Release Date: October 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Applied Digital Corp (APLD, Financial) reported a 67% increase in revenue to $60.7 million for the quarter, driven by strong contributions from cloud services contracts.
- The company has significantly improved its balance sheet with strategic investments from institutional and accredited investors, including NVIDIA.
- Construction of the Ellendale HPC campus is on schedule, with plans to expand capacity to 400 megawatts.
- The cloud services business is experiencing growth, with plans to deploy additional clusters starting in the second half of fiscal year 2025.
- The company has a strong cash position with $86.6 million in cash, cash equivalents, and restricted cash, alongside a recent cash infusion from large investors.
Negative Points
- Applied Digital Corp (APLD) incurred $4.1 million in expenses for facilities not yet generating revenue, impacting financial results.
- The company is facing higher depreciation and amortization expenses, which increased to $34.4 million for the quarter.
- There is uncertainty around the finalization of a lease with a US-based hyperscaler, with the exclusivity period having expired.
- The company is incurring significant expenses related to data center leases for its cloud business without yet deploying GPU clusters.
- The adjusted net loss for the quarter was $21.6 million, indicating ongoing financial challenges.
Q & A Highlights
Q: Wes, my first question is about the lease negotiation. Has the exclusivity period expired, or has it been renewed?
A: The exclusivity period has officially expired. We chose not to renew exclusivity. We're just pursuing the finalization of the natural lease document, and neither party saw any reason to extend the exclusivity just to complete the document. - Wesley Cummins, CEO
Q: Could you clarify if the lease with the hyperscaler is just for 100 megawatts, or do they have options on additional capacity?
A: The initial lease will be for 100 megawatts, and the expectation is that it will include a reservation on the other 300 megawatts. The single tenant is expected to take the entire campus, but it will come in two leases. - Wesley Cummins, CEO
Q: What's your plan for deploying additional GPU clusters, and how do you see the timing on that?
A: We expect to start deploying additional clusters in the second half of our fiscal year, starting December 1. We've done a lot of work to ensure the right type of financing and have seen increased interest and visibility following our recent investment. - Wesley Cummins, CEO
Q: After the 400 megawatts are leased up, have you started talking to potential customers for additional capacity, and where might that data center be located?
A: We've seen significant inbound interest from three additional hyperscalers for 2025 and 2026 capacity. We're marketing our sites to these customers, likely in the Dakotas, and expect to have an LOI by the end of calendar '24. - Wesley Cummins, CEO
Q: Can you give more specificity on the finalization of the lease? What remains to be done?
A: There's very little left on the lease; it's mostly clerical at this point. We feel confident it will be finalized soon, possibly within days to six weeks. The site-level financing is ready to fund once the lease is signed. - Wesley Cummins, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
