Applied Digital (APLD) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues for Q1 fiscal 2026 were $64.2 million, an increase of 84% from $34.8 million in Q1 fiscal 2025, primarily due to $26.3 million from tenant fit-out services [18][19] - Adjusted net loss was $7.6 million or $0.03 per share, while adjusted EBITDA was $0.5 million compared to $6.3 million the prior year [20] - The company ended the quarter with $114.1 million in cash and $687.3 million in debt, excluding $362.5 million in proceeds from financing that occurred after the quarter [20][21] Business Line Data and Key Metrics Changes - The HPC data center hosting segment expanded its lease agreements with CoreWeave, increasing contracted revenue from approximately $7 billion to $11 billion over 15 years [4][5] - The blockchain hosting business operates 286 megawatts of fully contracted capacity across two North Dakota locations, with strong Bitcoin prices positively impacting customer sentiment [13][14] - The cloud services business is under strategic review and classified as held for sale, with no further updates provided until a definitive plan is established [14] Market Data and Key Metrics Changes - Publicly traded hyperscalers are projected to invest over $350 billion in AI data centers in 2025, highlighting unprecedented investment levels in AI infrastructure [8] - The industry recognizes that the limiting factor in AI infrastructure deployment is the availability of suitable data centers, referred to as AI factories [9] Company Strategy and Development Direction - The company aims to scale its operations significantly, with a goal of reaching $1 billion in net operating income (NOI) run rate within five years [22] - The company is focused on securing capital at the lowest possible cost and building repeatable financing structures to support data center development across the U.S. [16] - The company is actively evaluating new sites across additional states and regions to meet accelerating demand for data center infrastructure [23] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of speed, reliability, and readiness in meeting the surge in demand for AI infrastructure [8] - The company believes it is uniquely positioned to meet the challenges of the market, having secured early construction crews and built strong relationships with local communities [10] - Management anticipates a potential shakeout in the market as new entrants may struggle to meet construction timelines, favoring proven vendors and developers [64] Other Important Information - The company has secured an initial $112.5 million draw from a $5 billion preferred equity facility with Macquarie Asset Management to advance construction of Polaris Forge 1 [15] - The initial development cost for Polaris Forge 2 is projected to be approximately $3 billion, with potential for future expansion [7] Q&A Session Summary Question: What are the largest remaining factors for project financing? - Management indicated that project financing will encompass both buildings at Polaris Forge, aiming for a facility that is competitive with market offerings [31] Question: What is the current status of power infrastructure at Polaris Forge 2? - Management confirmed that 280 megawatts of initial utility power is in place, with infrastructure being built to meet timelines for 2026 and 2027 [32] Question: Can you discuss the Macquarie Asset Management financing? - The financing allows the company to scale significantly, unlocking $20 to $25 billion of total capital for future projects while minimizing dilution for shareholders [40] Question: How does the company define its active pipeline? - The active pipeline includes projects that are expected to move into construction within the next six to twelve months, with ongoing work on permitting and power agreements [45] Question: What are the expectations for power availability in South Dakota? - Power is expected to be available in South Dakota in 2026, with the main gating item being a sales tax exemption for IT equipment [60]