Participants

Alex Kovtun; IR; Gateway Group, Inc.

Wes Cummins; Chairman & CEO; Applied Digital Corp

David Rench; Chief Financial Officer; Applied Digital Corp

Lucas Pipes; Analyst; B. Riley Financial, Inc.

George Sutton; Analyst; Craig-Hallum Capital Group LLC

Ron Brown; Analyst; Lake Street Capital Markets LLC

Mike Grondahl; Analyst; Northland Capital Ltd

Darren Aftahi; Managing Director, Senior Research Analyst; Roth Capital Partners LLC

John Todaro; Senior Analyst; Needham & Company LLC

Kevin Dede; Analyst; H.C. Wainwright & Co.

Presentation

Operator

Good afternoon and welcome to Applied Digital's Fiscal Third Quarter 2024 conference call. My name is Doug and I will be your operator today. Before this call, Applied Digital issued its financial results for the fiscal third quarter ended February 29th, 2024 in our press release, a copy of which will be furnished in a report on Form eight K 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 Rench. 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.

Alex Kovtun

Thank you, operator. Good afternoon, everyone, and welcome to Applied Digital's Fiscal Third Quarter 2024 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 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 disclosures in our earnings release and public filings made with the Securities and Exchange Commission. We disclaim any obligation or any 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 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 annual report on Form 10 K and our quarterly report on Form 10-Q. You may get Applied Digital's 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 website.
Now I will turn the call over to Applied Digital, Chairman and CEO. Wes Cummins. Wes?

Wes Cummins

Well, thanks, Alex, and good afternoon, everyone. Thank you for joining our fiscal third quarter 2024 conference call. I want to start by thanking our employees for their ongoing hard work and service and supporting our mission of providing purpose-built infrastructure to the rapidly growing high-performance computing industry.
Before turning over the call over to our CFO, David wrench, for a detailed review of our financial results. I'd like to share some recent developments across our business. During the quarter, we encountered several challenges that impacted our financial performance due to facility power outages in our data center hosting business. Despite these short-term setbacks. The company has made significant progress with our key growth initiatives in the development of our cloud services business and the establishment of our special purpose built 100 megawatt each PC data center and Ellendale.
Our achievements include welcoming our newest cloud service customer together AI and the strategic decision to divest our Garden City facility. We are also pleased to announce that we have entered into exclusivity and executed an LOI with a US-based hyperscaler for 400 megawatts of capacity at our Ellendale campus, inclusive of our current 100 megawatt facility and two forthcoming buildings. We're in discussions for project level financing for this investment grade tenant, and we hope to have construction financing in place coinciding with the site signed lease. We also significantly strengthened our balance sheet after the quarter closed with [$160 million] of announced asset sales and financing transactions.
Now I will provide an update on each of our business units.
Let's begin by discussing our data center hosting business. Our 100 megawatt Jamestown facility has consistently met expectations operating at full capacity with uninterrupted uptime throughout the quarter. This achievement marks the sixth consecutive quarter of full capacity operation for the Jamestown facility. While we are pleased with James towns performance, we encountered challenges at our other facilities as previously disclosed, our 180 megawatt Ellendale facility in North Dakota experienced a power outage starting in January. In response to these challenges, our utility provider installed additional equipment to enable us to selectively power down the affected portions of our site upon re energization, we have determined that the failures were due to transformers, not meeting industry standards.
We have now successfully procured replacement transformers and related component components from North American industry leading manufacturers. As of today, the Ellendale facility has been reenergized to approximately 14% of its full capacity or 25 megawatts. Additionally, we anticipate that as the new transformers are received and installed, the Ellendale facility will be operating at 65% to 75% of full capacity by the end of May 2024 company is also pursuing remedies to recoup lost revenues and additional costs incurred to identify and rectify the outages.
Furthermore, we made the strategic decision to sell Garden City as it was not compatible with our HPC. growth strategy. This divestment enables us to redirect financial and operational resources towards our strategic sites in North Dakota bolstering our growth initiatives in HPC and cloud service applications. The decision to sell this facility underscores our commitment to optimizing our asset portfolio while focusing on our core growth areas. As a result of this sale, we will maintain 280 megawatts of data center hosting capacity across our two, two fully contracted locations in North Dakota. This positions us to be insulated from volatility in the crypto markets leading up to the halving event.
Let's move on to our cloud services business, which provides high performance computing power for AI applications. Despite a lack of significant sequential revenue growth due to delays in clusters entering revenue generation. This segment continues to experience rapid growth as we advance in fulfilling our existing contracts and exploring new opportunities in our pipeline. We've recently seen positive developments, including the enrollment of clients like together AI, and we have exited this quarter with positive momentum. Newly deployed clusters were turned over to customers late in the quarter, which will provide a significant positive inflection to revenue and EBITDA in our fiscal fourth quarter.
Lastly, let me lastly, let me provide an update on our purpose-built HPC data centers. We currently have 400 megawatts of capacity in development across North Dakota, not including the nine megawatts of capacity we have at our HPC. facility at Jamestown to support cloud service customers. During the quarter, we continued to make significant strides in the construction of our 100 megawatt high performance computing facility in Ellendale North Dakota. This state-of-the-art facility will feature cost effective, highly efficient liquid-cooled infrastructure, specifically designed for the most demanding HPC applications. Construction is proceeding as expected, and we are proud of the progress to date, we encourage you to visit our social media channels for some recent images of the facility.
As previously mentioned, we have entered into exclusivity and executed a letter of intent with a US-based hyperscaler for a 400 megawatt capacity lease and are progressing with project level financing tailored for this investment grade tenants.
In summary, we are encouraged by the positive trends we are witnessing across our business and remain confident in our growth trajectory. We are excited about the numerous potential catalysts on the horizon, and we'll continue to allocate our capital strategically to achieve the highest risk-adjusted returns and maximize shareholder value.
With that, I will now turn the call over to our CFO, David wrench, to walk you through our financials.
And provide an update on guidance. David?

David Rench

Thanks, Wes, and good afternoon, everyone. Let me begin by addressing the complexity of this quarter's financial reporting. Although we reported an adjusted EBITDA loss of approximately $2.3 million, several one-time significant items significantly impacted our financial performance and comparability to prior quarters.
Notably, we missed out on a substantial revenue opportunities in our cloud service business due to the difference in timing between hardware delivery and final configuration and customer access. We incurred one-time professional service expenses primarily related to our capital raising initiatives, financial analysis for data center financing and strategic transactions.
Additionally, unexpected expenses arose from addressing power outages at our Ellendale data center hosting facility, which alone had an estimated $4.5 million impact on operating loss during the quarter. We also incurred a $21.7 million loss on held-for-sale classification related to the Garden City transaction and $4.2 million of accelerated depreciation and amortization related to the disposal of damaged equipment of the L&L facility, which further impacted our financials. We are pursuing all available remedies to recoup lost revenues and the additional costs incurred to identify and rectify these outages.
With these items in mind, let's move to our results for the quarter. Revenues for the fiscal third quarter of 2024 were $43.3 million, compared to $14.1 million for the fiscal third quarter of 2023. The increases the increase was driven primarily by increased capacity across data center hosting facilities and the contribution of revenue from the cloud services contracts.
Our datacenter hosting segment generated $37.7 million in revenue while our cloud services segment generated $5.6 million of revenue. Cost of revenues for the fiscal third quarter of 2024 was $47.1 million compared to $10.5 million for the fiscal third quarter of 2023. The increase in cost of revenues was attributable to higher energy costs due to higher number of megawatts used to generate hosting revenues as well as increases in depreciation and amortization expense and personnel expenses driven by the growth of the business as more facilities were energized.
Selling, general and administrative expenses for the fiscal third quarter of 2024 were $30.4 million, compared to $10.5 million in the prior year comparable period. The increase was primarily due to start-up costs due to start-up costs as we ramp the cloud services business, including increases in depreciation, amortization and lease costs on assets not yet supporting revenue has fallen personnel costs to support the overall growth of the business.
Net loss for the fiscal third quarter of 2024 was $62.8 million or $0.52 per basic and diluted share based on a weighted average share count during the quarter of approximately $121.4 million. This compares to net loss of $7 million or $0.07 per basic and diluted share in the fiscal third quarter of 2023 based on a weighted average share count during the quarter of approximately 94.1 million.
Notably, our cloud services business reported a $21.6 million operating loss this quarter, inclusive of $16.5 million in depreciation and amortization expenses alone. We expect these losses to decrease as we deploy more clusters over the next six months.
Adjusted net loss, a non-GAAP measure for the fiscal third quarter of 2024 was $28.9 million or adjusted net loss per basic and diluted share of $0.24 based on a weighted average share count during the quarter of approximately 121.4 million. This compares to adjusted net loss of $1.4 million or $0.01 per basic and diluted share for the fiscal third quarter of 2023 based on a weighted average share count of approximately 94.1 million during the quarter.
Adjusted EBITDA, a non-GAAP measure for the fiscal third quarter of 2024 was a loss of $2.3 million compared to adjusted EBITDA for the fiscal third quarter of 2023 of $0.9 million.
Moving to our balance sheet, we ended the fiscal third quarter with $41 million in cash, cash equivalents and restricted cash and $61.8 million in debt. We continue to work on improving our cash position taking into account the sale of our Garden City locations, which includes maximum cash consideration of approximately $87.3 million.
While there are still ongoing elements in the sale of the Garden City assets, including a $25 million holdback and $9 million in contingent liabilities relating to final power approval in Texas, we have observed an improvement in our balance sheet since the close of the quarter, including a $50 million convertible debenture that we recently announced. Despite the challenges, we are encouraged in the past quarter, we remain confident in the promising future of Applied Digital.
Now I'll turn the call over to West for closing remarks.

Wes Cummins

Thank you, David. I'd like to take a few minutes to discuss our capital formation strategy to fund the growth we expect in our business. Our two highest growth segments are our capital intensive businesses. To date, we have primarily been funding these initiatives from corporate level financing. We are planning for this to change in the near future.
Specifically to cloud services. We have engaged an engagement process since late last year to secure a large that facility directly at our cloud services subsidiary to fund GPU purchases. We have received indications from multiple parties and are proceeding forward with the goal to close a debt facility by the end of the current fiscal quarter.
The debt facility has some attractive attributes relative to the leases we currently used to fund the deployments first, that would change the amortization schedule for the GPUs from the current two years to approximately five years, which would align with the expected useful life. This would have a positive effect on our income statement in the near term as well as aligning assets and liabilities on our balance sheet to better reflect reality. A significant portion of our lease financing is in current liabilities, while the entire asset of the GPUs is in long-term assets. This creates a growing negative working capital balance as we deploy more GPUs. If we're not successful in securing the debt facility, we will continue to have access to lease financing and have recently seen more attractive financing structures coming to the market.
Moving to our HPC data center financing, we have been funding the initial building of our cost of our L&L facility with corporate-level funds. We had been in the process of securing project level debt for this facility since late last year. We have multiple interested parties. The recent positive results from a feasibility study have push this process forward. We expect to have this financing in place with the execution of a lease on the current 100 megawatt building. Once these asset level financing vehicles are in place, that will leave the Company in a positive free cash flow position due to the strategic financing in the different business segments.
In summary, we faced significant challenges this quarter, largely due to external factors, but we are fully dedicated to delivering strong long-term shareholder value. The robust demand for our products and services, coupled with our differentiated asset base and the attractive valuation of our peers strengthens our conviction.
We welcome your questions at this time. Operator?

Question and Answer Session

Operator

Thank you. Ladies and gentlemen, at this time, we'll be conducting a question-and-answer session. (Operator Instructions) Lucas Pipes, B. Riley. Please proceed with your question.

Lucas Pipes

Thank you very much, operator. And good afternoon, everyone. At West, you described Ellendale and Jamestown as a strategic. So I wanted to ask if it's fair to conclude from that comment that those assets would not be sold on specifically just the BTC. piece of it. Thank you very much.

Wes Cummins

Sure. Thanks, Lucas. So those assets are strategic to us and that they have a really good fiber connectivity at those sites versus what we had in Texas. And we have no plans of selling those in the US in the immediate future.

Lucas Pipes

That's that's helpful. Thank you. And then on on on Ellendale, you mentioned you have more than 600 megawatts of future capacity. And first, is this 600 megawatt inclusive of the current PTC business are incremental. And then how is this power capacity secured? Obviously, there a lot of interest for power assets out there with them with everything that you've been talking about for a very long time. So I wonder how investors should think.

Wes Cummins

So it's inclusive of the one 180 on the BTC. com. And right now, we've secured 535 megawatts at that site, but we believe it goes to 605.

Lucas Pipes

Got it. And what's the mechanism through to down-payments or could you could you expand on that a bit.

Wes Cummins

I'm sorry, the mechanisms for --

Lucas Pipes

The mechanisms through which this power is secured.

Wes Cummins

It's through signed DSAs.

Lucas Pipes

Very helpful. Thank you. And then I'm not trying to squeeze some one way. And just in terms of the debt facility that you had mentioned for the GPUs, what potential size could we think about for that?

Wes Cummins

I'm hesitant to say the size, but it's somewhere in the multi-hundred million, maybe $500 million to $1 billion range.

Operator

George Sutton, Craig-Hallum.

George Sutton

Thank you, Wes, obviously, the big news on this call is the 400 megawatt hyperscaler contract. Can we just talk about that relative to the 100 megawatt that you had previously announced? Where does that original 100 megawatts set? Would this be in addition to or a completely new move on your part with respect to what you have out there for sale.

Wes Cummins

So the 400 megawatts is inclusive of the 100. So it will take that the previous customer didn't go forward. As I've mentioned on our call last call in January, we've we have had a significant amount of interest at that site. And I think you don't know feel like we're moving forward with the best party for us to move forward with now, which is effectively for the entire site Okay, great.

George Sutton

So that original customer in talking to some of the infrastructure investors that we talk to was suggestive of a little bit more challenging to finance a 10-year contract. This hyperscaler customer definitionally would be a very high credit worthy customer and therefore, I assume the ability to get that financed would be substantially easier. Is that a reasonable scenario?

Wes Cummins

Yes, that's the correct way to think about that.

George Sutton

So when you announced the 100 megawatt deal, you gave some a sense of a 10-year contract term of $2.2 billion, would this be suggestive of an $8 billion-plus 10-year deal? Is that kind of how I'm to read that yet?

Wes Cummins

I don't want to get into too many of the details because there's a ways to go here, um, but this will we're looking at more like 15-year commitments. But it's [$6 billion] close to what we've talked about in the past. You know what the economics per megawatt we expect.

George Sutton

Okay. And then finally, on the GPU side, could you just give us a quick update on sort of where your orders sit, where the supply of GPUs, how well that's coming in, including inclusive of InfiniBand? And just any sense on an example of sort of once you get a cluster Bill, how long it takes to get to revenue recognition just so we're clear on that.

Wes Cummins

Yes, sure. So couple of things on that. We feel good on the supply. We're seeing shipments on including everything. One of the the blocks we hit a little bit in the quarter is we've been hiring more people because there is a significant amount of work to put these together to commission them and turn them over to customers. And we have a bill or a limited team. And so we've been adding to that team. I think it's tens of thousands of cables that need to be connected. The cabling takes a long time and in the commissioning, but there's a lot of work involved. So hopefully, we'll shorten that with experience and with more bodies in the future. But the right now you should be thinking about eight weeks from when we receive all components on site two, the clusters being turned over to customers.

Operator

Rob Brown, Lake Street.

Ron Brown

Good afternoon, Maria, on the a large potential new contract, could you give us a sense of the some of the steps that go into that as is it? Is it contingent on financing? Or are there some details to negotiate contracts and then you go out and get financing sense of the steps and timing and how that plays out, sir?

Wes Cummins

So I'm not worried about financing on this one on. There's just a process that the steps you go through from a from where we are now, you know, some some diligence, a lot of things that we have to provide. And there's a lot of work to be done from a legal contracting perspective from. And then, you know, I would expect this to be kind of a 60 to 90 day process from when we started.

Ron Brown

Okay. Good. And I guess on the on the transformer that you're trying or transformers you're trying to procure and it gets put in place. You have some timing on May, but have what's the time line for the rest of the transformers and getting that site up to full speed?

Wes Cummins

So we've procured all the transformers. They'll all be on site within the next few weeks. A minute will just be the work connecting these. There's I don't have to get into the weeds too much, but there's been a certain connector component that actually has been the delay, not the transformers on connecting and energizing these, but we've already installed several of them and they should just continue daily as we ramp this back up. The All indications from a performance perspective is the new transformers we procured are working extraordinarily well. And so we expect that to proceed fairly smoothly, but it was procuring transformers and this market is not easy. We were really happy with the team able to find the amount of Transformers we found in the timeframe, we found them and like I said, already shipped to site. It's it's painful for us on that site being down just from an economic perspective. So the faster and for our customer by the way. And so the faster we can get that back online, the better for all of us.

Operator

Mike Grondahl, Northland Securities.

Mike Grondahl

Wes, you said that the contract with the hyperscaler, the 400 megawatts, it was like 60 to 90 days from when you started when roughly did those discussions start? Just trying to figure out that start date.

Wes Cummins

It's I'm trying to think on it, but it's you know, it's been going for maybe three or four weeks on the discussions. And just to make it clear, it's not there's no contract. There's a letter of intent, which is kind of the standard process here.

Mike Grondahl

Got it. But I think you're saying from when you started three or four weeks ago, 60 to 90 days from that time, you might have a contract and financing in place?

Wes Cummins

Yes, I think that's the right way to think about it.

Mike Grondahl

Okay. And then on the cloud services GPU side, how many GPUs did you own at the end of February and how many were generating revenue? And then what's your kind of estimate for the same, how many you'll own and will be generating revenue at the end of May?

Wes Cummins

Yes. So we own, I believe, 5,120 for the H-100 class GPUs. So there's 4,000 -- I'm having trouble doing the math in my head to round it to the exact number, but -- So rounded to 4,000. So there's 4,000 in revenue generation now and then there's 2000 that are needed being brought up to that stage and we should have more before the end of the quarter.

Mike Grondahl

Got it. So 4,000 as of today you're generating revenue and another 2,000 to 4,000 by the end of May?

Wes Cummins

Yes, that's our goal.

Mike Grondahl

Okay. Okay. And roughly, how much does the transformers cost that you need to do put in to Ellendale the new one?

Wes Cummins

I have David here. 300,000 apiece.

David Rench

Yes, apiece.

Mike Grondahl

And how many total did you need?

Wes Cummins

We needed about 45 of those. We -- there are some of the ones that the other model that we had that are still working technically, but we're replacing all of them.

Mike Grondahl

Got it. Okay. And last question for me. Do you guys have a rough kind of committed CapEx number for the rest and lender '24?

Wes Cummins

We have seven more weeks of -- calendar '24. I'm sorry, let me let me come back to you on that, Mike, I don't have that in front of me. We didn't have it here for the call.

Mike Grondahl

Fair enough.

Wes Cummins

Okay, Mike, I did want to make a point on the GPU business, Tom, we've been adding people. We've been accelerating or working to accelerate from receiving to revenue generating, but there's one piece that I mentioned on the last call, and we're much more focused on it now, which is we started seeing demand from enterprise customers and large enterprise customers, which we've really been focused on. And so pushing we can continue to deploy it with the current customer base kind of as aggressively as we want to.
But we'd really like to transition up to the enterprise customers and we're close. I think we have a few of those in process right now, but that's one of the reasons that there's some some of the slowness in the deployment through the end of May of just because I'd like to diversify our customer base outside of just the startups. You know, I'd love our customers there, but we'd like to diversify the customer base we're working pretty hard on that.

Operator

Darren Aftahi, Roth.

Darren Aftahi

Wes, may I just follow up on that last comment you made. So I think in the prior year, oh, you guys guided to 10,000 as a bogey for GPU number exiting may, can you sort of speak to that that goal is still one and better than that? Your comment about slowing down to diversify away from more VC-backed clients is the achievement of getting that 10,000 less important, but more important to be diversified going into fiscal 25?

Wes Cummins

Yes, I think you hit it right on the second one on the types of customers diversifying away from the group of. They're all doing different things. Obviously, our different products for the start-up. So, you know, it's a and it's diversified through those customers, but it's all similar and they're all start-ups and VC-backed. And so I think it's more important for us just to think about diversification in that business over the longer term instead of kind of rushing to make a single date.
And just outside of that, I wanted to make a correction to 200,000 on the transformers, not 300,000 on the prior question.

Darren Aftahi

Got it. And then maybe one on the data center piece. So the hyperscaler LoI, is there a financing negotiation period like you have with your prior LoI?

Wes Cummins

No.

Darren Aftahi

Okay. And does that LOI. include a role for on additional capacity beyond the 400 megawatts now?

Wes Cummins

No.

Darren Aftahi

And then just last one for me, any change on AI cloud pricing since the last call, it's stable or moved up?

Wes Cummins

It's been stable. I think we've talked about this on the last call, but we've kind of seen that pricing, you know, level out, I hate giving pricing talk on public calls, but and kind of where the prepayment percentage and the price per hour on GPUs has been pretty steady for us since the last quarter.

Operator

John Todaro, Needham & Company.

John Todaro

Thanks, for taking my question guys, just kind of summarizing it here. So first, on the GPU piece, you mentioned, I think it's 4,000 generating revenue now, 2,000 to 4,000-plus online end of May. So kind of as we think about that exiting may run rate, fair to say about 8,000 generating revenue?

Wes Cummins

Could be close to 8,000. Somewhere between 6,000 and 8,000 is the right number to think about.

John Todaro

Okay. And then on the enterprise customers that you'd want to diversify into two of those still aren't signed. So the slowdown is just you still would need to go out and sign those or kind of I guess just where are we in that process?

Wes Cummins

Yes. So it's advanced since the last quarter. I think I'd mentioned we're in proof of concept with some and there's more move to contract negotiation, um, so that's that's definitely made an advancement. Those take just take longer. Having talked. I don't know. I think I've talked about this publicly, but you know, like our first customer contract we signed I think it was two weeks from initial conversation to signing. So it's pretty fast on the enterprise has a much longer process for qualification, but we're I'm happy where we are in that process.

John Todaro

Got it. And then just lastly, so on the 100 megawatt site, you kind of how much now is built on a percentage basis and how much financing additionally need to do to get it 100% done.

Wes Cummins

So we have about a little over $100 million into that site at this point. And where we're negotiating now on financing, we expect the LTC somewhere in the 80% to 85% range. So we've put a lot of the money that we're going to need to put in on the equity side Got it. Okay.

Operator

Kevin Dede, H.C. Wainwright.

Kevin Dede

Thank SkyWest's. Thanks for having me on because I'm sure can you give me a ballpark on how many AI. customers you have now that are running off of like the Nevada, Colorado, Minnesota and Ellendale sorry, some change to Jamestown site?

Wes Cummins

Yes. So we have some we have primarily we have some smaller, but we primarily have two larger customers that are deployed, and we expect to deploy more with the new clusters that we're bringing out. So we've got the 4,000 that are in service is split primarily between to customers.

Kevin Dede

Are you thinking that you'll be able to dump those co-location sites and move what you have there to Ellendale in the next quarter?

Wes Cummins

So Ellendale is going to go. We won't have capacity for our AI cloud at Ellendale as it's currently structured that the potential customer there is taking all of that capacity. And I think that's the right decision for the Company on long-term contract and just where to best place our dollars, the co-location sites, I think, are going to prove to be extraordinarily valuable. The demand we see from enterprise and even some customers that are larger than enterprise is pretty large. And I think we're not going to have a problem filling those up. I would never cut those loose because they're extraordinarily hard to find in the market.

Kevin Dede

Okay. Can you help me understand the difference between the transformers you had at Ellendale versus the ones at Jamestown and why the Ellendale ones failed on you?

Wes Cummins

Yes. So the I don't want to get into too many of the specifics here because there is, as we said, we're going to be pursuing all remedies to come to recoup our costs there on the Allen or the Jamestown transformers are from a US-based one manufacturer actually based in Texas and then when we went to Ellendale, we had a speed of delivery. We bought some from a non, you know, Americas based company, and there are well recognized company in the industry but we've made that change and they just haven't lived up to spec as far as I'm concerned.

Kevin Dede

Understood. I appreciate the color. The you mentioned that you were okay on equipment source. But if I remember you, you did see some problems getting InfiniBand product. Is that no longer an issue? I know you mentioned it earlier this evening that I just wanted to make sure I understood it.

Wes Cummins

Yeah. No longer an issue.

Kevin Dede

Okay.So what would keep you from reaching that 8,000 goal that you have for me?

Wes Cummins

I don't think there will be anything that keeps us from reaching that, like I said, where we were in process as soon as we secure some of these other customers that we have been pursuing I think you'll see us accelerate, which is, like I said, why we're augmenting the team for deployment on and so that we can we can move quickly with that. So I don't I don't see anything from a supply chain side that will stop us.

Kevin Dede

And based on I think you alluded to about a $150 million, I think that includes the sale of Garden City that you that you that you have in your hands, how far does that get you and does that does that mean the the Jamestown HPC site is fully paid for and you're just working to build the [400] now? Is that the way to --?

Wes Cummins

Yes. So Jamestown paid for. It gets us out of ways. It's just a matter of how much we spend on construction in Ellendale between now and site level financing. So hopefully, that's six to eight weeks away because that's where the vast majority of our funds are going. And if we know something went awry and that got delayed or pushed, you know, could we could we pause there? Yes, we could. But that's where the vast majority of our CapEx is going at this point.

Kevin Dede

And just apologies for not being the sharpest only shed, Wes, but just to make sure, the site level financing is a function of turning that LoI to a contract?

Wes Cummins

Correct.

Kevin Dede

Okay. Thank you for entertaining my questions and apologies for making you go over stuff.

Wes Cummins

Never a problem.

Operator

(Operator Instructions) Lucas Pipes, B. Riley.

Lucas Pipes

Thank you very much for taking the follow-up question. I was wondering if you could maybe talk a little bit about the cadence of how the LOA came about you had and the contingent financing agreement up until recently that did you decide to walk away from that agreement? Expire was some hyperscaler kind of always in the wings was less discussion with the same hyperscaler before you entered into this prior agreement. Can we get some additional color.

Wes Cummins

Sure. So Lucas, we've constantly have discussions once we went into the agreement on the 100 megawatts. We stopped having discussions on that because there was there was that exclusivity, but we had additional capacity that we're marketing both at Ellendale and in other markets. And so we were in constant discussions with other parties.
As I mentioned on the call in January, we are seeing a lot of demand and on, you know, our additional capacity we've been in discussions with and three hypers, three different hyperscalers and then two parking to be. I don't know if I would classify as that, um, so that's that's kind of a constant that we continue to market the capacity we have available.
And so that's a help now that's how those discussions came about. But yes, we're constantly doing that and said, look, it's helpful. I don't think I haven't I don't recall if I mentioned this in the call, but we have a pipeline of roughly 1.6 gigawatts that we're working. And so it's beyond just the Ellendale site.

Lucas Pipes

Thank you, Wes. Can you expand on that pipeline a bit? Is that all? I'm sorry to harp on this, but again, my view is power is going to be constrained. So that pipeline is that power that you have committed to you?

Wes Cummins

Sure. And so we we have I don't want to give states, Lucas, because we haven't signed these fully yet, but we're during the process of probably over the next few months, but we have a pipeline of sites, a lot of it in the, call it the Midwest. So we have some you have a site to have for 300 megawatts in the Midwest that would come online in '25, one for 500 that would come online in '25. One that's in the northern part, not not in North Dakota, but up in that area that we have kind of in that area that we work now for 200 that would be available for '25. And then a few other sites that are we have obviously, the Utah site for 100 that we've mentioned publicly before. So that's that's just a few.

Lucas Pipes

I appreciate that. And I had assumed the power would be it can have similar cost structure as to what you have from Ellendale at Jamestown.

Wes Cummins

Yeah. It's an attractive price for the HPC application for sure.

Lucas Pipes

Very helpful. Thank you. Then follow up on the recourse. Thinking of $8 million or so. So is the primary potential source of recourse going back to the supplier or the business interruption insurance and potentially other sources?

Wes Cummins

It's every every source available for us. But yeah, there there's obviously should be warranty obligations here and other sources have recourse for us.

Operator

As there are no further questions in the queue, I'd like to hand it back to Wes Cummins for closing remarks.

Wes Cummins

Thanks, everyone, for joining and looking forward to catching up on our next quarterly call. Again, I want to thank all of our employees for their hard work and our shareholders for their patience with us and looking forward to speaking to you soon.

Alex Kovtun

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.