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Applied Digital (APLD) - 2025 Q1 - Earnings Call Transcript
APLDApplied Digital (APLD)2024-10-09 23:07
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Financial Data and Key Metrics - Revenue increased by 67% to 60.7millionthisquarter,drivenbycloudservicescontracts[10]−Datacenterhostingsegmentgenerated60.7 million this quarter, driven by cloud services contracts [10] - Data center hosting segment generated 34.8 million in revenue, while cloud services contributed 25.9million[10]−Depreciationandamortizationexpensestotaled25.9 million [10] - Depreciation and amortization expenses totaled 34.4 million, up from 8millioninthesameperiodlastyear[10]−AdjustedEBITDAforthequarterincreasedsignificantlyto8 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 21.6millionor21.6 million or 0.15 per basic and diluted share [11] - Cash, cash equivalents, and restricted cash stood at 86.6million,with86.6 million, with 143.6 million in debt and shareholders' equity at 241.8million[11]BusinessLineDataandKeyMetrics−Datacenterhostingbusinesshas286megawattsofcapacityacrosstwofullycontractedlocationsinNorthDakota,operatingatfullcapacity[8]−Cloudservicesbusinesshassixclustersonline,withplanstodeployadditionalclustersstartinginthesecondhalfoffiscalyear2025[9]−SignificantprogressmadeonamendingleasefinancingforGPUs,allowingamortizationovertheexpectedusefullife,improvingreportedresults[9]MarketDataandKeyMetrics−ThecompanyisfinalizingaleasewithaUS−basedhyperscalerfortheEllendaleHPCcampus,withaninitial100−megawattbuildingandplanstoexpandto400megawatts[7]−RisingdemandforproprietaryHPCdatacentersamongtop−tierindustryplayers,withsignificantinterestfromhyperscalersfor2025and2026capacity[14]−Thecompanyisexploringopportunitiestoacceleratethemonetizationofitsover1.4gigawattpipeline[8]CompanyStrategyandIndustryCompetition−ThecompanyaimstobecomeaplatformcapableofbuildingandoperatingmultipleHPCdatacentersatscale[15]−Strategicinvestmentsfromprominentinvestorsaffirmthecompany′smarketpositionandhighlightthepotentialforitsstrategicplan[15]−Thecompanyispositioningitselfasafull−stackdeveloperforhyperscalers,leveragingitsearlyinvestmentintheindustry[14]ManagementCommentaryonOperatingEnvironmentandFutureOutlook−Thecompanyisencouragedbypositivetrendsacrossitsbusinessandremainsconfidentinitsgrowthtrajectory[9]−ManagementseessignificantdemandforHPCdatacenters,withlimitedcapacityavailablefor2025and2026[14]−Thecompanyismakingexecutiveteamchangestobetterpositionitselfforexpansionandgrowth[15]OtherImportantInformation−Thecompanyincurred241.8 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]