Revenue and Cost Analysis - Revenue increased by $51.9 million (73%) from $70.7 million to $122.6 million for the six months ended November 30, 2024, driven by growth in the Cloud Services Business[208] - Cost of revenues increased by $58.4 million (106%) from $55.0 million to $113.4 million for the six months ended November 30, 2024, primarily due to business growth and increased service provision[210] - Selling, general and administrative expense increased by $7.7 million (21%) from $36.4 million to $44.1 million for the six months ended November 30, 2024, driven by overall business growth[211] Interest and Debt-Related Expenses - Interest expense, net increased by $10.0 million (211%) from $4.8 million to $14.8 million for the six months ended November 30, 2024, primarily due to increases in finance leases and debt obligations[217] - Loss on change in fair value of debt was $85.4 million for the six months ended November 30, 2024, primarily due to changes in the fair value of the conversion option derivative of the 2.75% Senior Unsecured Convertible Note[219] Business Segment Performance - Data Center Hosting Business operating profit increased by $28.5 million (143%) from $19.9 million to $48.4 million for the six months ended November 30, 2024, due to operational improvements and favorable power pricing[225] - Cloud Services Business operating loss increased by $2.7 million from $19.0 million to $21.6 million for the six months ended November 30, 2024, primarily due to amortization expense on finance leases and stock-based compensation[226] - HPC Hosting Business operating loss increased by $7.1 million from $1.7 million to $8.8 million for the six months ended November 30, 2024, largely due to legal expenses and stock-based compensation[227] Non-GAAP Measures and Adjustments - Adjusted Operating Loss and Adjusted net loss attributable to Applied Digital Corporation are non-GAAP measures excluding stock-based compensation, non-recurring expenses, and other items not representative of ongoing costs[231] Capital Raising and Financing Activities - Company issued and sold approximately 2.9 million shares under the Sales Agreement for net proceeds of $16.4 million, net of issuance costs of $0.5 million[176] - Company completed a private offering of $450 million in 2.75% Senior Unsecured Convertible Notes due 2030, with net proceeds of approximately $435.2 million[168][249] - Company entered into a $150 million Macquarie Promissory Note with an 18-month term and 0.25% annual interest rate[171][250] - Company closed on three offerings of Series E Preferred Stock, selling 301,673 shares for net proceeds of $6.9 million[242][180] - Company entered into a $50.0 million Series F Convertible Preferred Stock private placement, with proceeds of $50.0 million before fees[246][181] - Company completed a private placement of 49,382,720 shares of common stock for gross proceeds of approximately $160 million[247] - Company entered into a Standby Equity Purchase Agreement (SEPA) with YA Fund, allowing the sale of up to $250.0 million of common stock over a 36-month period[178][245] Debt Repayment and Asset Sales - Company repaid the CIM Promissory Note in full, including all outstanding principal, accrued interest, fees, and expenses, using proceeds from the Macquarie Promissory Note[164][250] - Gain on classification of held for sale was $24.6 million for the six months ended November 30, 2024, primarily due to the receipt of $25.0 million from the sale of the Garden City facility[214] - Company received $25 million in escrowed funds from the sale of the Garden City hosting facility[177] Future Service Payments - Company received $28.3 million in payments for future cloud services and $59.2 million in payments for future data center hosting services during the six months ended November 30, 2024[252] Stock Conversions - 10,191 shares of Series F Convertible Preferred Stock were converted into approximately 1.5 million shares of common stock during the three months ended November 30, 2024[186] - The remaining 43,000 shares of Series F Convertible Preferred Stock were converted into approximately 6.1 million shares of common stock subsequent to the quarter ended November 30, 2024[186]

Revenue Growth - Revenues for the fiscal second quarter 2025 were $63.9 million, up 51% from the prior year period[5] - Cloud Services Business generated $27.7 million in revenues, representing a 523% increase compared to the same period in 2023[8] - Data Center Hosting Business generated $36.2 million in revenue, with facilities operating at full capacity[11] - Total revenue for the six months ended November 30, 2024 was $124.572 million, compared to $78.527 million for the same period in 2023[36] Net Loss and Financial Performance - Net loss for the fiscal second quarter 2025 was $138.7 million, impacted by $87.2 million from the loss on change in fair value of debt and $25.4 million from the loss on conversion of debt[5] - Net loss attributable to common stockholders for the six months ended November 30, 2024 was $143.646 million, compared to $21.986 million for the same period in 2023[36] - Basic and diluted net loss per share attributable to common stockholders for the six months ended November 30, 2024 was $0.80, compared to $0.21 for the same period in 2023[36] - Net loss for the six months ended November 30, 2024, was $142,973 thousand, compared to $22,383 thousand in the same period last year[37] - Adjusted net loss attributable to Applied Digital Corporation for the six months ended November 30, 2024, was $34,197 thousand, compared to $5,083 thousand in the same period last year[40] Adjusted EBITDA and Operating Metrics - Adjusted EBITDA for the fiscal second quarter 2025 was $21.4 million, up 93% from the prior year period[5] - Adjusted Operating Loss excludes stock-based compensation, non-recurring repair expenses, and other non-recurring expenses[30] - Adjusted EBITDA is defined as EBITDA adjusted for stock-based compensation, non-recurring repair expenses, and other non-recurring expenses[31] - Adjusted operating loss for the six months ended November 30, 2024, was $19,406 thousand, compared to $730 thousand in the same period last year[40] - Adjusted EBITDA for the six months ended November 30, 2024, was $41,355 thousand, compared to $20,950 thousand in the same period last year[42] Financing and Capital Structure - Applied Digital entered into a $5.0 billion perpetual preferred equity financing facility with Macquarie Asset Management for its HPC business[5] - The Company completed a $450 million offering of 2.75% Convertible Senior Notes due 2030, with net proceeds of approximately $435.2 million[7] - As of November 30, 2024, the Company had $314.6 million in cash, cash equivalents, and restricted cash, along with $479.6 million in debt[20] - Cash and cash equivalents increased significantly from $3.339 million as of May 31, 2024 to $286.237 million as of November 30, 2024[34] - Cash flow from financing activities was $618,584 thousand for the six months ended November 30, 2024, compared to $47,611 thousand in the same period last year[37] Asset and Liability Changes - Total assets increased from $762.867 million as of May 31, 2024 to $1,543.169 million as of November 30, 2024[34] - Property and equipment, net increased from $340.381 million as of May 31, 2024 to $772.664 million as of November 30, 2024[34] - Total liabilities increased from $638.037 million as of May 31, 2024 to $1,052.815 million as of November 30, 2024[34] Cash Flow and Investment Activities - Cash flow from operating activities was negative $128,154 thousand for the six months ended November 30, 2024, compared to positive $9,054 thousand in the same period last year[37] - Cash flow used in investing activities increased to $207,539 thousand for the six months ended November 30, 2024, from $65,606 thousand in the same period last year[37] Non-GAAP Measures and Adjustments - The company updated its presentation of non-GAAP measures starting in the third quarter of 2024, no longer excluding start-up costs[29] - The company incurred $11,667 thousand in diligence, acquisition, disposition, and integration expenses for the six months ended November 30, 2024[40] - The company reported a loss on conversion of debt of $33,612 thousand for the six months ended November 30, 2024[40] - The company reported a loss on change in fair value of debt of $85,439 thousand for the six months ended November 30, 2024[40] Data Center and HPC Developments - Applied Digital is in late-stage discussions to finalize a lease agreement for its 100 MW facility and plans to bring an additional 300 MW online, increasing Ellendale's total HPC capacity to 400 MW[10] - The Company successfully energized the on-site main substation transformer at the Ellendale HPC data center, marking a significant milestone in its development[7]

Core Insights - Applied Digital Corporation reported a fiscal second quarter revenue of $63.9 million, representing a 51% increase year-over-year, driven primarily by the growth in its Cloud Services business [4][13] - The company experienced a net loss of $138.7 million, significantly impacted by various financial adjustments, including a loss of $87.2 million from changes in the fair value of debt [4][18] - Applied Digital secured a $5.0 billion perpetual preferred equity financing facility with Macquarie Asset Management to support its high-performance computing (HPC) business [3][5] Financial Performance - Total revenues for the fiscal second quarter 2025 were $63.9 million, up 51% from the prior year [4][13] - Adjusted EBITDA was $21.4 million, reflecting a 93% increase from the previous year [4][20] - The adjusted net loss for the quarter was $12.6 million, with an adjusted net loss per diluted share of $0.06 [4][19] Operational Highlights - The company entered into a financing agreement with Macquarie Asset Management, allowing for up to $900 million investment in the Ellendale HPC data center campus [5] - The Ellendale HPC Campus is designed to support advanced AI workloads and aims to establish the company as a leading HPC data center operator in the U.S. [5][7] - The Cloud Services segment generated $27.7 million in revenue, a 523% increase compared to the same period last year [8] Debt and Financing - Applied Digital completed a $150 million senior secured debt financing with Macquarie Equipment Capital, which will help repay project-level debt [5] - The company also issued $450 million in 2.75% Convertible Senior Notes due 2030, with net proceeds of approximately $435.2 million [6] Future Outlook - The company is in late-stage negotiations with multiple hyperscalers for leasing agreements for its 100 MW facility currently under construction [10] - Plans are in place to expand the Ellendale campus to a total capacity of 400 MW through additional buildings [10]

Core Insights - Applied Digital's stock experienced significant gains, rising 9.4% and previously reaching 25.1% during trading, driven by a major investment announcement and favorable macroeconomic data [1][2]. Investment Agreement - Applied Digital announced an agreement with Macquarie Asset Management for up to $5 billion in funding to enhance its high-performance computing (HPC) initiatives, including an immediate investment of up to $900 million in one of its HPC data centers [2][3]. - Macquarie will acquire a perpetual preferred and a 15% common equity interest in Applied Digital's HPC business, while the company retains 85% ownership, with potential for an additional $4.1 billion investment in future HPC projects [3]. Macroeconomic Factors - The stock's positive momentum is also attributed to the Bureau of Labor Statistics' Producer Price Index (PPI) report, which indicated a 0.2% annual increase, lower than the anticipated 0.4%, alleviating inflation concerns and boosting growth stock sentiment [4]. Upcoming Financial Results - Applied Digital is set to release its second-quarter fiscal year results, with strong sales momentum linked to AI computing demand, following Nvidia's investment in the company [5]. - Wall Street estimates predict a loss of $0.14 per share on revenue of $61.6 million, with a year-over-year revenue increase of 46%, suggesting potential volatility in stock performance based on actual results [6].

Core Viewpoint - Applied Digital Corporation has secured a $5.0 billion perpetual preferred equity financing facility to support its high-performance computing (HPC) data center business, positioning itself for significant growth in the industry [2][5]. Financing Details - The financing agreement involves an investment from Macquarie Asset Management (MAM), which will provide $2.25 million for each executed lease of 1 MW of capacity, totaling up to $900 million for the full 400 MW build-out of the Ellendale HPC Campus [3][7]. - The investment proceeds will be utilized to complete the Ellendale HPC Campus, repay approximately $180 million in existing bridge debt, recover an estimated $300 million of equity investment, fund general and administrative expenses, and cover transaction costs [4][7]. Ownership and Equity Structure - MAM's investment will result in an 85% ownership stake in both existing and future HPC assets, minimizing dilution for Applied Digital's public stockholders [7]. - The preferred equity will accrue a dividend at a rate of 12.75% per annum, with a potential increase after five and six years if still outstanding [8]. Strategic Positioning - The partnership with MAM is expected to establish Applied Digital as a leading HPC data center owner and operator in the U.S., with the capability to construct over 2.0 GW of HPC data center capacity [5][6]. - The company aims to leverage its unique power portfolio and advanced technologies to deliver efficient data center solutions tailored for AI and HPC workloads [9]. Market Outlook - As demand for AI innovation grows, Applied Digital is positioned to deliver next-generation data center solutions and GPU cloud services, catering to complex AI and HPC applications [9].

Earnings and Financial Performance - Applied Digital Corporation (APLD) is set to report its second-quarter fiscal 2025 results on Jan 14, with a Zacks Consensus Estimate for revenues of $63 65 million, indicating a year-over-year growth of 50 83% [1] - The consensus mark for loss is pegged at 14 cents per share, unchanged over the past 30 days, compared to a loss of 10 cents per share in the year-ago quarter [1] - APLD shares have appreciated 11% in the trailing 12 months, underperforming the broader Finance sector's return of 22% and the Zacks Financial Miscellaneous Services industry's appreciation of 19 1% [4] Growth Drivers and Strategic Initiatives - APLD benefits from strong top-line growth driven by its next-generation digital infrastructure for High-Performance Computing (HPC) applications, cloud services, and data center hosting [3] - The company is accelerating the monetization of its more than 1 4 gigawatt pipeline and expects to deploy additional clusters in the second half of fiscal 2025 [8] - APLD has a rich partner base, including NVIDIA, Super Micro Computer, Hewlett Packard, and Dell Technologies, which supports its growth prospects [8][12] - The company is finalizing a lease agreement with a U S -based hyperscaler for its 100 MW facility at the Ellendale HPC campus, with plans to increase total capacity to 400 MW [11] Valuation and Market Position - APLD's forward 12-month Price/Sales (P/S) ratio is 5 4X, higher than its median of 2 55X and the industry's 2 62X, indicating a stretched valuation [10] - The company carries a Zacks Rank 3 (Hold), suggesting investors wait for a better entry point to accumulate the stock [13] Operational Highlights - APLD recently refinanced a senior secured credit facility, lowering the overall cost of capital for its Ellendale HPC data center campus, and secured $150 million in debt financing with Macquarie Equipment Capital [9] - The company successfully energized its on-site main substation transformer in Ellendale, and its data center hosting business operates at full capacity with 106 MW in Jamestown, ND, and 180 MW in Ellendale, ND [15] - APLD entered into definitive agreements for a $160 million private placement on Sept 5, 2024, improving its liquidity position [16]

Investment Strategy - The investor manages a family portfolio primarily through a Self Managed Super Fund, focusing on generating alpha potential compared to the S&P 500 [1] - The investment approach is generalist, exploring and analyzing any sector with perceived alpha potential, with holding periods ranging from a few quarters to multiple years [1] - The investor encourages readers to evaluate performance based on the success of recommendations, which serves as a proxy for genuine investing and alpha-generating skill [1] Portfolio and Positions - The investor holds a beneficial long position in VOO through stock ownership, options, or other derivatives [2] - The investor plans to build a starter position in APLD within the next 72 hours [2]

Executive Appointment - Applied Digital Corporation appoints Laura Laltrello as Chief Operating Officer (COO) to strengthen its leadership in next-generation data centers and digital cloud solutions at the forefront of the AI revolution [1] - Laura Laltrello brings nearly 20 years of executive leadership experience, expertise in data center operations, building technologies, and large-scale infrastructure projects [2] - The appointment is expected to enhance the company's strategic vision execution and operational alignment with long-term objectives [3] Laura Laltrello's Background - Most recently, Laura Laltrello served as Vice President and General Manager of Building Automation Services at Honeywell International Inc [3] - She has a proven track record in operations, strategic execution, and profit management, having led transformative projects for global technology leaders [3] - Laura Laltrello holds a Bachelor of Applied Science degree in Applied Mathematics: Operations Research and Economics from Clemson University and completed the Executive Leadership Program at the International Institute for Management Development [3] Employment Inducement Award - Laura Laltrello was granted 600,000 time-based restricted stock units (RSUs) as part of her employment inducement award, with an effective grant date of January 6, 2025 [4] - The RSUs will vest over a three-year period, subject to continuous employment on each applicable vesting date [4] - The award was approved by the company's Board of Directors on December 27, 2024, and granted outside of the company's equity incentive plan in accordance with Nasdaq Rule 5635(c)(4) [5] Company Overview - Applied Digital Corporation develops, builds, and operates next-generation data centers and cloud infrastructure, specializing in accelerated compute, secure and scalable digital hosting, and GPU-as-a-Service solutions [6] - The company's purpose-built facilities are designed to support AI/ML, blockchain, and high-performance computing (HPC) workloads, backed by deep hyperscale expertise and a robust pipeline of available power [6]

Core Insights - Applied Digital Corporation (APLD) shares have increased by 47.9% over the past six months, significantly outperforming the broader Finance sector's return of 15.6% and the Zacks Financial Miscellaneous Services industry's appreciation of 3.9% [1] Financial Performance - In the first quarter of fiscal 2025, APLD's revenues surged by 67% year over year to $60.7 million, primarily driven by strong contributions from Cloud Services contracts [2] - The Data Center hosting segment generated $34.8 million in revenues, 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% [11] - The consensus estimate for second-quarter fiscal 2025 revenues is pegged at $63.65 million, reflecting a year-over-year growth of 50.83% [29] Industry Trends - The growing complexity and power requirements of AI models are leading to increased energy consumption, with data centers' electricity consumption expected to grow by 125% by 2030, accounting for 9% of all electricity used in the United States [3] - APLD's access to hundreds of megawatts of affordable energy and its capability to construct high-quality AI data centers are enhancing its growth prospects [3] Operational Developments - APLD is finalizing a lease agreement with a U.S.-based hyperscaler for its 100 MW facility at the Ellendale HPC campus, which is currently under construction [5] - The company has successfully energized its on-site main substation transformer in the Ellendale HPC center [6] - APLD plans to accelerate the monetization of its more than 1.4 gigawatt pipeline and expects to deploy additional clusters in the second half of fiscal 2025 [7] - The company has added two additional clusters to its Cloud Services Business, increasing the total to six clusters, each containing 1,024 GPUs [16] Partnerships and Collaborations - APLD has partnered with Hewlett Packard, which provides powerful and energy-efficient supercomputers to support large-scale AI through APLD's cloud service [8] - The company has supply agreements with Dell for the delivery of AI and GPU servers [8] - APLD has a diverse partner base that includes NVIDIA, Super Micro Computer, Hewlett Packard, and Dell Technologies [20] Financial Position - APLD's liquidity position has improved, ending the first quarter of fiscal 2025 with $86.6 million in cash, cash equivalents, and restricted cash, compared to $31.7 million at the end of fiscal 2024 [10] - The company entered into definitive agreements for a $160 million private placement with institutional and accredited investors, including NVIDIA [9] - APLD's debt increased to $143.6 million compared to $125.4 million at the end of fiscal 2024 [10] Valuation Metrics - APLD is currently trading at a forward 12-month Price/Sales (P/S) ratio of 5.08X, which is higher than its median of 2.34X and the industry's 2.63X [12] - The company's valuation is considered stretched, with a Value Score of F indicating potential concerns for investors [25]

Core Viewpoint - Applied Digital Corporation will host a conference call on January 14, 2025, to discuss its operations and financial results for the fiscal second quarter ended November 30, 2024 [1][2]. Group 1: Conference Call Details - The conference call is scheduled for January 14, 2025, at 5:00 p.m. Eastern Time [1][2]. - Participants can join the call by dialing 1-877-407-0792 or 1-201-689-8263, with Conference ID 13750721 [2]. - A replay of the call will be available from 8:00 p.m. Eastern Time on January 14, 2025, until January 28, 2025 [3]. Group 2: Company Overview - Applied Digital develops, builds, and operates next-generation data centers and cloud infrastructure [4]. - The company focuses on high-performance computing (HPC) applications, providing secure, scalable, and sustainable digital hosting solutions [4]. - Applied Digital aims to support AI Factories and high-performance computing workloads, leveraging its expertise and robust power pipeline [4].