APLD - Earnings call transcript Q2 2025 | Applied Digital Corporation

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Operator

Good afternoon, and welcome to Applied Digital's Fiscal Second Quarter 2025 Conference Call. My name is Julian, and I will be your operator for today.

For this call, Applied Digital issued its financial results for fiscal second quarter ended November 30, 2024, in a press release, a copy of which will be furnished in a report on a Form 8-K filed with the SEC and will be available in the Investor Relations section of the company's website.

Joining us today -- or joining us on today's call are Applied Digital's Chairman and CEO, Wes Cummins and CFO, Saidal Mohmand.

Following their remarks, we will open the call for questions.

Glover Group Matt brief make begin, statement. introductory we from will Gateway a Before Mr. begin. may you Glover,

Matt Glover

Thank afternoon, Julian. Second you, Good Quarter Digital's to XXXX Fiscal Applied Conference Call. everyone, and welcome

to formal uncertainties. we we're begin today considered and securities be statements may that of involve management Before a making would like number some remind remarks, statements under laws forward-looking everyone risks and

events which cause you result, a number statements. and of we actual many could control, caution forward-looking that differ those are a from our As factors, beyond the materially described to results of in

For to of forward-looking Commission, made Exchange or more detailed risks, the with our by uncertainties We disclosures filings occur after and forward-looking reflect and the assumptions Securities law. that disclaim except or relating obligation SEC. forward-looking circumstances any any statements, events to see earnings as our the date or public are undertaking statements please release and in made, to required statements update the

metrics you encourage to in metrics. applicable We also tables earnings the and the you our these discuss as carefully release disclosures GAAP our to measures reconciliation and consider financial non-GAAP read

our uncertainties refer report but other caption We our the business, with for variable quarterly XX-Q. disclosures in our identified Factors to Risk Form and risks our and of on circumstances, on filings detailed including, and to, XX-K not descriptions the limited SEC uncertainties you and under report annual Form

replay the the free will of like visiting and call website. for You available being to this filings in that Investor Applied SEC at made may everyone is www.sec.gov. be link section get Digital's Applied would Digital's for remind by website Relations I also SEC via recorded

of Chairman Wes? call Applied Digital's Wes turn over to the and like I'd Cummins. Now to CEO

Wesley Cummins

continued I the infrastructure Thank you their Thanks, Matt, fiscal rapidly our work call. computing high-performance supporting industry. second providing our by joining for quarter purpose-built and to to of mission good employees and start expressing for conference to hard service XXXX afternoon, gratitude want our and growing everyone.

of the results, across Saidal like Before share to review to our financial our a detailed developments turning CFO, I'd recent over call our businesses. Mohmand, for some

our X Dakota, Starting have center across capacity. locations currently center XXX in fully clients capacity hosting megawatts are data contracted our for We operating at cryptocurrency North with of which full data business.

As our hit Bitcoin of in many you recently and $XXX,XXX, demand know, remains sector the robust. for this services

as cloud services computing our discuss explore contracts power segment which This and existing our our let's high-performance opportunities applications. new Next, growth for pipeline. provides we business, continues to AI fulfill experience in

X end quarter, online. the had of second the clusters we As of

area are numerous currently how in evaluating GPUs opportunities to this We next-generation as come we see market.

our transformer. campus construction in segment, Dakota. substation a we energization major In milestone of continued successful we the XXX-megawatt our main hosting of December, reached HPC the North Ellendale, with In

Award that Google, finalized were the announce an in This Dakota. to the Europe to Impact center through Telehouse established supporting Community pleased R globe emerging alongside very significant won I'm like as our Additionally, based such firm the [ we our ours London. from we from a space program, Ellendale Economic addressing Ellendale, and we housing for Community are and North shortages in growth workforce ] DCD initiatives Development wish NTT India in is for companies accomplishment data data and as around

North turn of Dakota. lease everyone now campus mind, that our Let's the the to everyone's on is topic Ellendale, in

Over through. process is the the hyperscaler extremely year, contract we've that past learned

shareholders' it and best in we continue within on speed, available on time avoid exact control XXX-megawatt is on and data can we their budget. of center we believe what completing While cannot our that asset critical our we a strongly of megawatts campus XXXX. can an in speculating managing XXX date. valuable believe with to load interest IT We I construction the Ellendale focusing control, is our are what

strategic the While of has excited the Macquarie engaged been agreed investment in is Group one some Asset significant to that in we've the of a undergoing been finance -- with diligence Management. to with I'm process division world. share global major organization process Today, Macquarie of XX of benefits largest the such Asset with Management partnership over long, partners form Asset is services Macquarie financial markets XX,XXX we employees. have operating a the

capital of They investors have the infrastructure world raising data million been recognized XX in ] largest alone. the [ brings past infrastructure years, investments extensive Macquarie centers. for experience the in as in last $XX year over in one

our companies. our form delivering with United We The Digital's recover HPC billion Digital an the Macquarie Digital's estimated will growth and in and center significant fastest-growing conjunction enterprise $XXX equity in HPC data perpetual with of ecosystem investment $XXX allow -- developers the business interest for capabilities XX% future expanded project a this facility. data HPC and campus. future hyperscale project level partnership give for debt over along infrastructure an take and of the the allocate industry, the used leverage company Data's equity perpetual and in growing Applied one to the data their believe data Macquarie as infrastructure will repay will segment. will relationship preferred billion in preferred center owners, million with development complement center Digital include the positions expertise, with high-performance will of servicing to investment digital facility to digital operators financing common establishing $X company's financing along right up Applied The equity Macquarie States. in growing This Ellendale its to HPC across [indiscernible] in investing the and We solutions be pipeline. to investment Applied Applied $X.X center million computing and campus invest to to up additional Ellendale first expertise Applied

we ownership the stake equity XX% HPC financing a cost, in to an level capacity, have of sufficient over including we both to future HPC fund campus. to build ourselves the in positioned project as center establish continuing excited data needed existing HPC support significant We're today's sector, scale our we large centers gigawatts of leader as revolution. operate the develop facility for HPC and are a data At preferred state-of-the-art at we Ellendale pipeline, customers X construct portion project forefront the equity Tier transformative With for infrastructure of X a while center data assets to to believe Macquarie profits. AI world-class and our have

growth Saidal? on trends to through will provide and walk encouraged across our summary, call that, the remain our you positive business Mohmand, our I witnessing In we're our now With to in turn confident financials over by the Saidal and CFO, trajectory. guidance. an update we're

Mohammad Saidal Mohmand

everyone. an delighted few and active our to for been finance good the and department and accounting afternoon, It the months new Wes, team, lead has as CFO. Thanks, I am

facility billion parent Macquarie the Capital credit allowed Asset us and our from our Management offering a included facility highlighting some detailed the of senior $XXX allocated share $X due secured recent by the financial assets which perpetual announcements, by announced X.XX% we Equipment strategic encumbrances well Today, Macquarie review debt simultaneously to for Let as senior facility. convertible partnership announced followed with as on In XXXX, In November, guarantee. with quarter. repaid senior equity million, a financing financing million $XXX me begin $XX remove for a note a we preferred SemGroup. of This repurchases. completed we million December,

$XX.X $XX.X up This in our for data fiscal over of of the million comparable center prior additional was growth turn segment contributed hosting due the to In the revenue, total, quarter cloud generated million, second Cloud XXXX quarter. services segment by to our our business deployment of Services Revenues XX% let's GPU million. primarily the the increase Now driven continued were period. clusters. $XX.X while

period, the growth the business million, energized of growth million $X.X to and energized as Cost the revenues $XX.X provided and services increased customers. million primarily more by driven more SG&A to facilities in $XX.X services also driven by facilities additional were business million the $XX.X additional as prior in were were increased provided. expense to from comparable were

million expense in our attributable Of discussed our depreciation in leases same in primarily X-year million to our segment. previous quarter, to amount, have period, $XX.X driven XXXX. $XX.X is amortization which over increased and earnings a to D&A million Cloud was segment's the of $XX.X the D&A this by period we compared calls. This of This GPU amortization

to timeline of standard quarter, lease GPU which our During million renegotiated industry period segment terms, adjustment years. amortization this us the for more This we extend allowed X reduced for the to by a quarter. lease $X.X expense GPU D&A

quarter around the $XX further a on expect D&A. All million expect ahead, segment per Looking forward, GAAP by cloud the lower about $X per this basis. reported in, D&A quarter we recognize we in for to million going change expenses to

between loans common impacted on primarily $XXX.X on loss and increase periods. the I of $X.X Moving to to convertible million and note $X.XX want increased by attributable on converted share. as in issued was to was finance during $XX.X loss driven conversion or [indiscernible] a to the debt debt interest million, stockholders to an million leases basic interest-bearing diluted fund Interest expense. $X.X Net was period. of this that quarter million by our expense

a change recorded which the of to value notes fair fair We convertible was on debt a the of in during X-week also senior loss value period conversion X.XX% due the the to recognized the adjustments of derivative. in as million $XX.X option

or authorized The XXXX, to to adjusted loss November shareholder well. as count. us receiving $XX.X XX, approval Adjusted million million at net annual XX% increased per $X.XX share. EBITDA to was prior the was This meeting our on increase share $XX.X

$XXX.X sheet. balance in restricted second cash, cash the equivalents $XXX.X We along with our million fiscal with ended quarter million and cash, debt. to Moving of

for With that, to Wes the over I'll closing remarks. turn call

Wesley Cummins

was adding Morgan to rapid significant there U.S. AI centers requires of data the the construction needs, demand we the Saidal. center market planning, data recognize Digital and gigawatts fully or is approvals next before can The of landscape. of of presenting for is capabilities be of not this by dynamics, few facilities recent Addressing grasp the capacity generation under Thank be shortfall for to U.S. regulatory that According believe first one data growing in demand that approximately this straightforward could availability even you, new the to we years. processes Applied report, the electricity a currently excess U.S. our in available XXXX. much is on development growing began XX within demand new and years expansion by infrastructure transmission available as hyperscale and companies could power for power issue Based challenges Anticipating shifting these centers. Stanley the of a power these driven decades. lengthy contract span the

result, these we we capitalize trends. well are positioned believe a on to As

our of been from and into vision our of now approach, asset transforming year by investments Management. has strategy cost valuable further validated pipeline, SemGroup, Asset also only the for but capital securing the strategic Macquarie NVIDIA our our shareholders. validate not and These and accelerate Our highly over development it a past investments lower

Our a of vision is unfolds. to we're forward operating to questions multiple the centers. time. We and the quarter progress establish building this this and significant proud HPC look platform year at your further achieved as updates Operator? welcome sharing And data for

Operator

Instructions] [Operator

Securities. Giles, from question Nick comes B. first Our Riley

Nick Giles

Wes diligence processes other stand you and In can And provide team, congratulations this with on multiple today's at on discussions you noted with late-stage was the wondering, hyperscalers release, due any hyperscalers. color potential announcement. point? I the where

My you would next these with is, counterparties. where a there any would reenter point come question of exclusivity

Wesley Cummins

question. the for thanks Nick,

in things, say design, to it's we think either expired. the technicals, easy customers -- with once your October the once, more access help the prepared look. fiber, doing We -- stages potential does power, when opened much Those question? everything I we is had accelerated November but been that and for had those So progression first diligence so the for all done site customer once are exclusivity of this of you're additional And those. I of around progress, would it's on that answer disclosed varying the in

Nick Giles

improve That does. Macquarie follow-up that looking extent similar just line? one deals? Maybe helpful. did been on have a investment. time very over And the terms at long you what How That's to

Wesley Cummins

the that we progress best did the the year. signed best made It's terms last think, terms the probably structure We to make that X looked the I this and sure market months. process moved in and proposals partner we've as very we're the the happy we getting with Macquarie. this our and on year site, full multiple developed the started process best we But at and I'm with at been We, think I do terms. with a did outcome So on

Operator

comes next Street from Brown, Lake Rob And our Capital. question

Robert Brown

roadblocks final Just further of details at Are of or there can't hyperscaler left on just that through and I go? are brought you of to the sense where but what's exactly kind are discussions. you they know moving working protect, some you forward? maybe it's into kind

Wesley Cummins

Rob, this it, the specifically very think going is to We've perspective, from have thorough design, the what's we've in a I we the I thanks. great, way process. would best again, Power. guess experience and work into I done Ellendale thus technical about What far, say had frame there site, done that fiber,

All that that. and great been of huge of has progress a on made amount

full [indiscernible] again. level. hyperscale -- know scale the break to for it. with allow hyperscalers I'm announcement the last think us a get But -- and the in supplier then new this XXXX us, of available backing piece operations this, the well-known partner hitting moving don't I the a really of while I a finalizing puzzle before, this market. capital, that the about is of financial lot I we facility the think checking have really I've first-time today, But which I we're helpful we're from over box development the is I to really we're next is anything last need in think for going on lease if this of communicated we capacity to on into optimistic here how the the in and piece to demand stack for to with is think, these any very and last

Robert Brown

of additional there it. funding, up this does Got guess, and you're the how And accelerate maybe I facilities with does $X the Okay. discussions these backing having? that marketplace? that billion kind next the open How for, guess, I of some other plus, then an funding are --

Wesley Cummins

the think that backing just into the reason I right, due amount we wanted to Again, in partnership. there's a of general, enter diligence. full both this There's

funds a step it's and as this great us, We this -- center team, finalize have first, different level. think, huge that the well and amount last this financing for, development available. as really I is move needed is level. as step That's to asset-heavy ops in funding across we X calls, think business, a I marketing and power This or a the pipeline have X of what for team, with is And really about locations. we CapEx-heavy to is great talked the an next our significant I XXXX it earnings power great down important, to asset does data a X so we this -- moving a business, and this down asset really Rob, the

debt near time So and map do question a every there's the time then on top we start a dilution have new company. here I clear get prepared lays campus, equity? 'XX we to equity But go important in the over pipeline of where plan we a public build think commitment to clear at us provides in a the to between just go you is is the that. the pipeline, we allow It every which finance the what new map of remarks, much said very and as the that gigawatts road to project comes out. mark out how 'XX, part not term, get it finance we we on side that very road layered X of contract, How of the build 'XX, the and

Operator

comes question from next Partners. Darren Capital ROTH Paul Aftahi, Our

Darren Aftahi

If may. I

take it there is I hit Macquarie anything XXX the of down kind is to already announcement of there X? a path to the ] and timing scenario amongst lease strategic in one of Just the this know a be morning, entity megawatts all in on relates Is [ going the capacity. terms process and are Or hyperscalers you the that then PR. multiple Ellendale as this guys the to in you the split where

Wesley Cummins

Darren. Thanks,

get getting the terms, On else and timing to that. first into really as question, I'm the anything as far whether right it's about the not there's going around

for a the On to split, single the be I customer could second question, strongly going believe it's entire campus. it

Operator

comes from Mike next Securities. Northland Our question Grondahl,

Mike Grondahl

exactly HPC and financing? in much you with Could to much us out you'll Macquarie how pull had money invested be you Ellendale, this remind able how

Wesley Cummins

into that. Saidal let I'll Yes.

Mohammad Saidal Mohmand

important we we campus on in we million the we to project I be Mike, parent. as up as million and assuming it's terms the of going paid as over along a in well. the so back there's have take that cash can the in debt think there. just excess is Mike, extra expect proceeds There's reminder, But financing to we have $XXX some invested Ellendale lease, back Capital facility -- $XXX of the roughly disclosed entered X-K, Macquarie the that

out, repayment. and a from do forward that when view Applied to trying million the math campus, megawatt pull requirement, there the it we million $X between then the and of debt Ellendale for the the per $XXX,XXX Applied, is you're Ellendale the when basis, we So going increase megawatt that as Effectively $XXX on outside campus.

Mike Grondahl

Right.

in over that out $XXX or off the debt pull million paid of net with and million $XXX million of some have So then you Ellendale, million end up a $XXX $XXX with capital. you'll invested other you'll

investment So about your is $XXX million? net

Wesley Cummins

it's moving There's target a also too. also --

it, -- well. into the as about We're we're month spending in right? ground putting project think Just dollars every the

Yes.

parent the what Moving and target as be goes out now what [indiscernible]. subsidiary out. to is pull back to back as back of the far cash HPC Yes, -- the comes able the we'll public

Mike Grondahl

look environment know, the could get I pretty all -- secondly, And much then what's like right pipeline maybe looks you more like? you after these with good. gigawatts. if don't $XXX how questions. the hyperscalers. X just X it more sounds your fund can you then Wes, can you Or -- do you now, One, Macquarie demand have? million, And your could define But pricing if hands maybe Do on?

Wesley Cummins

answer first. the second one I'll So

of plenty just that pipeline, call. then a and last we I talked points demand data data to the of Mike, of environment in spend the indicator And strong center hyperscalers is we've there's market where the about environment. So even about demand on think some remains the of of the few -- this weeks reflective pricing about last is the from our the talked

have other We think I X.X. campuses, is the total

So already that's those market the XXXX outside campuses. campuses where Ellendale, that, we cases, power XXXX X.X some of ones power, with those we've X and in so of the been have in are

Mike Grondahl

'XX? or available So can outside X-X ], have [ of you and Ellendale, 'XX that

Wesley Cummins

it at that's Yes. building build point all 'XX you available all this matters. first really the and can't of in that, power but for all 'XX,

you building started haven't power. having not If now, you're XXXX

is the for this at So looking 'XX really campuses. other

Operator

And our Sutton, next Craig-Hallum. question comes from George

George Sutton

the Macquarie deal on Congratulations today.

So a Wes, just is facility, understand that you timing I is signing date? looks specific predict. I'm challenging address the February But lease it for curious. is to this. XXXX, XX, that there Can like in date necessary

Wesley Cummins

Yes.

thanks, So George.

in lease at XX June. items, other some have But that February lot, is date I'll the date. I So not Feb is to back it's a of the but least is completion date. for maybe figure XX go signing think a but outside not

George Sutton

And and forward. equity infrastructure I'm is, this for we component the this going belief just everybody, if correct define effectively my wrong, can is so me

that, represents, go would fairly traditional equity a a of the get that of infrastructure large you be that the So rest for percentage. significant that's construction what would portion this loan correct? Underneath financing a is

Wesley Cummins

That's it. exactly

delineate finance, ABS future or equity then debt project component, So into is another between component, and here which flips the in the what the which debt is this instrument. deal an important is then to

be that total debt, a at big capital if want effect right, equity multiplier available to when match you that So you would there. look there's with

George Sutton

takes in the fund are that of on what there just if understand is a $XXX-ish for that ownership investment And Is Or Macquarie making for the of million? to lastly, billion initial a XX% them portion $X requirement I total. then specific business, they Understand. HPC the the could that?

Mohammad Saidal Mohmand

it's We'll that George, assuming they asset. APLDH box, HPC and they the goes that, accept about to by entity, on, basically it's that that into it, will So lease any [ ], asset go what deem And way into [indiscernible] company, then think we the entity. the funded lease, lease entering we XX% goes call so of. each what own the

Wesley Cummins

Yes.

fund they goes the into any So asset entity. that

drops So that it's in. asset asset, by

George Sutton

Beautiful.

Okay.

choose contain So would in that they that don't equity a to specific project support not the case.

Wesley Cummins

Yes. That's correct.

Operator

And our Knoblauch, Cantor Fitzgerald. last Brett question comes from

Brett Knoblauch

to just go or the route? a that have the to Or secondary? raise ROFR the would say ROFR, before use on wanted preferreds could traditional On use that to before, you through perpetual you is that preferred equity down you a you have

Wesley Cummins

at it's X -- levels. So of it different think

the So then the we mean at please there's talking everything top want as what correct preferred public that's to equity, our And nothing the asset you're if that. not level me. on finance if like you about with anything company up

Brett Knoblauch

receive that work? will common how I it. kind common. on shares many of I answers does in they And then that another think getting? preferred Macquarie just guess how question mechanism of are And

Wesley Cummins

XX% just it's the So HPC subsidiary. of

Brett Knoblauch

parent? So not like common of the

Wesley Cummins

the Not comment subsidiary. of the of XX% parent. HPC

Brett Knoblauch

Understood. have guys call Perfect. you on lease terms you then or the on just more XX.XX% equity the just maybe dividend, cost a cost about where the mid-teens, preferred? side, talked above is yield yield range it, on low preferred you I here of terms, to a cost to improve level the on capital And guess, the terms the get in seen of, of ranging which on cost less

Wesley Cummins

Yes.

of SOFR site finance, [ the is capital is And which or in the then plus ]. the our sliver the So just a XXX and preferred remainder is remember, XXX of project equity level capital. the then

So our expect to cost, fully when north of the return look you cost the blended capital. we at of be well

Operator

from X & question more Biden, have Brian do we Needham Co. And

Unknown Analyst

negotiations, You learnings take, mentioned set delivered of of what's apply you approach may be one learnings which on those can the been some to some there's the hyperscalers ongoing. of next

Wesley Cummins

Yes.

things I design the just for said, being aspect. accelerated far the it else on we getting for I'll of have provide a changes we as through the was all signing one looked call have just And as the base being a the with So of being is we one to of preparation there's stamped, especially knowledge is so all lease it the constant we that think because biggest cooling, [indiscernible], like and anyone that things. process, then stamped the do of have more I what need much these these the to potential of going through everything in process, ability there's types of by right, just, customers that evolution, the future

accelerate I it. help think that's going to

learned is we supplier, it's if the to company. longer but it first-time of things big that just bit that be, always you're thought. guess, we going existing supplier supplier is larger I One a have delta to the take little that than a between And a surprise, shouldn't already first times is than

Operator

like There questions no further back you. would Thank pass at Wes to this for are closing I time. remarks. to it Cummins

Wesley Cummins

everyone Thank April. our look call. you. XXXX conference QX Thanks, to everyone, with for I fiscal speaking forward joining in

Operator

Thank you. teleconference. today's for conclude We your thank participation. you This does

may time. lines this You at disconnect your

Applied Digital (APLD) 14 Jan 252025 Q2 Earnings call transcript