Applied Digital Q4 2023 Earnings Call Transcript

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Provided by Quartr
July 24, 2023

There are 9 speakers on the call.

Operator

Morning, and welcome to Applied Digital's Fiscal 4th Quarter and Full Year 2023 Conference Call. My name is Donna, and I will be your operator today. Before this call, Applied Digital issued its financial results for the fiscal Q4 and full year ended May 31, 2023 in a press release, a copy of which will be furnished in a report on Form 8 ks filed with the SEC and will be available in the Investor Relations of the company's website. Joining us on today's call are Applied Digital's Chairman and CEO, Wes Cummins and CFO, David Wrench. Following their remarks, we will open the call for questions.

Operator

Before we begin, Alex Kufton from Gateway Group will make a brief introductory statement. Mr. Kufton, please proceed.

Speaker 1

Great. Thank you, operator. Good morning, everyone, and welcome to Applied Digital's fiscal 4th Quarter and full year 2023 conference call. Before management begins their formal remarks, we would like to remind everyone that some statements we're making today may be considered forward looking statements under securities laws and involve a number of risks and uncertainties. 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.

Speaker 1

For more detailed risks, uncertainties and assumptions relating to our forward looking statements, please see the disclosures in our earnings release and 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 The 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 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 ks. You may get Applied Digital Securities and Exchange Commission filings for free By visiting the SEC website at www.sec.gov.

Speaker 1

I would also like to remind everyone that this call is being recorded Now, I will turn the call over to Applied Digital's Chairman and CEO, Wes Cummins.

Speaker 2

Wes? Thanks, Alex, Good morning, everyone. Thank you for joining our fiscal Q4 and full year 2023 conference call. I want to start by thanking our employees for Ongoing hard work in service and advancing our mission. Before turning the call over to our CFO, David Wrench, for a detailed review of our financial results, I'd like to touch on some recent developments across our business.

Speaker 2

I will also share why we remain confident about the future and our ability to deliver long term growth. Over the last year, we've been working toward providing digital infrastructure solutions that provide differentiated services from traditional data centers. Demand for our services from both traditional customers and emerging HPC applications remains robust and we're excited about the year ahead. As we enter fiscal 2024, We are focused on 3 key strategic goals. First, we aim to have all three of our crypto hosting facilities fully online with high reliability and Our 100 Megawatt Jamestown facility continues to perform as expected and operated at full capacity with improved uptime throughout the quarter.

Speaker 2

We announced the initial energization of our 180 Megawatt facility in Ellendale, North Dakota in March and today it's fully energized. This brings Applied Digital to 280 megawatts of hosting capacity across all our facilities in North Dakota, all of which are contracted out to customers on multiyear terms. High voltage interconnection work began last week at our Garden City site and is expected to finish this week. Energization is expected after We expect these facilities to generate approximately $300,000,000 in revenue and $100,000,000 of EBITDA Annualized basis, having 3 facilities online with high uptime will provide us with steady cash flow. This will aid And the capital needed to fund the build out of our HPC data centers as well as the purchase of GPUs to service our AI cloud customers.

Speaker 2

The second goal is to expand our AI cloud service business to support the next wave of AI powered applications. With the launch of this service, we can expand our offerings And capitalize on the unprecedented demand we're seeing from customers. We initially provide this service From our 9 Megawatt HPC Jamestown facility along with 3rd party colocation space as we continue to execute on the development of our dedicated next gen HPC data We continue to see extraordinary demand for our new cloud service offering. We recently announced 2 AI customers solidifying our position as a key player in the new cloud service provider landscape. During the quarter, we announced The signing and successful onboarding of our first customer Character AI with an agreement worth up to $180,000,000 over 24 months.

Speaker 2

This includes the activation of the 1st compute cluster. We anticipate the service to be fully ramped by the end of 2023. This customer has already executed their option for the full $180,000,000 agreement and made a significant prepayment. They've also signed an option agreement for an additional $180,000,000 which would bring the total value of the contract to $360,000,000 if executed. We also secured our 2nd AI cloud agreement in June, which is worth up to $460,000,000 over 36 months.

Speaker 2

To help support these contracts and our go forward capabilities, we have ordered over 26,000 GPUs and have secured The capacity to bring these online between now April of next year. The GPUs will be financed through customer prepayments, vendor financing options and other financing options that have been structured specifically for this market. To ensure seamless service We have collaborated with industry leading OEMs such as Supermicro and Hewlett Packard Enterprise to leverage their HPC expertise and support the execution of Our services are made available to customers through 2 distinct models, Reserve capacity and on demand capacity. Under the reserve capacity model, customers pay a predetermined amount for the entire Contracted duration of the GPU usage. This option provides stability and allows customers to reserve capacity in advance At a discount to on demand capacity.

Speaker 2

For on demand capacity, customers have more flexibility in terms of usage, but pay higher rates. The typical customers for our AI cloud service are private, VC backed companies that have raised significant funding and will likely raise additional funding to help Scale their AI applications. We tailor our agreements to these customers so that as they raise money, they can exercise options embedded in the contract to deploy GPUs Pipeline of business opportunities for AI cloud service Remains robust and we have significant opportunity in front of us. Our third priority is the development of our next gen HPC data centers. We are well positioned for success in this space and believe our next generation facilities are ideal hosting sites for HPC applications As they can accommodate the unique demands for this growing industry.

Speaker 2

Our data centers offer a more purpose built solution offering lower cost combined with high computing power compared to traditional data centers that are typically focused on delivering low latency applications. Have 300 megawatts of capacity in development, which represents an additional 100 megawatts of capacity to what we previously disclosed. This capacity pipeline does not include the current 9 megawatts of capacity we have at our standalone HPC facility in Jamestown, which Was initially commissioned in May to begin supporting our AI cloud service customers. This facility will be brought online in phases over the next few months. The 300 megawatts of capacity includes 200 megawatts of capacity available in North Dakota and a new facility we plan to build in Utah.

Speaker 2

We have a significant customer lined up for a new HPC facility in North Dakota and are currently planning to break ground in the coming months. We will continue to target states that have favorable laws and regulations for HPC application industries. We believe this further minimizes the associated risk with scaling To finance the build out of these facilities, we're working with traditional data center lenders along with alternative funding options. I will now turn the call over to CFO, David Wrench, to walk you through our financials and provide guidance for the upcoming 2024 fiscal year before providing my closing remarks. David?

Speaker 3

Thanks, Wes, and good morning, everyone. Revenues for the fiscal Q4 of 2023 were $22,000,000 Compared to $7,500,000 for the fiscal Q4 of 2022, the results this quarter were attributable to our hosting operations in Jamestown, North Dakota, Along with the increase in energized megawatts capacity of the Ellendale, North Dakota facility, the Jamestown site operated at full capacity throughout the quarter. Cost of revenue for the fiscal Q4 of 2023 was $16,000,000 compared to $7,400,000 for the fiscal quarter of 2020 The increase in the cost was attributable to the higher energy costs used to generate hosting revenues, depreciation and amortization expense and personal expenses for employees That excludes depreciation embedded in the cost of revenue and one time electricity charges was $7,800,000 or Approximately 36% of revenue for the fiscal Q4 of 2023, which was compared to adjusted gross profit of 1,100,000 Or 15% of revenue for the fiscal Q4 of 2022. Operating expenses for the Q4 of 2023 were $12,300,000 which included $5,200,000 of stock based compensation, dollars 6,200,000 in general and administrative costs And $900,000 of depreciation and amortization expenses. For the year ago comparable period, operating expenses were $4,000,000 almost all of which were attributable to general and administrative costs.

Speaker 3

Net loss attributable to Applied Digital for the fiscal 4th Quarter of 2023 was a loss of $6,500,000 or a loss of $0.07 per basic and diluted share based on a weighted average share count During the quarter of approximately $95,100,000 This compares to a loss of $2,800,000 or Loss of $0.04 per basic and diluted share in the fiscal Q4 of 2022 based on a weighted average share During the quarter, approximately $76,600,000 Adjusted net loss attributable to Applied Digital, a non GAAP measure for the fiscal 4th Quarter of 2023 was a loss of approximately $300,000 or a loss of less than $0.01 per basic and diluted share based on a weighted average share count During the quarter of approximately $95,100,000 this compares to adjusted net loss attributable to Applied Digital of 1,400,000 Or a loss of $0.02 per basic and diluted share for the fiscal Q4 of 2022 based on a weighted average share count during the quarter of approximately 76,600,000. Adjusted EBITDA, a non GAAP measure for the fiscal Q4 of 2023 was $2,900,000 to an adjusted EBITDA loss of $3,100,000 for the fiscal Q4 of 2022. Lastly, on the balance sheet, we ended the fiscal year With $29,000,000 in unrestricted cash and cash equivalents and $79,400,000 in debt, during the fiscal Q4 of 2023, we received approximately $1,100,000 in net deferred revenue due to the structure of our commercial agreements With our customers that incorporate prepayments, in certain contracts, the prepayments are amortized back to the customers over the 1st year The contract with no impact to revenue recognition, but the timing of the cash flow with the upfront cash to us is a major benefit to the company And that it helps with our CapEx funding as we build our data centers.

Speaker 3

Now turning to guidance for full fiscal year 2024, expect revenue in the range of $385,000,000 to $405,000,000 and adjusted EBITDA in the range of $195,000,000 to $205,000,000 That completes my financial summary. Now I will turn the call over to Wes for closing remarks.

Speaker 2

Thank you, David. To add some detail around the guidance, We expect revenue to ramp significantly in every quarter with our fiscal 4th quarter approaching $150,000,000 of revenue. We ended the fiscal year with significant momentum. We successfully energized our Ellendale facility and launched our AI cloud service to We've been advancing our existing crypto hosting operations while simultaneously expanding our Offerings to further capitalize on surging demand we're seeing from customers for our services. As we look to the year ahead, even amidst the dynamic and complex macro environment, it's increasingly clear The secular tailwinds of digital transformation remains strong and we are well positioned to capitalize on strong demand for both crypto and non crypto customers for our services.

Speaker 2

We're now happy to take questions.

Operator

Operator? Thank you. Ladies and gentlemen, the floor is now open for questions. Today's first question is coming from George Sutton of Craig Hallum. Please go ahead.

Speaker 4

Thank you and congratulations on the great results and the great outlook. So I'm curious if you could walk through What you mean by the pipeline being robust and just provide a little more detail relative to the 26,000 GPUs That you've discussed relative to NVIDIA, can you just walk through sort of how those will lay out over the next couple of years?

Speaker 2

Yes. Hey, George. So the 26,000 GPUs, we have those on order. We have actually increased that order Recently, but we have those on order and as we said, the expectation is those deploy Through April, we've already secured both our own facilities and 3rd party colo facilities to deploy that and that's kind of what we think the delivery schedule is From NVIDIA as well. So we have that locked in.

Speaker 2

And then from a customer standpoint, as we mentioned, character has Doubled their option on their contract. So we think just with the metrics they're seeing, I'm really optimistic about the demand from that And then as our other customer, our second customer starts to ramp up later this year, that will those 2 combined, I think, will take the majority of the 26, If not potentially more than that, but then we have I think we shared back in June kind of the customer pipeline, Which didn't include either one of those, but we still are working on some of those contracts that I can close over the next couple of weeks.

Speaker 4

As a follow-up on the competitive landscape, just so we better understand, when we're talking about reserve capacity deals And large language model training. What other options do these new players have relative to Your kind of low cost power options?

Speaker 2

So you mean the other type of cloud options?

Speaker 4

So for customers 3, 4, 5, 6, 7, etcetera, who are looking to run these large language models, Yes. But don't require ultra low latency. What other options are there?

Speaker 2

So there's other companies that are doing this, that are doing what we're doing. It's The it's kind of a new class of CSPs that NVIDIA has invested in some of these. And so we it's a competitive process for us every time. That's the That's for us every time. That's the primary competition for us.

Speaker 5

Thanks guys.

Operator

Thank you. The next question is coming from Lucas Pipes of B. Riley Securities. Please go ahead.

Speaker 1

Thank you very much, operator. Good morning, everyone. Wes, I wanted to follow-up on the other financing solutions that you mentioned in your prepared remarks, specifically for AI. And I wondered if you could share some of the typical terms, such as loan to value, amortization, Schedules, borrowing costs, etcetera. Thank you very much for any color.

Speaker 2

Sure. So the it's Range, so you get typical vendor financing, right? So from the OEMs, we have terms from HPE, we actually have terms Dalen from Super Micro. So there's typical vendor financing, and then there's another company that does the same style of vendor financing. And those Terms with the one that we have used or will use already is kind of a 24 month term and it's fairly reasonable rate, High single digits on those.

Speaker 2

Then there's other options and the LTVs on that, Lucas, can be anywhere From 50% to, call it, 75%. And the GPUs, I think we've mentioned this previously, The purchase price of the GPU we recoup in the 1st 24 months of operating. So kind of the financing lining up with that, That number works fairly well. We're seeing other options that are more low double digit kind of low teens financing. It's Specialized specifically for this market, seeing those anywhere from 50% to 90% LTVs and the Payback schedule is much less aggressive, I would say on those, maybe 4 to 5 year type terms.

Speaker 2

We haven't Used that yet, but it's an option out there for us. But we're seeing quite a few different financing options and some like I said fairly attractive rates.

Speaker 1

I really appreciate that detail. That's very helpful. For my second question, I wanted to touch on the guidance. Very helpful. Thank you.

Speaker 1

I appreciate the detail. I wondered if you could maybe share the breakdown of BTC hosting and AI and HPC respectively that would be embedded in that calendar sorry fiscal year guidance? Thank you.

Speaker 2

Yes. I actually don't have that. I don't think we planned to share that, Lucas, but we will in the future as that ramps up.

Speaker 5

All right. I appreciate it. Thanks again and continue best of luck.

Speaker 2

All right. Thanks.

Operator

Thank you. The next question is coming from John Todaro of Needham and Co. Please go ahead.

Speaker 1

Great. Thanks for taking my question and congrats on the guide here. How many megawatts do you envision you're going to need to So the $180,000,000 of that initial contract with Character AI and then the second one with that other AI provider. And then on that, the 3rd party colo capacity you're using, is it already secured? And for how much of those contracts is it already

Speaker 2

Yes. So what I mentioned in the script, I believe, was that for the 26,000 GPUs between our own And third party colo that we have secured, so we have space for all of those. And just for reference, John, so the First, so I'll just say that the 5,000 GPUs takes about 7.5 megawatts of IT capacity. So depending on which type of colo and what the PUE is in that colo, you can multiply into what the full amount of power you need. But For IT capacity, it will take 7.5 for the 5,000 GPUs.

Speaker 1

Got it. And then As we think about the margin profile over time, how would it change when you're using a 3rd party colo provider versus your own site such as the 9 megawatts

Speaker 6

Yes.

Speaker 2

Sure. So we have a slide that we actually used at your conference that breaks down the 3 businesses and And the margin, we expect an op margin or an EBIT margin for the cloud piece of approximately 40%. And that is in 3rd party colo. And so when you think about it our own facility, what you should think about is stacking Our HPC margins that we outlined plus the AI Cloud Margin.

Speaker 1

Okay. That's helpful. Thanks guys.

Speaker 6

I really appreciate it. Yes.

Operator

Thank you. The next question is coming from Mike Grondahl of Northland Securities. Please go ahead.

Speaker 6

Hey, guys. First question, just you guys mentioned that the first customer, The original $180,000,000 is you're working towards and they signed an option for a second $180,000,000 Could you explain that second $180,000,000 a little more? Does that sort of point to year 3 and 4? Or does that point to a 2 year contract starting near term and not really extending the terms?

Speaker 2

Yes. No, it's not extending the term. It's pointing to additional GPUs. So the doubling of the number of GPUs.

Speaker 6

Got it. And then earlier you guys were asked a little bit to bifurcate the guidance, the 385 to 405. I think before we kind of updated models, we sort of We're in a rough range of about $300,000,000 for the BTC hosting business. Are you still ramping towards that? If we were just to think about it roughly, is That about the level you think you can do in BTC hosting in 2024 or is that sort of been scaled back a little bit?

Speaker 2

Once it's scaled back just from the simple fact that Texas isn't on yet and so we're going to miss 2 months of Texas running and then there will be some ramp time for Texas. We've talked about it coming on Faster generally than because the construction is complete there, but there will be some ramp time. Annualized when they're fully operational at $300,000,000 And so obviously we've already missed The June July months for that facility. And then if you think about the AI piece, I didn't give this to George, but I'm happy to give Some color to this, but if you think about the AI compute side, you'll get a few million of revenue because we have the first piece Came online in July for character and so you get the month of August. So our Q1, you should be thinking of a couple of 1,000,000 of revenue there and then as we deploy more with them that will ramp and then as we make all of the deployments up To the 26,000, you see that ramp through the April timeframe.

Speaker 2

And so If you think of a few million in the Q1 and then you think about the data center portion being that $300,000,000 a year, dollars 75,000,000 a quarter, it gives you a pretty good idea if you're exiting at $150,000,000 kind of where that You know where the AI cloud portion would be.

Speaker 6

Fair. Yes, that's helpful. And then How do we your partnerships with SMCI and Hewlett Packard, What are sort of the 1 or 2 things you gain the most from those partnerships? Is it basically sort of the OEM Pipeline that they have, what just help us understand that.

Speaker 2

Yes. So we get a couple of things. Obviously, getting delivery of these Servers is fairly difficult right now. So getting kind of prioritized and getting delivery, but then the expertise They all bring, I mean, Super Micro has been one of the largest manufacturers and shippers of this style of compute for a long time and so their business, I'd saw them preannounced recently, is ramping really well. But they have a lot of expertise as far as Racking shipping, they have full solutions.

Speaker 2

They have techs come help set up, tune these, get everything operational. HPE does the same thing. So there's a lot of expertise around that, but there is a pipeline that customers come to them and that they Can bring to us, that's the way really we found a lot of our pipeline. So the biggest places we're finding it is OEMs bringing customers to us. We have one other or another place that we find these customers.

Speaker 2

And then The venture capitalists that are have introduced the ones that are invested in several of these companies, they have introduced us Other portfolio companies after the us kind of onboarding our first customer Fairly quickly, I mean, it wasn't all like perfectly smooth, but I think we did that in a really short time frame and fast time frame and everyone's happy with that. And so we've been Into other portfolio companies. So that's kind of how we get that pipeline, but the OEMs bring mostly those two things to the table, a lot of expertise.

Speaker 6

Great. Hey, thanks guys. Yes.

Operator

The The next question is coming from Kevin Dede of H. C. Wainwright. Please go ahead.

Speaker 7

Good morning. Hi, Wes. Hi, David. Thanks for taking my question. Hi, Devin.

Speaker 7

Yes, I was wondering, I apologize if I sort of missed the boat on this one, but Could you peel the onion back a little bit on the contracts themselves? I'm wondering like with CharacterAI, for instance, is it exclusive, Binding, is there any penalty for termination, early termination on either side?

Speaker 2

It's a standard contract. So we walked through kind of how these are structured and the first customer has It's these option periods and the first customers executed the option, so we have the full contract for the 180. It's a non cancelable contract except for kind of standard contract terms if we fail to perform on the contract. But other than that, it's standard. It's not exclusive for either one of us.

Speaker 2

It doesn't obviously, it doesn't preclude us from doing business With anyone else and it doesn't stop any our customers from going and getting compute power elsewhere, but that's the basic structure.

Speaker 7

Well, reserve capacity sort of implies, Wes, and I apologize if I read too much in this, but it It implies that you're providing capacity as a 2nd tier supplier. Is that not the right way?

Speaker 2

No, No. So there's 2 models in this market, if you go and look at just the vernacular for the market. Reserve capacity Means that the customer has reserved that capacity exclusively from themselves. Don't think of it as like the Coast Guard reserves or the Air National Guard reserves, right? It's not don't think of it as that.

Speaker 2

It's they've reserved the capacity exclusively for themselves. And so think of it as a K core pay contract. So they have to pay for it whether they're using it or not. And then as you move over, the other model in Space is on demand, so people just pay for usage. And so if they use an hour, they use Several 1000 hours, they just pay for the hours they use.

Speaker 2

The on demand market, the pricing is at a, call it, a 30 Percent premium, it's not exactly that number, but a premium to the reserve capacity market because when you're in the on demand market, obviously, you have the risk As an operator of not having all of your capacity utilized, but the reserve contracts On for our side are much safer, because it's basically take or pay guaranteed for the length of the contract. And generally what we're doing is signing contracts with especially the first that pay us back for The equipment purchases in the life of the contract. So it doesn't leave us hanging out. And then so think of the first one, we have 2 years On the contract and then we should have 3 to 4 years of useful life on the H100s. Maybe the innovation cycle speeds up significantly, but NVIDIA introduced the A100, I believe in 2019.

Speaker 2

And if you have A100s operating now, you can still book those for pretty attractive rates. So that's kind of the lifecycle of those.

Speaker 7

Can you, I guess diving a little bit deeper on exactly how much colo power you're penciling in and Maybe an idea sort of on the spreads there, what you're paying for power and then I guess what you are charging your customers in sort of rough terms?

Speaker 2

So Which segment are you talking about, Kevin? Are you talking about our HPC data center side?

Speaker 7

Yes, because I understand what you said, right? You said 7.5 megawatts for 5,000 GPUs, I got that. I guess, sort of assuming that your 9 megawatts at Jamestown is fully booked. So And I know that to meet initial customer demand, you're going to and have secured colo. I just Like a little bit more of how you're seeing that play out?

Speaker 2

Yes. So think of the Colo Portion of our business, so like the Jamestown facility, the other facilities that are in development, it looks On this one, so Bitcoin hosting was marketed a certain way, which was basically just an all in power price. And the HPC colo will look more it will look exactly like kind of the contracts you would see from a Digital Realty or an Equinix or Switch or someone of that nature where there's a fixed rate, generally something like a $100 per month, dollars 100 depending on where you are. So somewhere between $100 $130 per month per Kilowatt hour that you use and then so that's the fixed monthly rate and then you do power pass through to the customer just at cost. So it's a little bit different billing model.

Speaker 2

It's a standard data center billing model, but different than what we did on the Bitcoin facilities.

Speaker 3

Okay. Okay.

Speaker 7

Last question for me and I'll hop back in the queue. Sorry, Wes. Can you give us a view as to what the balance sheet might look like now versus the end of May?

Speaker 2

David, do you have the update on the balance sheet now?

Speaker 8

Can you repeat the question?

Speaker 7

Yes, sorry. Sorry, David. I caught you off guard. I was just wondering if you could Intimate what the change of the balance sheet might look like as of sort of end of July versus the end of May?

Speaker 8

Yes. So cash balances went up during that period, if that's what you're We received the prepayment from character and continue to build the cash balances.

Speaker 7

I guess I was a little more curious about the financing side.

Speaker 8

Yes. So we will also have The sub event that says we paid off the most recent loan that we've taken, so our loan balances will have also decreased.

Speaker 7

Perfect. Thanks. I'm sorry to cut you off, David.

Speaker 2

That will be in the K, Kevin.

Speaker 7

Perfect, perfect. Okay. I appreciate that. Sorry for pushing you, gents. Appreciate you taking the questions.

Speaker 3

Thank you. Thanks Kevin.

Operator

Thank you. The next question is coming from Lucas Pipes of B. Riley Securities. Please proceed with your follow-up question.

Speaker 1

Thank you very much for taking my follow-up. And

Speaker 5

Listen, David, it's about the sequence or cadence of cash flow. So when you place an order, How do we think about kind of cash coming in, cash going out? Is it the moment that you Place the order, it's essentially paid for through a combination of prepayments and other financing or is there Maybe a staggered payment plan. I would just appreciate your color on that. Thank you very much.

Speaker 2

Yes, Lucas. So we're getting I would say we're Getting in a better and better position with that. So the first one, because we're relatively unknown, we paid upon order and then we got the prepayment After it was deployed, in the future from that vendor, we get in that 30 day terms. So we Should be able to deploy, get the prepayment, make the payment to the vendor instead of make the payment, deploy and get the prepayment, if that makes sense?

Speaker 5

That is helpful. And the financing, when does that come in within that 30 day period?

Speaker 2

The planting typically comes in as we take delivery.

Speaker 5

Got it. And delivery would be when in that sequence?

Speaker 2

Again, it wouldn't be set up. So if you take delivery at either our facility or another colo facility, Financing kicks in for that, for the payment on the financing and then it will take us 1 or 2 weeks To typically set these up and get them turned on and then you get prepayment. So your financing happens before the prepayment and typically before we pay the in the future we'll pay the vendor.

Speaker 5

Okay. Okay. That's very helpful. Maybe just to follow-up on that for the order of the 26 1,000, is there a way to break that down between what is fully paid for versus, where there's still that sequence playing out as you

Speaker 2

So the way that is, we have 1,000 that we've turned on and then we'll take delivery Another significant number in late August in the neighborhood of 4000 to 5000 and we just keep taking delivery all the way through April.

Speaker 1

Got it. Got it.

Speaker 2

So if you look in our financials like reflected, At the end of the quarter was we had made I believe we had made payment. David, you have to correct me if I'm wrong, but you won't see any of the I don't think you see any of the assets show up on the balance sheet as of the end of the fiscal year.

Speaker 3

That's correct.

Speaker 6

Yes.

Speaker 1

Wes and David,

Speaker 2

I believe we've got the June event, yes.

Speaker 5

Yes. So I guess we'd see that in the fiscal Q1.

Speaker 2

For the August quarter. Yes, for the August quarter.

Speaker 5

All right. Thank you very much, gentlemen.

Operator

We're showing no questions in queue at this time. I'd like to turn the floor back over to Mr. Cummins for closing comments.

Speaker 2

Thanks, everyone, for joining us for the call. And again, thanks to all of our employees, everyone who's been working extremely hard to make it happen, And we'll speak with you in October. Thanks.

Operator

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.

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Applied Digital Q4 2023
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