Q3 2023 Applied Digital Corporation Earnings Call
Speaker 2: Good morning and welcome to Applied Digital's third fiscal quarter 2023 conference call. My name is Melissa and I will be your operator today. For the call, Applied Digital issues its financial results.
Speaker 2: For the third quarter of fiscal 2023 ended February 28th, 2023, in a press release, a copy of which will be furnished in a report on Form 10-Q, filed with the SEC, and will be available on the Investor Relations section of the company's website. Joining us on today's call are Applied Digital's Chairman and CEO, Westcoming.
Speaker 3: to Apply Digital's fiscal third quarter 2023 conference call. Before management begins their formal remarks, we would like to remind everyone that some statements we're making today may be considered forward-looking statements under securities laws and involve a number of risks and uncertainties.
Speaker 3: As a result, we caution you that there are a number of factors, many of which are beyond our control, that could cause actual results and events.
Speaker 3: To differ materially from those described in the forward-looking statements.
Speaker 3: For more detailed risks, uncertainties, and assumptions relating to a forward-looking statement, please check the belowidency tomatoh Rubio video.
Speaker 3: Please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission.
Speaker 3: We disclaim any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law.
Speaker 3: We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and the reconciliation tables to applicable GAAP measures in our earnings release carefully as you consider these metrics.
Speaker 3: We refer you to our filings with the Securities and Exchange Commission for detailed disclosures and descriptions of our business, as well as uncertainties and other variable circumstances including, but not limited to, risks and uncertainties identified under the caption 'Risk Factors' in our annual report on Form 10-K.
Speaker 3: You may obtain applied digital Securities and Exchange Commission files for free by visiting the SEC website at www.sec.gov.
Speaker 3: I would also like to remind everyone that this call will be recorded and will be made available for replay. The link is available in the investor relations section of Applied Digital's website.
Speaker 3: Now I will turn the call over to Applied Digital Chairman and CEO, West Cummings West.
Speaker 3: Thanks, Alex, and good morning, everyone. Thank you for joining us for our fiscal third quarter of 2023 conference call. I want to start by thanking our employees for their ongoing hard work, including our construction and operations team, for getting through the winter and keeping our facilities operational and construction timeline reasonable.
Speaker 3: Before turning the call over to our CFO, David REN, for a detailed view of our financial results, I'd like to touch on some updates from our business over the last quarter and why we remain excited about the future and in our ability to deliver long-term high-margin, sustainable cash flow.
Speaker 3: Let's start with an update on our two newest facilities, Ellendale and Garden City.
Speaker 3: We successfully completed energization of our 180 megawatt facility in Allendale, North Dakota in early March. This marks the second facility that we energized within North Dakota following the successful 100 megawatt facility in Jamestown that was energized in 2022.
Speaker 3: Recall that we broke ground on Allendale in September 22 and are now powering and operating the new site only six months after initial work began.
Speaker 4: This is a tremendous accomplishment given the harsh winter weather we experienced in North Dakota over the last several months along with some construction delays.
Speaker 4: We continue to ramp up our capacity and anticipate that the first half of capacity will be turned on by the end of April, and the rest will be turned on by the end of June.
Speaker 4: The facility is fully contracted by Maron for five years with a flat rate agreement, and our agreement begins upon energization.
Speaker 4: Once fully energized, this location will bring Applied Digital to 280 megawatts of hosting capacity across all our facilities in North Dakota, all of which are contracted out to customers on multi-year terms.
Speaker 4: In addition to Hellenale, we're making great progress on our 200-megawatt Garden City facility in Texas. The construction of Garden City is complete, and over 130 megawatts of miners are installed and ready to be turned on.
Speaker 4: Our customers are continuing to send mine or short of the facility and we're actively installing them.
Speaker 4: Given the unique behind the meter aspect of this facility, we are awaiting final approval on some final technical details and expect to resolve these issues in the coming weeks to begin energizing the facility.
Speaker 4: Once we energized our Garden City facility, we anticipated ramping up faster than our Ellendale facility, due to the amount of miners already installed. As a reminder, both in our Ellendale and Garden City facilities are fully contracted with fixed prices, and we are not exposed to any volatility in the cryptocurrency markets.
Speaker 4: Our 100-megawatt Jamestown facility continues to perform as expected and operated at full capacity throughout the quarter. We delivered revenue of $14.1 million in the quarter, exceeding the $12 million steady-state capabilities of the facility that we previously discussed.
Speaker 4: As mentioned on our last call we successfully retrofitted a small portion of our existing facility in Jamestown to accommodate HPC requirements to support a Web3 application with a non crypto customer.
Speaker 4: We have decided that instead of using the GPU capacity for the one-three application, it would be better utilized for machine learning and AI applications. We have onboarded multiple customers and recognized our first HPC revenue in the quarter.
Speaker 4: We also broke ground on a five-megawatt stand-alone facility adjacent to George James town site in December. That will host several hundred graphics processing units for a machine learning application with a new customer.
Speaker 4: Our first GPUs in the new facility are expected to be operational later this month or early May. The build-out will be completed in two additional stages, with the first scheduled to come online this summer and the second later in the year.
Speaker 4: Upon finalization, we expect to have over 7000 via a 100-class gposus in the building, making it one of the largest GPU clusters of its kind in the world.
Speaker 4: Importantly, it's worth noting that demand for hosting capacity across our facilities has not been impacted during the last several months and we're exploring numerous opportunities.
Speaker 4: Now, let's discuss the HPC opportunity in front of us and why we're excited about the year ahead. While we continue to see robust demand from cryptocurrency miners, we aim to diversify our customer base and exposure to the growing segments of the HPC market as we believe that will be the highest return of capital in the long term for our shareholders. Our goal remains to get at least 10% of our revenue from HPC by the end of this calendar year.
Speaker 4: required to store the data and we believe our next generation facilities are ideal hosting sites for HPCA applications as they can accommodate the unique demands for this growing industry. Our data centers offer a more purpose-built solution offering lower costs combined with higher computing power compared to traditional data centers that are typically focused on delivering low latency and high computing power.
Speaker 4: Cr C applications require a different startup that provides sufficient power in cooling to handle those unique.
Speaker 4: Needs and proper scalability are essential. These applications don't require ultra-low latency, and so we believe that the deciding factor on whether these applications will be hosted comes down to the cost of computing. Our next-generation data centers are optimized for green computing. We aim to be the lowest-cost compute provider, with our access to renewable energy and cooling.
Speaker 4: In closing, we remain confident that Applied Digital will continue to be a leader in digital infrastructure. With our next-generation data centers, demand for our services from both traditional customers and emerging HPC applications remains robust, validating our position as a fundamentally strong digital infrastructure provider to serve various hosting needs.
Speaker 4: With that update, I'll pass it over to our CFO, David French, for a financial update.
Speaker 3: Thanks, West, and good morning everyone. Before I begin my remarks, I would like to note that, like last quarter's call, since we did not have operations in a year-ago comparable period, we will not be providing any year-over-year comparisons.
Speaker 3: Revenues in the fiscal third quarter were 14.1 million, which were entirely attributable to our hosting operations. The Jamestown site operated at full capacity throughout the quarter.
Speaker 3: Cost of revenues in the fiscal third quarter were $10.5 million, consisting of $8.6 million of energy costs to generate our hosting revenues, $900,000 of depreciation and amortization expense and $1 million of personnel expense for employees directly working at our Jamestown hosting facility. Tip and
Speaker 3: Adjusted gross profit, a non-GAAP measure that excludes depreciation, embedded in the cost of revenues, and one-time electricity charges, was $4.4 million, or 31% of revenue for the fiscal third quarter of 2023.
Speaker 3: Operating expenses for the fiscal third quarter of 2023 were $10.5 million, which includes $4.5 million of stock-based compensation, $3.9 million in other selling, general, and administrative costs, and $1.1 million in depreciation and amortization expenses.
Speaker 3: Net loss attributable to Apple Digital for the fiscal third quarter of 2023 was a loss of seven million, or a loss of eight cents per basic and diluted share based on a weighted average share count during the quarter of approximately 94.1 million.
Speaker 3: Adjusted net loss attributable to Applied Digital for the fiscal third quarter of 2023 was a loss of seven million, or a loss of eight cents per basic and diluted share, based on a weighted average share count. During the quarter, approximately 94.1 million adjusted net loss attributable to Applied Digital occurred.
Speaker 3: Adjusted EBITDA and non-GAAP measure for the fiscal third quarter of 2023 was $900,000.
Speaker 3: Lastly, on our balance sheet, we ended the fiscal third quarter of 2023 with 22.9 million in cash and cash equivalents, and 23.7 million in debt. During the third fiscal quarter of 2023, we received 11.7 million in net customer deposits and 32.3 million in net deferred revenue.
Speaker 3: Which collectively amounted to a 44 million net cash inflow. Due to the structure of our commercial arrangements with our customers, which incorporate upfront deposits and prepayments.
Speaker 3: In certain contracts, the prepayments are amortized back to the customers for the first year of their contract, with no impact on revenue recognition. However, the timing of cash flow with upfront cash to us is a major benefit for the company, as it helps with our CapEx funding needs while we build our data centers. Our balance sheet remains strong, and we have no exposure to Celsius Network.
Speaker 3: of the Allendale facility that should occur in the fiscal fourth quarter.
Speaker 3: Once both facilities are online, we will have nearly 500 megawatts of hosting capacity that we expect to put us an annualized adjusted EPDEV run rate of approximately 100 million.
Speaker 4: That completes my financial summary. Now I'll turn the call over to Wes for closing remarks. Thank you, David. I want to add a little more detail around our expectations for the current quarter. While we expect Garden City to energize during the quarter, if we exclude it completely and look at our expected ramp of Allendale, we expect to generate approximately $24 million of revenue and approximately $4 million of revenue.
Speaker 4: or Allendale facility in the near term.
Speaker 4: We will also continue to build out our non-crypto use cases to demonstrate the broad capabilities of our next generation data center assets for HPC applications.
Speaker 4: So while the crypto industry remains volatile, we are well-positioned to capitalize on strong demand from both crypto and non-crypto customers for our services.
Speaker 4: I remain optimistic about our future and want to thank all of our team members for their dedication and service to Applied Digital.
Speaker 4: With that, operator, let's open up the call for questions.
Speaker 2: Thank you. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the STAR keys.
Speaker 2: In the interest of time, we ask that you each keep to one question and one follow-up. Thank you. Our first question comes from the line of Lucas Pipes with B Riley Securities. Please proceed with your question.
Speaker 5: Thank you very much, operator, and good morning everyone. Congrats on the progress at Allendale, and I do want to.
Speaker 5: I asked about Garden City. You mentioned an expectation that it could come online in the coming weeks. And I wondered if you could touch on the level of confidence on that statement and in terms of a faster pace of energization which was also mentioned in the prepared remarks.
Speaker 5: is their ability to quantify the cadence of the ramp once you have those.
Speaker 5: Final metering issues resolved. Thank you very much.
Speaker 4: Yeah, thanks Lucas, this is Wes. Let me try to explain the specific issue, the primary issue that we're dealing with. And it is an issue with the behind the meter installation. We're not unique right now in Texas. And there's several.
Speaker 4: large projects turning on or trying to turn on. And I think work might be the only Bitcoin mining project of these kinds. So there's several other kind of projects that are turning on. The issue is the way they settle on metering and the visibility they want into the power gen plus the grid energy.
Speaker 4: And there's an issue with double settlement or being double counted. There's not, there's, say there wasn't really a framework for this in ERCOT, and we're dealing with it mostly on the on-course side from a metering perspective. ERCOT had a meeting last week that a rule changed that should solve this issue. So now it's back in the hands of on-course.
Speaker 4: We think that issue was solved, but they typically seem to move very slow. So while it wouldn't be, you know, didn't happen the next day, you know, we expect some really meaningful progress on finalizing this. There's...
Speaker 4: Just my opinion, some very simple solutions for it, but it just has had to go through the process and it feels like the process is now largely complete with the rule change, with ERCA. It should solve the issue with Encore, not just for us, but for several different people. So we expect this to move forward in the very near term. Now I'll see.
Speaker 4: So hopefully that makes sense. As far as the pace of energizing, so recall Ellen Dale.
Speaker 4: You know, this is as we build, we're energizing. The buildings will go up much faster now. So we had all the concrete poured. We're finalizing the buildings. All of them worked on in stages. But now it's just turning on each building as it's completed as the miners are racked and as they're available to turn on. So that's much more like we did in Jamestown. But because, you know, we originally expected
Speaker 4: Garden City energized much earlier, the construction is complete, a large majority of the miners are already racked, so we're not doing it in those types of stages as we've done in North Dakota. So when we have the final approval, when we're ready to turn on, all of these buildings are ready to turn on so you can see these come up in just a week.
Speaker 5: my second question I do want to turn to HPC and could you share some light on what an anchor agreement could look like in terms of revenue, unit economics, term, duration and then what would be the capital potential capital requirements?
Speaker 5: for a large HBC kind of acre.
Speaker 5: for a large HBC kind of acre tenant. Thank you very much.
Speaker 4: Sure, sure. So there's a couple of different models that we're exploring with HPC. So there's a model where, you know, the first ones that we're running in our, in what we call the HPC closet, it's the retrofitted portion of one of the mining buildings. We own those GPUs. We rent the...
Speaker 4: helping us with that on the front end that loads onto the system. So that's gone very well. As we move into the pilot phase of the new building, so it'll be around 300 GPUs that will ramp up. Those will also be owned by us.
Speaker 4: you know we'll have customers with customers that are booked for those GPUs as well and then the rest of the building can go in one of two ways so there's there's a potential for us to do just colocation on on those areas and if you think about colocation
Speaker 4: you know a good area is we've gotten a kind of put a finer point on this a good uh way to think about this is on a per megawatt basis and I'm just comping that's what we do with bitcoin mining because that's what we've done so far you should expect more than 10 to 12 times
Speaker 4: revenue versus per megawatt versus the Bitcoin hosting for the HPC applications. And similar lift in EBITDA, maybe even slightly higher, maybe a little bit better margin on the EBITDA front from an HPC colocation.
Speaker 4: If we move forward with owning GPS, that is what we provide to a customer. It's a significant step up again in terms of revenue and EBITDA. But if we own the GPS in the entire facility and we book those out, we would only do that if we had the right.
Speaker 4: style of customer to do that and a very large solid counterparty to do that. That building would generate well north of 100 million of revenue and upwards of 50 or 60 million dollars if you did that. So we're still working through
Speaker 4: How is the business model? I think it'll be a little bit split there, but right now, we are fully funded on our balance sheet. We saw where the quarter ended cash; as of yesterday, the company had about 41 million of cash. So actually, a significant step up, but that was the debt facility that went in place post the end of the quarter.
Speaker 4: I think when you think about a longer-term model here, you should really think about a colocation model is what we're 'chasing.' And then blend it in with some GPU ownership when necessary.
Speaker 5: Very very helpful. That one million revenue. What size of building would that make, lot-wise?
Speaker 4: That's just the current build, the five megawatts. If we owned all the GPS and did a leasing business, more of an integrated model, like what you would see with AWS, it would be close to one million. It would be well worth one million.
Speaker 5: That's super helpful. Wes and team really appreciate the color and all the best of luck. Thank you. More info www.plastics-car.com
Speaker 2: Thank you. Our next question comes from the line of Rob Brown with Lake Street Capital. Please proceed with your question.
Speaker 6: Good morning. I wanted to get a little more color on the Jamestown facility. I think you said it ran at $14 million in revenue above its sort of name plate capacity. What drove that and do you see that continuing?
Speaker 4: Yeah, Dave, good morning Rob, thanks for the question. So just higher efficiency in the quarter for us was part of it. There was a little bit of a price lift. We do have the ability to increase price somewhat on our customers because we do have, I think we've talked about this before. You know, last quarter you saw a lower gross margin for us and it's kind of lagging in effective...
Speaker 4: of Marathon containers at that facility that we expect to turn on any day. The boost the operations there a little bit, but I think that that level that somewhere in the 13 to on the upper bound maybe 15 or 16 million revenue is reasonable on a quarterly basis from James Town.
Speaker 6: Okay, great. And then just wanted to get a little bit into the cash flow of the customer prepayments and deferred revenue. You said it would happen over 12 months, but how long does it take to sort of burn off that balance sheet prepayment and sort of normalize the cash flow against the EBITDA you're reporting?
Speaker 4: Yeah so basically from the customers when their contract turns on when we energize that portion of the contract we begin to amortize that prepayment back to them and so here we get it's four months
Speaker 4: it's fairly simple. So it's four months of prepayment amortized back over 12 months. And then once we go through a full 12 months that that deferred revenue will be, you know, gone off the balance sheet, obviously, from a P&L perspective, you get the deferred revenue and you still get the same earnings impact.
Speaker 4: From a cash flow perspective you should think about is we're hitting that hundred million dollar run rate for the first year of that run rate. The cash conversion from EBITDA to cash flow is going to be lower but there still will be significant positive cash flow for the company as we advertise that back to the customers and then and then when you know
Speaker 2: Thank you. Our next session comes from line of George Sutton with Craig Helen Kaplow Group. Please pursue your question.
Speaker 6: Thank you. Wes, one thing I wanted to just clarify, because we had multiple clients concerned about the proposed permitting framework in Texas, in the Texas Legislature. You are well beyond that. The modest delay we have had has nothing to do with that. That is a correct statement?.
Speaker 4: on that site, specifically, you know, they're talking about, you know, the grid balancing or the demand response benefits in the legislature now and are the setup of that site, it is not an area where we, it's not where we take advantage of those programs in tech.
Speaker 4: Fully understood when we talked about machine learning versus what I was viewing as large language models. I just want to make sure we have seen somewhat of a use case change. We look to deploy in new customers. So, large language models fall into that machine learning category. So it's the training model and I think that's fine.
Speaker 4: Thanks, George.
Speaker 2: Thank you. Our next question comes from the line of John Tadara with Need a Main Company. Please proceed with your question.
Speaker 4: Can for taking questions, guys. Two questions here. First, on the bitcoin mining piece, can you just remind us when your major mining contracts are up for renewal, and then any expectations you have for the halving coming up in Q1 2024, which should raise those matter cost questions that you have.
Speaker 4: Yes, so the contracts are. The vast majority is contracted under five-year contracts that are effectively just starting. As we energize, excuse me and, we energize Allandale in Jamestown, I think. I don't know, off the top of my head, the exact contract lengths remaining, but it's.
Speaker 4: I think we run a really efficient operation, and our current customers are very profitable at the current Bitcoin price.
Speaker 4: and significantly below the Bitcoin price when you think about just about variable cost, but effectively, you know, your costs will increase double at the halving event, you know, so it really depends on two things It's you know, the price of Bitcoin and then the network hash rate and you know the genre
Speaker 4: The thing about Bitcoin over, you know, the life it has had is generally there's a self-correcting mechanism You know in the network of hash rate versus price that allows miners to stay profitable. There will be periods of time where they won't be.
Speaker 4: But, at the end of the day, you're looking for the most efficient guys. I think they're the ones who will stay online post to having. We're running only AS' 19 Pro, and the majority of what we're turning on now and will be at our current, the new facilities are all XTPs. So, running all the latest model mining equipment and.
Speaker 7: Could you just discuss?
Speaker 8: that a little bit and some of the competitive landscape there.
Speaker 4: Yes, I expect there to be plenty of competition and people entering the space. I anticipated it from the traditional data center providers and expected new entrants to come into the space. I think it's a really large opportunity. Just to kind of frame this opportunity and explain why I think we have this chance.
Speaker 4: And what the opportunity stated is: we talk about these next-generation data centers quite a bit, but let me just give you some comparisons between traditional data centers versus what we're building and what we see in the future. So, a traditional data center we talked about is generally built for ultra-low latency interconnect, video streaming, and all those types of things.
Speaker 4: Traditional data is going to build Iraq's power. Typically, for a full AQ, they deliver about seven and a half kilowatts. So, generally, their capability is somewhere around 10 to 15 kilowatts for Iraq when we load Iraq full.
Speaker 4: in video box with eight A100 GPUs, which is the gold standard right now for machine learning and AI. If you want that rack full, it requires about 40 kilowatts to power that rack. So you're looking versus what traditionally is there almost a five-fold increase.
Speaker 4: in the power needed and then that really directly correlates to the amount of heat created. But we're talking to the largest players in the industry and we're spending a lot of time with them and the view is that things are going from 40 to 70 to 100 kilowatt needs per rack.
Speaker 4: So you're bringing this power density. It's increasing significantly, and it's really difficult to retrofit older data centers to do this - and then they might. Then you're thinking about the amount of power that they need, and I think you're going to see a trend specifically for machine learning and AI, because it's a very unique load.
Speaker 4: That looks a lot more like what we're handling now to move them closer to the power source. You don't need this ultra-low latency aspect for these. So, we're positioned very well. We have large amounts of low-cost power. We're situated mostly in very cold locations in our data center, for example, the air.
Speaker 4: of airflow, just massive amounts of airflow for the cooling because the climate in North Dakota is absolutely perfect for this. We're sitting on a fiber grid, we have 100 gig connectivity now going to 400 gig at the end of the year, so we have really good fiber connectivity which is also necessary, you just don't need the ultra low latency aspect.
Speaker 4: but we're sitting in a really good spot. Now is it easy for everyone to go into this space? You know, just like we've seen in building out hosting capacity for pickling money, that was hard. I think this is even harder. We've put a really good team in place.
Speaker 4: We pulled some people out of a large company that builds data centers here in the US and actually internationally as well. You know they were building data centers for some of the largest hyperscalers. So we have people that are experienced with doing this. We've spent a lot of time designing this specific design. Now we're implementing it.
Speaker 4: So I do think we have a significant lead versus almost everyone out there. We've seen a few other smaller players that have been doing this for a few years. But I think you're going to see some of the larger ones move towards it. But I do think we have a
Speaker 4: you know a pretty good advantage given where we are now where the sites that we already have the operations that we already have and the knowledge base we have with our you know really on our electrical engineering as far as being able to deal with this kind of power density already but I do expect competition expected to be an extraordinarily large industry and
Speaker 9: Operator.
Speaker 10: Thank you. The next question is coming from Mike Gondal of Northland Securities. Please go ahead. Hi, everyone. I'm
Speaker 11: Hey guys, thanks, Wes.
Speaker 11: When do you think you kind of have a green light?
Speaker 11: the HPC opportunity is that when the five megawatts are sort of up and running
Speaker 11: And that's shown everybody you can do this.
Speaker 11: Is that this summer, this fall? When do you think you have that? And then.
Speaker 11: Is that this summer, this fall? When do you think you have that? And then, what could the HPC business...
Speaker 4: Looks like in two to three years in terms of the number of megawatts and a rough range for revenue, sure. So, I gave the kind of a revenue comparison earlier. I can repeat that if you want me to, just to kind of frame where we think.
Speaker 4: you know, HPC is as far as revenue versus the Bitcoin mining. You know, the green light, we've kind of, we're definitely maybe like a, we've moved from red to yellow already. So we're operating in our site. We see that these work. We see the network connectivity works. We see the software works. We see this setup works.
Speaker 4: Now, as we bring the building on, there will be some fine tuning on the five-gigawatt building from a design perspective for sure, just like we did some tuning up from when we built in Jamestown versus what we built in Garden City and Enendale. But we're really close and.
Speaker 4: The conversations that we're having, and the people we're having these conversations with, have really given me and the team a large amount of confidence that we're moving in the right direction. As for what that could look like right now, we're trying to think about what it could look like a few years out.
Speaker 4: I mean, we talked about getting to a 50-50 split. I think the demand that is out there for this type of data center build is large right now. And the people that we're talking to about
Speaker 4: about hosting or about GPU rental, it's very large quantities. And, you know, it's something that, you know, depending on how a few of these things go over the next few months, this business will be...
Speaker 4: you know, potentially very material, you know, by the end of this year. But it could ramp extraordinarily quickly, and if it starts...
Speaker 4: If it starts to go this way, it's kind of one of these, right? I think it'll be a really long runway of growth, but the conversations we're having right now, by.
Speaker 4: You know we're seeing demand you know of People wanting individual demand of ten or twenty megawatts and some you know fifty and a hundred megawatts of HPC build Which is which is a very large amount given like I said with the with the numbers for that I gave you earlier in the call about the
Speaker 4: the revenue comparison for HPC versus Bitcoin mining. But we're seeing a lot of demand. You know, we're getting to some certifications that we need that we'll get in the summer, but I don't know that that's going to stop us from signing some large customers prior to even reaching that because it's, you know, these are really in the stage of development projects that will need to be built and turned on.
Speaker 4: And so the cadence might call for some of these to come on or to be signed at least earlier than expected. What I maybe initially expected and took away is the revenue comparison. It's like 10 to 12 times the revenue that's going to be generated. Okay, got it.
Speaker 4: Yes, and that's for Mike, that's for colocation. So if we just do the hosting, that's – I think it's a good comparison right now. And if we own the GPU, it's significantly higher than that.
Speaker 2: Got it, okay. Thanksthank you, ladies and gentleman. Reminder: if you'd like to join the question Q, please press AR one on your telephone keypad.
Speaker 2: Our next question comes from line of Kevin Deedee with HC Wainwright. Please proceed with your question. Hi, Wes. Thanks for the discussion on...
Speaker 4: You know on the HPC side. I guess it sort of begs it sort of begs the question and given That you seem pretty fully contracted out on 500 What other I can give us a I guess a peek into the pipeline? for your next round of builds your next site acquisition
Speaker 4: And that kind of timing. Yes, so we have A. We have a very good site identified in another cold region, not in North Dakota, that has a good power price for us. We're optioning that site.
Speaker 4: I actually, you know, we have demand for Bitcoin mining for that site, but we're seeing the amount of demand I think we're seeing emerge on the HPC front. I think it's, you know, the likelihood that it goes towards HPC is extraordinarily high. But we do have another site identified and we also expect to expand at the J.
Speaker 4: or above the 5 megawatts. And we're calling it paid.
Speaker 4: I guess I recall the, but originally in Jamestown we expected to go to 200 megawatts. And so I think we can push that beyond the hundred, you know, with the power provider there with HPC. I'm not certain what that limit is for us just yet. But we do think that we can expand at that site, but then we'll push more.
Speaker 4: versus I guess machine-owned business models in HPC Wes? How would you approach that from a financing perspective?
Speaker 4: So, from a financing perspective, you know, the goal, so on the owning the GPUs would be significantly more expensive. These are probably, you know, the pricing on these types of GPUs that they're extremely high. So, we, you know, our team on the finance side has done a great job to date.
Speaker 4: you know, getting a very low cost financing for the sites that we have for that particular market. If you want to own the the GPUs, there is a much better.
Speaker 4: really well developed financing mechanism and financing market for that. So we've already done that path and I think we'll be able to tap some of that financing. And we are on the unkind of the initial build. But if it is going to be extraordinarily large, we're working on solutions. quien Somethin Pellano AudorHA média Kevin Tr finally met with the
Speaker 4: colocation side, I don't think we'll have any issue financing that for HPC builds for colocation. The customer set there that we'll contract for that.
Speaker 4: You know, it's large companies, you know, AAA type credit companies. I don't think, with our ability that we've had to finance the Bitcoin mining facilities once contracted with customers, I think it's going to be significantly easier, even in a much more difficult financing environment that we're seeing right now.
Speaker 4: just because of the customer profile for those types of co-location buildings. Okay, would you mind just sort of touching on the JV that you sort of set up on sort of picking up excess rigs and
Speaker 4: How's that looking? What are you thinking about that now? What can you speak to that? So, we didn't pull any significant amount of money in, unfortunately, on that JV. We saw the opportunity there. We didn't get a lot of demand on the.
Speaker 4: you know, it was basically coming out set up, you know, it was like a fund structure, like an SPV to go out and do that. And, and the opportunity is kind of, I wouldn't say totally coming when but you know, the price of the of the equipment, you know, has has moved up materially, that would have been a great trade. Had we been successful and in pulling money in, but at the time that we were doing that, you know, we had
Speaker 4: I appreciate the insight.
Speaker 9: Thanks Kevin.
Speaker 4: Thank you, ladies and gentlemen. That concludes our question and answer session. I'll turn the call back to Mr. Coming for any final comments. Thanks, operator. And just to clarify the prepared remarks and have David repeat the, not or the adjusted earnings number.
Speaker 4: twice at two different numbers. The appropriate one is a loss of 1.4 million and a loss of one cent on the adjusted net income. Outside of that, I just want to thank the shareholders that are on the call for their support and thank our employees. Again, it was an extraordinarily difficult winter in North Dakota and it's still going with more snow recently falling there as well.
Speaker 4: Everyone has done a great job getting the buildings, operating the buildings, and I really appreciate everyone's EF on that - and we'll talk to you next quarter. Thank you, thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you.
Speaker 9: For your participation.