Applied Digital Corp. Q1 FY2025 earnings call

• Balance sheet improved due to strategic investments from institutional and accredited investors, including NVIDIA. • Ellendale HPC campus building continues on schedule, finalizing lease with a US-based hyperscaler and progressing with site-level debt financing. • Data center hosting business has 286 megawatts of capacity at full capacity in North Dakota. • Cloud services business has six clusters online, with progress on amending GPU lease financing to improve reported results, expecting to deploy additional clusters in the second half of fiscal 2025. • Revenue grew 67% to $60.7 million, driven by cloud services contracts, but incurred higher depreciation and amortization expenses and facility expenses for non-revenue generating data centers.

Revenue increased by 67% to $60.7 million this quarter. The data center hosting segment generated $34.8 million in revenue, contributing approximately 57.3% to total revenue. The cloud services segment contributed $25.9 million, accounting for roughly 42.7% of total revenue.

• Revenue increased by 67% to $60.7 million this quarter. • Adjusted EBITDA for the quarter was $20 million. • Plan to utilize data centers in the future to offset current non-revenue generating facility expenses. • Expect to deploy additional GPU clusters starting in the second half of fiscal 2025.

• Forward-looking statements involve risks and uncertainties beyond control, detailed in SEC filings. • Factors such as changes in market conditions, supply chain issues, and regulatory changes could materially affect results.

Q: Lucas Pipes asked about the expiration or renewal of the exclusivity period under the LOI for the lease.

A: Wes Cummins stated the exclusivity period has expired, and they are focusing on finalizing the lease document.

Q: Darren Aftahi inquired about whether the lease for 100 megawatts includes options for additional capacity.

A: Wes Cummins said the initial lease is 100 megawatts with reservations for additional 300 megawatts, and the economics of the two leases will be similar.

Q: Rob Brown asked about additional GPU clusters and timing.

A: Wes Cummins said they expect to start deploying additional clusters in the second half of fiscal 2025, with work done on financing to align with the business model.

Q: Mike Grondahl asked about additional customers and LOI timing for another site.

A: Wes Cummins said they are seeing significant demand, with potential for an LOI by the end of 2024 for another site in the Dakotas.

Q: George Sutton inquired about the finalization of the lease and remaining items.

A: Wes Cummins said the lease is mostly in a clerical phase, with confidence it will finalize soon, and site-level financing is lined up.

Q: John Todaro asked about lease economics and clerical phase.

A: Wes Cummins said the two leases have similar economics, and the first lease is mostly in a clerical phase.

Q: Michael Davin asked about cloud services customer turnover and pricing.

A: Wes Cummins said pricing has been flat for bare metal GPU hours, and there's demand growth in the enterprise and AI markets.

Q: Jon Gruber asked about the percentage of lease completion.

A: Wes Cummins said the lease is nearly complete, at 98.5% to 99%.

Q: Darren Aftahi followed up on yield on cost and prepayment for buildings 2 and 3.

A: Wes Cummins said details on yield are premature, but they plan to secure lease and financing for buildings 2 and 3 without large upfront CapEx.