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Applied Digital (APLD) - 2025 Q1 - Quarterly Report
APLDApplied Digital (APLD)2024-10-09 21:14
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Revenue and Financial Performance - Total revenue for the three months ended August 31, 2024, was 60.7million,a67.160.7 million, a 67.1% increase compared to 36.3 million in the same period in 2023[14] - Net loss attributable to common stockholders improved to 4.3millionforthethreemonthsendedAugust31,2024,comparedtoanetlossof4.3 million for the three months ended August 31, 2024, compared to a net loss of 11.5 million in the same period in 2023[14] - Basic and diluted net loss per share improved to 0.03forthethreemonthsendedAugust31,2024,comparedto0.03 for the three months ended August 31, 2024, compared to 0.11 in the same period in 2023[14] - Operating income for the three months ended August 31, 2024, was 9.5million,comparedtoanoperatinglossof9.5 million, compared to an operating loss of 7.4 million in the same period in 2023[14] - Net loss decreased to 4.247millioninAugust2024from4.247 million in August 2024 from 11.854 million in August 2023, showing a significant improvement in financial performance[22] - Revenue increased by 26.6million(8326.6 million (83%) from 32.1 million in Q3 2023 to 58.8millioninQ32024,drivenbyincreaseddatacentercapacityandthelaunchofCloudServices[179]−AdjustedEBITDAwas58.8 million in Q3 2024, driven by increased data center capacity and the launch of Cloud Services[179] - Adjusted EBITDA was 19.993 million in Q3 2024, representing 33% of revenues, compared to 9.864million(279.864 million (27% of revenues) in Q3 2023[176] - Adjusted EBITDA for the three months ended August 31, 2024, was 19.9 million, compared to 9.8millionforthesameperiodin2023[200]−AdjustedoperatinglossforthethreemonthsendedAugust31,2024,was9.8 million for the same period in 2023[200] - Adjusted operating loss for the three months ended August 31, 2024, was 14.3 million, compared to an adjusted operating income of 1.6millionforthesameperiodin2023,reflectingasignificantdeclineinperformance[199]−AdjustednetlossattributabletoAppliedDigitalCorporationforthethreemonthsendedAugust31,2024,was1.6 million for the same period in 2023, reflecting a significant decline in performance[199] - Adjusted net loss attributable to Applied Digital Corporation for the three months ended August 31, 2024, was 21.6 million, compared to a net loss of 129,000forthesameperiodin2023[199]CostsandExpenses−Costofrevenuesincreasedto129,000 for the same period in 2023[199] Costs and Expenses - Cost of revenues increased to 61.1 million for the three months ended August 31, 2024, compared to 25.2millioninthesameperiodin2023[14]−Costofrevenuesincreasedby25.2 million in the same period in 2023[14] - Cost of revenues increased by 35.8 million (142%) from 25.2millioninQ32023to25.2 million in Q3 2023 to 61.1 million in Q3 2024, primarily due to higher depreciation, lease expenses, and personnel costs[180] - Selling, general, and administrative expenses decreased by 1.8million(111.8 million (11%) from 16.2 million in Q3 2023 to 14.3millioninQ32024,mainlyduetoreducedstock−basedcompensation[182]−Depreciationandamortizationexpensesincreasedto14.3 million in Q3 2024, mainly due to reduced stock-based compensation[182] - Depreciation and amortization expenses increased to 34.316 million in August 2024 from 7.86millioninAugust2023[22]−DepreciationexpenseforthethreemonthsendedAugust31,2024,was7.86 million in August 2023[22] - Depreciation expense for the three months ended August 31, 2024, was 3.0 million, compared to 2.2millionforthesameperiodin2023[45]−TotalnetleasecostforthethreemonthsendedAugust31,2024,was2.2 million for the same period in 2023[45] - Total net lease cost for the three months ended August 31, 2024, was 44.643 million, including 8.962millioninoperatingleasecostand8.962 million in operating lease cost and 35.626 million in finance lease cost[103] - Interest expense, net increased by 5.2million(2435.2 million (243%) from 2.1 million in Q3 2023 to 7.3millioninQ32024,drivenbyhigherfinanceleasesandinterest−bearingloans[185]CashFlowandLiquidity−Cashflowfromoperatingactivitieswasnegativeat7.3 million in Q3 2024, driven by higher finance leases and interest-bearing loans[185] Cash Flow and Liquidity - Cash flow from operating activities was negative at 75.89 million in August 2024, compared to a positive 4.517millioninAugust2023[22]−Cashflowfromfinancingactivitiesincreasedto4.517 million in August 2023[22] - Cash flow from financing activities increased to 163.365 million in August 2024 from 23.663millioninAugust2023,drivenbyborrowingsandstockissuances[22]−Totalcash,cashequivalents,andrestrictedcashincreasedto23.663 million in August 2023, driven by borrowings and stock issuances[22] - Total cash, cash equivalents, and restricted cash increased to 86.557 million in August 2024 from 31.688millioninMay2024[42]−Thecompanyhadaworkingcapitaldeficitof31.688 million in May 2024[42] - The company had a working capital deficit of 302.6 million, raising substantial doubt about its ability to continue as a going concern, but subsequent events alleviated this doubt[43] - As of August 31, 2024, the company had unrestricted cash and cash equivalents of 58.2millionandnegativeworkingcapitalof58.2 million and negative working capital of 302.6 million[201] - The company expects to have sufficient liquidity to support operations and meet working capital needs for at least the next 12 months[209] - Liquidity sources include cash on hand, customer payments, debt financing, and access to public capital markets[209] - The company may face challenges in raising additional funds on favorable terms, which could negatively impact financial conditions[209] - Failure to secure necessary financing could force delays, reductions, or termination of operations and development plans[209] - The company's liquidity estimates are based on assumptions that may prove incorrect, potentially leading to faster capital depletion[209] - If capital resources are used sooner than expected, the company may need to seek additional financing earlier than projected[209] - Additional financing may not be available on acceptable terms or at all, posing risks to the company's financial stability[209] - The inability to raise capital as needed would negatively impact the company's ability to pursue its business strategy[209] Debt and Equity Transactions - The company issued 6.1 million shares in an offering, net of costs, during the three months ended August 31, 2024[18] - The company converted 56.2millionofdebtintoequityduringthethreemonthsendedAugust31,2024[18]−Thecompanyissued56.2 million of debt into equity during the three months ended August 31, 2024[18] - The company issued 60.726 million in preferred stock in August 2024, with issuance costs of 5.444million[22]−Long−termdebtincreasedto5.444 million[22] - Long-term debt increased to 106.2 million as of August 31, 2024, up from 79.5millionasofMay31,2024,primarilyduetotheCIMPromissoryLoanof79.5 million as of May 31, 2024, primarily due to the CIM Promissory Loan of 105.0 million[59] - Remaining principal payments on long-term debt total 156.7million,with156.7 million, with 112.7 million due in FY28 and 12.0millionfromSAFEagreements[60]−DuringthethreemonthsendedAugust31,2024,12.0 million from SAFE agreements[60] - During the three months ended August 31, 2024, 48.0 million of Yorkville Convertible Debt was converted into approximately 11.4 million shares of common stock[63] - The CIM Promissory Note balance was 105.0millionasofAugust31,2024,withwarrantsissuedtopurchaseupto9,265,366sharesofCommonStock[64]−CIMWarrantswereissuedintwotranches:6,300,449CommonShares(InitialWarrants)at105.0 million as of August 31, 2024, with warrants issued to purchase up to 9,265,366 shares of Common Stock[64] - CIM Warrants were issued in two tranches: 6,300,449 Common Shares (Initial Warrants) at 4.8005 per share and 2,964,917 Common Shares (Additional Warrants) at the same price, with a five-year term[65] - The fair value of the Initial Warrants and Additional Warrants was 4.36and4.36 and 3.04 per warrant, respectively, totaling 36.5million[67]−TheCompanyenteredintotwoSAFEagreementstotaling36.5 million[67] - The Company entered into two SAFE agreements totaling 12.0 million, which may convert into preferred stock or entitle the investor to proceeds in liquidity or dissolution events[70][71] - The Company sold approximately 3.1 million shares for net proceeds of 14.6millionundera14.6 million under a 25 million "at the market" sale agreement with Roth Capital Partners[76] - The Company entered into a Sales Agreement allowing the sale of up to 125,000,000insharesofcommonstock,with125,000,000 in shares of common stock, with 16.4 million net proceeds from 3.0 million shares sold as of August 31, 2024[77] - The Company entered into a Standby Equity Purchase Agreement (SEPA) with YA Fund, allowing the sale of up to 250.0millionofcommonstock,witha250.0 million of common stock, with a 2,125,000 commitment fee paid in 456,287 shares of common stock[78][79] - The Company issued approximately 9.6 million shares of common stock under equity incentive plans, with (2.9)millionand(2.9) million and 5.6 million of stock-based compensation recognized in the three months ended August 31, 2024 and 2023, respectively[80] - The Company sold 301,673 shares of Series E Redeemable Preferred Stock for proceeds of 6.9million,withafixeddividendrateof9.06.9 million, with a fixed dividend rate of 9.0% per annum[87][88] - The Series E Preferred Stock has a 25.00 per share liquidation value, with optional redemption fees ranging from 9.00% to 0.00% based on the redemption timing[91] - Series F Convertible Preferred Stock private placement closed on August 30, 2024, for total proceeds of 50.0million,witha3.550.0 million, with a 3.5% fee paid to Northland Securities, Inc.[93] - Series F Convertible Preferred Stock holders are entitled to cumulative preferential dividends at an annual rate of 8.0% of the Stated Value of 1,000 per share[93] - The fair value of Yorkville convertible debt was 30.463millionasofAugust31,2024,calculatedonanas−convertedbasisusingquotedmarketprices[98][99]−TheCompanyrecordedalossonthechangeinfairvalueofdebtof30.463 million as of August 31, 2024, calculated on an as-converted basis using quoted market prices[98][99] - The Company recorded a loss on the change in fair value of debt of 6.4 million in its unaudited condensed consolidated statements of operations[99] - The company completed a private placement on September 5, 2024, issuing 49.4 million shares of common stock at 3.24pershare,raisingapproximately3.24 per share, raising approximately 160 million in gross proceeds[128] - The company received the final 20.0millionoffundingassociatedwiththeCIMPromissoryNoteonOctober8,2024,bringingthetotalbalanceoutstandingunderthenotetoapproximately20.0 million of funding associated with the CIM Promissory Note on October 8, 2024, bringing the total balance outstanding under the note to approximately 125 million[131] - The company entered into a Dealer Manager Agreement on September 23, 2024, to offer up to 2.5 million shares of Series E-1 Redeemable Preferred Stock at 25.00pershare[130]−Thecompanyconverted25.00 per share[130] - The company converted 17.8 million of Initial YA Notes into approximately 5.8 million shares of common stock and 4.1millionoftheMayNoteintoapproximately1.4millionsharesofcommonstock,leaving4.1 million of the May Note into approximately 1.4 million shares of common stock, leaving 6.2 million outstanding across all YA Notes[129] - The company borrowed 125millionundertheCIMPromissoryNoteasofAugust31,2024[202]−DuringthequarterendedAugust31,2024,thecompanysoldapproximately3.1millionsharesfornetproceedsof125 million under the CIM Promissory Note as of August 31, 2024[202] - During the quarter ended August 31, 2024, the company sold approximately 3.1 million shares for net proceeds of 14.6 million[203] - The company entered into a securities purchase agreement for the private placement of Series F Convertible Preferred Stock, raising 50.0million[206]−Thecompanyclosedaprivateplacementofcommonstock,raisingapproximately50.0 million[206] - The company closed a private placement of common stock, raising approximately 160 million in gross proceeds[207] - The company received 17.4millioninpaymentsforfuturecloudservicesand17.4 million in payments for future cloud services and 26.9 million in payments for future data center hosting services during the three months ended August 31, 2024[207] Segment Performance - Total revenue for the three months ended August 31, 2024, was 60.7million,withthedatacenterhostingsegmentcontributing60.7 million, with the data center hosting segment contributing 34.8 million and the cloud services segment contributing 25.9million[118]−Thedatacenterhostingsegmentreportedasegmentprofitof25.9 million[118] - The data center hosting segment reported a segment profit of 35.9 million, while the cloud services segment reported a segment loss of 15.8millionforthethreemonthsendedAugust31,2024[119]−TotalsegmentprofitforthethreemonthsendedAugust31,2024,was15.8 million for the three months ended August 31, 2024[119] - Total segment profit for the three months ended August 31, 2024, was 17.1 million, compared to 0.8millionforthesameperiodin2023[119]−DataCenterHostingsegmentoperatingprofitincreasedby0.8 million for the same period in 2023[119] - Data Center Hosting segment operating profit increased by 26.9 million (298%) from 9.0millioninQ32023to9.0 million in Q3 2023 to 35.9 million in Q3 2024, largely due to the Garden City facility sale[189] - Cloud Services segment operating loss increased by 8.4millionfrom8.4 million from 7.4 million in Q3 2023 to 15.8millioninQ32024,drivenbyhigheramortizationandoccupancycosts[190]−HPCHostingsegmentoperatinglossincreasedby15.8 million in Q3 2024, driven by higher amortization and occupancy costs[190] - HPC Hosting segment operating loss increased by 2.2 million (290%) from 0.8millioninQ32023to0.8 million in Q3 2023 to 2.9 million in Q3 2024, due to stock-based compensation and payroll expenses[191] - Data Center Hosting Business operates at full capacity with 106 MW in Jamestown and 180 MW in Ellendale, North Dakota as of August 31, 2024[147] - Cloud Services Business recognized 25.9millioninrevenueduringthefiscalquarterendedAugust31,2024[149]−HPCHostingBusinessisnegotiatinga400MWcapacityleasewithaUS−basedhyperscaler,includinga100MWfacilityunderconstructioninEllendale,NorthDakota[150]AssetandLiabilityManagement−Totalstockholders′equityincreasedto25.9 million in revenue during the fiscal quarter ended August 31, 2024[149] - HPC Hosting Business is negotiating a 400 MW capacity lease with a US-based hyperscaler, including a 100 MW facility under construction in Ellendale, North Dakota[150] Asset and Liability Management - Total stockholders' equity increased to 241.8 million as of August 31, 2024, compared to 127.9millionasofAugust31,2023[18][19]−Thecompanyreceived127.9 million as of August 31, 2023[18][19] - The company received 25 million in connection with the sale of its Garden City facility[14] - Restricted cash related to letters of credit totaled 28.3million,heldinmoneymarketfunds[39]−Propertyandequipmentincreasedto28.3 million, held in money market funds[39] - Property and equipment increased to 495.6 million as of August 31, 2024, up from 354.8millionasofMay31,2024,drivenbyconstructioninprogresswhichroseto354.8 million as of May 31, 2024, driven by construction in progress which rose to 313.6 million from 190.2million[45]−Deferredrevenuebalancedecreasedto190.2 million[45] - Deferred revenue balance decreased to 16.9 million as of August 31, 2024, from 39.4millionatthebeginningoftheperiod,primarilyduetorevenuerecognitionof39.4 million at the beginning of the period, primarily due to revenue recognition of 60.4 million[48] - Customer deposits balance decreased to 13.7millionasofAugust31,2024,from13.7 million as of August 31, 2024, from 15.4 million at the beginning of the period, with 2.8millionreceivedand2.8 million received and 1.5 million refunded during the quarter[49] - The Company had letters of credit totaling 28.3millionasofAugust31,2024,withrestrictedcashheldinseparateaccounts[61]−FutureminimumleasepaymentsasofAugust31,2024,total28.3 million as of August 31, 2024, with restricted cash held in separate accounts[61] - Future minimum lease payments as of August 31, 2024, total 318.554 million, with 150.292millionforoperatingleasesand150.292 million for operating leases and 168.262 million for finance leases[105] - The Company has a minimum commitment of approximately 68.1millionrelatedtotheenergyservicesagreementforitsJamestown,NorthDakotaco−hostingfacility[108]−TheCompanyhasenteredintoleaseswhichareexecutedbutnotyetcommencedwithtotalminimumpaymentsofapproximately68.1 million related to the energy services agreement for its Jamestown, North Dakota co-hosting facility[108] - The Company has entered into leases which are executed but not yet commenced with total minimum payments of approximately 18.9 million[106] - As of August 31, 2024, the company had total assets of 937.7million,withthedatacenterhostingsegmentaccountingfor937.7 million, with the data center hosting segment accounting for 143.1 million and the cloud services segment accounting for 338.8million[124]−Thecompanyreceivedtheremaining338.8 million[124] - The company received the remaining 25 million of the purchase price held in escrow related to the sale of its Garden City hosting facility, which was included in the gain on classification of held for sale[116] - Company sold Garden City hosting facility for up to 87.3million,with87.3 million, with 25 million released from escrow after meeting conditional approval requirements[147][148][161] Legal and Regulatory Matters - The Company is involved in a putative securities class action lawsuit, with potential material impact on results of operations if an unfavorable outcome occurs[111][112] - A derivative action was dismissed without prejudice on June 5, 2024, with no pending or threatened lawsuits as of August 31, 2024, that could materially affect the Company's operations[114][115] Revenue Recognition and Customer Contributions - Revenue recognition for data center hosting and cloud services is based on fixed rates over the term of agreements, with advanced payments recorded as deferred revenue[32][33] - Revenue from Customer A decreased to 48% of total revenue for the three months ended August 31, 2024, down from 68% in the same period in 2023, while Customer G contributed 16% of revenue in 2024[47] - Gain on classification of held for sale was 24.8millioninQ32024,primarilydueto24.8 million in Q3 2024, primarily due to 25.0 million released from escrow funds related to the sale of the Garden City facility[183] Stock-Based Compensation and Equity Plans - Stock-based compensation expense was 2.9millionforthethreemonthsendedAugust31,2024[18]−TheCompanyissuedapproximately9.6millionsharesofcommonstockunderequityincentiveplans,with2.9 million for the three months ended August 31, 2024[18] - The Company issued approximately 9.6 million shares of common stock under equity incentive plans, with (2.9) million and 5.6millionofstock−basedcompensationrecognizedinthethreemonthsendedAugust31,2024and2023,respectively[80]FutureCommitmentsandAgreements−TheCompanyenteredintoaCIMPromissoryNoteforinitialborrowingof5.6 million of stock-based compensation recognized in the three months ended August 31, 2024 and 2023, respectively[80] Future Commitments and Agreements - The Company entered into a CIM Promissory Note for initial borrowing of 15 million, with potential subsequent borrowings of up to 110millionandanadditional110 million and an additional 75 million accordion feature[151][153] - YA Fund converted 64.0millionofYANotesinto16.2millionsharesofcommonstock,with64.0 million of YA Notes into 16.2 million shares of common stock, with 6.2 million principal amount outstanding as of August 31, 2024[155] - Company entered into a Standby Equity Purchase Agreement with YA Fund for up to 250.0millionofcommonstock,withacommitmentfeeof250.0 million of common stock, with a commitment fee of 2,125,000 paid in shares[162][163] - Series F Preferred Stock offering closed on August 30, 2024, raising $50.0 million with an annual dividend rate of 9.0%[165][166]