Q1 2025 Bit Digital Inc Earnings Call
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Hello, and welcome to the digital first quarter 2025 earnings Conference call. Good morning, Good afternoon, and good evening, depending on where you are joining us from thank you for being here. We are just giving a few more moments for attendees to dial in so thank you for your patience, while we wait.
Please note that during this call all participant lines will be in N is in listen mode listen only mode. Following the officers update we will open the floor for question and answer session. If you have a question at that time simply press star one on your telephone keypad also as a reminder, today's conference is being recorded I'll now hand it.
Speaker Change: Over to your host Cameron Schnier head of Investor Relations at bet digital cameras the floor is yours.
Thank you.
Speaker Change: Good morning, and welcome to the Big Digital first quarter 2025 earnings call.
Speaker Change: Joining us on the call today are Sam Barr, Chief Executive Officer, and Eric Wong Chief Financial Officer, before we begin I would like to remind all participants that some of the statements. We will be making today are forward looking these matters involve risks and uncertainties that could cause our results to differ materially from those projected in these statements I. Therefore refer you to yesterday's 10-K filing in.
Speaker Change: Our other SEC filings.
Speaker Change: Our comments today May also include non-GAAP financial measures additional details and reconciliation to the most directly comparable GAAP financial measures can be found in our 10-K filing which is on our website.
Speaker Change: After our prepared remarks, we will open the call up for questions if you'd like to ask a question. Please hit star one on your keypad with that covered I will turn the call over to Sam to discuss our performance Sam.
Sam Barr: Thank you Cam ladies and gentlemen, thank you for joining us on the call today.
Sam Barr: Today I'll walk through our first quarter results and provide key updates across the different business units at bad debts at all.
Sam Barr: Let's start with the mining business.
Sam Barr: Our overall top line results were dragged down by our mining segment, where first quarter 'twenty twenty-five revenue decreased 64% year over year and 26% sequentially.
Sam Barr: This contrasts greatly with our H B C business lines, which demonstrated solid growth.
Sam Barr: Mining results were affected by the 'twenty 'twenty four having event and by our fleet redeployment program as we exited claimant facilities at the end of 2024.
Sam Barr: Yeah.
Sam Barr: These factors contributed to an 80% year over year decline in production to 83 big points for the quarter.
Sam Barr: Despite the lower production our mining operations domains gross margin positive in fact mining margins expanded approximately 500 basis points sequentially to 21%, reflecting improvements in fleet efficiency and cost structure.
Our active pass rate stood at approximately 1.5 extra house by the end of March 'twenty 'twenty 2025.
Sam Barr: And fleet efficiency was approximately 24.5 jewels Portera house.
Sam Barr: We had a shipment of previously ordered as 'twenty, one miners from southeast Asia that we paused amid tariff uncertainty as the prescribed import duties would have significantly increased payback periods.
Sam Barr: But we have since begun taking delivery of those units and expect to return to approximately 2.5 X a house with fleet efficiency in the low twenties during June.
Sam Barr: Mining represented just 31% of our total revenue for the quarter compared to 72% in the same period last year. This shift reflects both the growth of our H P C business and the reality that without heavy reinvestment mining market share.
Sam Barr: Naturally declines.
Sam Barr: And we are fine with that.
Sam Barr: While our highest rate stands to rebound in the second quarter. Our primary focus remains on investing in our data center Buildout and cloud services business.
Sam Barr: Turning to cloud services.
Sam Barr: Revenue for the segment increased to 84% year over year, and 14% sequentially to $14 $8 million.
Sam Barr: Gross margins rebounded expanding approximately 700 bps sequentially to 59%.
Sam Barr: We continue to expect segment margins to improve over time as revenue scales and as the impact from operating lease costs tied to our anchor customer contract is spread across a broader base.
Sam Barr: Based on our current contracted deployments, we expect stronger sequential revenue growth in the second quarter and continued growth in the third quarter of 2025.
Sam Barr: Several deployments commenced midway through the first quarter.
Sam Barr: So we expect a recognition of a full quarter of revenue contribution in the second quarter.
Sam Barr: Additionally, our initial deployment for a DNA filed a 576 the H 200 cluster began generating revenue in April and represents approximately $10 million in annualized revenue.
Sam Barr: In May we expanded our relationship with DNA found through new two new contracts totaling 616, H 200, Gpus under two year terms, representing approximately $10 $8 million of additional annualized revenue.
Sam Barr: The expansion with this customer for that reflects our strategy of building trust through execution.
Sam Barr: And using that as the foundation for expanding relationships overtime.
Sam Barr: Our procurement strategy remains focused on aligning GPU purchases with contracted demand rather than taking speculative inventory risk.
Sam Barr: We are effectively sold out of H 200 capacity and have prioritized deployments backed by secured contracts.
Sam Barr: While overall demand for be 200, Gpus remains healthy uptake through our on demand distribution partnership with state farm has been impacted by hardware reality reliability issues.
Sam Barr: We believe the crux of that issue is tied to the early iterations of servers, we received and we're working with the OEM to address that issue.
Sam Barr: We expect this dynamic to improve overtime as early hardware issues or hopefully resolved.
Sam Barr: We are currently marketing this cluster to customers for a multi year contract.
Sam Barr: Separately, our anchor customer exercised their right to adjust the start date on their 464 B 200 deployment from June 30th to August 20th the latest allowable date under the agreement as a result, this contract represents approximately $15 billion of annualized.
Sam Barr: Revenue for 18 months.
Sam Barr: If we don't secure at acceptable customer contract for our existing B 200 cluster, we will likely use those gpus to fulfill our anchor customer contract.
We continue to prioritize securing multi year deployments with credit worthy counterparties as the foundation for our growth strategy.
Sam Barr: Looking ahead, we're engaged in several large contract discussions with our focus on securing multiyear agreements that are financeable and aligned with our capital efficiency objectives.
Sam Barr: Currently.
We are conducting diligence and negotiating on four separate deployments with credit worthy counterparties.
Sam Barr: Each opportunity carries an annualized revenue potential above $100 million and at three to five year contract term.
Sam Barr: These are the types of contracts that we believe would support attractive financing structures and we're working on those financing options in parallel with negotiations.
Sam Barr: It's too early to say, whether it will ultimately win any of those deals, but we're encouraged by the progress and the fact that we're increasingly included in these processes.
Sam Barr: We believe this reflects the strength of the platform that we've built and are continuing to build to a disciplined investment and execution.
Sam Barr: Finally, we are investing in proprietary software development to enhance our platform capabilities.
Sam Barr: A key milestone was the launch of our API layer for external provisioning of bare metal GPU servers with shade for MSR first integration partner.
Sam Barr: This development not only expands our ability to integrate with third party platforms, but also streamlines operations for our direct customers.
Sam Barr: Overtime, we expect that this will position white fiber as a premium cloud infrastructure offering.
Sam Barr: Just on maximal performance and reliability.
Sam Barr: Turning to co location services with our data centers.
Sam Barr: Development activity continues across our sites.
Sam Barr: While this segment represents a small portion of our Q1 revenue we are laying the foundation for this segment to be a major growth engine in the coming years.
Sam Barr: At Montreal too.
Sam Barr: Development timelines have shifted modestly and we now expect initial capacity to come online around early to mid third quarter.
Sam Barr: The delays largely due to the timing of debt financing, which we had expected to secure quicker, but but we're now in the very very final stages.
Sam Barr: We recently completed the physical installation of a pilot G. B 200 liquid cooled system at Montreal too.
Sam Barr: Well not yet operational the project supports collaboration between our cloud services and co location teams, providing our cloud team a platform to test next generation hardware in our data center team early exposure to advanced liquid cooled systems.
Sam Barr: We secured our third data center site Montreal three in April under our lease to own structure.
Sam Barr: Development remains on track with the cerebral deployment expected to commence about two months from now.
Sam Barr: As a result, this is a build to suit deployment with for a customer with a very sophisticated technology requirements and we're really proud to partner with them and help accelerate their growth plans.
Sam Barr: We are making progress on both sites and remain confident in our ability to meet key customer key customer commitments.
Sam Barr: In April we disclosed via an 8-K filing that we signed the purchase agreement to acquire a roughly 95 acre property in North Carolina intended for datacenter development.
Sam Barr: This transaction remains subject to customary closing conditions.
Sam Barr: Actively working through those processes.
Sam Barr: While it is too early to provide additional details we are very excited about the potential strategic significance of the site of this plot for our platform and we look forward to providing further updates as appropriate.
Sam Barr: In addition to our active projects our broader development pipeline remains robust.
Sam Barr: We continue to pursue additional data center opportunities across Canada, and the U S with over 500 megawatts of potential capacity under evaluation or negotiation.
Sam Barr: Customer demand for high performance.
Sam Barr: I optimized colocation remains strong and we're engaged in multiple active discussions that could drive incremental leasing at our existing and planned sites.
Sam Barr: On the financing side, we are now nearing finalization of a mortgage financing package for our Montreal to use facility with a leading global banking partner.
Sam Barr: We expect to be in a position to announce the terms shortly.
Sam Barr: We believe this financing will validate the scalability and capital efficiency of our datacenter development model and provide a very strong foundation for future growth.
Sam Barr: Our data center platform is a critical pillar of our strategy to build a durable diversified and high margin infrastructure platform.
Sam Barr: We're very excited about the opportunities ahead, as we continue to expand capacity and deepen relationships with high quality customers.
Eric Wong: I'll now hand over the line to Eric who will discuss our financial results.
Eric Wong: Thank you Sir.
Eric Wong: I would now I'll walk through our financial results for the first quarter of 2020.
Eric Wong: Okay.
Eric Wong: Total revenue for the quarter was $25 1, million% to 17% decrease compared to the same quarter last year as slightly below the $26 1 million reported in the fourth quarter of 2000.
Eric Wong: For.
Eric Wong: Decline was primarily due to the lower bitcoin mining revenue, which was partially offset by growth in our cloud services business.
Eric Wong: Full quarter of Colocation revenues.
Eric Wong: They claim mining revenue was $7 $8 million down 64% year over year.
Eric Wong: And 26% sequentially.
Eric Wong: This decline reflects the impact of April 24 happening.
Eric Wong: Net worth difficulty and a temporary decrease in operational hatch rate as we exit chips.
Eric Wong: Amongst the series.
Eric Wong: We also retired and replaced older units.
Eric Wong: Mike.
Eric Wong: Recency.
Speaker Change: Cloud services revenue was $14 $8 million increase of 84% compared to the first quarter up 274, and 14% sequentially.
Speaker Change: Growth was supported by Neil crowds contracts signed in both late 'twenty 'twenty four and during the first quarter up to 25.
Eric Wong: Okay.
Eric Wong: Should be with its one $6 million of revenue.
Eric Wong: $1 4 million in the fourth quarter.
Eric Wong: This reflects a full quarter of operations and following our acquisition of <unk>.
Eric Wong: In late 2024.
Eric Wong: If you are mistaking revenue it was $26 million slightly lower than the prior quarter.
Eric Wong: Our cost of revenue, excluding depreciation was $12 $8 million down from $16 2 million in the same period last year and flat compared to the first quarter.
Eric Wong: This included $6 $1 billion in cloud services costs and six one point.
Eric Wong: $6 $1 million in mining costs.
Eric Wong: Gross profit was $12 $3 million, representing a total gross margin of 49%.
Eric Wong: That compares to 47% in the same quarter last year at 40% in the fourth quarter of 2024.
Eric Wong: Cloud services gross margin expanded to 59% from 52% last quarter, reflecting improved.
Eric Wong: And scale.
Eric Wong: Colocation services gross margin improved.
Eric Wong: Improved modestly.
Eric Wong: 67%.
Eric Wong: General and administrative expenses were $8 $2 million up $6 million in Q1, translating for which reflects an increase in head count as we invest in our HPLC business volumes.
Eric Wong: Depreciation and amortization was $7 $2 million up slightly from the prior quarter, mainly due to a larger GPU.
Eric Wong: As a note.
Eric Wong: Adjusted our depreciation schedule for our cloud services for three years from three years to five years, which we believe better reflects the useful lives of these assets.
Eric Wong: Yes, the accounting change decreased DNA by approximately $2 $5 million for the quarter.
Eric Wong: Adjusted EBITA was negative $44 million.
Eric Wong: $44 $5 million compared to a positive 3% to eight 5 million in the fourth quarter.
Eric Wong: So before.
Eric Wong: This decline was primarily due to a $49 million mark to market loss digital asset holdings.
Eric Wong: Tracking lower PTC at each U S prices at quarter end.
Eric Wong: These were noncash charges and do not reflect changes in operating performance.
Eric Wong: GAAP net loss per share was 32 cents on a fully diluted basis compared to earnings of 43 cents per share in the first quarter of two before.
Eric Wong: Now turning to the balance sheet.
Eric Wong: As of March 31, we held $57 $6 million in cash and cash equivalents and three.
Eric Wong: $3 $7 million in restricted cash.
Eric Wong: The fair market value of our digital assets.
Eric Wong: Approximately $80 million as of that date.
Eric Wong: Total liquidity, including digital assets and U S. D C plus approximates a $141 million as of that date.
Speaker Change: Thanks Ben.
Eric Wong: So bitcoin has increased by 25% and the price of ECM has increased by 40%.
Eric Wong: The market value of these are asset position has appreciated on a mark to market basis.
Eric Wong: Total assets were $485 million and shareholders' equity was $417 million, we remain debt free.
Eric Wong: Capex for the quarter was $65 million approximate $36 million for the court Capex was spent on the gpus, including our <unk> hundred deployment.
Eric Wong: The remainder spent on data center infrastructure networking and storage equipment and bitcoin mining units.
Sam Barr: I will now hand, it back to Sam for closing remarks.
Sam Barr: Thank you Eric.
Sam Barr: Before opening the line for questions I want to address our financing strategy and recent capital our capital activity.
Sam Barr: We remain firmly committed to pursuing non dilutive financing structures to support the expansion of our H P C platform.
Sam Barr: We're actively working towards finalizing our first commercial mortgage financing.
Sam Barr: And we're confident that this will provide a strong foundation for scaling our data center business efficiently.
Sam Barr: We have also initiated the process for commercial mortgage financing in the U S.
Sam Barr: Regarding the filing of a new ATM registration I want to emphasize that this was a mechanical renewal of our shelf capacity it doesn't reflect any change in our philosophy.
Sam Barr: We continue to view equity issuance as a tool to be used selectively and strategically with a strong preference for non dilutive financing wherever possible.
Sam Barr: During the first quarter, we raised approximately $10 million through our ATM program as part of our normal course of operations.
Sam Barr: Subsequent to quarter end, we raised approximately $48 million through the ATM. These proceeds strengthen our liquidity position and support certain strategic growth initiatives that we believe will be transformative for our business.
Sam Barr: We look forward to providing additional updates on these certain initiatives at the appropriate time.
Sam Barr: In parallel we also sold approximately $32 million worth of Bitcoin holdings during the quarter to help fund growth, while managing our use of equity issuance, we did not sell any east during the quarter, but transferred 3400 into an internal.
Sam Barr: Managed fund, which we did not count as Treasury holdings.
Sam Barr: Maintaining a strong liquidity position is critical not just for executing on our expansion plans.
Sam Barr: But also for building trust with our customers.
Sam Barr: Prospective colocation tenants view financial strength is a key factor in selecting infrastructure partners and our balance sheet reinforces our ability to deliver projects reliably.
Sam Barr: Our focus remains on executing our growth strategy.
Sam Barr: Scaling our infrastructure platform and pursuing disciplined shareholder friendly capital deployment.
Sam Barr: As our business continues to evolve.
Sam Barr: We are actively evaluating corporate structure and strategic initiatives to maximize long term shareholder value.
Speaker Change: With that I would like to turn the call over to the operator for Q&A, but as to note. We have Billy Christopoulos, who leads our data center business and Ben Lamb said ahead of revenue for our cloud business on the line for Q&A.
Sam Barr: Thank you.
Speaker Change: If you would like to ask a question. Please signal by pressing star one on your telephone keypad. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. If you're on a speakerphone you may need to pick up the handset to signal a voice prompts on the phone line will indicate when your line is open.
Speaker Change: I ask that you. Please limit yourself to one question and then rejoin the queue for additional questions again press star one to join the queue well pause for just a moment to allow everyone an opportunity the signal.
Speaker Change: And we can take our first question from George Sutton with Craig Hallum.
Speaker Change: Thank you.
Speaker Change: Thank you Ben.
Speaker Change: My question to you if I could on the white fiber rebranding can you just.
Speaker Change: Give us an update of how that's been received in the market and then I know you are.
Speaker Change: Working on a lot of platform.
Speaker Change: She has that are somewhat new to the market can you just give us any updates there.
Speaker Change: Yeah.
Speaker Change: Thank you so the rebrand has been.
Speaker Change: Really really well received we actually have gone through a few iterations on the website as we've gotten feedback from customers and partners. You may have seen we recently launched a new version of the website.
Speaker Change: Two weeks ago, we can half ago.
Speaker Change: And and.
Speaker Change: The reviews have been fantastic, so really really happy with with how thats been panning out for us.
Speaker Change: Terms are on the platform layer.
Speaker Change: I want to be careful not really anything a little too soon we will have some news coming out here in the next couple of weeks that will be really exciting.
Speaker Change: Some first to market technology that we're going to be releasing.
Speaker Change: We're just waiting on some independent third parties to publish and benchmarks around that.
Speaker Change: So look out for that and that's going to be coming in the coming weeks and then we've got some other developments coming later this year on the platform side around cost data Center workloads, which we believe is can be a really a revolutionary technology in terms of us being first to market product ties that.
Speaker Change: So I don't want to say too much just because I want to allow some of these independent third parties to release some of this data and we will be able to leverage that the media splash, they're appropriately, but just stay tuned in the next few weeks for some announcements.
Speaker Change: I understand thank you.
Speaker Change: Thank you.
Our next question comes from Brian Dobson with clear Street.
Brian Dobson: Thanks, very much for taking my questions. This morning.
Brian Dobson: Do you think that we could take maybe step back and if you could provide a 30000 foot view on how you see demand from Hyperscale and enterprise users evolving over the next six months or so.
Brian Dobson: But that would be for the data center side. So Billy please feel free to weigh in.
Speaker Change: Is that just to clarify that that's with respect to data center Colocation correct.
Brian Dobson: Yes, that's right.
Brian Dobson: Okay.
Brian Dobson: So Lee would you like to think that.
Brian Dobson: We're seeing very strong and positive demand from.
Brian Dobson: Not only hyper scaler, but medium sized neo clubs as well.
Brian Dobson: Or capacity that we're evaluating and looking to come online later on this year.
Brian Dobson: We should have some news.
Brian Dobson: And the next couple of months.
Brian Dobson: How about that.
Brian Dobson: That's very exciting thank you very much.
Brian Dobson: Thank you.
Speaker Change: Our next question comes from Mike Grondahl with Northland Securities.
Mike Grondahl: Hey, guys good morning.
Speaker Change: I think what you were describing as a delay for customer one from June 30 to August 20.
Speaker Change: One can you talk a little bit about why and then I think you were saying how you were going to use.
Speaker Change: Maybe those gpus for your.
Speaker Change: One book.
Speaker Change: Just kind of walk us through the options you have there.
Speaker Change: Yes, I think the maximal allowable date is the date they've exercised then.
Speaker Change: As you mentioned Mike.
Speaker Change: We have we have the cluster to honor what they're looking for so that's that's that's a good thing since we already have that question. If I could just use that if we don't want to score a multiyear Cox for that current inventory.
Speaker Change: Is your question about why they shifted.
Yeah, the first couple of months.
Speaker Change: And then if so what youre, saying is hey.
Speaker Change: The Gpus might not sit idle until August if you can put them in a new customer win.
Speaker Change: Correct.
Speaker Change: Got it but as for the reasons for shifting I am not familiar Eric do you have any color on the reasons, they're shifting the start date for two months.
Speaker Change: Yes.
Speaker Change: <unk> had some internal product development schedule change so I'd like to this tier one those compute denied access.
Speaker Change: The option to extend at a later date.
Speaker Change: And we had installed and deployed those equipments.
Speaker Change: And <expletive> on Dennis into already so right now we can sell those compute and I know things working on that.
Speaker Change: Theres, a few counterparties when negotiating with for multiyear contracts.
Speaker Change: And.
Speaker Change: On top of that we're putting this you'll be 200 compute on demand.
Speaker Change: Okay handful enthuse shape as well so it's already generating some revenue.
Speaker Change: Okay. Okay, great. Thank you.
Speaker Change: Thank you. Our next question comes from Nick Giles with B Riley Securities.
Hi, Nick.
Nick Giles: Thank you operator, good morning, everyone guys.
Nick Giles: Guys. It's good to see you further expand into the U S with the <unk>.
Speaker Change: North Carolina agreement. So my first question is how should we think about your desire to continue that expansion in the U S versus Canada, and secondly, apologies if I missed this but can you just outline when those megawatts could be available what the ramp will ultimately look like and in Capex XP.
Nick Giles: Patients.
Nick Giles: Yeah, well look as you know we disclosed in an 8-K that we signed the purchase agreement to acquire a roughly 95 acre property in North Carolina. The transaction remains subject to some closing conditions. So we're it's too early for us to provide additional detail until it closes but.
Nick Giles: I can tell you I'm deeply excited about its potential strategic significance.
Nick Giles: And we will definitely update you in the markets as soon as if this closes the deal isn't closed so there isn't much we can say, we're frankly or what you know what we want to say until something is finalized in either in either.
Nick Giles: Direction, but to your question about the broader Colocation development pipeline.
Nick Giles: We're evaluating and negotiating over 500 megawatts of additional potential capacity across Canada and the U S. These sites ranged from small sites in the 5% to 21 20 megawatt range the sites with over 100 megawatts and we continue to target those sites and adjacent adjacent to market cities.
Nick Giles: Or in proven corridors of customer demand, that's really important for us geographically, we focus on retrofits. So we look at sites that arent currently configured as data centers, but would lend themselves well to redevelopment and reduce costs and timelines relative to a greenfield site and the team that we have.
Nick Giles: When we acquired end of them.
Nick Giles: Last year. It wasn't just about an acquisition of a tier three data center, but more importantly was about a team that's been doing this their entire careers and also a huge pipeline that you've identified.
Nick Giles: Through LOI and through a lot of work, but 500 megawatt 500 megawatts worth so they are the secret sauce with respect to that particular acquisition was their experience.
Nick Giles: In retrofit and how they could do it faster and cheaper and they have a track record of doing it faster and cheaper and this is this is this is really the secret sauce of where we're not trying to sort of figure it out as we go we have acquired a team that's been doing this.
Nick Giles: For a long time before this sector got hot so.
Nick Giles: We're really looking forward to developing that co location pipeline and and there'll be some exciting definitely some exciting announcements in the medium term future if not the near term future.
Speaker Change: Tim I appreciate all the color and look forward to the updates.
Nick Giles: Likewise, thank you for asking.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Joe Gomes with noble capital.
Joe Gomes: Good morning.
Joe Gomes: Just wanted to kind of.
Joe Gomes: Get your thoughts if I, if I look through the 10-Q this morning.
Joe Gomes: You've got 33 million on the balance sheet of investments.
Joe Gomes:
Joe Gomes: And at the same time Youre raising equity.
Joe Gomes: And just trying to get your thought on how do you weigh that.
Joe Gomes: More.
Joe Gomes: There has been a better opportunity to liquidate those investments and not have to sell so many shares in the ATM.
Joe Gomes: Just trying to get your thought process on that.
Joe Gomes: Yeah, absolutely. So the the recent filing with that mechanical renewal just to maintain flexibility and optionality. It doesn't reflect a change in our posture towards selective and strategic use of equity issuance, we understand I completely understand the optics are not great given the.
Joe Gomes: Size of the ATM relative to our market cap the market cap is transitory having the ATM on file is really just a tool we have access to it's worth more to have that optionality in future years venture forgo in favor of optics.
Joe Gomes: But look liquidity is critical for executing strategic initiatives and building customer confidence I've mentioned on my.
Joe Gomes: On the call earlier.
Joe Gomes: We do balance raising equity with selling digital assets to fund growth responsibly, we did sell some bitcoin Fortunately, we did not sell any ease.
Joe Gomes: As you know the ethers had a really great run.
Joe Gomes: And we're still pretty strong believers, there's a lot of there's a lot of juice in there but.
Joe Gomes: We also are very excited to announce mortgage financing, which is really inexpensive capital in order to you.
Joe Gomes: Fun the growth of our data center business and we look forward to announcing the terms of that mortgage financing very soon and that will really help.
Joe Gomes: With respect to how we.
Joe Gomes: Fund our growth we want to use cheap sources of financing, we do not want to use the ATM.
Joe Gomes: But it has to be an option.
Joe Gomes: Thanks.
Joe Gomes: Hmm.
Joe Gomes: Thank you.
Speaker Change: Before we take our next question just a reminder to our audience that is star one to ask a question.
Joe Gomes: Our next question comes from Kevin Dede with H C Wainwright.
Kevin Dede: Hi, Kevin.
Speaker Change: Good morning, Sam.
Kevin Dede: Eric Thanks for having me on the call.
Speaker Change: Apart, Eric mentioned changing the depreciation schedule, but apart from that Sam can you walk through.
Sam Barr: The levers that you can pull or the variables that you see changing the gross margin profile.
Sam Barr: Of your cloud and Colo business and maybe layer in a little discussion on the GPU procurement strategy and filling the shade form and DNA fund business.
Sam Barr: There's a few questions there let me rephrase a couple of those questions with respect to.
Sam Barr: I'm not sure if it was a question or a comment about changing the depreciation schedule, but three years was just overly conservative in a way too aggressive if you look at others in the industry. They do five some even do more than five.
Sam Barr: So even being at five at this point is still we believe are responsible and conservative I think the next question you had in there was.
Sam Barr: Or what are the different leavers to increase the margins of our cloud business in our datacenter business is that is that right is that correct.
Speaker Change: Yes, absolutely Sam Thank you very much I apologize for that.
Sam Barr: The connection working with here.
Speaker Change: Yes, all good.
Speaker Change: I mean, besides charging more of course to the customers I'd love for <unk>.
Speaker Change: Billy to weigh in on the different levers.
Speaker Change: To increase our margins.
Speaker Change: Margins.
Ken: And then I guess go ahead, Ken jump in Sam.
Sam Barr: I mean, Kevin the biggest thing on the cloud side.
Sam Barr: It's really just spreading the operating lease for.
Sam Barr: For our anchor customer over a larger revenue base because that is one of the major.
Sam Barr: Yes.
Sam Barr: Cogs items right now.
Sam Barr: Effectively a financing structure, but it's above the line so just getting more revenue.
Sam Barr: Actually the absorption across that will naturally.
Sam Barr: Drive gross margin up so any increase in revenue is broadly gross margin accretive delay could add on the datacenter side, but I think the way we look at it as pretty much every <unk>.
Sam Barr: Leading edge contracts that we sign in revenue that goes on well lift gross margins as well.
Sam Barr: On the data on the datacenter side.
Sam Barr: Margins are very predictable.
Sam Barr: And can be relied on long term contracts with clients who are very sticky.
Sam Barr:
Sam Barr: It gives us great insight on what the numbers will be over the next couple of years, we're aiming for a minimum five year contracts on that segment. So the predictability and the reliability of those are very certain.
Sam Barr: Okay.
Speaker Change: Yes, Sam could you just touch on your procurement thinking your GPU procurement thinking I mean I knew in the past you both.
Sam Barr: Bot and lease them just wondering if that.
Speaker Change: Thinking and philosophy is altered in any way.
Speaker Change: I think Eric is closer to that work stream than I am So I'd love to.
Speaker Change: The procurement for on the cloud side, just to clarify which side of the business that you're referring to procurement for equipment for datacenters procurement for the Gpus.
Speaker Change: <unk> GP GPU for cloud right because youre.
Speaker Change: He was responsible providing their compute for both shade for and DNA.
Speaker Change: As I understand I loved it.
Speaker Change: Yep.
Speaker Change: Joe.
Speaker Change: <unk>.
Maryland.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: You remain the same strategy tried.
Speaker Change: Tried to.
Speaker Change: Same contract and tied to a procurement.
Speaker Change: So that minimize our exposure to speculate if procurement.
Speaker Change: But at the same time, we did.
You procure some gpus prior of signing a desert.
Speaker Change: I agree.
Speaker Change: Agreements.
Speaker Change: It would allow us to do the R&D and to some benchmarking and testing.
Speaker Change: Well so.
Speaker Change: So we had completed our departments in Iceland right now there is a couple of deployment, we're working on in Canada.
Speaker Change: Canada.
Speaker Change: At different sites.
Speaker Change: Well.
Speaker Change: And then a higher level, if I may add.
Speaker Change: And I don't know if if I may add we tend to.
Speaker Change: Secured those most advanced.
Speaker Change: Technologies or Gpus.
Speaker Change: And.
Speaker Change: On a more attractive.
Speaker Change: To end users and our new stage ESMO, and we had those relationships with Oems and <unk>.
Speaker Change: Get those chips.
Speaker Change: Now faster.
Speaker Change: Or more accelerated.
Speaker Change: Timeline.
Speaker Change: Great. Thank you I appreciate it.
Speaker Change: Thanks Sam.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: It appears that we have no further questions at this time, Mr. Tomorrow, I'll hand, the call back to you for closing remarks.
Okay, well, then that Seth and thank you for joining us on the call today everybody. We appreciate your continued interest and support we look forward to speaking with you again in the next quarter.
Speaker Change: Officially concludes our call and have a great day everybody.
Speaker Change: Yeah.
Speaker Change: This concludes today's call. Thank you for your participation you may now disconnect.
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