Core Viewpoint - Shares of Applied Digital Corporation (APLD) have increased by 13.1% in the past four weeks, closing at $7.79, with a potential upside indicated by Wall Street analysts' price targets suggesting a mean estimate of $10.71, representing a 37.5% increase from the current price [1] Price Targets and Analyst Estimates - The mean estimate consists of seven short-term price targets with a standard deviation of $1.11, where the lowest estimate is $9 (15.5% increase) and the highest is $12 (54% increase) [2] - A low standard deviation indicates a strong agreement among analysts regarding the stock's price movement, which can serve as a starting point for further research [7] Earnings Estimates and Analyst Optimism - Analysts show growing optimism about APLD's earnings prospects, as indicated by a strong consensus in revising EPS estimates higher, which correlates with potential stock price increases [9] - Over the last 30 days, the Zacks Consensus Estimate for the current year has risen by 64.1%, with four estimates moving higher and no negative revisions [10] Zacks Rank and Investment Potential - APLD holds a Zacks Rank 1 (Strong Buy), placing it in the top 5% of over 4,000 ranked stocks based on earnings estimate factors, indicating a strong potential upside in the near term [11]

Core Viewpoint - Applied Digital Corporation has successfully completed a private offering of $450 million in 2.75% Convertible Senior Notes due 2030, which includes an additional $75 million exercised by initial purchasers [1][3] Group 1: Offering Details - The offering was made to qualified institutional buyers under Rule 144A of the Securities Act of 1933 [1] - The net proceeds from the sale of the Convertible Notes were approximately $434.5 million after deducting discounts, commissions, and estimated offering expenses [3] - The company plans to use approximately $84 million of the net proceeds for share repurchases, including $52.7 million for prepaid forward repurchase costs and $31.3 million for common stock repurchases [3] Group 2: Capped Call Transactions - In conjunction with the issuance of the Convertible Notes, the company entered into capped call transactions with a cap price of $14.72, representing a 100% premium over the last reported sale price [2] - The overall transaction is expected to have potential net dilution implications, which are illustrated in a provided table [2] Group 3: Company Overview - Applied Digital develops, builds, and operates next-generation data centers and cloud infrastructure, focusing on high-performance computing applications [4] - The company's facilities are designed to support AI, machine learning, blockchain, and HPC workloads, backed by deep hyperscale expertise [4]

Core Viewpoint - Applied Digital Corporation has announced the pricing and upsize of its offering of $375 million in 2.75% Convertible Senior Notes due 2030, aimed at enhancing its digital infrastructure for High-Performance Computing applications [1] Transaction Details - The offering consists of $375 million in 2.75% Convertible Notes with a 32.5% conversion premium [2] - The initial cap price for capped call transactions is set at $14.72 per share, representing a 100% premium over the closing price of $7.36 on October 30, 2024 [2] - The company plans to repurchase approximately $84 million in shares of common stock as part of the offering [2] - An option for initial purchasers to buy an additional $75 million in Convertible Notes is available within a 13-day period after the initial issuance [2] Use of Proceeds - The estimated net proceeds from the offering are approximately $361.8 million, or $434.5 million if the additional notes option is fully exercised [3] - Approximately $84 million of the net proceeds will be allocated for share repurchases, with $52.7 million for prepaid forward repurchase and $31.3 million for direct share buybacks [3] - Around $43.1 million will be used for capped call transactions, with the remainder for general corporate purposes [3] Convertible Notes Details - The Convertible Notes will accrue interest at 2.75% per annum, payable semi-annually, and will mature on June 1, 2030 [4] - The initial conversion rate is set at 102.5431 shares per $1,000 principal amount, equating to an initial conversion price of approximately $9.75 per share [5] - The company may redeem the Convertible Notes starting December 1, 2027, under specific conditions [6] Share Repurchase Program - The share repurchase program includes a prepaid forward repurchase and concurrent buybacks totaling approximately $84 million [8] - The prepaid forward repurchase involves approximately 7.2 million shares, with the forward counterparty paying equivalent cash dividends to the company [9] - This program is designed to facilitate derivative transactions and hedge positions for investors in the Convertible Notes [9][10] Capped Call Transactions - Capped call transactions have an initial cap price of $14.72 per share, aimed at reducing potential dilution upon conversion of the Convertible Notes [13][14] - The company expects that the option counterparties will engage in purchasing shares and entering derivative transactions, which may influence the market price of the common stock [15]

Core Viewpoint - Applied Digital Corporation plans to offer $300 million in convertible senior notes due 2030, subject to market conditions, to qualified institutional buyers under Rule 144A of the Securities Act [1][13]. Group 1: Offering Details - The company may grant initial purchasers an option to buy an additional $45 million in convertible notes within 13 days of the initial issuance [2]. - The convertible notes will be senior unsecured obligations, accruing interest payable semi-annually starting June 1, 2025, and maturing on June 1, 2030 [4]. - The notes will be convertible into cash, shares of common stock, or a combination, with specific terms to be determined at pricing [5]. Group 2: Use of Proceeds - A portion of the net proceeds will fund capped call transactions, and the company plans to repurchase up to one-third of the final aggregate principal amount of the convertible notes [3]. - Remaining proceeds will be used for general corporate purposes, with additional proceeds from any exercised options also allocated for capped call transactions [3]. Group 3: Market Impact and Hedging - The company expects to enter into a prepaid forward stock purchase transaction to facilitate derivative transactions, which may influence the market price of the common stock [6][7]. - Activities related to the prepaid forward and capped call transactions could lead to fluctuations in the market price of the common stock and the convertible notes [11][12]. Group 4: Company Overview - Applied Digital develops and operates next-generation data centers and cloud infrastructure, focusing on high-performance computing applications [15].

Core Viewpoint - Applied Digital Corporation (APLD) has shown strong performance in the market, with a year-to-date share appreciation of 22.7%, surpassing the broader Finance sector and the Zacks Financial Miscellaneous Services industry [1] Financial Performance - In the first quarter of fiscal 2025, APLD's revenues increased by 67% year over year to $60.7 million, primarily driven by Cloud Services contracts [2] - The Data Center hosting segment generated $34.8 million, while the Cloud Services segment contributed $25.9 million [2] - The Zacks Consensus Estimate for fiscal 2025 revenues is projected at $270.77 million, indicating a year-over-year growth of 63.54% [8] - The second-quarter fiscal 2025 revenue estimate is pegged at $63.65 million, reflecting a year-over-year growth of 50.83% [9] Operational Expansion - APLD is finalizing a lease agreement with a U.S.-based hyperscaler for a 100 MW facility currently under construction, designed for high-performance computing applications [3] - The company is also in the design phase for two additional buildings, which will increase total capacity to 400 MW [3] - APLD's Data Center Hosting Business operates facilities that are currently at full capacity, with plans to accelerate monetization of its 1.4 gigawatt pipeline [4] Partnerships and Collaborations - APLD has established partnerships with major companies including NVIDIA, Super Micro Computer, Hewlett Packard, and Dell Technologies [5] - Hewlett Packard provides supercomputers to support large-scale AI through APLD's cloud service, while Dell has supply agreements for AI and GPU servers [5] Financial Position - APLD's liquidity position has improved, with $86.6 million in cash and equivalents as of the end of the first quarter of fiscal 2025, up from $31.7 million at the end of fiscal 2024 [7] - The company has $143.6 million in debt, an increase from $125.4 million at the end of fiscal 2024 [7] Valuation and Market Position - APLD's stock is currently trading at a forward Price/Sales (P/S) ratio of 5.58X, which is significantly higher than its median of 1.82X and the industry's 2.51X, indicating a stretched valuation [10] - The company holds a Zacks Rank 3 (Hold), suggesting that investors may want to wait for a better entry point [12]

Core Insights - Small-cap companies present significant growth opportunities, often overlooked in favor of larger firms, but they come with higher volatility [1][11] - These companies typically operate in emerging markets, allowing for rapid market share expansion and potential stock price appreciation [2] Company Summaries The Honest Company - Focuses on clean and sustainable personal care products, reporting a 10% revenue growth to $93 million in Q2 2024, with gross margins increasing from 27.1% to 38.3% year over year [3][4] - Achieved three consecutive quarters of positive adjusted EBITDA, prompting management to raise full-year revenue and profitability guidance [4] - Stock price has risen over 222% in the past 12 months, with a current market cap of approximately $378 million, indicating a conservative valuation in the multi-billion-dollar clean consumer products market [5] Poet Technologies - Develops photonic solutions for data communications and AI applications, with stock rising 314% this year due to strategic partnerships and design wins [5][6] - Recently announced collaboration with Mitsubishi Electric for 3.2T optical engines and secured design wins with Foxconn Interconnect Technology and Luxshare Tech [6] - Currently in early commercialization stages with limited revenue and facing intense competition in the optical components market [7] Applied Digital - Builds and operates next-generation digital infrastructure focused on high-performance computing and AI applications, reporting Q1 fiscal 2025 revenues of $60.7 million, a 67% increase from the previous year [8][9] - Validated strategy through a $160 million private placement, including investment from Nvidia, while expanding cloud services and developing a 100-megawatt data center for AI [9] - Faces execution risks and requires significant capital investment to scale operations amid intensifying competition in the high-performance computing sector [10]

AI Industry Overview - Artificial intelligence (AI) is transforming industries and creating massive economic opportunities, with AI spending projected to have a $19.9 trillion global economic impact by 2030 [1] - The AI boom is accelerating, leading investors to seek hidden gems in the AI space beyond the usual suspects [1] Navitas Semiconductor (NVTS) - Navitas Semiconductor is at the forefront of next-generation power solutions critical for energy-efficient AI data centers, utilizing GaN (gallium nitride) and SiC (silicon carbide) power semiconductors [2] - The company's "IntelliWeave" digital control technique enables AI data center power supplies to achieve over 99% efficiency, potentially revolutionizing power consumption in AI applications [2] - Navitas reported Q2 2024 revenue of $20.5 million, a 13% year-over-year increase, with a growing pipeline of over 60 data center customer projects and new products tailored for AI applications [3] Applied Digital (APLD) - Applied Digital is expanding its high-performance computing infrastructure to meet the booming demand for AI processing power, focusing on next-generation data centers optimized for AI and machine learning [4] - The company's cloud services business generated $25.9 million in revenue in the most recent quarter, with two new GPU clusters added [5] - Applied Digital is developing a 100 MW high-performance computing facility in North Dakota, with plans to expand total capacity to 400 MW, and is in the design phase for two additional buildings at the site [5] - The company raised $160 million in a private placement, including investments from Nvidia and Related Companies, and reported a 67% year-over-year revenue increase to $60.7 million in fiscal Q1 2025 [6] Iris Energy (IREN) - Iris Energy is leveraging its Bitcoin mining infrastructure expertise to capitalize on the growing demand for AI computing power, generating $3.1 million in revenue from AI cloud services in fiscal year 2024 [7] - The company is evaluating AI data center opportunities for its 1.4 GW West Texas site, managed by Morgan Stanley [7] - Iris Energy reported improved financial results for fiscal year 2024, with EBITDA of $19.6 million compared to a loss of $123.2 million in the previous year, and Bitcoin mining revenue reaching a record $184.1 million, up from $75.5 million in fiscal year 2023 [8] Summary of AI Companies - Navitas Semiconductor, Applied Digital, and Iris Energy offer unique angles on the AI revolution, with potential to benefit from the ongoing technological transformation [9] - These companies are currently unprofitable and face intense competition, but their success depends on the continued growth and adoption of AI technologies [9]

Core Viewpoint - Applied Digital Corp. (APLD) experienced significant stock volatility following its earnings report, with a notable 67% revenue increase to $60.7 million, despite a loss of 15 cents per share, which was better than analysts' expectations of a 29 cents loss [1][2][3] Financial Performance - Revenue increased by 67% to $60.7 million, following a nearly 100% year-over-year increase from $22 million to $43.7 million in the previous quarter [2] - The company reported a loss of 15 cents per share, which was lower than the expected loss of 29 cents per share by analysts [2] Stock Performance - APLD stock initially gained 4% in after-hours trading but then fell by 12.8% in pre-market trading, before recovering to about 6% above its previous close, remaining approximately 4% below its October 9 closing price [1][2] - The stock has increased by 147% over the last six months and over 14% in the month leading up to the earnings report [3] Market Context - The data center market is projected to reach $418 billion by 2030, indicating a compound annual growth rate (CAGR) of 9.6%, driven by demand from generative AI [5] - Applied Digital is focusing on the data center space, having changed its name from Applied Blockchain to reflect this shift [4] Strategic Developments - The company is finalizing a lease for 100 megawatts with a U.S.-based hyperscaler, with an additional reservation for 300 megawatts, indicating growing demand for capacity [6] - Short interest in APLD stock increased by 9.4% in the month prior to earnings, suggesting some investor caution [3] Analyst Sentiment - Analysts remain bullish on APLD, with a 12-month stock price forecast averaging $9.67, indicating a potential upside of 40.30% [8] - Three analysts have reiterated a Buy rating post-earnings, with price targets ranging from $10 to $12, the highest being $12 from Craig Hallum [8]

Financial Data and Key Metrics - Revenue increased by 67% to $60.7 million this quarter, driven by cloud services contracts [10] - Data center hosting segment generated $34.8 million in revenue, while cloud services contributed $25.9 million [10] - Depreciation and amortization expenses totaled $34.4 million, up from $8 million in the same period last year [10] - Adjusted EBITDA for the quarter increased significantly to $20 million [11] - Adjusted net loss for the quarter was $21.6 million or $0.15 per basic and diluted share [11] - Cash, cash equivalents, and restricted cash stood at $86.6 million, with $143.6 million in debt and shareholders' equity at $241.8 million [11] Business Line Data and Key Metrics - Data center hosting business has 286 megawatts of capacity across two fully contracted locations in North Dakota, operating at full capacity [8] - Cloud services business has six clusters online, with plans to deploy additional clusters starting in the second half of fiscal year 2025 [9] - Significant progress made on amending lease financing for GPUs, allowing amortization over the expected useful life, improving reported results [9] Market Data and Key Metrics - The company is finalizing a lease with a US-based hyperscaler for the Ellendale HPC campus, with an initial 100-megawatt building and plans to expand to 400 megawatts [7] - Rising demand for proprietary HPC data centers among top-tier industry players, with significant interest from hyperscalers for 2025 and 2026 capacity [14] - The company is exploring opportunities to accelerate the monetization of its over 1.4 gigawatt pipeline [8] Company Strategy and Industry Competition - The company aims to become a platform capable of building and operating multiple HPC data centers at scale [15] - Strategic investments from prominent investors affirm the company's market position and highlight the potential for its strategic plan [15] - The company is positioning itself as a full-stack developer for hyperscalers, leveraging its early investment in the industry [14] Management Commentary on Operating Environment and Future Outlook - The company is encouraged by positive trends across its business and remains confident in its growth trajectory [9] - Management sees significant demand for HPC data centers, with limited capacity available for 2025 and 2026 [14] - The company is making executive team changes to better position itself for expansion and growth [15] Other Important Information - The company incurred $4.1 million in expenses this quarter for facilities not yet generating revenue, with plans to utilize these data centers in the future [11] - The company is exploring heat recirculation solutions for its HPC facilities, with potential applications in agriculture [52] Q&A Session Summary Question: Lease Negotiation Status - The exclusivity period for the lease negotiation has expired, and the company is finalizing the lease document [18] Question: Lease Details for Hyperscaler - The initial lease will be for 100 megawatts, with a reservation on the additional 300 megawatts, expected to be finalized in two separate leases [21] Question: Additional GPU Clusters - The company expects to deploy additional GPU clusters in the second half of fiscal year 2025, with demand influenced by customer preferences for Hopper or Blackwell GPUs [24][25] Question: Demand Environment and Future Data Centers - The company has seen increased interest from hyperscalers for 2025 and 2026 capacity and is working on securing an LOI for a second site, likely in the Dakotas [28][29] Question: Lease Finalization Timeline - The lease finalization is in the clerical phase, with expectations for completion within six to eight weeks [35][36] Question: Economics of Two Leases - The economics of the two leases are expected to be similar, with one structured as a Colo-style lease and the other as a yield on cost model [43][45] Question: Customer Turnover and Pricing in Cloud Services - Pricing for GPU services has remained stable, with customer turnover influenced by market dynamics and enterprise demand [48][50] Question: Heat Recirculation Solutions - The company is exploring heat recirculation solutions for its HPC facilities, with potential applications in agriculture, such as greenhouses or aquafarming [52] Question: Progress on Lease Finalization - The company estimates that 98.5% to 99% of the work on the lease finalization is complete, with the remaining tasks being clerical [55] Question: Yield on Cost and Prepayment for Future Buildings - The company is not disclosing specific yield targets but expects to secure leases and project financing before committing significant CapEx for future buildings [58][59]

Core Insights - Applied Digital Corporation reported a quarterly loss of $0.03 per share, significantly better than the Zacks Consensus Estimate of a loss of $0.28, and an improvement from a loss of $0.10 per share a year ago, indicating an earnings surprise of 89.29% [1] - The company generated revenues of $60.7 million for the quarter ended August 2024, exceeding the Zacks Consensus Estimate by 12.35% and showing a substantial increase from $36.32 million in the same quarter last year [1] Financial Performance - The earnings surprise of 89.29% is notable, especially compared to the previous quarter where the actual loss of $0.52 per share was worse than the expected loss of $0.23, resulting in a surprise of -126.09% [1] - Over the last four quarters, the company has surpassed consensus EPS estimates only once, indicating inconsistent performance [1] - The current consensus EPS estimate for the upcoming quarter is -$0.29 on projected revenues of $62.35 million, while the estimate for the current fiscal year is -$1.12 on revenues of $263.45 million [4] Stock Performance - Since the beginning of the year, Applied Digital Corporation shares have increased by approximately 16.5%, underperforming compared to the S&P 500's gain of 20.6% [2] - The stock currently holds a Zacks Rank of 3 (Hold), suggesting it is expected to perform in line with the market in the near future [4] Industry Context - The Financial - Miscellaneous Services industry, to which Applied Digital Corporation belongs, is currently ranked in the bottom 41% of over 250 Zacks industries, which may negatively impact stock performance [5] - Ponce Financial, another company in the same industry, is expected to report a quarterly earnings decline of 41.7%, with revenues projected to decrease by 10.7% year-over-year [5]