Applied Digital (APLD) - 2025 Q3 - Quarterly Report

Business Operations - As of February 28, 2025, the Data Center Hosting Business operates at full capacity with a 106 MW facility in Jamestown and a 180 MW facility in Ellendale, North Dakota[170]. - The HPC Hosting Business is constructing a 369,000-square-foot facility in Ellendale, expected to provide ultra-low cost and efficient liquid-cooled infrastructure for HPC applications[173]. - The company is negotiating leases for up to 400 MW capacity with multiple US-based hyperscalers, including the Ellendale HPC Facility under construction[175]. Financial Performance - The Cloud Services Business generated $17.8 million and $71.3 million in revenue during the three and nine months ended February 28, 2025, respectively, accounting for 34% of total revenue for the fiscal quarter[171]. - Total revenue for the three months ended February 28, 2025, was $52.9 million, a 31% increase from $40.3 million for the same period in 2024[221]. - Revenue increased by $64.6 million, or 58%, from $111.0 million for the nine months ended February 29, 2024 to $175.6 million for the nine months ended February 28, 2025[233]. Expenses and Losses - Cost of revenues increased by $2.1 million, or 4%, from $47.1 million to $49.1 million for the same comparative periods[223]. - Selling, general and administrative expenses decreased by $7.3 million, or 24%, from $30.0 million to $22.7 million for the three months ended February 28, 2025[224]. - Net loss attributable to common stockholders for the three months ended February 28, 2025, was $36.1 million, compared to a net loss of $62.8 million for the same period in 2024[219]. Adjusted Metrics - Adjusted EBITDA for the nine months ended February 28, 2025, was $51.4 million, representing 29% of revenues, compared to $19.7 million, or 16% of revenues, for the same period in 2024[220]. - Adjusted operating loss for the three months ended February 28, 2025, was $8.764 million, compared to $23.448 million for the same period in 2024, reflecting a significant improvement[263]. - Adjusted net loss attributable to common stockholders for the nine months ended February 28, 2025, was $51.976 million, compared to $33.301 million for the same period in 2024, indicating an increase in losses[263]. Debt and Financing - The company entered into a promissory note for an initial borrowing of $15 million, with subsequent borrowings of up to $110 million, and an accordion feature allowing for an additional $75 million[178]. - The company completed a private offering of 2.75% Senior Unsecured Convertible Notes due 2030, raising $450 million, with net proceeds of approximately $435.2 million after expenses[186][187]. - As of February 28, 2025, total debt obligations are projected at $871.9 million, with significant payments due in FY 2027 and beyond[286]. Regulatory and Compliance - The company is committed to maintaining compliance with evolving regulatory frameworks affecting HPC, cloud, and blockchain hosting services[167]. - The regulatory landscape for digital assets remains complex, with ongoing discussions in Congress regarding comprehensive legislation to regulate digital assets[166]. Leadership Changes - The company welcomed a new Chief Operating Officer and experienced a transition in its executive team, with significant changes in leadership roles[176][177]. Cash Flow and Liquidity - As of February 28, 2025, the company had unrestricted cash and cash equivalents of $68.7 million and a working capital deficit of $119.3 million[265]. - The company expects to have sufficient liquidity for at least the next 12 months, but may face challenges in raising additional funds[288]. Shareholder Activities - The company increased the number of authorized shares of common stock to 400 million and preferred stock to 10 million[193]. - The company has the option to sell up to $250 million of common stock to YA Fund under the Standby Equity Purchase Agreement[197]. - A private placement of 53,191 shares of Series F Convertible Preferred Stock raised $50 million, with all shares converted into approximately 7.6 million common stock shares by February 28, 2025[277].