Applied Digital Corporation

Good morning and welcome to Applied Digital's fiscal fourth 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 fourth quarter and full year ended May 31st, 2023 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 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. Before we begin, Alex Kovtun from Gateway Group will make a brief introductory statement. Mr. Kovtun, please proceed.

Great. Thank you, operator. Good morning, everyone, and welcome to Applied Digital's fiscal fourth 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. 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 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 applicable gap 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 annual report on Form 10-K. You may get Applied Digital Securities and Exchange Commission filings for free by visiting the SEC website at www.sec.gov. I would also 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 Digital's website. Now, I will turn the call over to Applied Digital's chairman and CEO, Wes Cummins. Wes?

Thanks, Alex, and good morning, everyone. Thank you for joining our fiscal fourth quarter and full year 2023 conference call. I want to start by thanking our employees for their ongoing hard work and service in 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. 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 three key strategic goals. First, we aim to have all three of our crypto hosting facilities fully online with high reliability and performance for our customers. Our 100 megawatt Jamestown facility continues to perform as expected and operated at full capacity with improved uptime throughout the quarter. 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 multi-year terms. The high voltage interconnection work began last week at our Garden City site and is expected to finish this week. Energization is expected after completion and approval of the facility's extension agreement, which is imminent. We expect these facilities to generate approximately 300 million in revenue and 100 million of EBITDA on an annualized basis. Having three facilities online with high uptime will provide us with steady cash flow. This will aid in 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. 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 nine megawatt HPC Jamestown facility, along with third party co-location space as we continue to execute on the development of our dedicated next gen HPC data centers. We continue to see extraordinary demand for our new cloud service offering. We recently announced two 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 million over 24 months. This includes the activation of the first 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 million agreement and made a significant prepayment. They have also signed an option agreement for an additional $180 million, which would bring the total value of the contract to $360 million if executed. We also secured our second AI Cloud agreement in June, which is worth up to $460 million over 36 months. 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 and 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 delivery, 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 cloud service for AI-powered applications. Our services are made available to customers through two distinct models, reserved 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. 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 and ramp up hosting capacity over time. Customers will typically make a prepayment on the contract, which helps fund a significant portion of the purchase price of the 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 the 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. Our data centers offer a more purpose-built solution, offering lower costs combined with high computing power compared to traditional data centers that are typically focused on delivering low latency applications. We 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. We have a significant customer lined up for our 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 risks with scaling our operations. 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?

Thanks, Wes, and good morning, everyone. Revenues for the fiscal fourth quarter of 2023 were $22 million compared to $7.5 million for the fiscal fourth quarter of 2022. The results this quarter were attributable to our hosting operations in Jamestown, North Dakota, along with the increase in energized megawatt capacity at the Allendale, North Dakota facility. The Jamestown site operated at full capacity throughout the quarter. Cost of revenue for the fiscal fourth quarter of 2023 was $16 million compared to $7.4 million for the fiscal quarter of 2022. 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 directly working on our Jamestown and Allendale hosting facilities. Adjusted gross profit for the non-GAAP measure that excludes depreciation embedded in the cost of revenue and one-time electricity charges was $7.4 or approximately 36% of revenue for the fiscal fourth quarter of 2023, which was compared to adjusted gross profit of $1.1 million, or 15% of revenue for the fiscal fourth quarter of 2022. Operating expenses for the fiscal fourth quarter of 2023 were $12.3 million, which included $5.2 million of stock-based compensation, $6.2 million in general and administrative costs, and $0.9 million of depreciation and amortization expenses. For the year-ago comparable period, operating expenses were $4.4 million, almost all of which were attributable to general and administrative costs. Net loss attributable to applied digital for the fiscal fourth quarter of 2023 was a loss of $6.5 million, or a loss of $0.07 per basic and diluted share based on a weighted average share count during the quarter of approximately 95.1 million. This compares to a loss of 2.8 million or a loss of 4 cents per basic and dilute share in the fiscal fourth quarter of 2022, based on a weighted average share count during the quarter of approximately 76.6 million. Adjusted net loss attributable to applied digital, a non-GAAP measure for the fiscal fourth quarter of 2023, was a loss of approximately 300,000 or a loss of less than a penny per basic and diluted share based on a weighted average average share count during the quarter of approximately $95.1 million. This compares to adjusted net loss attributable to applied digital of $1.4 million or a loss of two cents per basic and diluted share for the fiscal fourth quarter of 2022 based on a weighted average share count during the quarter of approximately $76.6 million. Adjusted EBITDA, a non-GAAP measure for the fiscal fourth quarter of 2023, was $2.9 million compared to an adjusted EBITDA loss of $3.1 million for the fiscal fourth quarter of 2022. Lastly, on the balance sheet, we ended the fiscal year with $29 million in unrestricted cash and a cash equivalent and $79.4 million in debt. During the fiscal fourth quarter of 2023, we received approximately $1.1 million 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 first year of 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 in that it helps with our CapEx funding as we build our data centers. Now turning to guidance for full fiscal year 2024, we expect revenue in the range of $385 million to $405 million. adjusted EBITDA in the range of $195 million to $205 million. That completes my financial summary. Now I will turn the call over to Wes for closing remarks.

Thank you, David. To add some detail around the guidance, we expect revenue to ramp significantly in every quarter, with our fiscal fourth quarter approaching $150 million of revenue. We ended the fiscal year with significant momentum. We successfully energized our Ellendale facility, and launched our AI cloud service to provide high-performance computing power for AI applications. 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 that the secular tailwinds of digital transformation remain strong, and we're well positioned to capitalize on strong demand for both crypto and non-crypto customers for our services. We're now happy to take questions. Operator?

Thank you. Ladies and gentlemen, the floor is now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Once again, that's star 1 to register a question at this time. Today's first question is coming from George Sutton of Craig Hallam. Please go ahead.

Thank you, and congratulations on the great results and the great outlook. 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?

Yeah. Hey, George. So, the 26,000 GPUs, we have those on order. Actually, we've 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 third-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, and then from a customer standpoint, as we mentioned, Character has double their option on their contract. So we think just with the metrics they're seeing, I'm really optimistic about the demand from that customer. And then as our other customer, our second customer starts to ramp up later this year, those two 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 can close over the next couple of weeks.

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 offer? new players have relative to your kind of low-cost power options.

So you mean the other type of cloud options?

So for customers 3, 4, 5, 6, 7, etc., who are looking to run these large language models but don't require ultra-low latency, what other options are there?

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

Thanks, guys.

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

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, et cetera. Thank you very much for any comments.

Sure. It's a range. You get typical vendor financing from the OEMs. We have terms from HPE. We actually have terms from Dell and from Supermicro. There's typical vendor financing. Then there's another company that does the same style of vendor financing. 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 rates, high single digits on those. Then there's other options, and the LTVs on that, Lucas, can be anywhere from 50% to 75%. And the GPUs, I think we've mentioned this previously, on the purchase price of the GPU, we recoup in the first 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 four- to five-year-type terms. 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.

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

Yeah, 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.

All right. I appreciate it.

Thanks again, and continued best of luck.

All right. Thanks.

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

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

Yeah, so what I mentioned in the script, I believe, was for the 26,000 GPUs between our own facilities 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, you know, which type of colo and what the PUE is in that colo, you know, you can multiply into what the full amount of power you need. But for IT capacity, it'll take seven and a half for the 5,000 or for 5,000 GPUs. Got it. Thanks.

And then as we think about the margin profile over time, how would it change when you're using a third-party colo provider versus your own site, such as the nine megawatts that James has?

Yes. Sure. So, you know, we have a slide that we actually used at your conference that breaks down the three businesses and the margin. You know, we expect an odd margin or an EBIT margin for the cloud piece of approximately 40%. And that is in third-party colo and so when you think about in our own facility what you should think about is stacking you know our hpc margins that we outline plus the the uh ai cloud margin okay um that's helpful thanks guys really appreciate it yep thank you the next question is coming from mike grondle of northland securities please go ahead

Hey, guys. First question, you guys mentioned that the first customer, the original $180 million you're working towards, and they signed an option for a second $180 million. Could you explain that second $180 million a little more? Does that sort of point to year three and four? Or does that point to a two-year contract starting near a term and not really extending the term?

Yeah, no, it's not extending the term.

It's pointing to additional GPUs, so doubling the number of GPUs.

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 were in a rough range of about $300 million 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 24, or has that sort of been scaled back a little bit?

Well, it's scaled back just from the simple fact that, you know, Texas isn't on yet. And so we're going to miss, you know, two months of Texas running. And then there'll be some, you know, some ramp time for Texas that, you know, we've talked about it coming online faster generally than because the construction's complete there, but there will be some ramp time.

So, you know, annualized when they're fully operational at 300 million, uh,

And so obviously we've already missed the June and 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 you know, color to this, but if the, if you think about the AI compute side, you'll get a few million of revenue because we have the first piece, you know, came online in July for character. And so you get the month of August for our first quarter, you know, you should be thinking of a couple of million of revenue there. And then as we deploy more with them, that will ramp. And then as we, you know, make all of the deployments up to the, to the 26,000, you know, you see, that ramp through, you know, the April timeframe. And so if you think of a few million in the first quarter, and then you, you know, you think about the, the, the data center portion being, you know, that, that 300 million a year, 75 million a quarter, you know, it gives you a pretty good idea if you're exiting at 150 kind of where that, you know, where the AI cloud portion would be.

Fair. Yep. That's helpful. And then it, How do we, your partnerships with SMCI and Hewlett Packard, what are sort of the one or two things you gain the most from those partnerships? Is it basically sort of the OEM pipeline that they have? Just help us understand that.

Yeah, so we get a couple of things. Obviously, you know, getting delivery of these, servers is fairly difficult right now. So, you know, getting kind of prioritized and getting delivery. But then the expertise, you know, that they all bring, I mean, Supermicro has been one of the largest, you know, manufacturers and shippers of this style of compute for a long time. And so their business, I saw them pre-announced recently, is ramping really well. But they have a lot of expertise as far as, you know, racking, shipping. They have full solutions. They, you know, have techs come help set up, tune these, you know, get everything operational. HP 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 another place that we find these customers. And then the venture capitalists that have introduced the ones that are invested in several of these companies, they have introduced us into other of their portfolio companies after us 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 timeframe and fast timeframe and everyone's happy with that. And so we've been introduced into, 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.

Great. Hey, thanks guys.

Yep.

Once again, that is star one. If you would like to register a question at this time, The next question is coming from Kevin Deedy of HC Wainwright. Please go ahead.

Good morning. Hi, Wes. Hi, David. Thanks for taking my question. Yeah, 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 Character AI, for instance, is it exclusive, binding? Is there any penalty for termination, early termination on either side?

It's a standard contract. So we've walked through kind of how these are structured. And the first customer has, you know, it's these option periods. And the first customer has, you know, executed the option. So we have the full contract for the 180 contract. It's a non-cancellable 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. It obviously doesn't preclude us from doing business with anyone else, and it doesn't stop our customers from going and getting compute power elsewhere. But that's the basic structure.

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

No. No. There's two 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, you know, the Coast Guard reserves or the Air National Guard reserves, right? It's not. Don't think of it as that. They've reserved the capacity exclusively for themselves. And so think of it as a take or 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 the space is on-demand. So people just pay for usage. And so if they use an hour, they use several thousand hours, they just pay for the hours they use. The on-demand market, the pricing is at a, call it a 30% 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 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, especially the first two, that pay us back for the equipment purchases in the life of the contract. So it doesn't leave us hanging out. So think of the first one, we have two years on the contract, and then we should have three to four years of useful life on the H100s. Maybe the innovation cycle feeds up significantly, but NVIDIA introduced the A100, I believe, in 2019, 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.

Wow, thanks, Wes. Appreciate the color. Can you, I guess, dive in 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?

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

Yeah, because I understand what you said, right? You said seven and a half megawatts for 5,000 GPUs. I got that. I guess I'm sort of assuming that your nine 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'd just like a little bit more of how you're seeing that play out.

Yeah, so think of the Colo portion of our business. So like the Jamestown facility, you know, the other facilities that are in development. It looks, you know, on this one, so Bitcoin hosting was, you know, marketed a certain way, which was basically just an all-in power price. And the HPC colo will look more, it'll look exactly like kind of the contracts you would see from a digital realty or an Equinix or a switch or someone of that nature where there's a fixed rate, you know, generally, you know, something like a hundred dollars per month, depending on where you are. So somewhere between a hundred and, $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. It's the standard data center billing model, but different than what we did on the Bitcoin facilities.

Okay. Okay. 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?

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

Can you repeat the question?

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

Yeah, so cash balances went up during that period. We received the prepayment from Character and continued to build the cash balances.

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

Yeah. So we will also have a sub event that says, you know, we paid off the most recent loan that we've taken. So our loan balances will have also decreased.

Perfect.

We did. Yeah.

Thanks. I'm sorry. Sorry to cut you off, David. That'll be in the K, Kevin.

Ah, perfect. Perfect. Okay. I appreciate that. Sorry for pushing your gents.

Appreciate you taking the questions. Thank you. Thanks, Kevin.

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

Thank you very much for taking my follow-up. And listen, David, it's about the sequence or cadence of cash flows. 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.

Yeah, 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 not 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.

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

The financing typically comes in as we take delivery.

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

Again, it wouldn't be set up. So we take delivery at either our facility or another COLO facility. Financing kicks in for that, you know, for the payment on the financing. And then it'll take us one or two weeks to – 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.

Okay. Okay. That's very helpful. Maybe just to follow up on that, for the order of the $26,000, 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 just outlined?

So the way that is, so we have 1,000 that we've turned on, and then we'll take delivery of another significant number in late August, you know, in the neighborhood of 4,000 to 5,000, and then we just keep taking delivery all the way through April. Got it.

Got it.

So if you look in our financials, like reflected at the – 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 at the end of the fiscal year.

That's correct. Yep. Wes and David. June event. Yep. Yeah. So I guess we'd see that in, it was fiscal first quarter. For the August quarter. Yeah, for the August quarter.

All right.

Thank you very much, gentlemen.

Yep.

Once again, that is star one for any additional questions at this time. We'll pause a minute for any final questions. 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.

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

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.