Applied Digital Corporation

Good morning and welcome to Applied Blockchain's fiscal third quarter 2022 conference call. My name is Doug and I'll be your operator today. Before this call, Applied Blockchain issued a financial results for their fiscal third quarter ended February 28th, 2022 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 you on today's call are Applied Blockchain's Chairman and CEO, Wes Cummins, and CFO, David Wrench. Following their remarks, we will open the call for questions. Before we begin, Jeff Gramp from Gateway Group will make a brief introductory statement. Mr. Gramp, please proceed.

Thank you. Good morning, everyone, and welcome. Before management begins their formal remarks, we need to remind everyone that some statements we're making today may be considered forward-looking statements under securities law 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. 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 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 IPO prospectus. You may get Applied Blockchain Securities and Exchange Commission filings for free by visiting the SEC website at www.sec.gov. I would 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 Blockchain's website.

now i would like to turn the call over to apply blockchain chairman and ceo wes cummins sir please proceed thanks jeff and good morning everyone thank you for joining us for our inaugural earnings call after completing our ipo last month i'd like to welcome our new and existing shareholders as we are appreciative of your support since many of you are newer to our company i thought it would be beneficial to first start with an overview and history of our business in early 2021 we began building a business focused on crypto assets, starting initially in Ethereum mining. We quickly got traction by partnering with brand names in the crypto industry, such as Bitmain, Sparkpool, and GMR, to assist in the operation and development of our mining business. In the middle of 2021, we saw a massive opportunity in data center hosting business and refocused our business and resources on this opportunity. As some of you may recall, China had just instituted a permanent ban on cryptocurrency mining. At the time, China was the world's leader in cryptocurrency mining, and we saw an opportunity to establish Applied as a leading data center provider to the massive amount of mining capacity that we need to find new homes for low-cost, reliable power. Concurrent with this development was also the significant increase in capital being raised by North American crypto miners who would also need to find low-cost, reliable power. We're now building applied blockchain to be a leading provider of next-gen data centers that are designed to provide massive computing power. With these next-gen data centers, we provide a co-location hosting business model where our customers place their hardware in our facilities and we provide full operational and maintenance services for a fixed recurring fee. We currently have long-term contracts, mostly five years with our customers, but we plan to have a mix of long-term contracts three to five years with larger blue chip counterparties and short-term contracts of 18 to 36 months for smaller customers at future facilities to maximize margin while maintaining stability we expect our hosting business model to provide secure long-term predictable recurring revenue and cash flow given the contractual structures of both our revenue and costs this unique model and structure will provide investors with differentiated exposure to the crypto industry as our results are not directly correlated to the price of any cryptocurrency, yet we can participate in the expected massive growth of power demand required by these industry participants. The next-generation data centers we are developing are optimized for large computing power and require more power than traditional data centers that are optimized for data retention and retrieval. Next-gen data centers have very different layouts, internet connection requirements, and cooling designs to accommodate different power demands and customer requirements. So we believe we've developed a core competency with our team that will be difficult to replicate, especially for traditional data center operators. We believe the traditional operators will be more challenged to move into our business as they cannot easily convert to next-gen data center facilities like ours, and they are generally geographically disadvantaged because they are usually found in high-cost areas with high-density populations. Initially, our data centers will primarily host Bitcoin miners, but we also expect to host hardware for other applications such as image processing, graphics rendering, artificial intelligence, machine learning, and other blockchain networks in the future. We also aim to provide white glove service for our customers and see margin expansion opportunities over time by providing value added services. We also expect access to low cost power to be one of the primary differentiators in our business as power capacity availability for cryptocurrency mining at scalable sites over 100 megawatts of capacity is scarce. This scarcity allows us to realize attractive hosting rates given our ability to provide long-term hosting contracts that can span up to five years. Since the crypto industry is still in its nascent stages, the talent pool is naturally not particularly deep. Fortunately, we have assembled a strong team of dedicated power infrastructure experts with proficiency in design, building, and operating next-gen data centers. I would put our team up against anyone in the industry. We believe another competitive advantage for our company is the strength of our partnerships. Bitmain, the leading Bitcoin mining manufacturer, and GMR both have invested in our company and are hosting customers. These partners also provide us with various additional resources, including hardware access and data center design and build out advisory services, operational expertise, and maintenance and repair training. With this backdrop now set, I'm pleased to report that we have been quickly executing on our business goals. After pivoting the business to hosting in the middle of 2021, We purchased our first property in August of 2021 located in North Dakota, which we refer to as our Jamestown site. We then began construction on our first co-hosting facility here in September 2021 with a planned capacity of 100 megawatts. We signed an energy services agreement with a local utility to power this facility, and this agreement has provided us with visibility into our cost structure as we have stable energy costs. Five-year hosting agreements pre-filled 100 megawatts of planned capacity before groundbreaking, and we found quick validation in our business model. The first 55 megawatts at Jamestown began to come online in early February, with the remaining brought online over the next few weeks. Today, we stand at just over 80 megawatts being operational. Lastly, and perhaps most importantly, In January of 2022, we in Antpool, an affiliate of Bitmain, entered into a joint venture to develop, operate, and own next-generation data centers with up to 1.5 gigawatts of capacity for hosting blockchain infrastructure. The JV is owned 80% by Applied, while Antpool will directly own 20% of the assets within the JV in the near term. They have an option to convert that ownership into Applied Common Equity at a premium to our current share price. We believe having an affiliate of Bitmain aligned with our goals and having skin in the game is a tremendous asset for Applied. We look forward to working with them and leveraging their expertise to scale and grow our business. Now I'll turn this over to CFO David Wrench to walk you through our financials before providing my closing remarks. David.