastructure positions into incremental contracted capacity efficiently.
This combination is designed to yield durable, infrastructure-style cash flows while enabling future growth as demand for compute accelerates. The Company's platform pipeline supports 250 MW to 500 MW of additional contracted IT load per year, supplementing the 594 MW already under contract.
Bitcoin mining remains a complementary component of the Lake Mariner Campus, leveraging the same low-cost, low-carbon infrastructure and serving as a flexible load; however, HPC is the Company's primary growth driver and capital allocation priority.
Our Facilities
Strategically located in Barker, New York, on the site of a former coal-fired power plant, the Lake Mariner Campus began operations in March 2022, designed to initially to support sustainable bitcoin mining. As of the date of this Quarterly Report, the mining facilities are capable of operating 245 MW of bitcoin mining capacity. In July 2025, TeraWulf commenced its HPC leasing operations and currently has energized 22.5 MW of HPC leasing capacity at the Lake Mariner Campus.
The Lake Mariner Campus sources 100% of its power from the Zone A grid, which is characterized by low-cost, low-carbon energy. Of the campus's total power needs, 90 MW is secured under a Power Purchase Agreement with the New York Power Authority ('NYPA") executed in February 2022, which provides high-load factor power under a ten-year term commencing with NYPA's initial power delivery. The Lake Mariner Campus is built for scalable expansion, with 500 MW and potentially 750 MW with targeted transmission upgrades. Its strategic location and direct access to sustainable Zone A power make it a highly attractive site for both bitcoin mining and HPC workloads.
During the three and nine months ended September 30, 2025 and 2024, we operated bitcoin mining activities as well as commenced our HPC leasing operations at the Lake Mariner Campus. During the three and nine months ended September 30, 2024, we also operated bitcoin mining activities at the jointly owned Nautilus Cryptomine Facility located in central Pennsylvania. In October 2024, we sold our entire equity interest in Nautilus Cryptomine LLC ("Nautilus"), allowing us to consolidate operations and reinvest in future infrastructure growth.
The Lake Mariner HPC Datacenter
We operate the Lake Mariner HPC Datacenter through our subsidiaries La Lupa Data LLC ("La Lupa") and Akela Data LLC ("Akela"). At the Lake Mariner HPC Datacenter, we deliver scalable, energy-efficient and environmentally responsible datacenter solutions tailored to the rapidly growing needs of artificial intelligence, machine learning and cloud computing workloads. By leveraging our engineering expertise, scalable infrastructure, and cost-efficient power models, we aim to become a premier hosting provider for enterprises requiring high-density compute capacity. Through La Lupa and Akela, we have signed 522.5 MW of HPC leasing agreements, with operations commencing in 2025 and 2026.
La Lupa
In December 2024, La Lupa entered into ten-year datacenter lease agreements with Core42 (the "Core42 Leases"), pursuant to which we committed to deliver 72.5 MW of HPC hosting capacity at the Lake Mariner Datacenter for GPU compute workloads. The Core42 Leases include two five-year renewal options and we remain in discussions with Core42 regarding future capacity.
This project accelerates our HPC hosting expansion, positioning us at the intersection of energy and digital compute infrastructure. To support this expansion, we have expanded our digital infrastructure at the site, featuring advanced liquid cooling systems and Tier 3 redundancy. This infrastructure will be optimized for high-density compute workloads, reinforcing our ability to attract hyperscale and enterprise customers. The contracted ten-year revenues for the Core42 Leases are expected to total approximately $1.1 billion.
Akela
In August 2025, Akela entered into three datacenter lease agreements (the "Fluidstack Leases") with Fluidstack USA I Inc. (together with its affiliates, "Fluidstack"), a leading AI cloud platform. Under the Fluidstack Leases, we will provide a total of more than 360 MW of critical IT load for HPC datacenter operations at the Lake Mariner Datacenter. Akela is expected to complete construction and deliver the premises to Fluidstack in three phases in 2026 (the "Lake Mariner Datacenter Expansion"). The total budgeted cost of the construction of the Lake Mariner HPC Datacenter has been financed.
Fluidstack's obligations to pay rent under each of the Fluidstack Leases begin on the delivery of the premises for each applicable Akela project and continue for a 10-year term thereafter. The Fluidstack Leases each include two five-year renewal options at the tenant's election.
The table below presents the lease and nonlease components of HPC lease revenue for the three and nine months ended September 30, 2025 and 2024:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
|
HPC lease revenue(1)
|
|||||||||||||||||||||||
|
Rent
|
$ | 5,747 | $ | - | $ | 5,747 | $ | - | |||||||||||||||
|
Power passthrough(2)
|
326 | - | 326 | - | |||||||||||||||||||
|
Maintenance and other
|
1,129 | - | 1,129 | - | |||||||||||||||||||
|
Total HPC lease revenue
|
$ | 7,202 | $ | - | $ | 7,202 | $ | - | |||||||||||||||
|
Cost of revenue (exclusive of depreciation)(2)
|
326 | - | 326 | - | |||||||||||||||||||
(1)Certain of the Core42 Leases commenced in 2025 which comprised 22.5 MW of HPC lease capacity as of September 30, 2025. The remainder of the HPC Leases are expected to commence in 2026.
(2)Cost of revenue (exclusive of depreciation) represents power costs which are passed through to the customer without markup and are included on a gross basis in HPC lease revenue.
The Bitcoin Mining Facilities
As of September 30, 2025, we owned approximately 61,500 miners, with approximately 56,100 operational at our bitcoin mining facilities on the Lake Mariner Campus (the" Bitcoin Mining Facilities") and the remainder undergoing maintenance, awaiting disposal or on standby to replace miners under repair. These miners were comprised as follows:
| Vendor and Model | Number of miners | ||||
| Bitmain S19 XP | 9,400 | ||||
| Bitmain S19j XP | 15,000 | ||||
| Bitmain S19k Pro | 2,300 | ||||
| Bitmain S21 | 8,100 | ||||
| Bitmain S21 Pro | 26,700 | ||||
| 61,500 | |||||
As of September 30, 2025, our fleet of miners ranged in age from 0.4 years to 3.3 years with an average age of approximately 1.1 year. We do not have scheduled downtime for our miners and while we periodically perform unscheduled maintenance on our miners, such downtime has not been significant historically. When performing unscheduled maintenance, depending on the length of estimated repair time, we may replace a miner with a substitute miner to limit overall downtime. As of September 30, 2025, our fleet of miners at the Bitcoin Mining Facilities had a range of energy efficiency from 15.0 to 23.0 joules per terahash (""j/th") and an average energy efficiency of 17.5 j/th.
The Nautilus Cryptomine Facility
Located in Berwick, Pennsylvania, Nautilus was a joint venture between TeraWulf and Talen Member. Under the Nautilus joint venture agreement and prior to the sale of TeraWulf's interests in Nautilus in October 2024, the Company held a 25% equity interest in Nautilus and Talen held a 75% equity interest, with ownership subject to adjustments based on capital contributions. Nautilus owned and operated the Nautilus Cryptomine Facility, a 200 MW bitcoin mining operation situated adjacent to the 2.5 gigawatt nuclear-powered Susquehanna Station, which was the first bitcoin mining facility site powered entirely by behind-the-meter zero-carbon nuclear energy, operating under a fixed-rate power contract of 2.0 cents per kilowatt hour ("kWh") for a five-year term, with options for two three-year renewals.
TeraWulf began mining bitcoin at the Nautilus Cryptomine Facility in the first quarter of 2023 with an allotted 50 MW of operational bitcoin mining capacity. While holding a 25% equity stake, TeraWulf's share of mined bitcoin was determined by relative hashrate contributions. The Company had contributed approximately 1.9 EH/s of the facility's total 5.2 EH/s capacity, representing approximately 35.7% of the total hashrate attributed to the Company. At the time of TeraWulf's ownership, the Nautilus Cryptomine Facility deployed approximately 48,000 miners, of which 15,800 miners were attributed to TeraWulf's contribution to utilize is 50 MW allotment.
In October 2024, TeraWulf sold its entire equity interest in Nautilus, allowing the Company to reallocate capital toward expanding its digital infrastructure at the Lake Mariner Campus and advancing its HPC leasing strategy. As part of the transaction, Nautilus distributed to TeraWulf all of its right, title, and interest in its miners, as well as certain other related equipment.
Bitcoin Mining - Combined Facilities
As outlined above, several factors influence our ability to mine bitcoin profitably, including bitcoin's USD value, mining difficulty global hashrate, power costs, fleet energy efficiency, and overall datacenter efficiency. Among these, energy efficiency is a critical driver of profitability, as power costs represent the most significant direct expense in bitcoin mining. We believe we operate a highly efficient mining fleet, optimized to maximize output while minimizing energy consumption. To assess operational performance and effectiveness, the Company tracks key metrics, which we believe are also valuable to investors for evaluating our progress and benchmarking against industry peers.
The table below presents our miner efficiency and computing power as compared to the global computing power as of September 30, 2025 and 2024:
|
Combined facilities(1)
|
September 30, 2025 | September 30, 2024 | |||||||||
|
Global hashrate (EH/s)(2)
|
1,139.0 | 602.1 | |||||||||
|
Miner efficiency (j/th)(3)
|
17.5 | 23.2 | |||||||||
|
TeraWulf operational hashrate (EH/s)(4)
|
8.5 | 8.1 | |||||||||
|
TeraWulf percentage of global hashrate
|
0.7 | % | 1.3 | % | |||||||
(1)Results as of September 30, 2024 reflect hashrate of mining operations at the Bitcoin Mining Facilities and TeraWulf's net share of hashrate produced at the Nautilus Cryptomine Facility.
(2)Total global hashrate obtained from YCHARTS (https://ycharts.com/indicators/bitcoin_network_hash_rate)
(3)Joules of energy required to produce each terahash of processing power
(4)While nameplate at the Bitcoin Mining Facilities was 11.6 EH/s as of September 30, 2025 and was 10.0 EH/s for TeraWulf's two facilities as of September 30, 2024, actual operational hashrate depends on a variety of factors, including (but not limited to) performance tuning to increase efficiency and maximize margin, scheduled outages (scopes to improve reliability or performance), unscheduled outages, curtailment due to participation in various cash generating demand response programs, derate of ASICS due to adverse weather and ASIC maintenance and repair.
As of September 30, 2025, our operational hashrate represented approximately 0.7% of the total global hashrate, aligning with our share of global blockchain rewards, which as of that date, is equivalent to approximately 4.5 bitcoin mined per day. To maintain profitably, we focus on optimizing operational efficiency and cost management, ensuring that our mining rewards consistently cover direct operating expenses.
The table below presents the average cost of mining each bitcoin for bitcoin mined at the Bitcoin Mining Facilities and for the three and nine months ended September 30, 2025, includes the Company's net share of bitcoin mined at the Nautilus Cryptomine Facility and the total energy cost per kWh utilized within the facilities:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| Cost of mining - Analysis of costs to mine one bitcoin | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
|
Cost of mining - Lake Mariner Campus and net share of the Nautilus Cryptomine Facility(1)
|
|||||||||||||||||||||||
| Cost of energy per bitcoin mined | $ | 44,655 | $ | 30,448 | $ | 51,457 | $ | 21,360 | |||||||||||||||
| Other direct costs of mining - non energy utilities per bitcoin mined | $ | 74 | $ | 51 | $ | 66 | $ | 36 | |||||||||||||||
|
Cost to mine one bitcoin(2)
|
$ | 44,729 | $ | 30,499 | $ | 51,523 | $ | 21,396 | |||||||||||||||
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Value of each bitcoin mined(3)
|
$ | 115,053 | $ | 61,075 | $ | 101,658 | $ | 59,247 | |||||||||||||||
| Cost to mine one bitcoin as % of value of bitcoin mined | 38.9 | % | 49.9 | % | 50.7 | % | 36.1 | % | |||||||||||||||
| Statistics | |||||||||||||||||||||||
|
Lake Mariner Campus and net share of the Nautilus Cryptomine Facility
|
|||||||||||||||||||||||
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Total bitcoin mined(4)
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377 | 555 | 1,234 | 2,305 | |||||||||||||||||||
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Total value of bitcoin mined(3) ($ in thousands)
|
$ | 43,375 | $ | 33,898 | $ | 125,416 | $ | 136,562 | |||||||||||||||
| Total MWhs utilized | 357,754 | 444,818 | 1,080,404 | 1,267,749 | |||||||||||||||||||
|
Total energy expense, net of expected demand response proceeds(5) ($ in thousands)
|
$ | 16,835 | $ | 16,899 | $ | 63,482 | $ | 49,226 | |||||||||||||||
| Cost per kWh | $ | 0.047 | $ | 0.038 | $ | 0.059 | $ | 0.039 | |||||||||||||||
| Energy expense, net as % of value of bitcoin mined | 38.8 | % | 49.9 | % | 50.6 | % | 36.0 | % | |||||||||||||||
|
Other direct costs of mining ($ in thousands)
|
$ | 28 | $ | 28 | $ | 82 | $ | 84 | |||||||||||||||
(1)Results for the three and six months ended September 30, 2024 reflect hashrate of mining operations at the Bitcoin Mining Facilities and TeraWulf's net share of hashrate produced at the Nautilus Cryptomine Facility.
(2)"Cost to mine one bitcoin" is a cash cost metric and does not include depreciation. Although the Company recognizes depreciation with respect to its mining assets, it does not consider depreciation in determining whether it is economical to operate its mining equipment. As a result, the Company does not consider the sunk costs or depreciation of past capital investments in its historical or forecasted breakeven analysis. If depreciation of our miner fleet were factored into the above cost of mining analysis, it would add $70,277 and $49,335 for the three and nine months ended September 30, 2025, respectively, bringing the total "cost to mine one bitcoin" to $115,006 and $100,858 for the three and nine months ended September 30, 2025, respectively. If depreciation of our miner fleet were factored into the above cost of mining analysis, it would add $28,827 and $20,477 for the three and nine months ended September 30, 2024, respectively, bringing the total "cost to mine one bitcoin" to $59,326 and $41,873 for the three and nine months ended September 30, 2024, respectively.
(3)Computed as the weighted-average opening price of bitcoin on each respective day the mined bitcoin is earned. Excludes bitcoin earned from profit sharing associated with a bitcoin miner hosting agreement that expired in February 2024 at the Bitcoin Mining Facilities.
(4)Excludes bitcoin earned from profit sharing associated with a bitcoin miner hosting agreement that expired in February 2024 at the Bitcoin Mining Facilities and includes TeraWulf's net share of bitcoin mined at the Nautilus Cryptomine Facility, based on the hashrate share attributed to the Company.
(5)Excludes energy expenses associated with a bitcoin miner hosting agreement that expired in February 2024 at the Bitcoin Mining Facilities and includes TeraWulf's net share of energy expense at the Nautilus Cryptomine Facility, based on aggregate nameplate power consumption of deployed miners attributed to TeraWulf's contribution to Nautilus.
Power costs are the most significant expense in our bitcoin mining operations, accounting for 38.9% and 50.7% of the total value of bitcoin mined for the three and nine months ended September 30, 2025, respectively, and 49.9% and 36.1% for the three and nine months ended September 30, 2024, respectively. The increase in power costs as a percentage of bitcoin mined for the three and nine months ended September 30, 2025 as compared to 2024 was primarily driven by a near doubling of network difficulty and the bitcoin reward halving in April 2024, which reduced block rewards. The increase in three and nine months ended September 30, 2025 is also driven by historically high power prices in the first quarter of 2025. These impacts were partially offset by growth in our average operating hashrate and an increase in the average market value of each bitcoin mined.
Energy prices are highly volatile, influenced by global events that can drive nationwide fluctuations in power costs. At the Lake Mariner Campus, power costs are subject to variable market rates, which can change hourly based on wholesale electricity pricing. While this introduces some unpredictability, it also provides us with the flexibility to actively manage our energy consumption, optimizing for profitability and efficiency. Energy prices are also highly sensitive to weather conditions, such as winter storms, which can increase regional power demand and drive up costs. During such events, we may curtail operations to avoid consuming power at peak rates, or we may be curtailed under demand response programs in which we participate. The average aggregate realized power prices at the Lake Mariner Campus were $0.047 and $0.059 per kWh during the three and nine months ended September 30, 2025, respectively, and $0.038 and $0.039 per kWh at the Lake Mariner Campus and the Nautilus Cryptomine Facility during the three and nine months ended September 30, 2024, respectively.
Our management and operations teams continuously monitor market conditions to determine when and for how long to curtail operations. If curtailment is not mandated under demand response programs, we make real-time decisions to curtail mining whenever power prices exceed the value of the fixed bitcoin reward. As a result, curtailment increases when bitcoin's value declines or energy prices rise, and decreases when bitcoin's value appreciates or energy costs fall. These decisions are actively managed on an hour-by-hour basis to optimize profitability.
During the three and nine months ended September 30, 2025 and 2024, we curtailed operations at the Bitcoin Mining Facilities in response to weather events, energy price spikes, and participation in demand response programs. The Company records expected payments to be received for demand response programs as a reduction in cost of revenue, which amounted to $7.4 million and $13.3 million for the three and nine months ended September 30, 2025, respectively, and $4.1 million and $7.3 million for the three and nine months ended September 30, 2024, respectively.
The Company has purchased all miners with cash, without relying on limited recourse equipment financing for miner acquisitions. To support operations and purchase miners and other fixed assets, we have raised capital through both equity issuances and corporate-level debt. Costs related to these capital raises are not included in this analysis.
Miner acquisition costs, or capital expenditures, are not factored into the cost of mining analysis, as they do not impact the marginal cost of producing one bitcoin. Instead, these costs are recorded as property, plant and equipment in the condensed consolidated balance sheets. Depreciation of property, plant and equipment is calculated using the straight-line method, with estimated useful lives of four years for miners and five years for computer equipment.
During the three and nine months ended September 30, 2025, the Company recorded accelerated depreciation expense of $7.8 and $7.8, respectively, related to the planned decommissioning of MB-3 January, including all miners and infrastructure. During the three and nine months ended September 30, 2024, the Company recorded accelerated depreciation expense of $0.0 million and $5.1 million, respectively, related to certain miners whose estimated useful lives were shortened due to planned replacement by April 2024.
While our standard depreciation period for miners is four years, historically low power costs may allow for a longer actual useful life in certain circumstances. However, if depreciation were included in the cost of mining analysis, it would add $70,277 and $49,335 per bitcoin mined for the three and nine months ended September 30, 2025, respectively, and $28,827 and $20,477 per bitcoin mined for the three and nine months ended September 30, 2024, respectively.
Estimating asset useful lives requires management judgment, particularly given the rapid evolution of next-generation mining rigs in industrial-scale bitcoin mining. Depreciation schedules may be adjusted if events, regulatory changes, or shifts in operating conditions indicate a need for revision. Management continuously evaluates factors such as future energy market conditions, operating costs, maintenance practices and capital investment needs to ensure depreciation assumptions remain reasonable. When an asset's estimated useful life is adjusted - either shortened or extended - depreciation provisions are updated accordingly, which could have a material impact on future financial results.
Recent Developments
On October 22, 2025, TeraWulf completed a private offering of $3,200.0 million aggregate principal amount of 7.75% 2030 Secured Notes. The net proceeds of the 2030 Secured Notes will be used to finance a portion of the cost of the HPC buildout at the Lake Mariner Campus.
On October 27, 2025, the Company entered into the Abernathy Joint Venture Agreement with the Fluidstack Member to govern the terms of operation of the Abernathy Joint Venture, which will develop and operate an HPC datacenter located on the Abernathy HPC Campus.
On October 31, 2025, the Company completed a private offering of 0.000% Convertible Senior Notes due 2032 (the "2032 Convertible Notes"). The 2032 Convertible Notes were sold under a purchase agreement, dated as of October 29, 2025, entered into by and between the Company and Morgan Stanley & Co. LLC and Cantor Fitzgerald & Co., as representatives of the several initial purchasers named therein (the "Initial Purchasers"), for resale to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act. The aggregate principal amount of notes sold in the offering was $1,025.0 million, which includes $125.0 million aggregate principal amount of notes issued pursuant to an option to purchase additional notes granted to the Initial Purchasers under the purchase agreement, which the Initial Purchasers exercised in full on October 30, 2025 and which additional purchase was completed on October 31, 2025. The 2032 Convertible Notes were issued at a price equal to 100% of their principal amount. The net proceeds from the sale of the 2032 Convertible Notes were approximately $999.4 million after deducting the Initial Purchasers' discounts and commissions and estimated offering expenses payable by the Company.
Results of Operations
The Company generates revenue in the form of bitcoin by providing hash computation services to a mining pool operator to mine bitcoin and validate transactions on the global bitcoin network using miners owned by the Company. The earned bitcoin are routinely sold for U.S. dollars. The Company also previously earned revenue by providing bitcoin miner hosting services to third parties.
In July 2025, the Company commenced its HPC leasing operations. HPC lease revenue is generated by leasing datacenter space and providing related services to our HPC customers. These leasing agreements include lease components, nonlease components (such as power delivery, physical security, maintenance), as well as non-component elements such as taxes. Under these leases, customers pay fixed payments (based on electric capacity) and variable payments on a recurring basis. HPC power costs are passed through to the customer without markup and are included on a gross basis in HPC lease revenue.
The Company's business strategy centers on growing revenue and profitability by enhancing the capacity and efficiency of our bitcoin mining fleet while expanding our datacenter infrastructure to support HPC leasing activities. We plan to strategically develop the infrastructure necessary for profitability of bitcoin mining while pursuing adjacent high-value HPC leasing opportunities that leverage our power utilization and digital infrastructure. We are confident that our expertise in power infrastructure and digital asset mining can be favorably applied to the design, development, and operation of large-scale datacenters. These datacenters are optimized for high-value applications such as cloud computing, machine learning, and artificial intelligence. We are actively seeking opportunities to expand into these areas using our knowledge, expertise, and existing infrastructure wherever favorable market opportunities arise.
Revenue
The following table presents revenue (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Digital asset revenue | $ | 43,375 | $ | 27,059 | $ | 125,416 | $ | 105,066 | |||||||||||||||
|
HPC lease revenue
|
7,203 | - | 7,203 | - | |||||||||||||||||||
| Total revenue | $ | 50,578 | $ | 27,059 | $ | 132,619 | $ | 105,066 | |||||||||||||||
| Percentage of total revenue | |||||||||||||||||||||||
| Digital asset revenue | 86% | 100% | 95% | 100% | |||||||||||||||||||
|
HPC lease revenue
|
14% | 0% | 5% | 0% | |||||||||||||||||||
| Total revenue | 100% | 100% | 100% | 100% | |||||||||||||||||||
Total revenue for the three months ended September 30, 2025 and 2024 was $50.6 million and $27.1 million, respectively, representing an increase of $23.5 million. Total revenue for the nine months ended September 30, 2025 and 2024 was $132.6 million and $105.1 million, respectively, representing an increase of $27.5 million. These changes were a result of the factors described below.
Digital asset revenue for the three months ended September 30, 2025 and 2024 was $43.4 million and $27.1 million, respectively, representing an increase of $16.3 million. Digital asset revenue for the nine months ended September 30, 2025 and 2024 was $125.4 million and $105.1 million, respectively, representing an increase of $20.3 million. These increases were primarily due to the increase in average bitcoin prices during the periods, partially offset by a decrease in total bitcoin mined during the periods. Although the Company expanded its mining infrastructure capacity, due to the halving in April 2024 as well as an increase in network difficulty, the Company mined 377 and 1,234 bitcoin during the three and nine months ended September 30, 2025, respectively, compared to 555 and 2,305 bitcoin during the same three and nine month period in the prior year, respectively.
Bitcoin prices averaged $114,390 and $102,192 per bitcoin during the three and nine months ended September 30, 2025, respectively, as compared to $61,023 and $60,022 per bitcoin during the three and nine months ended September 30, 2024, respectively.
During the three and nine months ended September 30, 2024, the Company also reported revenue from bitcoin miner hosting of $0 and $0.8 million prior to the expiration of the Company's one bitcoin miner hosting contract with a customer in February 2024.
HPC lease revenue for the three and nine month ended September 30, 2025 was $7.2 million. In July 2025, TeraWulf commenced its HPC leasing operations and currently has energized 22.5 MW of HPC leasing capacity at the Lake Mariner Campus.
Costs and Expenses
The following table presents cost of revenue (exclusive of depreciation) (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Cost of revenue (exclusive of depreciation) | $ | 17,123 | $ | 14,660 | $ | 63,770 | $ | 42,986 | |||||||||||||||
Cost of revenue (excluding depreciation) for the three months ended September 30, 2025 and 2024 was $17.1 million and $14.7 million, respectively, representing an increase of $2.4 million. Cost of revenue (excluding depreciation) for the nine months ended September 30, 2025 and 2024 was $63.8 million and $43.0 million, respectively, representing an increase of approximately $20.8 million. These increases were primarily driven by higher power expenses, resulting from higher realized power prices during the 2025 period partially offset by higher proceeds from participation in demand response programs.
Proceeds from participation in demand response programs are recorded as a reduction in cost of revenue during the period in which the underlying program occurs. These proceeds totaled $7.4 million and $13.3 million during the three and nine months ended September 30, 2025, respectively, as compared to $4.1 million and $7.3 million during the three and nine months ended September 30, 2024, respectively. The Company is actively expanding its participation in such programs across New York State.
The following table presents operating expenses (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Operating expenses | $ | 2,921 | $ | 729 | $ | 6,104 | $ | 2,311 | |||||||||||||||
| Operating expenses - related party | 1,582 | 856 | 4,805 | 2,619 | |||||||||||||||||||
| $ | 4,503 | $ | 1,585 | $ | 10,909 | $ | 4,930 | ||||||||||||||||
Operating expenses (including related party expenses) for the three months ended September 30, 2025 and 2024, were $4.5 million and $1.6 million, respectively, an increase of $2.9 million. Operating expenses (including related party expenses) for the nine months ended September 30, 2025 and 2024 were $10.9 million and $4.9 million, respectively, an increase of $6.0 million. These increases were primarily due to higher rent subsequent to the New Ground Lease in October 2024 and increased site labor, miner repairs, professional, and engineering expenses at the Lake Mariner Campus.
The following table presents selling, general and administrative expenses (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Selling, general and administrative expenses | $ | 16,550 | $ | 8,502 | $ | 73,119 | $ | 29,904 | |||||||||||||||
| Selling, general and administrative expenses - related party | 126 | 2,976 | 7,989 | 8,399 | |||||||||||||||||||
| $ | 16,676 | $ | 11,478 | $ | 81,108 | $ | 38,303 | ||||||||||||||||
Selling, general and administrative expenses (including related party expenses) for the three months ended September 30, 2025 and 2024 were $16.7 million and $11.5 million, respectively, an increase of $5.2 million which was primarily due to an increase in stock based compensation of $1.9 million and increased employee compensation and benefits of $4.5 million.
Selling, general and administrative expenses (including related party expenses) for the nine months ended September 30, 2025 and 2024 were $81.1 million and $38.3 million, respectively, an increase of $42.8 million primarily due to increased stock-based compensation of $30.1 million, increased employee compensation and benefits of $7.7 million, increased travel expenses of $1.6 million, and increased professional services $1.6 million.
Depreciation for the three months ended September 30, 2025 and 2024 was $26.5 million and $15.6 million, respectively, an increase of $10.9 million. Depreciation for the nine months ended September 30, 2025 and 2024 was $60.9 million and $44.9 million, respectively, an increase of $16.0 million. The increase was primarily due to the increase in mining capacity related to infrastructure constructed and placed in service between September 30, 2024 and September 30, 2025. In addition, during the three and nine months ended September 30, 2025, the Company recorded accelerated depreciation expense of $7.8 million related to a certain miner building and related miners of which the Company shortened its useful life based on expected shutdown of operations for purposes of supporting the HPC operations. The increase was partially offset by (i) decrease in depreciation on certain electrical equipment and leasehold improvements related to a change in accounting estimate of useful lives in connection with the New Ground Lease in October 2024 and (ii) accelerated depreciation expense of $5.1 million during the nine months ended September 30, 2024 related to certain miners of which the Company shortened their estimated useful lives based on expected replacement by April 2024.
Gain on fair value of digital assets, net during the three months ended September 30, 2025 and 2024 was $0.3 million and $1.0 million, respectively. Gain on fair value of digital assets, net during the nine months ended September 30, 2025 and 2024 was $0.4 million and $1.6 million, respectively, due to the steady increases in the price of bitcoin during the both the three and nine months ended September 30, 2025 and September 30, 2024.
Change in fair value of contingent consideration was $8.8 million and $10.4 million during the three and nine months ended September 30, 2025, respectively, related to fair value remeasurement of contingent consideration liabilities based on milestones achieved during the three and nine months ended September 30, 2025 related to the acquisition of Beowulf E&D.
During the three and nine months ended September 30, 2024, the Company recorded an impairment loss of $0.4 million related to the expected sale of 1,200 miners for proceeds $0.2 million which were classified as held for sale as of September 30, 2024 and included in other current assets in the condensed consolidated balance sheet.
Loss on disposals of property, plant, and equipment, net was $2.0 million and $5.8 million during the three and nine months ended September 30, 2025, respectively. related to 8,910 and 11,828 miners which were sold or otherwise disposed during the three and nine months ended September 30, 2025, respectively, for proceeds of $6.9 million and $8.8 million. No miners were sold or otherwise disposed during the three and nine months ended September 30, 2024.
Interest expense during the three months ended September 30, 2025 and 2024 was $9.8 million and $0.4 million, respectively, an increase of $9.4 million. The increase is primarily attributed to increases in amortization of debt issuance costs as noncash interest expense for the 2030 Convertible Notes and 2031 Convertible Notes of $5.9 million and stated interest of $3.9 million during the three months ended September 30, 2025. The Company fully repaid the principal balance of the Term Loans ahead of maturity in July 2024.
Interest expense during nine months ended September 30, 2025 and 2024 was $17.9 million and $16.8 million, respectively, an increase of $1.1 million. The increase is primarily attributed to increases in stated interest of $4.9 million
for the 2030 Convertible Notes and 2031 Convertible Notes during the nine months ended September 30, 2025 as compared to the LGSA during nine months ended September 30, 2024. The increase was partially offset by decreases in amortization of debt issuance costs of $3.8 million for the 2030 Convertible Notes and 2031 Convertible Notes during the nine months ended September 30, 2025 as compared to the LGSA during nine months ended September 30, 2024.
Change in fair value of warrant and derivative liabilities during the three and nine months ended September 30, 2025 was $(424.6) million related to the Google Warrants and the conversion feature of the 2031 Convertible Notes which was originally accounted for separately as a derivative liability. During the three and nine months ended September 30, 2025, the Company recognized a loss of $324.1 million for the change in fair of the Google Warrants and recognized a loss of $100.6 million for the change in fair value of the derivative liability.
Loss on extinguishment of debt during the three and nine months ended September 30, 2024 was $4.3 million and $6.3 million for related to voluntary prepayment of the Term Loans in February and July 2024, reflecting $1.0 million and $1.3 million of prepayment fees, respectively, and the derecognition of unamortized debt discount of $3.3 million and $5.0 million associated with the principal repaid, respectively. No loss on extinguishment of debt was recorded during the three and nine months ended September 30, 2025.
Interest income during the three months ended September 30, 2025 and 2024 was $4.1 million and $0.3 million, respectively, an increase of $3.8 million. Interest expense during the nine months ended September 30, 2025 and 2024 was $7.6 million and $1.3 million, respectively. These increase were primarily due to an increase of interest earned on higher average cash balances during the three and nine months ended September 30, 2025 as compared to the three and nine months ended September 30, 2024.
There was no income tax benefit for the three and nine months ended September 30, 2025 and 2024. Based upon the level of historical U.S. losses and future projections over the period in which the net deferred tax assets are deductible, at this time, management believes it is more likely than not that the Company will not realize the benefits of the remaining deductible temporary differences, and as a result the Company has recorded a full valuation allowance against its gross deferred tax assets as of September 30, 2025 and December 31, 2024.
Equity in net (loss) income of investee, net of tax was $(2.7) million and $3.4 million for the three and nine months ended September 30, 2024, which represents TeraWulf's proportional share of income of Nautilus. On October 2, 2024, the Company sold its entire 25% equity interest in Nautilus to the Talen Member.
Non-GAAP Measure
To provide investors with additional information in connection with our results as determined in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"), we disclose Adjusted EBITDA as a non-GAAP measure. This measure is not a financial measure calculated in accordance with U.S. GAAP, and it should not be considered as a substitute for net loss, operating loss, or any other measure calculated in accordance with U.S. GAAP, and may not be comparable to similarly titled measures reported by other companies.
We define Adjusted EBITDA as net loss adjusted for (i) impacts of interest, taxes, depreciation and amortization; (ii) stock-based compensation expense, amortization of right-of-use asset, related party expense settled with respect to Common Stock, which are noncash items that the Company believes are not reflective of its general business performance and for which the accounting requires management judgment, and the resulting expenses could vary significantly in comparison to other companies; (iii) equity in net income of investee, net of tax, related to Nautilus; (iv) interest income which management believes is not reflective of the Company's ongoing operating activities; (v) acquisition-related transaction costs which management believes is not reflective of the Company's ongoing operating activities; and (vi) change in fair value of contingent consideration, change in fair value of warrant and derivative liabilities, loss on extinguishment of debt and loss on disposals of property, plant and equipment, which are not reflective of the Company's general business performance. The Company's Adjusted EBITDA also included the impact of distributions from investee received in bitcoin related to a return on the Nautilus investment, which management believes, in conjunction with excluding the impact of equity in net income of investee, net of tax, is reflective of assets available for the Company's use in its ongoing operations as a result of its investment in Nautilus.
Management believes that providing this non-GAAP financial measure allows for meaningful comparisons between the Company's core business operating results and those of other companies, and provides the Company with an important tool for financial and operational decision making and for evaluating its own core business operating results over different periods of time. In addition to management's internal use of non-GAAP Adjusted EBITDA, management believes that Adjusted EBITDA is also useful to investors and analysts in comparing the Company's performance across reporting periods on a consistent basis. Management believes the foregoing to be the case even though some of the excluded items involve cash outlays and some of them recur on a regular basis (although management does not believe any of such items are normal operating expenses necessary to generate the Company's bitcoin related revenues). For example, the Company expects that share-based compensation expense, which is excluded from Adjusted EBITDA, will continue to be a significant recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers, directors and consultants. Additionally, management does not consider any of the excluded items to be expenses necessary to generate the Company's bitcoin related revenue.
The Company's Adjusted EBITDA measure may not be directly comparable to similar measures provided by other companies in the Company's industry, as other companies in the Company's industry may calculate non-GAAP financial results differently. The Company's Adjusted EBITDA is not a measurement of financial performance under U.S. GAAP and should not be considered as an alternative to net loss or any other measure of performance derived in accordance with U.S. GAAP. Although management utilizes internally and presents Adjusted EBITDA, the Company only utilizes that measure supplementally and does not consider it to be a substitute for, or superior to, the information provided by U.S. GAAP financial results. Accordingly, Adjusted EBITDA is not meant to be considered in isolation of, and should be read in conjunction with, the information contained in the Company's condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
The following table is a reconciliation of the Company's Adjusted EBITDA to its most directly comparable U.S. GAAP measure (i.e., net loss) for the periods indicated (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
|
Net loss
|
$ | (455,050) | $ | (22,733) | $ | (534,838) | $ | (43,222) | |||||||||||||||
|
Adjustments to reconcile net loss to non-GAAP Adjusted EBITDA:
|
|||||||||||||||||||||||
|
Equity in net income of investee, net of tax
|
- | 2,679 | - | (3,363) | |||||||||||||||||||
| Distributions from investee, related to Nautilus | - | 3,395 | - | 22,482 | |||||||||||||||||||
| Income tax benefit | - | - | - | - | |||||||||||||||||||
| Interest income | (4,094) | (339) | (7,585) | (1,286) | |||||||||||||||||||
| Loss on extinguishment of debt | - | 4,273 | - | 6,300 | |||||||||||||||||||
|
Change in fair value of warrant and derivative liabilities
|
424,642 | - | 424,642 | - | |||||||||||||||||||
| Interest expense | 9,830 | 409 | 17,891 | 16,779 | |||||||||||||||||||
|
Loss on disposals of property, plant, and equipment, net
|
1,987 | - | 5,818 | - | |||||||||||||||||||
|
Change in fair value of contingent consideration
|
8,797 | - | 10,397 | - | |||||||||||||||||||
| Depreciation | 26,502 | 15,643 | 60,862 | 44,864 | |||||||||||||||||||
| Amortization of right-of-use asset | 1,167 | 252 | 2,602 | 755 | |||||||||||||||||||
| Stock-based compensation expense | 4,345 | 2,408 | 44,323 | 14,181 | |||||||||||||||||||
|
Related party expense settled with respect to common stock
|
- | - | 2,375 | - | |||||||||||||||||||
|
Acquisition-related transaction costs
|
- | - | 1,475 | - | |||||||||||||||||||
| Non-GAAP Adjusted EBITDA | $ | 18,126 | $ | 5,987 | $ | 27,962 | $ | 57,490 | |||||||||||||||
Liquidity and Capital Resources
The principal uses of cash are for the operation and buildout of datacenter facilities, debt service and general corporate activities. Cash flow information is as follows (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash provided by (used in): | |||||||||||
|
Operating activities
|
$ | (35,009) | $ | 18,302 | |||||||
| Investing activities | (332,327) | (82,396) | |||||||||
| Financing activities | 806,025 | 33,593 | |||||||||
|
Net change in cash and cash equivalents
|
$ | 438,689 | $ | (30,501) | |||||||
Cash (used in) provided by operating activities was $(35.0) million and $18.3 million for the nine months ended September 30, 2025 and 2024, respectively. This decrease is primarily due to an $20.8 million increase in cost of revenue during the 2025 period compared to the prior year. Cost of revenue, which primarily consists of power expenses, increased due to expanded mining and hosting capacity, the effects of the April 2024 halving and increased network hashrate, and higher realized power prices. Additionally, prior to the repayment of its Term Loans in July 2024, the Company converted bitcoin to cash almost immediately. As a result, $97.6 million in proceeds from digital asset sales were included in operating cash flows for the nine months ended September 30, 2024. In contrast, during the same period in 2025, bitcoin sales proceeds of $125.8 million are classified as cash flows from investing activities, as the Company no longer converts bitcoin to cash on a near-immediate basis. Additionally, in 2025 the Company received $86.2 million in prepaid rent from the Company's HPC customer ahead of lease commencement, which are reflected in the condensed consolidated balance sheet as of September 30, 2025 within the current and noncurrent portions of deferred rent liability, totaling $50.7 million and $35.5 million, respectively.
Cash used in investing activities was $332.3 million and $82.4 million for the nine months ended September 30, 2025 and 2024, respectively. The increase in cash used in investing activities is primarily attributed to increases in purchase of and deposits on plant and equipment of $330.9 million related to the buildout of its facilities at the Lake Mariner Campus and $21.7 million cash paid for the acquisition of Beowulf E&D. The increase in cash used in investing activities was partially offset by the classification of cash received as proceeds from sales of digital assets not converted nearly immediately into cash of $125.8 million and cash received for miners sold of $8.8 million during the nine months ended September 30, 2025.
Cash provided by financing activities from continuing operations was $806.0 million and $33.6 million for the nine months ended September 30, 2025 and 2024, respectively. The increase in cash provided by financing activities is primarily attributed to the net proceeds from the issuance of the 2031 Convertible Notes of $975.3 million. The increase was partially offset by the purchase of capped calls of $100.6 million. During the nine months ended September 30, 2025 and 2024, the Company repurchased $33.3 million and $0 of treasury stock under the Share Repurchase Program, respectively, and paid $28.3 million and $16.8 million in taxes related to net share settlements of stock-based compensation awards, respectively. During the nine months ended September 30, 2024, financing activities included $188.7 million in proceeds from issuances of Common Stock, partially offset by $139.4 million in principal repayments on long-term debt.
Financial Condition
As of September 30, 2025, the Company had cash and cash equivalents of $711.3 million, a working capital balance of $23.3 million, total stockholders' equity of $247.3 million and an accumulated deficit of $867.1 million. The Company incurred a net loss of $534.8 million for the nine months ended September 30, 2025. The Company began mining bitcoin in March 2022 and has 11.6 EH/s of operating capacity at the Lake Mariner Campus as of the date of this Quarterly Report. To date, the Company has relied primarily on proceeds from sale of bitcoin, both self-mined and distributed from the joint venture which owned the Nautilus Cryptomine Facility, rent prepayments, and its issuances of debt and equity to fund its principal operations.
Critical Accounting Estimates
The above discussion and analysis of the Company's financial condition and results of operations are based upon its condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of the Company's condensed consolidated financial statements requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements.
See Note 2 of the Notes to Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q and Note 2 of the Notes to Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for a summary of the Company's significant accounting policies.
HPC Leasing
In December 2024, the Company entered into long-term datacenter lease agreements (the "HPC Leases") with a customer for specified datacenter infrastructure at the Lake Mariner Campus to support the customer's HPC operations. In accordance with ASC 842, Leases, the Company determined at contract inception that these agreements contained a lease, comprising lease components related to the right to use datacenter space and nonlease components for power delivery, physical security, and maintenance services. Certain of the HPC Leases commenced in 2025 and the remainder of the HPC Leases are expected to commence in 2026.
The Company has elected the practical expedient available under ASC 842, Leases, to combine the nonlease revenue components that have the same pattern of transfer as the related operating lease components into a single combined component. The single combined component is accounted for under ASC 842 as an operating lease if the lease components are the predominant components and is accounted for under ASC 606 if the nonlease components are the predominant components. The lease components are the predominant components in the Company's long term lease agreements and the single combined component in these arrangements are accounted for under the operating lease guidance of ASC 842. Recognition of HPC lease revenue begins when the Company determines the asset has been made available for the customer's use.
The Company has concluded that it is probable that substantially all of the payments will be collected over the term of the arrangements and recognize the total combined fixed payments under the agreements on a straight-line basis over the noncancellable term. The Company recognizes the difference between straight-line revenue recognized during the period and the lease payments due pursuant to the underlying arrangement as deferred rent liability or accrued rent receivable in the condensed consolidated balance sheets. Certain arrangements include options to extend the term. These extension options are not reasonably certain to be exercised and are excluded from the lease term and calculation of lease payments at lease commencement.
Payments for physical security and other routine maintenance services are included in the fixed lease payments. The lease agreements provide for variable payments for power delivery and other services. Power delivery services represent a stand-ready obligation to make power available to the customer over the coterminous lease term and have the same pattern of transfer as the related operating lease components. Customers are charged monthly for actual power costs incurred at current utility rates and fees incurred on other services. These payments from customers for power delivery and other services are recognized as variable lease payments in accordance with the practical expedient elected. Variable lease payments are presented on a gross basis and are included in HPC lease revenue in the condensed consolidated statements of operations.
Digital Assets
Digital assets consists of bitcoin earned as noncash consideration for providing hash computation services to a mining pool. Digital assets is classified as an intangible asset with indefinite useful life and presented as a current asset on the condensed consolidated balance sheets, based on the Company's ability to sell bitcoin in a highly liquid market and its expectation to convert these holdings to cash within the next twelve months. Effective January 1, 2024, the Company early adopted ASU 2023-08, which requires digital assets to be measured at fair value each reporting period in accordance with ASC 820, with changes in fair value recognized as net income. Gains and losses from the remeasurement of digital assets are recorded in "(gain) loss on fair value of digital assets, net" within the consolidated statements of operations. Similarly, realized gains and losses from bitcoin sales - measured as the difference between the cash proceeds and the cost basis, determined on a first-in, first-out basis - are also reported within this line item.
Bitcoin earned through mining is reflected as a noncash adjustment reconciling net loss to cash flows from operating activities in the consolidated statements of cash flows. Bitcoin received as distributions-in-kind from equity investees is reported as supplemental noncash investing activity. Prior to the repayment of the Term Loans in July 2024 (see Note 10), bitcoin was converted into cash immediately upon mining, and related sales proceeds were included in cash flows from operating activities. Following the loan repayment, the Company no longer converts bitcoin into cash immediately, and proceeds from bitcoin sales are now reported within cash flows from investing activities.
Long-Lived Assets
Property, plant and equipment are recorded at cost, net of accumulated depreciation. Judgment is necessary in estimating the Company's various assets' useful lives. This includes evaluating the Company's own usage experience with its currently owned assets, the quality of materials used in construction-related projects and, for its miners, the rate of technological advancement and market-related factors such as the price of bitcoin and the bitcoin network hashrate, which impact the value of the miners. Depreciation is computed using the straight-line method over the estimated useful lives of the assets (generally 5 years for computer equipment and 4 years for miners). Leasehold improvements and electrical equipment are depreciated over the shorter of their estimated useful lives or the lease term. Changes in depreciation and amortization, generally accelerated depreciation, are determined and recorded when estimates of the remaining useful lives or residual values of long-term assets change.
The Company reviews its long-lived assets, including property, plant and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, or asset group, may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted cash flows expected to be generated by the asset. Significant judgment is used when estimating future cash flows, particularly the price of bitcoin and the network hashrate. Any impairment loss recorded is measured as the amount by which the carrying value of the assets exceeds the fair value of the assets. Should our estimates of useful lives, undiscounted cash flows, or asset fair values change, additional and potentially material impairments may be required, which could have a material impact on our reported financial results.
Stock-Based Compensation
The Company measures stock-based compensation cost related to share-based payment awards at the grant date of the award, based on the estimated fair value of the award. For RSUs with time-based vesting, the fair value is determined by Common Stock price on the date of the grant. For RSUs with vesting based on market conditions ("PSUs"), the effect of the market condition is considered in the determination of fair value on the grant date using a Monte Carlo simulation model. Stock-based compensation expense for PSUs is recorded over the derived service period unless the market condition is satisfied in advance of the derived service period, in which case a cumulative catch-up is recognized as of the date of achievement. Stock-based compensation for PSUs is recorded regardless of whether the market conditions are met unless the service conditions are not met. The Company accounts for forfeitures as they occur. The Company uses significant judgment in determining the likelihood of meeting milestones and market conditions. Inputs into valuation models such as Monte Carlo simulations include both the Company's and guideline public company historical and expected annual volatility and, depending on the inputs selected, the Company could calculate significantly different estimated grant date fair values, materially impacting the valuation of our stock-based awards and the stock-based compensation expense we recognize in future periods.
Income Taxes
The Company accounts for income taxes pursuant to ASC 740, which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred tax asset will not be realized. The Company follows the provision of ASC 740 related to accounting for uncertain income tax positions. When tax returns are filed, it is more likely than not that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely that not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. The tax benefits recognized in the condensed consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with the tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the Company's balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The most critical estimate for income taxes is the determination of whether to record a valuation allowance for any net deferred tax asset, including net loss carryforwards, whereby management must estimate whether it is more likely than not that the deferred tax asset would be realized.
Assets Acquired and Liabilities Assumed in a Business Combination
The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805 - Business Combinations, by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, measured at the acquisition date fair value. The determination of fair value involves assumptions, estimates and judgments. Any purchase consideration in excess of the estimated fair values of net assets acquired is recorded as goodwill.
Goodwill Impairment
Goodwill is not subject to amortization, and instead, assessed for impairment annually, or more frequently when events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount in accordance with ASC 350.
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