Applied Digital (US:APLD)2023-04-07 01:22Financial Data and Key Metrics Changes - Revenues for the fiscal third quarter were $14.1 million, entirely from hosting operations, with a cost of revenues of $10.5 million, leading to an adjusted gross profit of $4.4 million or 31% of revenue [17][18] - Net loss attributable to the company was $7 million, or a loss of $0.08 per share, while adjusted net loss was $1.4 million, or a loss of $0.01 per share [18][19] - The company ended the quarter with $22.9 million in cash and cash equivalents and $23.7 million in debt, with a net cash inflow of $44 million from customer deposits and deferred revenue [20] Business Line Data and Key Metrics Changes - The Jamestown facility operated at full capacity, generating $14.1 million in revenue, exceeding its steady-state capabilities of $12 million [12] - The Ellendale facility, with a capacity of 180 megawatts, was energized in early March, and the Garden City facility, with a capacity of 200 megawatts, is expected to ramp up faster due to pre-installed miners [9][11] - The company aims to diversify its revenue, targeting at least 10% from high-performance computing (HPC) by the end of the year and a 50/50 split by 2025 [14] Market Data and Key Metrics Changes - The HPC market is expected to reach $900 billion globally by 2030, and the company is well-positioned to capitalize on this growth due to its expertise in hosting and unique data center capabilities [14][15] - Demand for hosting capacity has remained robust, with no impact from recent market volatility [14] Company Strategy and Development Direction - The company is focused on expanding its non-crypto use cases to demonstrate the capabilities of its data centers for HPC applications [22] - The strategy includes optimizing for green computing and aiming to be the lowest-cost compute provider [16] - The company is exploring new sites for expansion, with a strong pipeline for future builds, particularly in cold regions with favorable power prices [70] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting strong demand for both crypto and non-crypto services [23] - The company is confident in its ability to deliver long-term high-margin sustainable cash flow [8] - Management noted that while the crypto industry remains volatile, the company is well-positioned to capitalize on strong demand for its services [23] Other Important Information - The company has no exposure to major financial institutions that have faced recent challenges, ensuring a strong balance sheet [20] - The company is fully funded for its current projects and is exploring financing options for future GPU ownership [33][75] Q&A Session Summary Question: Update on Garden City energization timeline - Management explained that the primary issue is related to metering and visibility in Texas, with expectations for meaningful progress soon [26][27] Question: Details on HPC anchor agreements - Management discussed various models for HPC agreements, indicating potential for significant revenue increases compared to Bitcoin mining [30][32] Question: Performance of Jamestown facility - Management attributed higher revenue to increased efficiency and a slight price lift, with expectations for continued strong performance [39][41] Question: Customer prepayments and deferred revenue - Management clarified that prepayments are amortized over 12 months once contracts are energized, impacting cash flow positively [42][43] Question: Clarification on Texas permitting framework - Management confirmed that recent delays were unrelated to legislative changes, ensuring no impact on operations [46] Question: Competitive landscape in HPC - Management acknowledged expected competition in the HPC space but emphasized the company's unique advantages in power density and cooling capabilities [54][56] Question: Future HPC business outlook - Management indicated strong demand for HPC builds, with potential for rapid growth and significant revenue contributions in the coming years [62][64]