Applied Digital (US:APLD)2024-08-29 01:30Financial Data and Key Metrics - Revenue for Q4 2024 was $43.7 million, up from $22 million in Q4 2023, driven by expanded data center hosting capacity and cloud service contracts [14] - Data center hosting segment generated $26.9 million in revenue, while cloud services contributed $16.8 million [14] - Cost of revenue increased to $46.3 million from $15.9 million in Q4 2023, primarily due to higher energy costs and depreciation expenses [15] - Net loss for Q4 2024 was $64.8 million ($0.52 per share), compared to a net loss of $6.5 million ($0.07 per share) in Q4 2023 [16] - Adjusted EBITDA for Q4 2024 was $4.8 million, up from $3.4 million in Q4 2023 [17] - Cash, cash equivalents, and restricted cash stood at $31.7 million, with $125.4 million in debt at the end of Q4 2024 [18] Business Line Performance - Data center hosting: The 106-megawatt Jamestown facility operated at full capacity, while the 180-megawatt Ellendale facility faced power outages due to transformer failures, which were resolved by the end of Q4 [8][9] - Cloud services: Six clusters were online by Q1 2025, with a revenue run rate of $110 million annually, focusing on enterprise demand [29][30] - HPC data centers: 400 megawatts of capacity under development in North Dakota, with a 100-megawatt facility in Ellendale nearing completion [10][11] Market and Strategic Developments - The company signed an LOI with a US-based hyperscaler for 400 megawatts at the Ellendale campus, with technical due diligence completed [11][12] - Three additional campuses totaling 1.4 gigawatts are being marketed, with power availability expected by 2026 [12][40] - The company is focused on securing project-level financing for the Ellendale campus and aligning cloud service financing with industry norms [18][30] Management Commentary on Environment and Outlook - Management expects Q4 2024 to mark the bottom for revenues, with sequential improvements anticipated in Q1 2025 [21] - The company is committed to becoming a development platform for multiple HPC data centers, starting with Ellendale and expanding to additional campuses [20][40] - Strong demand for near-term power and supply chain challenges are key industry dynamics, with the company well-positioned due to its power availability and supply chain expertise [61][62] Other Important Information - The company incurred one-time professional service expenses related to capital-raising initiatives and strategic transactions [13] - Accelerated depreciation of GPU hardware significantly impacted adjusted earnings, with efforts underway to extend depreciation to six years [17][30] Q&A Session Summary Question: Ellendale HPC Campus Progress and Capital Requirements - The Ellendale facility is over 90% complete, with $200 million invested and an estimated total cost of $1 billion for the first 100 megawatts [24][25] - Project-level financing is expected to cover 80-90% of the remaining costs, pending lease finalization [25] Question: Cloud Services Business Growth - Six clusters are online, generating a $110 million annual revenue run rate, with growth constrained until better financing structures are in place [29][44] - The company is focusing on enterprise demand and has hired a new CRO from IBM to drive this market [30] Question: Hyperscaler Lease Timeline - The lease agreement with the hyperscaler is over 90% complete, with final details being ironed out [35][38] Question: Competitive Environment and Strategy - The company differentiates itself by securing power availability first, then ensuring fiber connectivity and latency requirements, giving it an edge in site selection [64][66] - Competition primarily comes from private data center companies with longer track records, but the company’s focus on near-term power and supply chain expertise positions it well [61][62] Question: GPU Financing Structure - Financing interest has grown, with costs dependent on the off-taker (AI labs, enterprises, or hyperscalers) [51] - The company is working on a bankruptcy-remote SPV structure to align financing with customer contracts [53] Question: Cloud AI Business Capacity - The company has over 30 megawatts of ready capacity for deployment across multiple locations, including Jamestown, Denver, and Salt Lake City [73]