• Revenue: $63.9 million, up 51% over the prior comparable period.
• Data Center Hosting Revenue: $36.2 million.
• Cloud Services Revenue: $27.7 million.
• Cost of Revenues: Increased by $22.6 million to $52.4 million.
• General and Administrative Expenses: Increased by $9.5 million to $29.8 million.
• Depreciation and Amortization Expense: Increased to $26.4 million from $13.4 million in the same period of 2024.
• Interest Expense: Increased by $4.9 million to $7.5 million.
• Net Loss Attributable to Common Stockholders: $138.7 million or $0.66 per share.
• Adjusted Net Loss: $12.6 million or $0.06 per share.
• EBITDA: Increased 93% to $21.4 million.
• Cash, Cash Equivalents, and Restricted Cash: $314.6 million.
• Total Debt: $479.6 million.

• Warning! GuruFocus has detected 7 Warning Signs with APLD.

Release Date: January 14, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Applied Digital Corp (NASDAQ:APLD) reported a 51% increase in revenues for the fiscal second quarter of 2025, driven by growth in their cloud services business.
• The company has successfully energized the main substation transformer for their 400 megawatt campus in Ellendale, North Dakota, marking a significant milestone.
• Applied Digital Corp (NASDAQ:APLD) announced a strategic partnership with Macquarie Asset Management, which includes a $5 billion perpetual preferred equity financing facility.
• The partnership with Macquarie positions Applied Digital Corp (NASDAQ:APLD) for significant growth, with plans to construct over two gigawatts of HPC data center capacity.
• The company has been recognized with the DCD Community Impact Award for their Ellendale Community and Economic Development Initiative, highlighting their positive community impact.

Negative Points

• The company reported a net loss attributable to common stockholders of $138.7 million for the quarter.
• Interest expenses increased significantly to $7.5 million, driven by an increase in finance leases and interest-bearing loans.
• The hyperscaler contract process has been lengthy and thorough, causing delays in finalizing agreements.
• Applied Digital Corp (NASDAQ:APLD) faces challenges with electricity availability for data centers, with a potential shortfall predicted by 2028.
• The company is dealing with a moving target in terms of investment and cash recovery from their Ellendale campus, complicating financial planning.

Q & A Highlights

Q: Can you provide any color on where due diligence processes stand with potential hyperscalers? Would there come a point where you would reenter exclusivity with any of these counterparties? A: The exclusivity with the first potential customer expired, and we opened the site for additional customers. The process is more accelerated now as everything is prepared for easy access. We are not currently in exclusivity with any party but are progressing well with multiple discussions. - Wesley Cummins, CEO

Q: How long have you been looking at similar deals to the Macquarie investment, and how have terms improved over that timeline? A: We started the process about seven months ago, reviewing multiple proposals. As the market developed and we made progress at our site, we secured the best terms with Macquarie. We conducted a full process to ensure we got the best partner and terms. - Wesley Cummins, CEO

Q: Are the hyperscaler discussions moving forward, and what are the remaining steps? A: The process is thorough, and we've made significant progress on design, technical aspects, and power. The financial backing from Macquarie is a crucial step in overcoming the last hurdle. We are optimistic about finalizing a lease and moving to the next level. - Wesley Cummins, CEO

Q: With the Macquarie funding, how does this open up the marketplace and accelerate discussions? A: The backing provides a clear roadmap for financing, moving funding to the asset level. This eliminates questions about equity and dilution at the public company level, allowing us to build over two gigawatts of our pipeline. - Wesley Cummins, CEO

Q: Could the 400 megawatts in Ellendale be split among multiple hyperscalers, or will it be a single customer? A: It could potentially be split, but I strongly believe it will be a single customer for the entire campus. - Wesley Cummins, CEO

Q: How much money has been invested in Ellendale HPC, and how much will be pulled out with the Macquarie financing? A: We have over $700 million invested in Ellendale. Assuming project financing and lease terms, we expect to recover over $300 million in cash proceeds. - Saidal Mohmand, CFO

Q: Can you define your pipeline, and how does the Macquarie funding support it? A: Outside of Ellendale, we have 1.6 gigawatts of campuses with power available in 2026 and 2027. The Macquarie funding provides a clear roadmap for financing these projects. - Wesley Cummins, CEO

Q: What are the learnings from the hyperscaler negotiations that can be applied to future discussions? A: The process is more accelerated now as we have a better understanding of what is required. Being recognized as a capable supplier by signing a lease with a major customer will help accelerate future negotiations. - Wesley Cummins, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.