Applied Digital Corp 10-Q for FY2024 Q1

Applied Digital Corp. (APLD)

10-Q 2023-10-10 For: 2023-08-31

Added on April 09, 2026

About this 10-Q

Applied Digital Corp filed this 10-Q on October 10, 2023, covering the quarter ended August 31, 2023 (FY2024 Q1).

Headline figures

Quarter ended August 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $36.32M; up 424.6% from $6.92M a year earlier
Net loss: $11.46M; compared with a net loss of $4.53M a year earlier
Diluted EPS: -$0.12; compared with -$0.05 a year earlier

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Nevada			95-4863690
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

3811 Turtle Creek, Blvd., Suite 2100, Dallas, TX			75219
(Address of Principal Executive Offices)			(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	APLD	Nasdaq Global Select Market


		Page
Part I - Financial Information

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of August 31, 2023 and May 31, 2023 (unaudited)	1
	Condensed Consolidated Statements of Operations for the three months ended August 31, 2023 and August 31, 2022 (unaudited)	2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended August 31, 2023 and August 31, 2022 (unaudited)	3

	Condensed Consolidated Statements of Cash Flows for the three months ended August 31, 2023 and August 31, 2022 (unaudited)	4
	Notes to the Condensed Consolidated Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22

Part II - Other Information

Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24
Signatures		25


	August 31, 2023		May 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	5,942	$	28,999
Restricted cash	25,271		14,575
Accounts receivable	27		82
Prepaid expenses and other current assets	2,308		2,103

Total current assets	33,548		45,759
Property and equipment, net	222,666		195,593
Operating lease right of use assets, net	11,183		1,290
Finance lease right of use assets, net	55,691		14,303


Other assets	26,065		7,012
TOTAL ASSETS	$	349,153	$	263,957

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	16,229	$	6,446
Accrued liabilities	12,743		8,330
Current portion of operating lease liability	1,807		320
Current portion of finance lease liability	23,471		5,722
Current portion of debt	9,163		7,950
Customer deposits	32,559		32,559
Related party customer deposits	3,811		3,811
Deferred revenue	50,863		47,168
Related party deferred revenue	971		1,524
Sales and use tax payable	62		1,630
Total current liabilities	151,679		115,460

Long-term portion of operating lease liability	9,573		1,005
Long-term portion of finance lease liability	25,071		8,334
Long-term debt	34,882		33,222
Long-term related party loan	—		35,257
Other long-term related party liabilities	—		1,000
Total liabilities	221,205		194,278
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value, 166,666,667 shares authorized, 110,850,885 shares issued and 105,849,157 shares outstanding at August 31, 2023, and 100,927,358 shares issued and 95,925,630 shares outstanding at May 31, 2023	110		101
Treasury stock, 5,001,728 shares at August 31, 2023 and 5,001,728 shares at May 31, 2023, at cost	(62)		(62)
Additional paid in capital	240,073		160,194
Accumulated deficit	(112,173)		(100,716)
Total stockholders’ equity attributable to Applied Digital Corporation	127,948		59,517
Noncontrolling interest	—		10,162
Total stockholders' equity including noncontrolling interest	127,948		69,679
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	349,153	$	263,957


	Three Months Ended
	August 31, 2023		August 31, 2022
Revenue:
Hosting revenue	$	29,987	$	4,338
Cloud services revenue	2,152		—
Related party hosting revenue	4,184		2,586
Total revenue	36,323		6,924
Costs and expenses:
Cost of revenues	24,398		6,093
Selling, general and administrative	17,052		5,008


Total costs and expenses	41,450		11,101
Operating loss	(5,127)		(4,177)
Interest Expense	2,074		356
Loss on extinguishment of debt	2,353		94
Loss from legal settlement	2,300		—
Net loss before income tax expenses	(11,854)		(4,627)
Income tax expense	—		32
Net loss	(11,854)		(4,659)
Net loss attributable to noncontrolling interest	(397)		(128)
Net loss attributable to Applied Digital Corporation	$	(11,457)	$	(4,531)

Basic and diluted net (loss) gain per share:
Basic and diluted net loss per share	$	(0.12)	$	(0.05)
Basic and diluted weighted average number of shares outstanding	100,521,673		93,105,835


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Common Stock			Treasury Stock			Additional Paid in Capital		Accumulated Deficit		Stockholders’ Equity		Noncontrolling interest		Total Equity
	Shares	Amount		Shares	Amount
Balance, May 31, 2023	100,927,358	$	101	(5,001,728)	$	(62)	$	160,194	$	(100,716)	$	59,517	$	10,162	$	69,679
Shares issued in offering, net of costs	7,908,528	8		—	—		64,474		—		64,482		—		64,482
Shares issued from award vestings	530,732	—		—	—		—		—		—		—		—
Stock-based compensation	—	—		—	—		5,641		—		5,641		—		5,641
Net loss	—	—		—	—		—		(11,457)		(11,457)		(397)		(11,854)
Extinguishment of noncontrolling interest	1,484,267	1		—	—		9,764		—		9,765		(9,765)		—
Balance, August 31, 2023	110,850,885	$	110	(5,001,728)	$	(62)	$	240,073	$	(112,173)	$	127,948	$	—	$	127,948


	August 31, 2023		May 31, 2023
Net Cash & Equivalents	$	5,942	$	28,999
Restricted Cash	25,271		14,575
Total Cash & Cash Equivalents	$	31,213	$	43,574


	Estimated Useful Life	August 31, 2023		May 31, 2023
Hosting equipment
Electric generation and transformers	15 years	$	7,763	$	4,655

Other equipment and fixtures	5 years - 7 years	3,101		1,684
Construction in progress		97,280		106,226
Information systems and software	5 years	27,570		21,173
Land and building
Land		2,152		2,152
Land improvements	15 years	1,296		1,293
Building	39 years	88,346		63,350
Leasehold improvements	3 years - 6 years	2,299		—
Total cost of property and equipment		229,807		200,533
Accumulated depreciation		(7,141)		(4,940)
Property and equipment, net		$	222,666	$	195,593


	Three Months Ended August 31,
	2023		2022
Customer A	68	%	—	%
Customer B	10	%	12	%
Customer C	—	%	36	%
Customer D	—	%	21	%
Customer E	—	%	17	%
Customer F	—	%	14	%


	Customer D balances as of				Customer E balances as of
	August 31, 2023		May 31, 2023		August 31, 2023		May 31, 2023
Deferred revenue	$	923	$	1,474	$	48	$	50
Customer Deposits	$	2,450	$	2,450	$	1,361	$	1,361


	August 31, 2023		May 31, 2023
6.50% Starion term loan	$	12,109	$	12,786
6.15% Vantage Garden City loan	13,154		10,074
7.48% Starion Ellendale loan	18,859		19,728
Other long-term debt	386		354
Debt issuance costs, net of amortization	(463)		(3,012)
Less: Current portion of term loan	(9,163)		(7,950)
Long-term debt, net	$	34,882	$	31,980


Remainder of FY24	$	6,930
FY25	9,831
FY26	10,508
FY27	11,221
FY28	6,018

Total	$	44,508


	Number of Shares	Weighted Average Grant Date Fair Value Per Share
Outstanding as of May 31, 2023	12,465,935	$	2.53
Granted	1,311,900	7.79
Vested	(573,428)	2.69
Forfeited	(286,699)	2.21
Outstanding as of August 31, 2023	12,917,708	$	3.06


	Three Months Ended
	August 31, 2023		August 31, 2022
Balance, beginning of period	$	48,692	$	3,877
Advance billings	39,465		22,240
Revenue recognized	(36,323)		(6,924)

Balance, end of period	$	51,834	$	19,193


	Operating Leases		Finance Leases		Total
Remainder of FY24	$	1,921	$	20,185	$	22,106
FY25	2,681		25,678		28,359
FY26	2,782		4,339		7,121
FY27	2,536		188		2,724
FY28	2,336		180		2,516
Thereafter	1,398		89,944		91,342
Total lease payments	13,654		140,514		154,168
Less: imputed interest	(2,274)		(91,972)		(94,246)
Total lease liabilities	11,380		48,542		59,922
Less: Current portion of lease liability	(1,807)		(23,471)		(25,278)
Long-term portion of lease liability	$	9,573	$	25,071	$	34,644


	Three Months Ended
	August 31, 2023		August 31, 2022
Weighted-average years remaining (in years):
Finance leases	8.4 years		51.0 years
Operating leases	5.0 years		4.2 years

Weighted-average discount rate:
Finance leases	8.5	%	8.0	%
Operating leases	7.7	%	12.5	%


Exhibit Number						Description of Document
1.1*						Sales Agreement, dated June 26, 2023, by and between the Company and Craig-Hallum Capital Group LLC
3.1*						Second Amended and Restated Articles of Incorporation, as amended to date.
31.1*						Chief Executive O fficer’s Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Chief Financial Officer’s Certificate Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						Inline XBRL Instance Document.
101.SCH*						Inline XBRL Taxonomy Extension Schema Document.
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


	August 31, 2023		May 31, 2023
Cloud services segment	$	68,075	$	3,127
Hosting segment	232,451		224,447
HPC hosting segment	23,449		10,949
Total segment assets	323,975		238,523
Other (1)	25,178		25,434
Total assets	$	349,153	$	263,957


	Three Months Ended
$ in thousands	August 31, 2023			August 31, 2022
Adjusted operating loss
Operating loss (GAAP)	$	(5,127)		$	(4,177)
Stock-based compensation	5,641			579
Non-recurring professional service costs	592			408

Other non-recurring expenses	653			200
Adjusted operating income (loss) (Non-GAAP)	$	1,759		$	(2,990)
Adjusted operating margin	4.8		%	(43.2)		%

Adjusted net income (loss)
Net loss attributable to Applied Digital Corporation (GAAP)	$	(11,457)		$	(4,531)
Stock-based compensation	5,641			579
Loss on extinguishment of debt	2,353			94
Loss from legal settlement	2,300			—
Non-recurring professional service costs	592			408

Other non-recurring expenses	653			200
Adjusted net income (loss) (Non-GAAP)	$	82		$	(3,250)
Adjusted net income (loss) per share (Non-GAAP)	$	—		$	(0.03)

EBITDA and Adjusted EBITDA
Net loss attributable to Applied Digital Corporation (GAAP)	$	(11,457)		$	(4,531)
Interest expense	2,074			356
Income tax benefit (expense)	—			32
Depreciation and amortization	7,860			1,136
EBITDA (Non-GAAP)	$	(1,523)		$	(3,007)
Stock-based compensation	5,641			579
Loss on extinguishment of debt	2,353			94
Loss from legal settlement	2,300			—
Non-recurring professional service costs	592			408

Other non-recurring expenses	653			200
Adjusted EBITDA (Non-GAAP)	$	10,016		$	(1,726)


Date:	October 10, 2023	By:	/s/ Wesley Cummins
			Wesley Cummins, Chief Executive Officer, Treasurer, Chairperson of the Board and Director (Principal Executive Officer)


Date:	October 10, 2023	By:	/s/ David Rench
			David Rench, Chief Financial Officer (Principal Financial and Accounting Officer)