Q3 2024 Applied Digital Corp Earnings Call

Operator: Good afternoon, and welcome to Applied Digital's fiscal third quarter 2024 conference call. My name is Doug, and I will be your operator today.

Good afternoon, and welcome to apply digital fiscal third quarter 2024 conference call.

Doug: My name is Doug and I'll be your operator today.

Operator: Before this call, Applied Digital issued its financial results for the fiscal third quarter ended February 29, 2024, in a press release, a copy of which will be furnished in a report on Form 8K filed with the SEC and will be available in the Investor Relations section of the company's website. Joining us on today's call are Applied Digital Chairman and CEO, Wes Cummins, and CFO, David Rench. Following their remarks, we will open the call for questions. Before we begin, Alex Kovtun from Gateway Group will make a brief introductory statement. Mr. Kovtun, please proceed.

Doug: Before this call apply digital issued its financial results for the fiscal third quarter ended February 29, 2024, and our press release, a copy of which will be furnished in our report on form 8-K filed with the SEC and will be available in the Investor Relations section of the company's website.

Doug: Joining us on today's call are applied Digital's, chairman and CEO, Wes Cummins and CFO David Wrench.

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

Speaker Change: Before we begin our captain from Gateway group well.

Mr. Coffman: Make a brief introductory statement Mr. Coffman. Please proceed.

Alex Kovtun: Great. Thank you, Operator. Good afternoon, everyone, and welcome to Applied Digital's fiscal third quarter 2024 conference call. Before management begins their formal remarks, we would like to remind everyone that some of the statements we're making today may be considered forward-looking statements under securities laws and involve a number of risks and uncertainties. As a result, we caution that there are a number of factors, many of which are beyond our control, which could cause actual results and events to differ materially from those describing the forward-looking statement.

Gateway Group: Great. Thank you operator, good afternoon, everyone and welcome to apply digital fiscal third quarter 2024 conference call.

Mr. Coffman: Before management begins their formal remarks, we would like to remind everyone that some statements. We'll make today may be considered forward looking statements under securities laws and involve a number of risks and uncertainties.

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

Alex Kovtun: For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission. We disclaim any obligation or any 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. 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. 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 and our quarterly report on Form 10-Q You may get Applied Digital Securities and Exchange Commission filing for free by visiting the SEC website at www.sec.gov.

Mr. Coffman: A more detailed risks uncertainties and assumptions relating to our forward looking statements. Please see disclosures in our earnings release and public filings made with the Securities and Exchange Commission.

Mr. Coffman: We disclaim any obligation or undertaking to update forward looking statements to reflect circumstances or events that occur. After the date forward looking statements are made except as required by law.

Mr. Coffman: We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and the reconciliation tables.

Mr. Coffman: Applicable GAAP measures in our earnings release carefully as you consider these metrics we.

Mr. Coffman: 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 variables circumstances, including but not limited to risks and uncertainties identified under the caption risk factors in our annual report on Form 10-K, and our quarterly report on Form 10-Q.

Mr. Coffman: You may get apply digital Securities Exchange Commission filing for free by visiting the SEC website at Www Dot S E C Dot Gov.

Wesley Cummins: I would also like to remind everyone that this call is being recorded and will be made available for replay via a link available in the Investor Relations section of Applied Digital's website. Now, I will turn the call over to Applied Digital Chairman and CEO, Wes Cummins. Thanks, Alex, and good afternoon, everyone.

Mr. Coffman: I would also like to remind everyone that this call is being recorded and will be made available for replay via a link available in the Investor Relations section of apply them to the website.

Mr. Coffman: Now I will turn the call over to apply digital as chairman and CEO Wes Cummins Wes.

Wesley Cummins: Thanks, Alex and good afternoon, everyone. Thank you for joining our fiscal third quarter 2024 conference call.

Wesley Cummins: Thank you for joining our fiscal third quarter 2024 conference call. I want to start by thanking our employees for their ongoing hard work and service in supporting our mission of providing purpose-built infrastructure to the rapidly growing high performance computing industry. Before turning the call over to our CFO, David Rench, for a detailed review of our financial results, I'd like to share some recent developments across our business. During the quarter, we encountered several challenges that impacted our financial performance due to facility power outages in our data center hosting.

Wesley Cummins: Want to start by thanking our employees for their ongoing hard work and service and supporting our mission of providing purpose built infrastructure to the rapidly growing high performance computing industry.

Wesley Cummins: Before turning over the call over to our CFO, David Ranch for a detailed review of our financial results I'd like to share some recent developments across our business.

David Rench: During the quarter, we encountered several challenges that impacted our financial performance due to facility power outages in our data center hosting business.

Wesley Cummins: Despite these short-term setbacks, the company has made significant progress with our key growth initiatives in the development of our cloud services business and the establishment of our special purpose-built 100 megawatt HPC data center in Allendale. Our achievements include welcoming our newest cloud service customer, Together AI, and the strategic decision to divest our Garden City facility. We are also pleased to announce that we have entered into exclusivity and executed an LOI with a U.S.-based hyperscaler for 400 megawatts of capacity at our Ellendale campus, inclusive of our current 100-megawatt facility and two forthcoming buildings. We're in discussions for project level financing for this investment grade tenant, and we hope to have construction financing in place coinciding with the site signed lease. We also significantly strengthened our balance sheet after the quarter closed with $160 million of announced asset sales and financing transactions.

David Rench: Despite these short term setbacks. The company has made significant progress with our key growth initiatives and the development of our cloud services business and the establishment of our special purpose built 100 megawatt HPT datacenter in Allendale.

David Rench: Our achievements include welcoming our newest cloud service customer together AI and the strategic decision to divest our garden city facility.

David Rench: We are also pleased to announce we have entered into exclusivity and executed an LOI with a U S based hyperscale or for 400 megawatts of capacity at our <unk> campus inclusive of our current 100 megawatt facility in two forthcoming buildings.

David Rench: We are in discussions for project level financing for this investment grade tenant and we hope to have construction financing in place coinciding with the site signed lease.

David Rench: We also significantly strengthened our balance sheet after the quarter closed with $160 million of announced asset sales and financing transactions.

Wesley Cummins: Now I will provide an update on each of our businesses. Let's begin by discussing our data center hosting business. Our 100 megawatt Jamestown facility consistently met expectations, operating at full capacity with uninterrupted uptime throughout the quarter. This achievement marks the sixth consecutive quarter of full capacity operation for the Jamestown facility. While we are pleased with Jamestown's performance, we encountered challenges at our other facilities.

David Rench: Now I will provide an update on each of our business units.

David Rench: Let's begin by discussing our data center hosting business. Our 100 megawatt Jamestown facility has consistently met expectations operating at full capacity with uninterrupted uptime throughout the quarter.

This achievement marks the sixth consecutive quarter of full capacity operation for the Jamestown facility. While we are pleased with Jamestown performance, we encountered challenges at our other facilities as previously disclosed our 180 megawatt Allendale facility in North Dakota experienced a power outage starting in January.

Wesley Cummins: As previously disclosed, our 180 megawatt Allendale facility in North Dakota experienced a power outage starting in January. In response to these challenges, our utility provider installed additional equipment to enable us to selectively power down the affected portions of our site. Upon re-energization, we determined that the failures were due to transformers not meeting industry standards. We have now successfully procured replacement transformers and related components from North American industry-leading manufacturers. As of today, the Allendale facility has been re-energized to approximately 14% of its full capacity, or 25 megawatts. Additionally, we anticipate that as the new transformers are received and installed, the Elendale facility will be operating at 65-75% of full capacity by the end of May 2024. The company is also pursuing remedies to recoup lost revenues and additional costs incurred to identify and rectify the outage. Furthermore, we made the strategic decision to sell Garden City as it was not compatible with our HPC growth strategy.

David Rench: In response to these challenges our utility provider installed additional equipment to enable us to selectively powered down the affected portions of our site coupon Reenergize Asian, we have determined that the failures were due to transformers not meeting industry standards.

David Rench: We have now successfully procured replacement transformers and related components components from North American industry, leading manufacturers.

David Rench: As of today, the Allendale facility has been reenergized to approximately 14% of its full capacity or 25 megawatts.

David Rench: Additionally, we anticipate that as the new Transformers have received and installed the allendale facility will be operating at 65% to 75% of full capacity by the end of May 2024.

David Rench: The company is also pursuing remedies to recoup lost revenues and additional costs incurred to identify and rectify the outages.

David Rench: Furthermore, we made the strategic decision to sell a garden city.

Not compatible with our <unk> growth strategy.

Wesley Cummins: This divestment enables us to redirect financial and operational resources towards our strategic sites in North Dakota, bolstering our growth initiatives in HPC and cloud service applications. The decision to sell this facility underscores our commitment to optimizing our asset portfolio while focusing on our core growth areas. As a result of this sale, we will maintain 280 megawatts of data center hosting capacity across our two fully contracted locations in North Dakota. This positions us to be insulated from volatility in the crypto markets leading up to the halving of the price.

David Rench: This divestment enables us to redirect financial and operational resources towards our strategic sites in North Dakota, bolstering our growth initiatives in HBC and cloud service applications.

David Rench: The decision to sell this facility underscores our commitment to optimizing our asset portfolio well for focusing on our core growth areas. As a result of this sale. We will maintain 280 megawatts of data center hosting capacity across our tool to fully contracted locations in North Dakota.

David Rench: This positions us to be insulated from volatility in the crypto markets, leading up to the having a debt.

Wesley Cummins: Let's move on to our cloud services business, which provides high-performance computing power for AI applications. Despite a lack of significant sequential revenue growth due to delays in clusters entering revenue generation, this segment continues to experience rapid growth as we advance in fulfilling our existing contracts and exploring new opportunities in our pipeline. We've recently seen positive developments, including the enrollment of clients like Together AI, and we have exited this quarter with positive momentum. The newly deployed clusters were turned over to customers late in the quarter, which will provide a significant positive inflection to revenue and EBITDA in our fiscal fourth quarter. Lastly, let me provide an update on our Purpose-Built HPC dataset. We currently have 400 megawatts of capacity in development across North Dakota, not including the 9 megawatts of capacity we have at our HPC facility in Jamestown to support cloud service customers. During the quarter, we continued to make significant strides in the construction of our 100 megawatt high-performance computing facility in Allendale, North Dakota. This state-of-the-art facility will feature cost-effective, highly efficient liquid-cooled infrastructure specifically designed for the most demanding HPC applications. Construction is proceeding as expected, and we are proud of the progress to date.

David Rench: Let's move on to our cloud services business, which provides high performance computing power for AI applications.

David Rench: Despite a lack of significant sequential revenue growth due to delays in clusters entering revenue generation. This segment continues to experience rapid growth as we advance in fulfilling our existing contracts and exploring new opportunities in our pipeline.

David Rench: We've recently seen positive developments, including the enrolment of clients like together AI and we have exited this quarter with positive momentum the newly deployed clusters were turned over to customers late in the quarter, which Paul will provide a significant positive inflection to revenue and EBITDA in our fiscal fourth quarter.

Paul: Lastly, let me put lastly, let me provide an update on our purpose built H P. C data centers. We currently have 400 megawatts of capacity in development across North Dakota, not including the nine megawatts of capacity, we have at our <unk> facility in Jamestown to support cloud service customers.

Paul: During the quarter, we continued to make significant strides in the construction of our 100 megawatt high performance computing facility in Allendale North Dakota. This state of the art facility will feature cost effective highly efficient liquid cooled infrastructure, specifically designed for the most demanding HPT applications.

Paul: <unk> is proceeding as expected and we are proud of the progress to date, we encourage you to visit our social media channels for some recent images of the facility.

Paul: As previously mentioned, we have entered into exclusivity and executed a letter of intent with a U S based hyperscale or for a 400 megawatt capacity lease and are progressing with project level financing tailored for this investment grade tenants.

Paul: In summary.

Paul: We are encouraged by the positive trends, we are witnessing across our business. We remain confident in our growth trajectory. We are excited about the numerous potential catalysts on the horizon will continue to allocate our capital strategically to achieve the highest risk adjusted returns and maximize shareholder value with that I will now turn the call over to our CFO, David Wrench to walk you through our finance.

David Rench: We encourage you to visit our social media channels for some recent images of the facility. As previously mentioned, we have entered into exclusivity and executed a letter of intent with a US-based hyperscaler for a 400 megawatt capacity lease and are progressing with project-level financing tailored for this investment grade. In summary, we are encouraged by the positive trends we are witnessing across our business and remain confident in our growth trajectory. We are excited about the numerous potential catalysts on the horizon and will continue to allocate our capital strategically to achieve the highest risk-adjusted returns and maximize shareholder value. With that, I will now turn the call over to our CFO, David Rench, to walk you through our financials and provide an update on guidance. David?

David Rench: I'll then provide an update on guidance David Thanks, Wes and good afternoon, everyone. Let me begin by addressing the complexity of this quarter's financial reporting.

David Rench: Although we reported an adjusted EBITDA loss of approximately $2 3 million several onetime significant items significantly impacted our financial performance and comparability to prior quarters, notably we missed out on a substantial revenue opportunities and our cloud services business due to the difference in timing between hardware delivery and final configuration and customer.

David Rench: Access we incurred onetime professional service expenses, primarily related to our capital raising initiatives financial analysis for data center financing and strategic transactions.

David Rench: Additionally, unexpected expenses arose from addressing power outages at our Allendale data center hosting facility, which alone had an estimated $4 5 million impact on operating loss during the quarter. We also incurred a $21 7 million loss on held for sale classification related to the garden city transaction and $4 2 million.

David Rench: Thanks, Wes, and good afternoon, everyone. Let me begin by addressing the complexity of this quarter's financial reporting. Although we reported an adjusted EBITDA loss of approximately $2.3 million, several one-time significant items significantly impacted our financial performance and comparability to prior quarters.

David Rench: Dollars of accelerated depreciation and amortization related to the disposal of the damaged equipment of Allendale facility, which further impacted our financials. We are pursuing all available remedies to recoup lost revenues and the additional costs incurred to identify and rectify these outages.

David Rench: Notably, we missed out on substantial revenue opportunities in our cloud service business. Additionally, unexpected expenses arose from addressing power outages at our Allendale Data Center hosting facility, which alone had an estimated $4.5 million impact on operating losses during the quarter. We also incurred a $21.7 million loss on the held-for-sale classification related to the Garden City transaction and $4.2 million of accelerated depreciation and amortization related to the disposal of the damaged equipment at the Allendale facility, which further impacted our financials.

David Rench: With these items in mind, let's move to our results for the quarter revenues for the fiscal third quarter of 2024 were $43 3 million compared to $14 1 million for the fiscal third quarter of 2023. The increases the increase was driven primarily by increased capacity across data center hosting facilities and the contribution of revenue.

David Rench: From the cloud services contracts are data center hosting segment generated $37 7 million in revenue, while our cloud services segment generated $5 6 million of revenue.

David Rench: Cost of revenues for the fiscal third quarter of 2024 was $47 1 million compared to $10 5 million for the fiscal third quarter of 2023. The increase in cost of revenues was attributable to higher energy costs due to higher number of megawatts used to generic hosting revenues as well as increases in depreciation and amortization.

David Rench: <unk> expense in personnel expenses, driven by the growth of the business has more facilities we're energized.

David Rench: We are pursuing all available remedies to recoup lost revenues and the additional costs incurred to identify and rectify these outages. With these items in mind, let's move to our results for the quarter. Revenues for the fiscal third quarter of 2024 were $43.3 million, compared to $14.1 million for the fiscal third quarter of 2023.

David Rench: Selling general and administrative expenses for the fiscal third quarter of 2024 were $30 4 million compared to $10 five in the prior year comparable period. The increase was primarily due to startup costs due to start up costs as we ramp the cloud services business, including increases in depreciation amortization and lease cost on assets.

David Rench: Not yet supporting revenue as well as personnel cost to support the overall growth of the business.

David Rench: The increase was driven primarily by increased capacity across data center hosting facilities and the contribution of revenue from the cloud services contract. Our data center hosting segment generated $37.7 million in revenue, while our cloud services segment generated $5.6 million in revenue. Cost of revenues for the fiscal third quarter of 2024 was $47.1 million compared to $10.5 million for the fiscal third quarter of 2023. The increase in cost of revenues was attributable to higher energy costs due to a higher number of megawatts used to generate hosting revenues, as well as increases in depreciation and amortization expense and personnel expenses driven by the growth of the business as more facilities were energized. Selling general and administrative expenses for the fiscal third quarter of 2024 were 30.4 million, compared to 10.5 million in the prior year comparable period.

David Rench: Net loss for the fiscal third quarter of 2024 was $62 8 million or <unk> 52 cents per basic and diluted share based on a weighted average share count during the quarter of approximately $121 4 million. This compares to a net loss of $7 million of our seven per basic and diluted share in the fiscal third quarter of <unk>.

David Rench: 2023 based on a weighted average share count during the quarter of approximately $94 1 million, notably our cloud services business reported a $21 six operating loss this quarter inclusive of $16 5 million and depreciation and amortization expenses alone. We expect these losses to decrease as we deploy more clusters.

David Rench: Over the next six months.

David Rench: Adjusted net loss a non-GAAP measure for the fiscal third quarter of 2024 was $28 9 million, our adjusted net loss per basic and diluted share a 24 cents based on a weighted average share count during the quarter of approximately $121 4 million. This compares to adjusted net loss of $1 4 million or <unk> per basic and diluted.

David Rench: <unk> share for the fiscal third quarter of 2023 based on a weighted average share count of approximately $94 1 million during the quarter.

David Rench: Adjusted EBITDA, a non-GAAP measure for the fiscal third quarter of 2024 was a loss of $2 3 million compared to adjusted EBITDA for the fiscal third quarter of 2023.

David Rench: The increase was primarily due to startup costs as we ramp up the cloud services business, including increases in depreciation, amortization, and lease costs on assets not yet supporting revenue, as well as personnel costs to support the overall growth. The net loss for the fiscal third quarter of 2024 was $62.8 million, or $0.52 per basic and diluted share based on a weighted average share count during the quarter of approximately $121.4 million.

David Rench: Point, <unk> 9 million.

Moving to our balance sheet, we ended the fiscal third quarter with $41 million in cash cash equivalents and restricted cash of $61 8 million in debt. We continue to work on improving our cash position taking into account the sale of our garden city location.

Which includes maximum cash consideration of approximately $87 3 million, while there are still ongoing elements and the sale of the garden city assets, including a $25 million hold back on the $9 million in contingent liabilities relating to final power approval in Texas, We have observed an improvement in our balance sheet since the close of the quarter, including a $50 million convertible debenture.

David Rench: This compares to a net loss of $7 million, or $0.07 per basic and diluted share in the fiscal third quarter of 2023 based on a weighted average share count during the quarter of approximately $94.1 million. Notably, our cloud services business reported a 21.6 operating loss this, inclusive of $16.5 million in depreciation and amortization expenses alone. We expect these losses to decrease as we deploy more clusters over the next. Adjusted net loss, a non-GAAP measure, for the fiscal third quarter of 2024 was $28.9 million, or adjusted net loss per basic and diluted share of $0.24 based on a weighted average share count during the quarter of approximately $121.4 million. This compares to adjusted net loss of $1.4 million, or $0.01 per basic and diluted share for Adjusted EBITDA, a non-gap measure, for the fiscal third quarter of 2024 was a loss of $2.3 million compared to adjusted EBITDA for the fiscal third quarter of 2023 of $0.9 million.

David Rench: We recently announced despite the challenges we are encouraged in the past quarter.

David Rench: We remain confident in the promising future of apply digital now I will turn the call over to west for closing remarks.

West: Thank you David I'd like to take a few minutes to discuss our capital formation strategy to fund the growth we expect in our business.

West: Our two highest growth segments or are capital intensive businesses to date, we have primarily been funding. These initiatives from corporate level financings. We were planning for this to change in the near future specifically to cloud services, we have engaged and engaged in that process. Since late last year to secure a large debt facility directly at our cloud services subsidiary.

West: To fund GPU purchases.

We have received indications from multiple parties and are proceeding forward with the goal to close the debt facility by the end of the current fiscal quarter.

West: That facility has some attractive attributes relative to the leases. We currently used to fund the deployments first it would change the amortization schedule for the Gpus from the current two years to approximately five years, which would align with the expected useful life.

Would have a positive effect on our income statement in the near term as well as aligning the assets and liabilities on our balance sheet to better reflect reality a significant portion of our lease financing is in current liabilities, while the entire asset of the Gpus is in long term assets. This creates a growing negative working capital balances, we deploy more gpus.

We were not successful in securing the debt facility. We will continue to have access to lease financing and have recently seen more attracted financing structures coming to the market move.

David Rench: Moving to our balance sheet, we ended the fiscal third quarter with $41 million in cash, cash equivalents, and restricted cash and $61.8 million in debt. We continue to work on improving our cash position, taking into account the sale of our Garden City location, which includes a maximum cash consideration of approximately $87.3 million. While there are still ongoing elements in the sale of the Garden City assets, including a $25 million holdback and a $9 million in continued liabilities relating to final power approval in Texas, we have observed an improvement in our balance sheet since the close of the quarter, including a $50 million convertible venture that we recently announced. Despite the challenges, we are encouraged by the past quarter. We remain confident in the promising future of Applied Digital.

West: Moving to our HBC datacenter financing, we have been funding the initial building of our <unk>.

West: Cost of our Allendale facility with corporate level phones.

And in the process of securing project level debt for this facility since late last year, we have multiple interested parties. The recent positive results from our feasibility study have push this process forward.

West: We expect to have this financing in place with the execution of a lease on the current 100 megawatt building.

West: Once these asset level financing vehicles that are in place that will lead the company in a positive free cash flow position due to the strategic financing in the different business segments.

West: In summary, we faced significant challenges this quarter largely due to external factors, but we are fully dedicated to delivering strong long term shareholder value the robust demand for our products and services, coupled with our differentiated asset base and the attractive valuation of our peers strengthens our conviction.

Wesley Cummins: Now, I'll turn the call over to Wes for closing. Thank you, David. I'd like to take a few minutes to discuss our capital formation strategy to fund the growth we expect in our. Our two highest growth segments are capital intensive. To date, we have primarily been funding these initiatives from corporate level funding, but we are planning for this to change in the near future. Specifically, to cloud services, we have been engaged in an engagement process since late last year to secure a large debt facility directly at our cloud services subsidiary to fund the GPU purchase. We have received indications from multiple parties and are proceeding forward with the goal to close the debt facility by the end of the current fiscal quarter.

We welcome your questions at this time operator.

Speaker Change: Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.

Speaker Change: If you'd like to ask a question you May press star one on your telephone keypad a.

Speaker Change: A confirmation tone will indicate your line is there any question queue.

Speaker Change: You May press Star two if you would like to remove your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the starkey.

Speaker Change: Our first question comes from the line of Lucas pipes with B Riley. Please proceed with your question.

Thank you very much operator, good afternoon, everyone.

Lucas Nathaniel Pipes: Wes you described Allendale and Jamestown is strategic so so I wanted to ask is it fair to conclude from that comment that those assets would not be sold specifically just just the BTC piece of it. Thank you very much.

Wesley Cummins: The debt facility has some attractive attributes relative to the leases we currently use to fund the deployments. First, it would change the amortization schedule for the GPUs from the current two years to approximately five years, which would align with the expected useful life. This would have a positive effect on our income statement in the near term, as well as aligning the assets and liabilities on our balance sheet to better reflect reality. A significant portion of our lease financing is in current liabilities, while the entire asset of the GPUs is in long-term assets. This creates a growing negative working capital balance as we deploy more. If we are not successful in securing the debt facility, we will continue to have access to lease financing and have recently seen more attractive financing structures coming to the market.

Speaker Change: Sure. Thanks Luca so.

Speaker Change: Those assets are strategic to us and that they have.

Speaker Change: Really good fiber connectivity at those sites versus what we had in Texas.

Speaker Change: And we have no plans of selling those in the immediate future.

Speaker Change: Okay.

Speaker Change: Helpful. Thank you and then on an on Allendale, you mentioned you have more than 600 megawatts of future capacity and.

Speaker Change: First is this 600 megawatt.

Speaker Change: Inclusive of the current PTC business or incremental and then how is this power capacity secured obviously theres a lot of interest for power assets out there with with.

Wesley Cummins: Moving to our HPC data center financing. We have been funding the initial building of our cost of our L&L facility at the corporate level. We have been in the process of securing project level debt for this facility since late last year. We have multiple interested parties. The recent positive results from a feasibility study have pushed this process along. We expect to have this financing in place with the execution of the lease on the current 100 megawatt. Once these asset-level financing vehicles are in place, it will lead the company to a positive free cash flow position due to the strategic financing in the different businesses.

Speaker Change: With everything that you've been talking about a very long time.

Speaker Change: So I wonder how are investors should think about that thank you.

Speaker Change: So it is inclusive of the 180 on the BTC.

And right now we've secured.

Speaker Change: 535 megawatts at that site, but we believe it goes to 605.

Speaker Change: Got it.

Speaker Change: The mechanism is through too.

Tom payments or.

Speaker Change: Could you could you expand on that a bit.

Speaker Change: I'm sorry, the mechanisms for.

Speaker Change: The mechanism through which this power is secured.

Speaker Change: Got.

Speaker Change: It's through signed Esa.

Speaker Change: Very helpful. Thank you and then.

Wesley Cummins: In summary, we face significant challenges this, largely due to external factors, but we are fully dedicated to delivering strong long-term shareholder value. The robust demand for our products and services coupled with our differentiated asset base and the attractive valuation of our peers strengthens our conviction. We welcome your questions.

Speaker Change: I'll try to squeeze.

Speaker Change: One way and just just in terms of the debt facility that you had mentioned for the Gpus.

Speaker Change: What potential size competing capacity that.

Speaker Change: Uh huh.

I'm hesitant to say the size, but somewhere in the.

Operator: Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

Speaker Change: Multi $100 million, maybe 502 to roughly $1 billion range.

Speaker Change: Okay.

Speaker Change: Well really appreciate all the all the color and to Uinta team best of luck.

Speaker Change: Thanks.

Speaker Change: Our next question comes from the line of George Sutton with Craig Hallum. Please proceed with your question.

George Frederick Sutton: Thank you Wes obviously, the big news on this call is the 400 megawatt hyperscale or contract can we just talk about that relative to the 100 megawatt that you had previously announced where does that original 100 megawatts.

Lucas Nathaniel Pipes: You may press star 2 if you would 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 key. Our first question comes from the line of Lucas Pipes with B. Reilly. Please proceed with your question. Thank you very much, operator. Good afternoon, everyone.

George Frederick Sutton: It would just be in addition to or a completely new move on your part with respect to what you have out there.

Wesley Cummins: Wes, you described Allendale and Jamestown as strategic, so I wanted to ask if it's fair to conclude from that comment that those assets would not be sold specifically to. Sure. Thanks, Lucas. So those assets are strategic to us in that they have really good fiber connectivity at those sites versus what we had in Texas, and we have no plans of selling those in the immediate future. That's helpful. And then on Allendale, you mentioned you have more than 600 megawatts of future capacity. First, is this 600 megawatt inclusive of the current BTC business, or is it incremental? And then, how is this power capacity secured?

Speaker Change: For sale.

Speaker Change: Yes.

Speaker Change: The 400 megawatts is inclusive of the 100, so it will take that.

Speaker Change: The previous.

Speaker Change: Customer didn't go forward.

Speaker Change: As I've mentioned on our call last call in January.

Speaker Change: Have had a significant amount of interest at that site.

Speaker Change: I think.

Speaker Change: I feel like we're moving forward with the best party for us to move forward with which is.

Speaker Change: <unk> for the entire site.

Speaker Change: Okay, great. So the original customer.

Wesley Cummins: Obviously, there's a lot of interest in power assets out there with everything that you've been talking about for a very long time, so I wondered how. Yeah, so it's inclusive of the 180 on the BTC. And right now, we've secured 535 megawatts at that site, but we believe it goes up to 604, got it. And what's the mechanism through, through, Down payments, or could you could you expand on that? I'm sorry, the mechanism for the mechanism through which this power is secured?

Speaker Change: Talking to some of the infrastructure investors, who we talk to was suggestive of a little bit more challenging to finance a 10 year contract.

Speaker Change: This hyperscale customer definition really would be a very high credit worthy customer and therefore I assume the.

Speaker Change: Our ability to get that finance would be substantially easier is that a reasonable.

Speaker Change: Scenario.

Speaker Change: Yeah.

Speaker Change: Thats correct.

Speaker Change: Correct way to think about that.

Wesley Cummins: Oh, it's through signed yes. Very helpful. And then, I'll try to squeeze one more in, just in terms of the debt facility that you had mentioned for the GPUs. What potential size could we think about? Uh, you know, I'm hesitant to say the size, but it's somewhere in the multi hundred million, maybe 500 to roughly a billion dollar range. Wes, I really appreciate all the color, and to you and the team, best of luck.

So.

Speaker Change: When you announced the 100 megawatt deal you gave some.

Speaker Change: Sense of a 10 year contract term of about $2 $2 billion would this be suggestive of an $8 billion plus 10 year deal is that kind of how I'm.

Read that yeah, I don't want to get into too many of the details because there's a ways to go here.

Speaker Change: But this what we're looking at more like 15 year commitments.

Speaker Change: It sticks close to what we've talked about in the past.

George Frederick Sutton: Thanks. Our next question comes from the line of George Sutton with Craig Hallam. Please proceed with your question. Thank you.

Speaker Change: The economics per megawatt we expect.

Speaker Change: Okay, and then finally on the GPU side could you just give us a quick update on sort of where your order sit where the supply of Gpus.

Wesley Cummins: Wes, obviously, the big news on this call is the 400 megawatt hyperscaler contract. Can we just talk about that relative to the 100 megawatts that you had previously announced? Where does that original 100 megawatts sit?

Speaker Change: Oh, well that's coming in.

Speaker Change: Adding inclusive and been a band and just any sense on an example of sort of once you get a cluster built how long it takes.

Wesley Cummins: Would this be in addition to or a completely new move on your part with respect to what you have out there for sale? Yeah, so the 400 megawatts is inclusive of the 100. So we'll take that. The previous customer didn't go forward.

Speaker Change: To get to revenue recognition, so historically around that yes.

Speaker Change: Yeah sure. So a couple of things on that.

Speaker Change: We feel good on the supply we're seeing shipments.

And including everything.

Wesley Cummins: As I mentioned on our last call in January, we've, you know, we have had a significant amount of interest at that site. And I think, you know, I feel like we're moving forward with the best party for us to move forward with, which is effectively for the entire Okay, great. So the original customer, in talking to some of the infrastructure investors that we talked to, was suggesting that it would be a little bit more challenging to finance a 10-year contract. This hyperscaler customer, definitionally, would be a very credit-worthy customer, and therefore, I assume the ability to get that finance would be substantially easier. Is that a reasonable scenario?

Speaker Change: One of the two.

Blocks, we hit a little bit in the quarter as we've been hiring more people because.

Speaker Change: There is a significant amount of work to put these together to commission them.

Speaker Change: Turn them over to customers and we have a <unk>.

Speaker Change: A limited team until we've been adding to that team.

Speaker Change: I think it's.

Speaker Change: It's tens of thousands of cables.

Speaker Change: Need to be connected to the cabling takes a long time and in the commissioning.

But there's a lot of work involved so hopefully will shorten that with experience and with more bodies in the future.

Right now you should be thinking about eight weeks from when we receive all components on site too.

Wesley Cummins: Yeah, that's the correct way to think about it. So when you announced the 100 megawatt deal, you gave a sense of a 10-year contract term of about $2.2 billion. Would this be suggestive of an $8 billion plus 10-year deal? Is that kind of how I think?

Speaker Change: The cluster is being turned over to customers.

Alright, very good thank you for.

Speaker Change: Andrew.

Andrew: Thanks George.

Andrew: Our next question comes from the line of Rob Brown with Lake Street. Please proceed with your question.

Robert Duncan Brown: Good afternoon.

Robert Duncan Brown: Alright.

Robert Duncan Brown: On the large potential new contract could you give us a sense of the.

Wesley Cummins: I don't want to get into too many of the details because there's a ways to go here, but we're looking at more like 15-year commitments, but it sticks close to what we've talked about in the past about the economics per megawatt we expect. Okay, and then finally, on the GPU side, could you just give us a quick update on sort of where your orders sit, where the supply of GPUs is, you know, how well that's coming in, including inclusive and in a band, and just any sense of an example of sort of once you get a cluster built, how long it takes to get to revenue recognition. So just so we're clear on that. Yeah, sure. So a couple of things on that. We feel good about the supply.

Robert Duncan Brown: The steps that go into that.

Robert Duncan Brown: Is it contingent on financing or or are there deane.

Robert Duncan Brown: Details to negotiating contracts and then you go out and get financing just a sense of the steps and timing on how that plays out.

Robert Duncan Brown: So.

Speaker Change: I'm not worried about financing on this one.

Speaker Change: There's just a process.

Speaker Change: The steps you go through.

Speaker Change: From a from where we are now.

Speaker Change: Some some diligence a lot of.

Speaker Change: You know things that we have to provide and theres a lot of work to be done from a legal contracting perspective.

Speaker Change: And then.

Speaker Change: I would expect this.

Speaker Change: To be kind of a 60 to 90 day process from from when we started.

Wesley Cummins: We're seeing shipments, including everything. One of the blocks we hit a little bit in the quarter is that we've been hiring more people because there is a significant amount of work to put these together, commission them, and turn them over to customers. And we have a limited team, so we've been adding to that team. I think it's tens of thousands of cables that need to be connected. The cabling takes a long time, and then commissioning, but there's a lot of work involved. So hopefully, we'll shorten that with experience and with more bodies in the future. But right now, you should be thinking about eight weeks from when we receive all the components on site to when the clusters are turned over to customers. All right, very good. Thank you for answering. Absolutely. Thanks, George.

Speaker Change: Okay, good good and.

Speaker Change: And I guess on the on the transformer that you're trying to or Transformers youre trying to.

For cure and and getting put in place. He has some timing on me, but what's the timeline for the rest of the transformers in getting that site up to full speed.

Speaker Change: So we've procured all the transformers.

All beyond site within the next few weeks minerals, just be the work connecting knees.

Speaker Change: There is I don't have to get into the weeds too much but theres been a certain connector component that actually has been the delay not the transformers.

Speaker Change: Connecting an energizing need, but we have already installed several of them and they should just continue daily as we ramp this back up.

Speaker Change: All indications from a performance perspective, as the new Transformers, we procured are working extraordinarily well.

Robert Duncan Brown: Our next question comes from the line of Rob Brown with Lake Street. Please proceed with your question. All right, good afternoon. On the large potential new contract, could you give us a sense of the steps that go into that? Is it contingent on financing, or are there details to negotiate and contracts, and then you go out and get financing?

Speaker Change: And so we.

Speaker Change: Spect that to proceed fairly smoothly, but it was.

Procuring Transformers and this market is not easy we were.

Speaker Change: I was really happy with the team able to find the amount of Transformers, we found in the timeframe we found them.

Speaker Change: And like I said already shift aside it's painful for us on that side being down just from an economic perspective, so the faster and for a customer by the way.

Wesley Cummins: Just a sense of the steps and timing of how that works. Sure. So I'm not worried about financing on this one. There's just a process that, you know, the steps you go through from where we are now, you know, some diligence, a lot of, you know, things that we have to provide, and there's a lot of work to be done from a legal contracting perspective. And then, you know, I would expect this to be kind of a 60 to 90 day process from when we start. Okay, good, good, and I guess on the transformer that you're trying, or the transformers you're trying to procure and... [inaudible] So we've, we've procured all the transformers. They'll all be on site within the next few weeks, and then it will just be the work connecting them. There's, I don't have to get into the weeds too much, but there's been a certain connector component that actually has been the delay, not the transformers on, on connecting and energizing these.

Speaker Change: So the faster we can get that back online the better for all of us.

Speaker Change: Okay. Thank you I'll turn it over.

Speaker Change: Our next question comes from the line of Mike Grondahl with Northland Securities. Please proceed with your question.

Michael John Grondahl: Hey, Thanks, Hey, Wes you said that the contract with the Hyperscale or the 400 megawatts was like 60 to 90 days from when you started.

Michael John Grondahl: When roughly did those discussions start just trying to figure out that start date.

Wesley Cummins: Oh, it's I'm trying to think on it but it's.

Wesley Cummins: <unk>.

Wesley Cummins: <unk> been going for maybe three or four weeks on the discussions.

Wesley Cummins: And just to make it clear it is not.

Wesley Cummins: There is no contract there was a letter of intent.

Wesley Cummins: Which is kind of a standard process here.

Got it but I think youre seeing from when you started three or four weeks ago 60 to 90 days from.

Wesley Cummins: But we've already installed several of them, and they should just continue daily as we ramp this back up. All indications from a performance perspective are that the new transformers we procured are working extraordinarily well. And so we expect that to proceed fairly smoothly, but procuring transformers and this market is not easy. We were, I was really happy with the team able to find the amount of transformers we found in the timeframe. We found them and, like I said, already shifted the site. It's painful for us on with that site being down, just from an economic perspective.

Wesley Cummins: That time, you might have a contract and financing in place.

Speaker Change: Yes, I think that's the right way to think about it.

Speaker Change: Okay and then.

Speaker Change: On the cloud services GPU side, how many Gpus do you own.

Speaker Change: End of February and how many were generating revenue and then what's your kind of estimate for the same how many you'll own and it will be generating revenue at the end of May.

Speaker Change: So we own I believe 5050, 120 or $15 20.

Speaker Change: <unk> hundred class Gpus.

Wesley Cummins: So, the faster and for our customer, by the way, so the faster we can get that back online, the better for all of us. Thank you. I'll turn it over to you.

Speaker Change: So there is there is 4000 and I'm, having trouble doing the math in my head could round it to the exact number but.

Michael John Grondahl: Our next question comes from the line of Mike Grondahl with Northland Securities. Please answer either question. Hey, thanks. Hey, Wes, you said that the contract with the hyperscaler, the 400 megawatts, was like 60 to 90 days from when you started. When roughly did those discussions start? Just trying to figure out when they started.

Speaker Change: So rounded to 4000 4000 and revenue generation now.

Speaker Change: And then there's 2000 that are.

Speaker Change: Being brought up to that stage and we should have more before the end of the quarter.

Speaker Change: Got it so.

4000 as of today are generating revenue and another two to 4000 by the end of May.

Wesley Cummins: It's, I'm trying to think about it, but it's, you know, it's been going for maybe three or four weeks in the discussions. And just to make it clear, it's not. There's no contract. There's a letter of intent, which is kind of the standard process here. Got it.

Speaker Change: Yes.

Speaker Change: That's our goal.

Speaker Change: Okay. Okay.

Speaker Change: How much did the transformers costs that you need to do.

Speaker Change: Put into Ellen deal the new ones.

David: David here.

David: Okay.

300000, a piece a piece.

David: And how many total did you need.

Wesley Cummins: But but I think you're saying from when you started three or four weeks ago, 60 to 90 days from now, you might have a contract. Yeah, I think that's the right way to think about it. And then

David: We needed about 45 of those.

There are some of the ones that the other model that we have are still working technically, but we're replacing all of them.

Speaker Change: Got it Okay and last question for me do you guys have a rough.

Wesley Cummins: On the cloud services GPU side, how many GPUs did you own at the end of February and how many were generating revenue? And then what's your kind of estimate for the same, how many you'll own and will be generating revenue at the end of May? Yeah, so we owned, I believe, 5,000 5120, or 5120, the H100 class GPUs. So there's 4,000, and I'm having trouble doing the math in my head to round it to the exact number, but I'll round it to 4,000. There are 4,000 in revenue generation now, and then there are 2,000 that are being brought up to that stage, and we should have more before the end of the quarter. Got it. So, 4,000 as of today are generating revenue, and another 2,000 to 4,000 by the end of May.

David: And are committed.

David: Capex number for the rest of calendar 'twenty four.

Speaker Change: Or we have.

Speaker Change: We have seven more weeks of calendar 'twenty four I'm sorry.

Speaker Change: Let me come back to you on that Mike I don't have that in front of me we didn't have it here for the call fair.

Speaker Change: Fair enough okay.

Speaker Change: I did want to make a point on the GPU business.

Speaker Change: <unk>.

Speaker Change: We've been adding people we've been accelerating are working to accelerate from receiving too.

Speaker Change: To revenue generating but theres, one piece that I.

Speaker Change: Mentioned on the last call and we're much more focused on it now which is.

Speaker Change: We started seeing demand from enterprise customers and large enterprise customers, which we've really been focused on.

Wesley Cummins: Yeah, that's our goal. Okay, okay. And roughly how much did the transformers cost that you needed to put in Elendale, the new one? I have David here.

Speaker Change: And so pushing we can continue to deploy with the current customer base kind of as aggressively as we want to but we'd really like to transition up to to the enterprise customers and we're we're close I think we have a few of those in process right now.

David Rench: Yeah, 300,000 a piece. Yeah. And how many total did you need?

David Rench: We needed about 45 of those. There are some of the ones that the other model that we had that are still technically working, but we're replacing them. Got it. Okay. And last question for me. Do you guys have a rough, kind of committed CapEx number for the rest of calendar 24? Well, we have seven more weeks of calendar 24.

Speaker Change: But that's one of the reasons that there's some some of the slowness in their deployment through the end of May just because they like to diversify our customer base outside of just the startups, even though I love our customers. They are big we would like to diversify the customer base, we're working pretty hard on that.

Wesley Cummins: I'm sorry. Let me come back to you on that, Mike. I don't have it in front of me. We didn't have it here for the call.

Speaker Change: Got it Okay, hey, thank you.

Speaker Change: Our next question comes from the line of Darren <unk> with Roth. Please proceed with your question.

Darren: Hey, guys. Thanks for taking my questions Westlake as a follow up on that last comment you made so.

Wesley Cummins: Fair enough. Okay. Mike, I did want to make a point about the GPU business. You know, we've been adding people; we've been accelerating, or working to accelerate, from receiving to revenue generation. But there's one piece that I mentioned on the last call, and we're much more focused on it now, which is, you know, we started seeing demand from enterprise customers and large enterprise customers, which we've really been focused on. And so pushing, we can continue to deploy with the current customer base, kind of as aggressively as we want to, but we'd really like to transition up to enterprise customers. And we're close.

Darren: In the prior.

Darren: Paul you guys guided to 10000 is a bogey for GPU number exiting may.

Speaker Change: Can you sort of speak to.

Speaker Change: <unk>.

Speaker Change: That goal if it's still one and then embedded in that your comment about slowing down to diversify away from more VC backed clients is is the achievement of getting that 10000, less important but more important to be diversified going into fiscal 'twenty five.

Speaker Change: Yeah, I think you hit it right on the second one.

Wesley Cummins: I think we have a few of those in the process right now. But that's one of the reasons that there's some slowness in the deployment through the end of May, just because I'd like to diversify our customer base outside of just the startups, even though, you know, I'd love our customers there, but we would like to diversify our customer base. We're working pretty hard on that.

The types of.

Speaker Change: <unk> diversifying away from the group of.

Speaker Change: All doing different things obviously.

Speaker Change: Different products for the startup so.

It's diversified through those customers.

Speaker Change: It's all similar and they're all startups and mostly VC backed.

Michael John Grondahl: Got it. Okay. Hey, thank you. Our next question comes from the line of Darren Aftahi with Roth. Please distribute your question. Hey guys, thanks for taking my questions. Um, Wes, if I could follow up on that last comment you made, so...

Speaker Change: And so I think it's more important for us just to think about diversification in that business over the longer term instead of kind of rushing to make a single date.

Darren Paul Aftahi: I think in the prior. Paul, you guys guided to 10,000 as a bogeyman for GPU numbers exiting May. Can you sort of speak to that goal, if it's still one, and then embedded in that, your comment about slowing down to diversify away from more VC-backed clients? Is the achievement of getting that 10,000 less important, but more important to be diversified going into fiscal 25? Yeah, I think you hit it right on the second one.

Speaker Change: And I just outside of that I wanted to make a correction to 200000 on the transformer is about 300000.

Speaker Change: On the prior question.

Speaker Change: Got it and then.

Speaker Change: Maybe one on the.

Speaker Change: The data center piece.

Speaker Change: So the the.

Speaker Change: The hyper scaler LOI is there a financing negotiation period like you have with your prior.

Speaker Change: The LOI.

Wesley Cummins: You know, the types of customers are diversifying away from the group of, you know, they're all doing different things, obviously, different products for the startup. So, you know, it's diversified through those customers. But, you know, it's all similar in that they're all startups and mostly VC-backed.

Speaker Change: No.

Speaker Change: Okay.

Speaker Change: And.

Speaker Change: Does that LOI include a roper on additional capacity beyond 400 megawatts.

Speaker Change: No.

Speaker Change: Got it and just last one for me any change on AI cloud pricing.

Wesley Cummins: And so I think it's more important for us just to think about diversification in that business over the longer term instead of kind of rushing to make a single date. And I just, outside of that, I wanted to make a correction to 200,000 on the transformers, not 300,000 on the prior question. Got it. And then maybe one of these.

Speaker Change: It's the last call is it.

Speaker Change: Stable moved up.

Speaker Change: It's been stable.

Speaker Change: I think we've talked about this on the last call, but we've kind of seen that pricing.

Level out.

Speaker Change: Getting pricing talk on public calls.

Wesley Cummins: The data center piece. So the hyperscaler LOI, is there a financing negotiation period like you had with your prior LOI? No. Okay. And does that LOI include a ROFR on additional capacity beyond the 400 megawatts? No. Got it. And just last one for me. Any change on AI cloud pricing since the last call? Has it stayed stable, or moved up?

Speaker Change: Kind of where the prepayment percentage and price per hour on Gpus has been pretty steady for us since the last quarter.

Got it thank you I appreciate it.

Speaker Change: Our next question comes from the line of Jonathan <unk> with Needham <unk> Company. Please proceed with your question.

Jonathan: Hi, Thanks for taking my question guys, just kind of summarizing it here so first on the GPU piece.

Wesley Cummins: Yeah, it's been stable. You know, I think I talked about this on the last call, but we've kind of seen that pricing, you know, level out. I hate giving pricing talk on public calls, but kind of where the prepayment percentage and the price per hour on GPUs have been pretty steady for us since the last quarter. Got it. Thank you. Appreciate it.

Jonathan: You had mentioned I think it's 4000 generating revenue now 2004 thousand brought.

Jonathan: Online end of May so.

As we think about that exiting ne run rate fair to say about 8000 generating revenue.

Jonathan: Could be close to 8000.

We're between six and 8000 is the right number to think about.

Jonathan: Okay, and then on the <unk>.

John Todaro: Our next question comes from the line of John Todaro with Needham and Company. Please proceed with your question. Thanks for taking my question, guys. Just kind of summarizing it here, so first on the GPU piece, you mentioned I think it's $4,000 generating revenue now, $2,000 to $4,000 broad online at the end of May. So kind of as we think about that exciting May run rate, fair to say about $8,000 generating revenue? could be close to 8,000, you know, somewhere between six and 8,000 is the right number to think about.

Jonathan: So the enterprise customers that you'd want to diversify into.

So those still arent side, so the slowdown as you still would need to go out and sign those or kind of I guess, just where are we in that process. Yes. Its advanced since the last quarter I think I'd mentioned, we're in proof of concept with some.

Jonathan: And there's more it's moved to contract negotiation.

Jonathan: So thats definitely made an advancement those take we'd just take longer.

Jonathan: Haven't talked I don't know I think I've talked about this publicly.

Wesley Cummins: Okay, and then on the enterprise customers that you'd want to diversify into. So those still aren't signed. So the slowdown is you still would need to go out and sign those, or kind of, I guess just where are we in that process? Yeah, so it's advanced since the last quarter. I think I've mentioned we're in, you know, proof of concept with some, and there's more; it's moved to contract negotiation. So that's definitely made an advancement; those take, they just take longer. You know, I haven't talked about this publicly, I don't know if I've talked about this publicly before, but you know, like our first customer contract we signed, I think it was two weeks from initial conversation to signing. So it was pretty fast.

Jonathan: Our first customer contract, we signed I think it was two weeks from initial conversation to signings was pretty fast.

Jonathan: The enterprise has a much longer process for qualification.

Jonathan: But where I'm.

Jonathan: I'm happy where we are in that process.

Got it.

Jonathan: And then just lastly, so on the.

Jonathan: The 100 megawatt site.

Jonathan: How much now is built on a on a percentage basis and how much financing Additionally need to do to get it 100% done.

Wesley Cummins: The enterprise has a much longer process for qualification, but we're, you know, I'm happy where we are in that process. Got it. And then just lastly, so on the 100 megawatt site, you know, kind of how much is now built on it on a percentage basis? And how much financing additionally needs to be done to get it 100% done?

Speaker Change: Yes, we have.

Speaker Change: Lynn.

Over a $100 million into that site at this point.

Speaker Change: And where we are.

Speaker Change: Negotiating now on financing, we expect the LTC somewhere in the 80% to 85% range. So we've put a lot of the money and that we're going to need to put in.

Wesley Cummins: So we've put about a little over 100 million into that site at this point, and where we're negotiating now on financing, you know, we expect the LTC somewhere in the 80 to 85% range. So we've put a lot of the money in that we're going to need on the equity side. Got it. Okay. Thanks, Wes. Appreciate it.

Speaker Change: On the equity side.

Speaker Change: Got it okay. Thanks, Wes I appreciate it yes, absolutely.

Speaker Change: As a reminder, it is star one to ask a question. Our next question comes from the line of Kevin Dede with H C. Wainwright. Please proceed with your question.

Kevin Darryl Dede: Thanks, <unk>, thanks for having me on.

Kevin Darryl Dede: Yes.

Kevin Darryl Dede: Sure can you.

Kevin Darryl Dede: Give me a ballpark on how many AI customers you have now.

Kevin Darryl Dede: Absolutely. As a reminder, it is star number one to ask a question. Our next question comes from the line of Kevin Dede with H.C. Wainwright.

Kevin Darryl Dede: That are running off of Lake, Nevada, Colorado, Minnesota, and Allendale sorry.

Kevin Darryl Dede: Please let me receive your question. Thanks. Hi, Wes.

Kevin Darryl Dede: James Jamestown site.

Wesley Cummins: Thanks for having me on. Sure. Can you... Give me a ballpark on how many AI customers you have now that are running off of like the Nevada, Colorado, Minnesota, and Allendale, sorry, Jamestown site. Yeah, so we have, primarily we have some smaller ones, but we primarily have two larger customers that are deployed. And we expect to deploy more with the new clusters that we're bringing up. So yeah, the 4,000 that are in service are split primarily between two customers. Are you thinking that you'll be able to...

Kevin Darryl Dede: Yes, so we have.

Kevin Darryl Dede: We have primarily we have some smaller but we primarily have two larger customers that are deployed.

Kevin Darryl Dede: And we expect to deploy more with the new clusters that we're bringing up.

Kevin Darryl Dede: So the 4000 that are in service is split primarily between two customers.

Kevin Darryl Dede: Are you thinking that youll be able to.

Kevin Darryl Dede: Dump those co location sites and move what you have there to allendale and the next quarter.

Wesley Cummins: Dump those co-location sites and move what you have there to Ellendale in the next quarter? Um, so Allendale is going to go. We won't have capacity for our AI cloud at Allendale as it's currently structured, because the potential customer there is taking all of that capacity. And I think that's the right decision for the company on a long-term contract and just where to best place our dollars. The co-location sites, you know, I think are going to prove to be extraordinarily valuable. The demand we see from enterprise and even some customers that are larger than enterprise is pretty large, And you know, I think we're not going to have a problem filling those up. I would never cut those loose because they're extraordinarily hard to find in the, Okay.

Speaker Change: So I wonder al is going to go.

Speaker Change: We won't have capacity for our AI cloud at Allendale as it's currently structured.

Speaker Change: Potential customer there is taking all of that capacity and I think thats. The right decision for the company long term contract and just where to best place our dollars the co location sites.

Speaker Change: I think are going to prove to be extraordinarily valuable.

Speaker Change: The demand we see from enterprise.

Speaker Change: And even some customers that are larger than enterprise.

Speaker Change: Is is pretty large and I think we're not going to have a problem filling those up.

Speaker Change: I would I would never cut those loose because it's extraordinarily hard to find in the market.

Speaker Change: Okay.

Wesley Cummins: Can you help me understand the difference between the transformers you had at Ellendale versus the ones at Jamestown and why? Did the Allendale ones fail on you? Yeah, so the, you know, I don't want to get into too many of the specifics here because, as we said, we're going to be pursuing all remedies to recoup our costs there, but the Jamestown Transformers are, you know, from a US-based manufacturer actually based in Texas, and then when we went to Allendale, we had a speed of delivery. We bought some from a non-American-based company, and, you know, they're a well-recognized company in the industry, but we've made that change, and they just haven't lived up to spec as far as I'm concerned. understood. I appreciate the color.

Speaker Change: Can you help me understand the difference between the Transformers, you had at Allendale versus the ones at.

Jamestown and why.

Speaker Change: The Allendale ones failed on you.

Yes, so the.

Speaker Change: I don't want to get into too many of the specifics here because as we said we're going to be pursuing all remedies to two three.

Speaker Change: Recoup our cost there.

Speaker Change: But the the element or the Jamestown Transformers are from.

Speaker Change: Thank you.

<unk> based one manufacturer actually based in Texas.

And then when we went to <unk>, we had a speed of delivery we bought some from non.

Speaker Change: America's base comp.

Speaker Change: And there are well recognized company in the industry.

Speaker Change: We've made that change and they just haven't lived up to spec as far as I'm concerned.

Speaker Change: Understood I appreciate the color there.

Wesley Cummins: Then you mentioned that you were okay on equipment sources, but if I remember correctly, you did see some problems getting the InfiniBand Product. Is that no longer an issue? I know you mentioned it earlier this evening, but I just want to make sure I understood it. Yeah, no longer. Okay, so, um... What would keep you from reaching that 8,000 goal that you have for May?

Speaker Change: You mentioned that you were okay on equipment source, but if I remember you you did see some problems getting me infiniband.

Speaker Change: Product is that no longer an issue I know you mentioned it earlier.

Speaker Change: I just wanted to make sure I understood. It yes.

Speaker Change: Yes, no longer an issue.

Speaker Change: Okay. So.

What would keep you from reaching that 8000 goal that you have for me.

Wesley Cummins: I don't think there'll be anything that keeps us from reaching that. Like I said, we're, you know, in the process. As soon as we secure some of these other customers that we have been pursuing, I think you'll see us accelerate, which is, like I said, why we're, you know, augmenting the team for deployment. And so that we can move quickly with that. So I don't I don't see anything from a supply chain side that will stop us. How far does that get you? And does that mean the Jamestown HPC site is fully paid for, and you're just working to build the 400 now? Yeah, so Jim Town is paid for. You know, it gets us out of the way.

Speaker Change: I don't think there'll be anything that keeps us from reaching that like I said.

Speaker Change: We're in process as soon as we secure some of these other customers that we have been pursuing I think you'll see us accelerate.

Speaker Change: Which is like I said why were.

Speaker Change: Augmenting the team for deployment.

Speaker Change: And so that we can we can move quickly with that so.

Speaker Change: I don't I don't see anything from a supply chain side that will stop us.

Based on I think you alluded to $160 million I think that includes the sale.

Speaker Change: Of of Garden City that that you that you have in your hands.

Speaker Change: How far does that get you.

And does that does that mean, the the Jamestown HBC site is fully.

Speaker Change: Paid for and you're just working to build.

The 400 now.

Speaker Change: Yes, so does that.

Speaker Change: Yes, Jim pounds is paid for.

Speaker Change: <unk>.

Speaker Change: It gets us out.

Wesley Cummins: It's just a matter of, you know, how much we spend on construction in Ellendale between now and site level. So, you know, hopefully that's six to eight weeks away because that's where the vast majority of our funds are going. And if we, you know, something went awry and that got delayed or pushed, you know, could we pause there? Yes, we could. But that's where the vast majority of our CapEx is going at this point.

Speaker Change: <unk>, it's just a matter of how much we spend on construction in allendale between now and site level financing.

Speaker Change: So hopefully that's six to eight weeks away.

Speaker Change: Because that's where the vast majority of our funds are going.

Speaker Change: And if we saw.

Speaker Change: Something went awry and that got delayed or pushed.

Speaker Change: Could we could we pause there yes, we could.

Speaker Change: Where the vast majority of our Capex is going at this point.

Wesley Cummins: And just apologies for not being the sharpest tool in the shed, Wes, but just to make sure that the site-level financing is a function of turning that LOI into a contract. Okay, thank you for entertaining my questions and apologies for making you go over stuff. Never a problem. As a reminder, it's star one to ask your question.

Speaker Change: And adjusted.

Speaker Change: Apologies for not being a sharps tool when we shed west, but just to make sure the.

Speaker Change: The state level financing as a function of turning that LOI to a contract correct.

Speaker Change: Okay. Thank you for entertaining my questions and apologies for making you go over stuff.

Speaker Change: Never a problem.

Speaker Change: As a reminder of star wanted to ask a question on.

Lucas Nathaniel Pipes: Our next question comes on the line from Lucas Pipes with B. Reilly. Please proceed with your question. Thank you very much for taking my follow-up question. I wondered if you could maybe talk a little bit about the process of how the LOI came about. You had a contingent financing agreement up until recently. Did you decide to walk away from that? Did that agreement expire? Was the hyperscaler always just in the wings?

Our next question comes from the line from Lucas pipes with B Riley. Please proceed with your question.

Lucas Nathaniel Pipes: Thank you very much for taking my follow up question.

Lucas Nathaniel Pipes: Yes.

Lucas Nathaniel Pipes: Wondered if you could maybe talk a little bit about the cadence of how the LOI came about.

Lucas Nathaniel Pipes: Contingent financing agreement up until recently did did you decided to walk away from that to do that.

Lucas Nathaniel Pipes: Agreement expire with the <unk>.

Lucas Nathaniel Pipes: Hyperscale I've kind of always in the wings was was there a discussion with the same hyperscale and before you entered into this prior agreement.

Wesley Cummins: Was there a discussion with the same hyperscaler before you entered into it? prior agreement, which is additional color. Sure. So, Lucas, we've constantly had discussions, you know? Once we went into the agreement on the 100 megawatts, we stopped having discussions on that. Because there was that exclusivity, but we had additional capacity that we were marketing, both at Allendale and other markets. And so we were in constant discussions with other parties. As I mentioned on the call in January, you know, we were seeing a lot of demand and for our additional capacity, we were, we've been in discussions with, you know, three hyper-three different hyperscalers. And then two parties that, you know, I don't know if I would classify as that.

Speaker Change: Just some additional color sure. So so Lucas we've constantly had discussions once we went into the agreement on the 100 megawatts, we stopped having discussions on that.

Speaker Change: Because there was there is that exclusivity, but we had additional capacity that we're marketing both at Allendale and in other markets and.

And so we were in constant discussions with other parties.

Speaker Change: Mentioned on our call in January we were seeing a lot of demand and on.

Speaker Change: Our additional capacity we were been in discussions with.

Speaker Change: Three hyper three different hyperscale or <unk>.

Speaker Change: And then the two partners.

Speaker Change: I don't know if I would classify as that.

Wesley Cummins: So that's, that's, it's kind of a constant that we, you know, continue to market the capacity we have available. And so that's, you know, how, I don't know if that's how those discussions came about, but yes, we're constantly doing that. I don't recall if I mentioned this in the call, but you know, we have a pipeline of roughly 1.6 gigawatts that we're working on. And so, you know, it's beyond just the Allendale site. Thank you. Wes, can you expand on that pipeline a bit? Is that all? I'm sorry to harp on this, but again, my view is that power is going to be constrained.

Speaker Change: So that's that's kind of a constant.

Speaker Change: We continue to market the capacity, we have available and so that's.

Speaker Change: Wow.

Speaker Change: That's how those discussions came about but yes.

Speaker Change: We're constantly doing that.

Speaker Change: Okay.

Speaker Change: And look it's helpful.

Speaker Change: I think I don't recall, if I mentioned this in the call, but we have a pipeline of roughly one six gigawatts that we're working.

Speaker Change: And so it's beyond just the <unk> site.

Okay.

Speaker Change: Thank you Wes can you can you can you expand on that pipeline a bit is that all and sorry to harp on this but again.

Wesley Cummins: My view is power is going to be constrained. So that pipeline is that power that you have.

Wesley Cummins: So that pipeline is that power that you have, and you. Sure. So we we have I don't want to give states, Lucas, because we haven't signed these fully yet, but we're, View in the process of probably over the next few months, but we have a pipeline of sites, a lot of them in the Midwest. So we have you have a site for 300 megawatts in the Midwest that would come online in 25, 1 for 500 that would come online in 25, 1 that's in the northern part And then a few other sites that are, obviously, the Utah site for 100 that we've mentioned publicly before.

Speaker Change: Committed to you sure.

Wesley Cummins: So we.

Wesley Cummins: We have.

Speaker Change: I don't want to give states Lucas because we havent signed these fully yet but we are.

Speaker Change: During the process of probably over the next few months, but we have a pipeline of sites a lot of it in.

Speaker Change: I would call it the Midwest So we have.

Speaker Change: You have a site.

Speaker Change: For 300 megawatts in the Midwest that would come online in 'twenty five one for 500 that would come online in 'twenty five one that's in the northern part not in North Dakota, a bit up in that area that we are.

Speaker Change: Kind of in that area that we work now for 200 that would be available for 25.

Speaker Change: And then a few other sites that are we have obviously, the Utah site for 100 that we've mentioned publicly before.

Wesley Cummins: So that's that's just a few. I appreciate that, and I'd assume the power would have a kind of similar cost structure as to what you have in Allendale. It's attractive.

Speaker Change: That's just a few.

Speaker Change: I appreciate that.

Speaker Change: I had assumed the power would be.

Speaker Change: Kind of similar cost structure as to what you have in Allendale at Jamestown.

Speaker Change: Yes.

Speaker Change: It's it's an attractive price for the HBC application for sure.

Wesley Cummins: Price for the HPC application for sure. Very helpful. Thank you. Then, follow up on the on the recourse. I'm thinking of $8 million or so, so is the primary potential source of recourse going back to the supplier, or is there business interruption insurance and potentially others? It's every source available for us, but obviously, there should be warranty obligations here and other sources of recourse for us.

Speaker Change: Very helpful. Thank you then.

Speaker Change: Follow up on the on the on the recourse.

Speaker Change: Yeah.

Speaker Change: Thinking of 8 million bucks or so so.

Speaker Change: The primary potential source of recourse going back to the supplier or is there a business interruption insurance.

Speaker Change: Essentially other sources. Thank you.

It's every every source available for us, but yes. There is obviously you should be warranty obligations here and other sources of recourse for us.

Wesley Cummins: Alright, I'll leave it here. Thank you very much. Thanks, Lucas.

Alright ill leave it here. Thank you very much.

Speaker Change: Thanks Lucas.

Wesley Cummins: There are no further questions in the queue. I'd like to hand the microphone back to Wes Cummins for closing remarks. Thanks everyone for joining us. Looking forward to catching up on our next quarterly call. Again, I want to thank all of our employees for their hard work and our shareholders for their patience with us. I am looking forward to speaking to you soon. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. And have a wonderful day.

Speaker Change: There are no further questions in the queue I'd like to hand, it back to you Wes Cummins for closing remarks.

Wesley Cummins: Thanks, everyone for joining.

Wesley Cummins: Looking forward to catching up on our next quarterly call.

Wesley Cummins: Again, I want to thank all of our employees for their hard work and our shareholders for their patience with us and looking forward to speaking to you soon.

Wesley Cummins: Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.