Applied Digital Corp. Q2 FY2025 earnings call

Key Points

• Data center hosting: 286 megawatts of capacity in North Dakota for cryptocurrency clients, operating at full capacity with robust Bitcoin demand.
• Cloud services: Growth with six clusters online, evaluating next-generation GPUs for AI applications.
• HPC hosting: Construction of 400-megawatt campus in Ellendale, ND; main substation transformer energized in December; won DCD Community Impact Award for Ellendale initiative.
• Partnership with Macquarie: $5 billion perpetual preferred equity financing facility, $900 million allocated to Ellendale campus, right of first refusal for $4.1 billion in future HPC data center pipeline.
• Financial updates: Completed $450 million convertible senior note offering, $150 million senior secured debt, repaid senior credit facility with CIM Group.

For the fiscal second quarter of 2025, Applied Digital's Data Center Hosting segment generated $36.2 million in revenue, and the Cloud Services segment contributed $27.7 million. Revenue for the quarter was $63.9 million, up 51% over the prior comparable period.

Forward-Looking

• Revenues for fiscal second quarter 2025 were $63.9 million, up 51% from prior period.
• Expect depreciation and amortization (D&A) in cloud segment to be around $15 million per quarter going forward.
• EBITDA increased 93% to $21.4 million.
• Partnership with Macquarie provides a clear funding roadmap for HPC project construction and expansion.

Risks

• Forward-looking statements subject to risks beyond control, including factors affecting hyperscaler contract timelines.
• Hyperscaler contract process is thorough and time-consuming, which could impact timeline for securing deals.
• Dependence on successful execution of construction plans for Ellendale campus and effective implementation of partnership terms with Macquarie.

Q: Can you provide color on where due diligence processes stand with other potential hyperscalers?

A: Exclusivity with the first potential customer had expired, and others are in varying stages of progress, with accelerated progression on technical, design, fiber, and power aspects.

Q: How long have you been looking at similar deals for Macquarie and how did terms improve?

A: Started the process last year, about 7 months ago; terms improved as the market developed and progress was made at the site, resulting in favorable terms with Macquarie.

Q: Is there a scenario where the 400 megawatts in Ellendale be a split amongst 2 hyperscalers?

A: Could split, but strongly believe it will be a single customer for the entire campus.

Q: How much money was invested in Ellendale HPC and how much can be pulled out with Macquarie financing?

A: Roughly over $700 million invested; assuming project financing, expect in excess of $300 million in cash proceeds can be taken back to the parent.

Q: On the Macquarie deal, is there a specific date for lease signing and details on 15% ownership?

A: Feb 15 is not a lease signing date; 15% ownership in the HPC business is asset by asset, with Macquarie owning 15% of any asset funded into the entity.