Applied Digital Corporation (Nasdaq: APLD)
("Applied Digital" or the "Company"), a designer,
builder, and operator of next-generation digital infrastructure
designed for high-performance computing (“HPC”) applications, cloud
services (“Cloud Services”), and data center hosting (“Data Center
Hosting”), reported financial results for the fiscal fourth quarter
and full year ended May 31, 2024. The Company also provided an
operational update.
Fiscal Fourth Quarter 2024 Financial and
Operational Highlights
- Fiscal fourth
quarter 2024 revenue of $43.7 million
- Fiscal fourth
quarter 2024 net loss of $64.8 million
- Fiscal fourth
quarter 2024 adjusted net loss of $45.3 million, which was
negatively impacted by $15.5 million of expenses associated with
facilities and equipment that were not yet generating revenue
- Fiscal fourth
quarter 2024 adjusted EBITDA of $4.8 million
- The Company
successfully procured new transformers and related components from
North American manufacturers resulting in the Company's Ellendale
Data Center Hosting facility to operate at full capacity as of the
date of this earnings release
Fiscal Year 2024 Financial and
Operational Highlights
- Fiscal 2024
revenue of $165.6 million versus $55.4 million in 2023
- Fiscal 2024 net
loss of $149.7 million versus $45.6 million in 2023
- Fiscal 2024
adjusted net loss of $77.5 million versus $7.9 million in 2023.
Fiscal 2024 adjusted net loss was negatively impacted by $38.5
million of expenses associated with facilities and equipment that
were not yet generating revenue
- Fiscal 2024
adjusted EBITDA of $24.5 million versus $0.8 million in 2023
Adjusted EBITDA and adjusted net loss are
non-GAAP measures. A reconciliation of each of adjusted EBITDA and
adjusted net loss to the most directly comparable financial measure
presented in accordance with accounting principles generally
accepted in the United States (“GAAP”) is set forth in the schedule
accompanying this release. See “Reconciliation of GAAP to Non-GAAP
Measures”
Recent Operational
Highlights
- Subsequent to
the fiscal year end we secured over $150 million in funding from
various financings and the settlement of the Garden City
contingency.
- On July 26,
2024, Applied Digital Corporation entered into an agreement
extending the exclusivity period under the previously announced LOI
for leasing the Company's Ellendale, North Dakota HPC data center
campus.
- On July 30, 2024
the conditional approval requirements related to the release of the
escrowed funds from the sale of its Garden City, Texas facility
were met, and those funds were received from escrow totaling $25
million.
- As of June 28,
2024 the transformer-based repairs at the Company's Ellendale Data
Center Hosting facility have been completed, and the site has been
restored to full operating capacity. As previously disclosed, the
data center experienced a power outage for most of the quarter due
to a transformer issue. This disruption was confined to our Data
Center Hosting operations and did not affect our HPC data center
construction.
Management Commentary
Wes Cummins, Chairman and CEO of Applied
Digital commented: “By the end of June, we successfully
resolved all transformer issues at our Ellendale Data Center
Hosting facility, restoring it to full power capacity. Despite
these short-term setbacks, we made significant progress on our key
growth initiatives, particularly in expanding our Cloud Services
business and executing an LOI with a U.S.-based hyperscaler for 400
MW capacity, which includes our 100 MW facility currently under
construction and two future buildings. Our state-of-the-art,
369,000-square-foot facility is designed for HPC applications such
as Artificial Intelligence.
We believe the hyperscaler has completed their
technical due diligence on the facility and we are now working to
finalize the details of the lease. This would then be followed by
working towards finalizing the project-level financing for this
investment-grade tenant.
Our vision is to become a development platform,
capable of building and operating multiple HPC data centers. This
starts with our Ellendale campus and continues with three
additional campuses we are actively marketing totaling 1.4 GW. To
support this vision, we have added several industry veterans to our
team and are already working on the design of our next two
buildings which will provide 300 MW of capacity.
We are incredibly proud of the progress made
this quarter and look forward to providing further updates as we
move into fiscal 2025. Looking ahead, we believe fiscal fourth
quarter marked the bottom of our revenues and anticipate sequential
improvements in the top line as we enter the first quarter of
fiscal 2025."
Cloud Services Update
Applied Digital’s Cloud Services division
provides high-performance computing power for artificial
intelligence and machine learning applications. This year, we are
pleased to welcome our newest Cloud Services customer, Together AI.
In the fiscal fourth quarter, we successfully brought four clusters
online, and we have already brought two additional clusters online
in the first quarter of fiscal 2025. The Company recognized $29.0
million in revenues from the Cloud business during fiscal year
2024.
HPC Data Center Hosting
Update
Applied Digital’s HPC Data Center Hosting
Business designs, builds, and operates next-generation data
centers, which are designed to provide massive computing power and
support high-performance computing applications within a
cost-effective model. During the fiscal second quarter, the Company
broke ground on its first 100 MW high-performance compute facility
in Ellendale, North Dakota. The new 369,000-square-foot building
will provide ultra-low-cost and highly efficient liquid-cooled
infrastructure for HPC applications.
The Company has entered into exclusivity through
an executed LOI with a US-based hyperscaler for 400 MW capacity,
inclusive of our 100 MW facility currently under construction and
two forthcoming buildings in Ellendale, North Dakota. The Company
is in advanced discussions with traditional financing
counterparties, to facilitate construction activities, for this
investment-grade tenant.
Data Center Hosting Update
The Company currently operates 286 MW of data
center hosting capacity. Our 106 MW facility in Jamestown, North
Dakota, operated at full capacity throughout the year. However, our
180 MW facility in Ellendale, North Dakota, experienced a power
outage starting in January. We identified that the outages were due
to transformer failures, and we have since procured new
transformers and related components from leading North American
manufacturers that have performed to our specifications and needs
without any further power loss or issues. By the end of fiscal year
2024, the Ellendale hosting facility was operating at approximately
80% capacity and as of June 28, 2024, this facility has been
restored to full operating capacity.
Additionally, the sale of our Garden City, Texas
hosting facility to Marathon was finalized in April 2024. On June
28, 2024 the conditional approval requirements related to the
release of the escrowed funds from the sale of its Garden City,
Texas facility were met, and those funds were subsequently released
to the Company from escrow totaling $25 million.
Financial Results for Fiscal Fourth
Quarter 2024 and Fiscal Year
Ended May 31, 2024
Operating Results
Fiscal Year 2024 Financial
Results:
Revenue increased $110.2 million, or 199%, from
$55.4 million for the fiscal year ended May 31, 2023 to $165.6
million for the fiscal year ended May 31, 2024 driven by increased
capacity across the Company’s three Data Center Hosting facilities
between the periods as well as the Company recognizing revenue
under its Cloud Services segment due to the launch of the service
during the current fiscal year.
Cost of revenues increased by $104.0 million, or
234%, from $44.4 million for the fiscal year ended May 31, 2023 to
$148.3 million for the fiscal year ended May 31, 2024. The increase
was primarily driven by the growth in the business as more
facilities were energized and more services were provided to
customers compared to the fiscal year ended May 31, 2023.
Selling, general and administrative expenses
increased by $43.4 million, or 79%, from $55.1 million for the
fiscal year ended May 31, 2023 to $98.5 million for the fiscal year
ended May 31, 2024. The increase was primarily due to the overall
growth in the business.
Net loss for the fiscal year ended May 31, 2024
was $149.7 million or $1.31 per basic and diluted share, based on a
weighted average share count during the quarter of 114.1 million
shares. This compares to a net loss of $45.6 million, or $0.48 per
basic and diluted share, based on a weighted average share count of
93.5 million shares for the fiscal year ended May 31, 2023.
Adjusted net loss, a non-GAAP measure, for the
fiscal year ended May 31, 2024, was $77.5 million or adjusted net
loss per basic and diluted share of $0.68, based on a weighted
average share count during the quarter of approximately 114.1
million shares. This compares to an adjusted net loss, a non-GAAP
measure, of $7.9 million, or $0.08 per basic and diluted share, for
the fiscal year ended May 31, 2023 based on a weighted average
share count during the quarter of approximately 93.5 million
shares. Adjusted net loss was negatively impacted by $38.5 million
of expenses associated with facilities and equipment that were not
yet generating revenue.
Adjusted EBITDA, a non-GAAP measure, for the
fiscal year ended May 31, 2024 was $24.5 million compared to an
Adjusted EBITDA of $0.8 million for the fiscal year ended May 31,
2023. Despite the year-over-year growth, Adjusted EBITDA was
negatively impacted by $5.9 million of expenses associated with
facilities that were not yet generating revenue.
Fiscal Fourth Quarter 2024 Financial
Results:
Total revenues in the fiscal fourth quarter 2024
were $43.7 million, up 98% from the fiscal fourth quarter 2023. The
increase in revenues was driven by increased capacity across the
Company’s three Data Center Hosting facilities between periods as
well as the Company recognizing revenue under its Cloud Services
segment due to the launch of the service during the current fiscal
year.
Cost of revenues in the fiscal fourth quarter
2024 was $46.3 million compared to $15.9 million in the fiscal
fourth quarter 2023. The increase was driven by increases in
depreciation and amortization expense and personnel expenses
primarily driven by the growth in the business as more facilities
were energized compared to the fiscal fourth quarter of 2023. The
increase in the cost of revenues was also attributable to higher
energy costs due to a higher number of MWs online.
Selling, general and administrative expenses in
the fiscal fourth quarter 2024 were $31.3 million compared to $12.3
million in the fiscal fourth quarter of 2023. The increase in
selling, general and administrative expenses, which, by nature, are
not directly attributable to revenue generation, was primarily
driven by an increase in depreciation and amortization expense for
equipment not yet supporting revenue, an increase in lease expenses
for facilities that have not yet begun generating revenue, and an
increase in professional service expenses related to legal services
associated with discrete transactions and projects as well as
general support of the growth of the business compared to the
fiscal fourth quarter 2023.
Net loss for the fiscal fourth quarter 2024 was
$64.8 million, or $0.52 per basic and diluted share, based on a
weighted average share count during the quarter of 124.7 million
shares. This compares to a net loss of $6.5 million, or $0.07 per
basic and diluted share, based on a weighted average share count of
94.1 million shares for the fiscal fourth quarter 2023.
Adjusted net loss, a non-GAAP measure, for the
fiscal fourth quarter of 2024, was $45.3 million or adjusted net
loss per basic and diluted share of $0.36, based on a weighted
average share count during the quarter of approximately 124.7
million shares. This compares to an adjusted net loss, a non-GAAP
measure, of $0.1 million, or $0.00 per basic and diluted share, for
the fiscal fourth quarter of 2023 based on a weighted average share
count during the quarter of approximately 94.1 million shares.
Adjusted net loss was negatively impacted by $15.5 million of
expenses associated with facilities and equipment that were not yet
generating revenue.
Adjusted EBITDA, a non-GAAP measure, for the
fiscal fourth quarter 2024 was $4.8 million compared to an Adjusted
EBITDA of $3.4 million for the fiscal fourth quarter 2023. Despite
the overall growth in this measure, Adjusted EBITDA was negatively
impacted by $5.9 million of expenses associated with facilities
that were not yet generating revenue.
Cash Flows
The Company experienced a net decrease in cash,
cash equivalents, and restricted cash during the fiscal year ended
May 31, 2024 of $15.1 million. The primary drivers of the change
were:
- Purchase of
property, equipment, and other assets of $141.8 million, driven by
construction of the Company's HPC Hosting data center;
- Finance lease
prepayments of $50.1 million and finance leases recurring
payments of $60.0 million, primarily driven by the Company's leases
of hosting equipment for Cloud services; and
- Debt repayments
of approximately $67.2 million.
These were partially offset by the
following:
- Borrowings of
$144.6 million including funding received from related party
loans;
- Net cash
received from the issuance of common stock of $130.8 million under
the Company's at-the-market sales agreement; and
- Net cash
received from operating activities of $10.6 million, driven by the
recurring operations of the business.
Conference Call
Applied Digital will host a conference call
today, August 28, 2024, at 5:00 p.m. Eastern Time (2:00 p.m.
Pacific Time) to discuss these results. A question-and-answer
session will follow the management’s presentation.
U.S. dial-in number: 1-877-407-0792International
number: 1-201-689-8263Conference ID: 13748390
The conference call will broadcast live and be
available for replay here.
Please call the conference telephone number
approximately 10 minutes before the start time. An operator will
register your name and organization. If you have any difficulty
connecting with the conference call, please contact Applied
Digital’s investor relations team at 1-949-574-3860.
A replay of the call will be available after
8:00 p.m. Eastern time on August 28, 2024, through September 11,
2024.
Toll-free replay number:
1-844-512-2921International replay number: 1-412-317-6671Conference
ID: 13748390
About Applied Digital
Applied Digital Corporation (Nasdaq: APLD)
designs, develops, and operates next-generation digital
infrastructure across North America to provide digital
infrastructure solutions and cloud services to the rapidly growing
industries of High-Performance Computing ("HPC") and Artificial
Intelligence ("AI"). Find more information at
www.applieddigital.com. Follow us on X (formerly Twitter) at
@APLDdigital.
Forward-Looking Statements
This release contains "forward-looking
statements" as defined in the Private Securities Litigation Reform
Act of 1995 regarding, among other things, future operating and
financial performance, product development, market position,
business strategy and objectives. These statements use words, and
variations of words, such as "continue," "build," "future,"
"increase," "drive," "believe," "look," "ahead," "confident,"
"deliver," "outlook," "expect," and "predict." Other examples of
forward-looking statements may include, but are not limited to, (i)
statements of Company plans and objectives, including our evolving
business model, or estimates or predictions of actions by
suppliers, (ii) statements of future economic performance, and
(iii) statements of assumptions underlying other statements and
statements about the Company or its business. You are cautioned not
to rely on these forward-looking statements. These statements are
based on current expectations of future events and thus are
inherently subject to uncertainty. If underlying assumptions prove
inaccurate or known or unknown risks or uncertainties materialize,
actual results could vary materially from the Company's
expectations and projections. These risks, uncertainties, and other
factors include: decline in demand for our products and services;
the volatility of the crypto asset industry; the inability to
comply with developments and changes in regulation; cash flow and
access to capital; and maintenance of third party relationships.
Information in this release is as of the dates and time periods
indicated herein, and the Company does not undertake to update any
of the information contained in these materials, except as required
by law.
Use and Reconciliation of Non-GAAP
Financial Measures
To supplement our consolidated financial
statements presented under GAAP, we are presenting certain non-GAAP
financial measures. We are providing these non-GAAP financial
measures to disclose additional information to facilitate the
comparison of past and present operations by providing perspective
on results absent one-time or significant non-cash items. We
utilize these measures in the business planning process to
understand expected operating performance and to evaluate results
against those expectations. We believe that these non-GAAP
financial measures, when considered together with our GAAP
financial results, provide management and investors with an
additional understanding of our business operating results
regarding factors and trends affecting our business and provide a
reasonable basis for comparing our ongoing results of
operations.
These non-GAAP financial measures are provided
as supplemental measures to the Company’s performance measures
calculated in accordance with GAAP and therefore, are not intended
to be considered in isolation or as a substitute for comparable
GAAP measures. Further, these non-GAAP measures have no
standardized meaning prescribed by GAAP and are not prepared under
any comprehensive set of accounting rules or principles. Because of
the non-standardized definitions of non-GAAP financial measures, we
caution investors that the non-GAAP financial measures as used by
us in this report have limits in their usefulness to investors and
may be calculated differently from, and therefore may not be
directly comparable to, similarly titled measures used by other
companies. Further, investors should be aware that when evaluating
these non-GAAP financial measures, these measures should not be
construed as an inference that the Company’s future results will be
unaffected by unusual or non-recurring items. In addition, from
time to time in the future there may be items that we may exclude
for purposes of our non-GAAP financial measures and we may in the
future cease to exclude items that we have historically excluded
for purposes of our non-GAAP financial measures. Likewise, we may
determine to modify the nature of the adjustments to arrive at our
non-GAAP financial measures. Investors should review the non-GAAP
reconciliations provided below and not rely on any single financial
measure to evaluate the Company’s business.
Change in Presentation
Beginning in the third quarter of 2024, the
Company updated its presentation of non-GAAP measures. As a result
of this updated presentation, the Company no longer excludes
start-up costs as an adjustment to Operating loss, Net loss, or
EBITDA in our calculation of Adjusted operating loss, Adjusted net
loss attributable to Applied Digital Corporation, Adjusted net loss
attributable to Applied Digital Corporation per diluted share, and
Adjusted EBITDA. EBITDA, Adjusted EBITDA, Adjusted net loss
attributable to Applied Digital Corporation, and Adjusted net loss
attributable to Applied Digital Corporation per diluted share are
non-GAAP measures and are defined below.
Adjusted Operating Loss, Adjusted Net
Loss, and Adjusted Net Loss per Diluted Share
“Adjusted Operating Loss” and “Adjusted Net
Loss” are non-GAAP measures that represent operating loss and net
loss, respectively, excluding stock-based compensation,
non-recurring repair expenses, diligence, acquisition, disposition
and integration expenses, litigation expenses, non-recurring
research and development expenses, loss on classification of held
for sale, accelerated depreciation and amortization, and loss on
legal settlement. Adjusted net loss is further adjusted for the
losses associated with changes in fair value of debt, related party
debt and warrants issued to related parties, as well as the loss on
extinguishment of debt. We define “Adjusted Net Loss per Diluted
Share” as Adjusted net loss divided by weighted average diluted
share count.
EBITDA and Adjusted EBITDA
“EBITDA” is defined as earnings before interest,
taxes, and depreciation and amortization. “Adjusted EBITDA” is
defined as EBITDA adjusted for stock-based compensation,
non-recurring repair expenses, diligence, acquisition, disposition
and integration expenses, litigation expenses, non-recurring
research and development expenses, loss on classification as held
for sale, accelerated depreciation and amortization, the losses
associated with changes in fair value of debt, related party debt
and warrants issued to related parties, as well as the loss on
extinguishment of debt and the loss on legal settlement.
Investor Relations Contacts Matt Glover or Ralf
Esper Gateway Group, Inc. (949) 574-3860 APLD@gateway-grp.com
Media Contact Brenlyn Motlagh Gateway Group,
Inc. (949) 899-3135 APLD@gateway-grp.com
|
APPLIED DIGITAL CORPORATION AND
SUBSIDIARIESConsolidated Balance Sheets
(Unaudited)(In thousands, except share and par
value data) |
|
|
May 31, 2024 |
|
May 31, 2023 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
3,339 |
|
|
$ |
28,999 |
|
Restricted cash |
|
21,349 |
|
|
|
14,575 |
|
Accounts receivable |
|
3,847 |
|
|
|
82 |
|
Prepaid expenses and other current assets |
|
1,343 |
|
|
|
2,012 |
|
Current assets held for sale |
|
384 |
|
|
|
— |
|
Total current assets |
|
30,262 |
|
|
|
45,668 |
|
Property and equipment,
net |
|
340,381 |
|
|
|
198,151 |
|
Operating lease right of use
assets, net |
|
153,611 |
|
|
|
1,290 |
|
Finance lease right of use
assets, net |
|
218,683 |
|
|
|
14,303 |
|
Other assets |
|
19,930 |
|
|
|
4,545 |
|
TOTAL
ASSETS |
$ |
762,867 |
|
|
$ |
263,957 |
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
116,117 |
|
|
$ |
6,446 |
|
Accrued liabilities |
|
26,282 |
|
|
|
9,960 |
|
Current portion of operating lease liability |
|
21,705 |
|
|
|
320 |
|
Current portion of finance lease liability |
|
107,683 |
|
|
|
5,722 |
|
Current portion of debt |
|
10,082 |
|
|
|
7,950 |
|
Current portion of debt, at fair value |
|
35,836 |
|
|
|
— |
|
Customer deposits |
|
13,819 |
|
|
|
32,560 |
|
Related party customer deposits |
|
1,549 |
|
|
|
3,810 |
|
Deferred revenue |
|
37,674 |
|
|
|
47,168 |
|
Related party deferred revenue |
|
1,692 |
|
|
|
1,524 |
|
Due to customer |
|
13,002 |
|
|
|
— |
|
Other current liabilities |
|
96 |
|
|
|
— |
|
Total current liabilities |
|
385,537 |
|
|
|
115,460 |
|
Long-term portion of operating lease liability |
|
109,740 |
|
|
|
1,005 |
|
Long-term portion of finance lease liability |
|
63,288 |
|
|
|
8,334 |
|
Long-term debt |
|
79,472 |
|
|
|
33,222 |
|
Long-term related party loan |
|
— |
|
|
|
35,257 |
|
Other long-term related party liabilities |
|
— |
|
|
|
1,000 |
|
Total liabilities |
|
638,037 |
|
|
|
194,278 |
|
Commitments and
contingencies |
|
|
|
Stockholders' equity: |
|
|
|
Common stock, $0.001 par value, 166,666,667 shares authorized,
144,083,944 shares issued and 139,051,142 shares outstanding at
May 31, 2024, and 100,927,358 shares issued and 95,925,630
shares outstanding at May 31, 2023 |
|
144 |
|
|
|
101 |
|
Treasury stock, 5,032,802 shares at May 31, 2024 and 5,001,728
shares at May 31, 2023, at cost |
|
(62 |
) |
|
|
(62 |
) |
Additional paid in capital |
|
374,738 |
|
|
|
160,194 |
|
Accumulated deficit |
|
(249,990 |
) |
|
|
(100,716 |
) |
Total stockholders’ equity
attributable to Applied Digital Corporation |
|
124,830 |
|
|
|
59,517 |
|
Noncontrolling interest |
|
— |
|
|
|
10,162 |
|
Total stockholders' equity
including noncontrolling interest |
|
124,830 |
|
|
|
69,679 |
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY |
$ |
762,867 |
|
|
$ |
263,957 |
|
|
APPLIED DIGITAL CORPORATION AND
SUBSIDIARIESConsolidated Statements of
Operations (Unaudited) (In thousands, except
per share data) |
|
|
Three Months Ended |
|
|
Fiscal Year Ended |
|
May 31, 2024 |
|
May 31, 2023 |
|
|
May 31, 2024 |
|
May 31, 2023 |
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
Revenue |
$ |
39,821 |
|
|
$ |
17,844 |
|
|
|
$ |
150,814 |
|
|
$ |
40,984 |
|
Related party revenue |
|
3,878 |
|
|
|
4,193 |
|
|
|
|
14,761 |
|
|
|
14,408 |
|
Total revenue |
|
43,699 |
|
|
|
22,037 |
|
|
|
|
165,575 |
|
|
|
55,392 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Cost of revenues |
|
46,289 |
|
|
|
15,909 |
|
|
|
|
148,340 |
|
|
|
44,388 |
|
Selling, general and administrative (1) |
|
31,318 |
|
|
|
12,298 |
|
|
|
|
98,461 |
|
|
|
55,059 |
|
Loss on classification as held for sale |
|
(6,306 |
) |
|
|
— |
|
|
|
|
15,417 |
|
|
|
— |
|
Loss from legal settlement |
|
— |
|
|
|
— |
|
|
|
|
2,380 |
|
|
|
— |
|
Total costs and expenses |
|
71,301 |
|
|
|
28,207 |
|
|
|
|
264,598 |
|
|
|
99,447 |
|
Operating loss |
|
(27,602 |
) |
|
|
(6,170 |
) |
|
|
|
(99,023 |
) |
|
|
(44,055 |
) |
Interest expense, net (2) |
|
18,303 |
|
|
|
919 |
|
|
|
|
26,832 |
|
|
$ |
1,980 |
|
Loss on change in fair value of debt |
|
4,789 |
|
|
|
— |
|
|
|
|
7,401 |
|
|
|
— |
|
Loss on change in fair value of related party debt |
|
13,812 |
|
|
|
— |
|
|
|
|
13,812 |
|
|
|
— |
|
Loss on extinguishment of debt (3) |
|
154 |
|
|
|
— |
|
|
|
|
2,507 |
|
|
|
94 |
|
Net loss before income tax expenses |
|
(64,660 |
) |
|
|
(7,089 |
) |
|
|
|
(149,575 |
) |
|
|
(46,129 |
) |
Income tax expense (benefit) |
|
96 |
|
|
|
(242 |
) |
|
|
|
96 |
|
|
|
(523 |
) |
Net loss |
|
(64,756 |
) |
|
|
(6,847 |
) |
|
|
|
(149,671 |
) |
|
|
(45,606 |
) |
Net loss attributable to noncontrolling interest |
|
— |
|
|
|
(383 |
) |
|
|
|
(397 |
) |
|
|
(960 |
) |
Net loss attributable to
Applied Digital Corporation |
$ |
(64,756 |
) |
|
$ |
(6,464 |
) |
|
|
$ |
(149,274 |
) |
|
$ |
(44,646 |
) |
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per
share attributable to Applied Digital Corporation |
$ |
(0.52 |
) |
|
$ |
(0.07 |
) |
|
|
$ |
(1.31 |
) |
|
$ |
(0.48 |
) |
Basic and diluted weighted
average number of shares outstanding |
|
124,666,579 |
|
|
|
94,119,944 |
|
|
|
|
114,061,414 |
|
|
|
93,545,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes related party selling,
general and administrative expense of $0.1 million and $0.1 million
for the three months ended May 31, 2024 and May 31, 2023,
respectively, and $0.6 million and $0.1 million for the fiscal
years ended May 31, 2024 and May 31, 2023,
respectively.(2) Includes related party interest expense
of $0.2 million and $0.1 million for the three months ended
May 31, 2024 and May 31, 2023, respectively, and $5.3
million and $0.1 million for the fiscal years ended May 31,
2024 and May 31, 2023, respectively.(3) Amounts
included in the fiscal year ended May 31, 2024 are related to
the extinguishment of related party debt.
|
APPLIED DIGITAL CORPORATION AND
SUBSIDIARIESConsolidated Statements of Cash Flows
(In thousands) (Unaudited) |
|
|
Fiscal Year Ended |
|
May 31, 2024 |
|
May 31, 2023 |
CASH FLOW FROM
OPERATING ACTIVITIES |
|
|
|
Net loss |
$ |
(149,671 |
) |
|
$ |
(45,606 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
Depreciation and amortization |
|
79,360 |
|
|
|
7,614 |
|
Stock-based compensation |
|
17,362 |
|
|
|
32,072 |
|
Lease expense |
|
13,944 |
|
|
|
— |
|
Deferred income taxes |
|
— |
|
|
|
(540 |
) |
Loss on extinguishment of debt |
|
2,507 |
|
|
|
94 |
|
Loss on legal settlement |
|
2,380 |
|
|
|
— |
|
Amortization of debt issuance costs |
|
2,002 |
|
|
|
410 |
|
Loss on classification as held for sale |
|
15,417 |
|
|
|
— |
|
Loss on change in fair value of debt |
|
7,401 |
|
|
|
— |
|
Loss on change in fair value of related party debt |
|
13,812 |
|
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
|
(3,765 |
) |
|
|
145 |
|
Prepaid expenses and other current assets |
|
899 |
|
|
|
(766 |
) |
Other assets |
|
327 |
|
|
|
364 |
|
Accounts payable |
|
41,840 |
|
|
|
(13,750 |
) |
Accrued liabilities |
|
21,601 |
|
|
|
7,485 |
|
Due to customer |
|
13,002 |
|
|
|
— |
|
Lease assets and liabilities |
|
(47,479 |
) |
|
|
(446 |
) |
Customer deposits |
|
(8,770 |
) |
|
|
24,584 |
|
Related party customer deposits |
|
(2,261 |
) |
|
|
2,261 |
|
Deferred revenue |
|
(9,494 |
) |
|
|
44,245 |
|
Related party deferred revenue |
|
168 |
|
|
|
569 |
|
CASH FLOW PROVIDED BY
OPERATING ACTIVITIES |
|
10,582 |
|
|
|
58,735 |
|
CASH FLOW FROM
INVESTING ACTIVITIES |
|
|
|
Purchases of property and equipment and other assets |
|
(141,809 |
) |
|
|
(131,278 |
) |
Proceeds from sale of investment securities |
|
— |
|
|
|
— |
|
Proceeds from sale of assets |
|
19,852 |
|
|
|
— |
|
Finance lease prepayments |
|
(50,089 |
) |
|
|
— |
|
Purchases of investments |
|
(390 |
) |
|
|
(810 |
) |
CASH FLOW USED IN
INVESTING ACTIVITIES |
|
(172,436 |
) |
|
|
(132,088 |
) |
CASH FLOW FROM
FINANCING ACTIVITIES |
|
|
|
Repayment of finance leases |
|
(59,967 |
) |
|
|
(3,353 |
) |
Borrowings of long-term debt |
|
116,554 |
|
|
|
45,650 |
|
Borrowings of related party debt |
|
28,000 |
|
|
|
36,500 |
|
Repayment of long-term debt |
|
(21,714 |
) |
|
|
(10,032 |
) |
Repayment of related party debt |
|
(45,500 |
) |
|
|
— |
|
Payment of deferred financing costs |
|
(320 |
) |
|
|
(567 |
) |
Payment of related party deferred financing costs |
|
— |
|
|
|
(1,548 |
) |
Proceeds from issuance of common stock, net of costs |
|
130,849 |
|
|
|
— |
|
Common stock issuance costs |
|
(284 |
) |
|
|
— |
|
Tax payments for restricted stock upon vesting |
|
(861 |
) |
|
|
(168 |
) |
Noncontrolling interest contributions |
|
— |
|
|
|
4,146 |
|
CASH FLOW PROVIDED BY
FINANCING ACTIVITIES |
|
146,757 |
|
|
|
70,628 |
|
|
|
|
|
NET DECREASE IN CASH,
CASH EQUIVALENTS, AND RESTRICTED CASH |
|
(15,097 |
) |
|
|
(2,725 |
) |
CASH, CASH
EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD |
|
43,574 |
|
|
|
46,299 |
|
CASH, CASH
EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD |
$ |
28,477 |
|
|
$ |
43,574 |
|
APPLIED DIGITAL CORPORATION AND
SUBSIDIARIESConsolidated Statements of Cash Flows
(In thousands) (Unaudited)
continued |
|
|
Fiscal Year Ended |
|
May 31, 2024 |
|
May 31, 2023 |
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
Interest paid |
$ |
13,275 |
|
|
$ |
1,118 |
|
Income taxes paid |
$ |
5 |
|
|
$ |
— |
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH ACTIVITIES |
|
|
|
Operating right-of-use assets obtained by lease obligation |
$ |
159,197 |
|
|
$ |
— |
|
Finance right-of-use assets obtained by lease obligation |
$ |
277,203 |
|
|
$ |
8,693 |
|
Property and equipment in accounts payable and accrued
liabilities |
$ |
85,019 |
|
|
$ |
9,384 |
|
Extinguishment of non-controlling interest |
$ |
9,765 |
|
|
$ |
— |
|
|
APPLIED DIGITAL CORPORATION AND
SUBSIDIARIESReconciliation of GAAP to Non-GAAP
Measures (Unaudited)(In thousands, except
percentage data) |
|
|
Three Months Ended |
|
|
Fiscal Year Ended |
$ in
thousands |
May 31, 2024 |
|
May 31, 2023 |
|
|
May 31, 2024 |
|
May 31, 2023 |
Adjusted operating
loss |
|
|
|
|
|
|
|
|
Operating loss (GAAP) |
$ |
(27,602 |
) |
|
$ |
(6,244 |
) |
|
|
$ |
(99,023 |
) |
|
$ |
(44,055 |
) |
Stock-based compensation |
|
3,597 |
|
|
|
5,195 |
|
|
|
|
17,108 |
|
|
|
32,072 |
|
Non-recurring repair expenses (a) |
|
645 |
|
|
|
— |
|
|
|
|
1,224 |
|
|
|
— |
|
Diligence, acquisition, disposition and integration expenses
(b) |
|
1,652 |
|
|
|
727 |
|
|
|
|
5,838 |
|
|
|
2,164 |
|
Litigation expenses (c) |
|
929 |
|
|
|
— |
|
|
|
|
1,589 |
|
|
|
— |
|
Research and development expenses (d) |
|
50 |
|
|
|
— |
|
|
|
|
169 |
|
|
|
893 |
|
Loss on classification as held for sale |
|
(6,306 |
) |
|
|
— |
|
|
|
|
15,417 |
|
|
|
— |
|
Accelerated depreciation and amortization (e) |
|
88 |
|
|
|
— |
|
|
|
|
4,307 |
|
|
|
— |
|
Loss on legal settlement |
|
— |
|
|
|
— |
|
|
|
|
2,380 |
|
|
|
— |
|
Other non-recurring expenses (f) |
|
— |
|
|
|
615 |
|
|
|
|
— |
|
|
|
1,606 |
|
Adjusted operating loss (Non-GAAP) |
$ |
(26,947 |
) |
|
$ |
293 |
|
|
|
$ |
(50,991 |
) |
|
$ |
(7,320 |
) |
Adjusted operating margin |
(62 |
)% |
|
|
1 |
% |
|
|
(31 |
)% |
|
(13 |
)% |
|
|
|
|
|
|
|
|
|
Adjusted net loss
attributable to Applied Digital Corporation |
|
|
|
|
|
|
|
|
Net loss attributable to
Applied Digital Corporation (GAAP) |
$ |
(64,756 |
) |
|
$ |
(6,464 |
) |
|
|
$ |
(149,274 |
) |
|
$ |
(44,646 |
) |
Stock-based compensation |
|
3,597 |
|
|
|
5,195 |
|
|
|
|
17,108 |
|
|
|
32,072 |
|
Non-recurring repair expenses (a) |
|
645 |
|
|
|
— |
|
|
|
|
1,224 |
|
|
|
— |
|
Diligence, acquisition, disposition and integration expenses
(b) |
|
1,652 |
|
|
|
727 |
|
|
|
|
5,838 |
|
|
|
2,164 |
|
Litigation costs (c) |
|
929 |
|
|
|
— |
|
|
|
|
1,589 |
|
|
|
— |
|
Research and development expenses (d) |
|
50 |
|
|
|
— |
|
|
|
|
169 |
|
|
|
893 |
|
Loss on classification as held for sale |
|
(6,306 |
) |
|
|
— |
|
|
|
|
15,417 |
|
|
|
— |
|
Accelerated depreciation and amortization (e) |
|
88 |
|
|
|
— |
|
|
|
|
4,307 |
|
|
|
— |
|
Loss on change in fair value of debt |
|
4,789 |
|
|
|
— |
|
|
|
|
7,401 |
|
|
|
— |
|
Loss on change in fair value of related party debt |
|
8,116 |
|
|
|
— |
|
|
|
|
8,116 |
|
|
|
— |
|
Loss on change in fair value of warrants issued to related
parties |
|
5,696 |
|
|
|
— |
|
|
|
|
5,696 |
|
|
|
— |
|
Loss on extinguishment of debt |
|
154 |
|
|
|
— |
|
|
|
|
2,507 |
|
|
|
94 |
|
Loss on legal settlement |
|
— |
|
|
|
— |
|
|
|
|
2,380 |
|
|
|
— |
|
Other non-recurring expenses (f) |
|
— |
|
|
|
615 |
|
|
|
|
— |
|
|
|
1,511 |
|
Adjusted net loss attributable to Applied Digital Corporation
(Non-GAAP) |
$ |
(45,346 |
) |
|
$ |
73 |
|
|
|
$ |
(77,522 |
) |
|
$ |
(7,912 |
) |
Adjusted net loss attributable
to Applied Digital Corporation per diluted share (Non-GAAP) |
$ |
(0.36 |
) |
|
$ |
— |
|
|
|
$ |
(0.68 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
APPLIED DIGITAL CORPORATION AND
SUBSIDIARIESReconciliation of GAAP to Non-GAAP
Measures (Unaudited) continued(In
thousands, except percentage data) |
|
|
Three Months Ended |
|
|
Fiscal Year Ended |
$ in
thousands |
May 31, 2024 |
|
May 31, 2023 |
|
|
May 31, 2024 |
|
May 31, 2023 |
EBITDA and Adjusted
EBITDA |
|
|
|
|
|
|
|
|
Net loss attributable to Applied Digital Corporation (GAAP) |
$ |
(64,756 |
) |
|
$ |
(6,464 |
) |
|
|
$ |
(149,274 |
) |
|
$ |
(44,646 |
) |
Interest expense, net |
|
18,303 |
|
|
|
919 |
|
|
|
|
26,832 |
|
|
|
1,980 |
|
Income tax expense (benefit) |
|
96 |
|
|
|
(242 |
) |
|
|
|
96 |
|
|
|
(523 |
) |
Depreciation and amortization (e) |
|
31,696 |
|
|
|
2,636 |
|
|
|
|
79,360 |
|
|
|
7,267 |
|
EBITDA (Non-GAAP) |
|
(14,661 |
) |
|
|
(3,151 |
) |
|
|
|
(42,986 |
) |
|
|
(35,922 |
) |
Stock-based compensation |
|
3,597 |
|
|
|
5,195 |
|
|
|
|
17,108 |
|
|
|
32,072 |
|
Non-recurring repair expenses (a) |
|
645 |
|
|
|
— |
|
|
|
|
1,224 |
|
|
|
— |
|
Diligence, acquisition, disposition and integration expenses
(b) |
|
1,652 |
|
|
|
727 |
|
|
|
|
5,838 |
|
|
|
2,164 |
|
Litigation expenses (c) |
|
929 |
|
|
|
— |
|
|
|
|
1,589 |
|
|
|
— |
|
Research and development expenses (d) |
|
50 |
|
|
|
— |
|
|
|
|
169 |
|
|
|
893 |
|
Loss on classification as held for sale |
|
(6,306 |
) |
|
|
— |
|
|
|
|
15,417 |
|
|
|
— |
|
Loss on change in fair value of debt |
|
4,789 |
|
|
|
— |
|
|
|
|
7,401 |
|
|
|
— |
|
Loss on change in fair value of related party debt |
|
8,116 |
|
|
|
— |
|
|
|
|
8,116 |
|
|
|
— |
|
Loss on change in fair value of warrants issued to related
parties |
|
5,696 |
|
|
|
— |
|
|
|
|
5,696 |
|
|
|
— |
|
Loss on extinguishment of debt |
|
154 |
|
|
|
— |
|
|
|
|
2,507 |
|
|
|
94 |
|
Loss on legal settlement |
|
— |
|
|
|
— |
|
|
|
|
2,380 |
|
|
|
— |
|
Other non-recurring expenses (f) |
|
133 |
|
|
|
615 |
|
|
|
|
— |
|
|
|
1,511 |
|
Adjusted EBITDA (Non-GAAP) |
$ |
4,794 |
|
|
$ |
3,386 |
|
|
|
$ |
24,459 |
|
|
$ |
812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Represents costs incurred in the
repair and replacement of equipment at the Company's Ellendale data
center hosting facility as a result of the previously disclosed
power outage.(b) Represents legal, accounting and
consulting costs incurred in association with certain discrete
transactions and projects.(c) Represents non-recurring
litigation expense associated with the Company’s defense of class
action lawsuits and legal fees related to matters with certain
former employees. The Company does not expect to incur these
expenses on a regular basis.(d) Represents specific
non-recurring research and development activities related to the
Company’s business expansion that the Company does not expect to
incur on a regular basis.(e) Represents the acceleration
of expense related to transformers that were abandoned by the
Company due to operational failure or other reasons. Depreciation
and amortization in this amount is included in Depreciation and
Amortization expense within the Company’s calculation of EBITDA,
and therefore is not added back as a management adjustment in the
Company’s calculation Adjusted EBITDA.(f) Represents
expenses that are not representative of the Company’s expected
ongoing costs and is presented for comparative purposes only.
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