1. Investment Snapshot
2. Thesis
3. Valuation & Price Target
4. Business & Product Moat
5. People & Governance
6. Market & Macro
7. Financial Quality
8. Risk Register
9. Prediction Market
10. 𝕏 Posts
Discussion
1. Investment Snapshot
2. Thesis
3. Valuation & Price Target
4. Business & Product Moat
5. People & Governance
6. Market & Macro
7. Financial Quality
8. Risk Register
9. Prediction Market
10. 𝕏 Posts
Discussion
1. Investment Snapshot
2. Valuation
Discussion
Symbol
APLD
Event Date
2022-04-13
Sector
Information Technology
Subsector
IT Services
Offer Range
$5.00
Shares Offered
8M
99.2M
$1.8B
8.1%
Implied Upside vs Midpoint
Description
We are building Next-Gen datacenters which are designed to provide massive computing power. Our first facility was constructed in North Dakota and as of February 2, 2022 is online and providing 55MW of energy and services to customers, with the remaining 45MW expected to be brought online during the second calendar quarter of 2022. We signed an energy services agreement with a utility to power this facility. The company pays for energy from part of the revenue from customers. Initially, these datacenters will primarily host servers securing the Bitcoin network but can also host hardware for other applications such as artificial intelligence, machine learning and other blockchain networks in the future. We have a colocation business model where our customers place hardware they own into our facilities, and we provide full operational and maintenance services for a fixed fee. We typically enter into long term fixed rate contracts with our customers. • Scaling Hosting Operations: leveraging partnerships to support scalable, low-cost mining solutions to support crypto and blockchain infrastructure. • Mining Cryptoassets: the company currently self-mines Ethereum. Operations will not expand. • Fleet Management: value-add services where from time to time we may facilitate the sale of blockchain mining equipment. Hosting Operation Our mission includes building co-hosting facilities in which our customers will lease space and access to electricity to mine cryptoassets. We are targeting bringing 800MW online by May 2023, 1.8GW by May 2024 and 5GW over the next five years. We are building Next-Gen datacenters which are designed to provide massive computing power. Initially, these datacenters will primarily host servers securing the Bitcoin network but can also host hardware for other applications such as artificial intelligence, machine learning and other blockchain networks in the future. We have a colocation business model where our customers place hardware they own into our facilities and we provide full operational and maintenance services for a fixed fee. We typically enter into long term fixed rate contracts with our customers. We have purchased property in North Dakota on which we constructed our first co-hosting facility. We have also entered into an Amended and Restated Energy Services Agreement with respect to 100 megawatts to be used by our co-hosting customers. We have also entered into agreements with four customers (JointHash Holding Limited (a subsidiary of GMR), Bitmain Technologies Limited, F2Pool Mining, Inc. and Hashing LLC) which will account for the total available energy under the Amended and Restated Energy Services Agreement at our first facility and 85MW of energy at our second facility once built and able to provide such energy. The company pays for energy from part of the revenue from customers. Working with expert advisors in the fields of power, crypto mining operations, procurement, and construction, we have designed a plan for a prefabricated facility and organization within the facility that can be delivered and installed quickly and maximize performance and efficiency of the facility and our and our customers’ crypto mining equipment. We have engaged a dedicated power/infrastructure team of consultants with expertise in building Next-Gen datacenters, including Etienne Snyman, Executive Vice President of Power, Nick Phillips, Executive Vice President of Hosting and Public Affairs and Roland Davidson, Executive Vice President of Engineering. Construction of our first co-hosting facility began in September 2021. On February 2, 2022, we brought the facility online as to the first 55MW, with the remaining 45MW expected to be brought online during the second calendar quarter of 2022. With low-cost energy powering our co-hosting facilities, our customers can expect an agile and cost competitive crypto mining solution. We have identified at least two additional sites for additional facilities and several potential customers to fill such additional sites. We are negotiating leases and/or purchases of such properties, energy agreements to support such facilities and agreements with potential additional co-hosting customers. On November 24, 2021, we entered into a letter of intent to develop a facility in Texas with 200MW of wind power. The arrangement is subject to entry into definitive agreements by the parties. There can be no assurance that we will enter into such agreements in a particular time period or at all. On January 6, 2022, we and Antpool Capital Asset Investment L.P., or Antpool, an affiliate of Bitmain Technologies Holding Company, entered into a Limited Liability Company Agreement of 1.21 Gigawatts, LLC, pursuant to which we and Antpool contributed $8,000 and $2,000, respectively, and will initially own 80% and 20% of 1.21 Gigawatts, respectively. 1.21 Gigawatts will develop, acquire, construct, finance, operate, maintain and own one or more Next-Gen datacenters with up to 1.5GW of capacity for hosting blockchain infrastructure. We are the managing member of 1.21 Gigawatts and are responsible for all site development, construction and operations of the datacenters. However, certain activities of 1.21 Gigawatts and its subsidiaries require the vote of 90% of the then outstanding units of each such entity. As long as Antpool owns 10% or more of the total issued and outstanding units of 1.21 Gigawatts, Antpool may appoint an individual with industry expertise to serve as an advisor to 1.21 Gigawatts. 1.21 Gigawatts will pay fees to such advisor as reasonably determined by us as managing member. Transfers by members of units of 1.21 Gigawatts are prohibited without approval of 90% of units then outstanding, which consent may be granted or withheld for any reason and transfers of such units to non-affiliates, after obtaining consent, are subject to a right of first refusal of other members to purchase some or all of such units. Additionally, Antpool has the right at any time to convert all or any portion of its 1.21 Gigawatts units into a number of shares of our common stock equal to the capital contributions by Antpool in connection with the acquisition of such units divided by $1.25 (or $7.50, after adjustment for the Reverse Stock Split), which will result in an increase in our ownership percentage of 1.21 Gigawatts. As our co-hosting operations expand, we believe our business structure will become conducive to a REIT structure. We have begun to investigate the possibility, costs and benefits of converting to a REIT structure. Mining Operation Our initial mission was to quickly scale a large mining operation focused on mining Bitcoin and Ethereum (Ether). With a specialized algorithm and advice provided by strategic partners and mining pool managers, we are able to mine the most profitable cryptoassets in the market and adjust in real-time. As a result of changes to Chinese regulations of cryptoasset mining, ultimately leading to the crackdown on mining facilities in locations across the country, this pushed us to explore other co-hosting locations outside of China. By July 2021, we had entered into a co-hosting agreement with Coinmint LLC, had our initial order of mining equipment delivered and installed at Coinmint's co-hosting facility and began our mining operations. We also determined that constructing our own co-hosting facilities would enable us to generate a stable cash flow stream through long-term hosting agreements, lower the cost of power for our own mining operations and eliminate risks to us of relying on a third-party host. During the building of our co-hosting operations, we determined that it would be beneficial to our stockholders to focus more of our resources on building our co-hosting operations than on expanding our mining operations. Accordingly, in December 2021, we began selling our crypto mining equipment. On March 9, 2022 we ceased all crypto mining operations and completed the sale of all crypto mining equipment in service. We have no plans to return to crypto mining operations in the future. We still own some mining equipment. However, the equipment is either not online or was previously purchased but has yet to be delivered. We intend to sell this equipment as soon as possible and have no plans to bring the equipment online or use it for mining purposes. We do not intend to accept digital assets as payment for services. We do intend to hold digital assets we mined prior to cessation of our mining operations for investment or conversion into fiat currency for working capital purposes. --- Our executive office is located at 3811 Turtle Creek Blvd., Suite 2100, Dallas, Texas 75219, and our phone number is (214) 427-1704. Our principal website address is www.appliedblockchaininc.com.
Applied Digital Corp. annual income statement and balance sheet, FY 2022 to FY 2025, as reported in SEC filings.
| Metric | FY 2022 | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|---|
| Revenue | $8.5M | $55.4M | $137M | $144M |
| Gross profit | ($957K) | $11.0M | $30.0M | $42.7M |
| Operating income | ($20.9M) | ($44.1M) | ($32.9M) | ($16.8M) |
| Net income | ($23.5M) | ($44.6M) | ($150M) | ($231M) |
| Metric | FY 2022 | FY 2023 | FY 2024 | FY 2025 |
|---|---|---|---|---|
| Total assets | $120M | $264M | $763M | $1.9B |
| Total liabilities | $40.7M | $194M | $638M | $1.2B |
| Total equity | $79.2M | $69.7M | $125M | $498M |
| Cash & equivalents | $38.8M | $29.0M | $3.3M | $41.6M |