Applied Digital Corporation Reports 67% Revenue Growth, Improved Profitability in Q3 2024

Applied Digital Corporation reported significant financial developments for the three months ended August 31, 2024, showcasing a robust increase in revenue and improvements in profitability compared to the same period in the previous year. The company generated total revenue of $60.7 million, an increase of 67% from $36.3 million in the prior year. This growth was primarily driven by the Data Center Hosting segment, which contributed $34.8 million, and the Cloud Services segment, which added $25.9 million.

Operating income for the quarter was $9.5 million, a notable turnaround from an operating loss of $7.4 million in the same quarter of 2023. The net loss before income tax expenses decreased to $4.2 million from $11.9 million year-over-year, reflecting improved operational efficiency. Basic and diluted net loss per share also improved to $(0.03) from $(0.11) in the prior year.

The company’s total assets rose to $937.7 million as of August 31, 2024, up from $762.9 million at the end of May 2024. Current assets saw a substantial increase, particularly cash and cash equivalents, which surged to $58.2 million from $3.3 million. However, long-term debt increased to $106.2 million from $79.5 million, indicating a strategic decision to leverage debt for growth.

In terms of capital raising activities, Applied Digital issued 6.1 million shares of common stock, raising $31.1 million in additional paid-in capital during the quarter. The company also converted $56.2 million of debt into approximately 11.4 million shares of common stock. Furthermore, the company entered into a Standby Equity Purchase Agreement (SEPA) with YA Fund, allowing for the potential sale of up to $250 million in common stock over the next three years.

Cash flow dynamics showed a net cash used in operating activities of $75.9 million, a significant shift from a net cash provided of $4.5 million in the previous year. This change was attributed to increased accounts payable and a decrease in revenue prepayments relative to revenue earned. Conversely, net cash provided by financing activities surged to $163.4 million from $23.7 million, driven by equity financing and debt proceeds.

The company also faced challenges, including a working capital deficit of $302.6 million, raising concerns about its ability to continue as a going concern. However, management expressed confidence in its liquidity to meet obligations for at least the next twelve months.

Overall, Applied Digital Corporation's financial performance for the quarter reflects a strategic focus on growth through capital raising and operational improvements, despite ongoing challenges related to debt and working capital.