Applied Digital (APLD) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues for Q3 2025 were $52.9 million, up 22$2.1 million to $49.1 million from the prior comparable period [23] - Net loss attributable to common stockholders was$36.1 million or $0.16 per share [24] - Adjusted net loss was$17.8 million or $0.08 per diluted share, with adjusted EBITDA increasing 878$10 million [25] Business Line Data and Key Metrics Changes - Data center hosting segment generated $35.2 million in revenue, while cloud services segment contributed$17.8 million [21] - Cloud services revenue declined sequentially due to a shift to an on-demand model, but technical issues have been resolved [22] Market Data and Key Metrics Changes - The company operates 286 megawatts of fully contracted data center hosting capacity, running at full capacity [9] - Bitcoin prices remain strong, positively impacting customer sentiment and business prospects [9] Company Strategy and Development Direction - The company is exploring strategic options for its cloud services business, driven by competitive dynamics and potential transition to a data center REIT structure [15][16] - Significant investments have been made, including a $5 billion potential investment from Macquarie Asset Management and a$375 million financing arrangement with Sumitomo Mitsubishi Bank [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the business and its future prospects, particularly in the high-performance computing industry [9] - The company is focused on completing construction on schedule and within budget, with plans for future expansions [28] Other Important Information - The company ended Q3 with $261.2 million in cash and$689.1 million in debt [27] - Construction for the first building is expected to generate revenue in Q4 2025, with subsequent buildings planned for 2026 and 2027 [13] Q&A Session Summary Question: Update on the split between on-demand and contracted cloud services - Currently, four of six clusters are in reserve contracts, while two have moved to on-demand, generating some revenue [33] Question: Long-term fit of the BTC hosting business - BTC assets are expected to align with HPC data center capacity, allowing for dynamic load adjustments [34] Question: Impact of Macquarie and SMBC on leasing momentum - Increased interest has been noted, with improved comfort levels among potential customers due to world-class financing partners [42] Question: Expected capital needs over the next 12 to 18 months - Capital expenditures are in line with past projections, running between $30 to$50 million per month for the first building [44] Question: Status of Bitcoin hosting contracts - Approximately two years remain on existing contracts, with some risk of non-renewal [46] Question: Remaining steps to complete the L&A facility - The facility is expected to be operational by Q4 2025, with remaining expenditures primarily for finishing touches and equipment deployment [51] Question: Plans for selling the cloud business - The process has just started, with various potential structures being evaluated [56] Question: Existing hyperscalers' disposition towards data center builds - Demand remains stable, with ongoing discussions with multiple hyperscalers [64] Question: Pricing trends for data center services - Pricing has been stable over the last 90 days but has increased year-over-year [69] Question: Sale process and potential lessors' requirements - There are no hard requirements for the sale process, but it is seen as the right time to separate the cloud business [83]