Applied Digital Corporation's Expansion Plans and Future Prospects
2024-01-17
Applied Digital Corporation, a leading provider of hosting and data center capacity, recently released its Q2 2024 Earnings Call Transcript. The transcript, which was released on January 16, 2024, provided valuable insights into the company's performance and future plans.
In terms of financials, Applied Digital Corporation reported an EPS of -$0.10 for Q2 2024, falling short of expectations by $0.10. The revenue for the quarter was $42.20 million, missing expectations by $13.46 million. Despite these challenges, the company remains optimistic about its future prospects.
During the conference call, various topics related to Applied Digital Corporation's business were discussed. Wes Cummins, the Chairman and CEO, highlighted the exceptional performance of the Jamestown facility. Throughout the quarter, the facility operated at full capacity with consistent uptime. With a hosting capacity of 5,000 GPUs, the Jamestown facility proved to be a significant asset for the company.
Applied Digital Corporation also boasts substantial hosting capacity across its North Dakota facilities, totaling 280 megawatts. The Garden City facility in Texas, currently operating at approximately 132 megawatts, is expected to undergo infrastructure improvements by April.
One crucial aspect addressed during the call was the company's exposure to volatility in the crypto markets. Applied Digital Corporation assured investors that it is not susceptible to such volatility, as the Garden City facility is fully contracted with fixed prices.
Looking ahead, Applied Digital Corporation is focused on expanding its hosting capacity. Once the Garden City facility becomes fully energized, the company will have approximately 500 megawatts of hosting capacity across its three data center hosting facilities. These facilities are projected to generate up to $300 million in revenue and $100 million of adjusted EBITDA on an annualized basis.
In addition to hosting capacity, Applied Digital Corporation is investing in next-generation supercomputers for AI applications. The company aims to have a minimum of 10 such supercomputers before the end of the fiscal year, which are expected to contribute over $200 million of annualized revenue.
To support its expansion plans, Applied Digital Corporation is actively developing project-level financing. The company anticipates contributing between 5% and 10% of the project in cash for the equity portion. The loan-to-cost ratio for project-level finance typically ranges between 65% to 80%, with the equity component providing a mid to high teens return on capital.
Despite facing challenges, including delays in component deliveries, Applied Digital Corporation remains confident in its ability to meet the growing demand for hosting capacity. The company has witnessed robust demand from various parties, including enterprise customers and VC-backed startups. The market is described as a barbell, with hyperscalers and VC startups on either side, and now the middle segment of enterprise customers is starting to emerge.
Overall, Applied Digital Corporation is dedicated to expanding its hosting capacity, developing next-generation supercomputers, and meeting the increasing demand in the market. Despite the hurdles faced, the company maintains an optimistic outlook for its future prospects and is actively working towards achieving its goals.