Applied Digital Corporation Announces Closing of $450 Million of Convertible Notes Offering

Rhea-AI Summary

Applied Digital (APLD) has completed its previously announced offering of 2.75% Convertible Senior Notes due 2030, raising $450 million. The offering includes $75 million in additional notes from exercised options by initial purchasers. The company implemented capped call transactions with a cap price of $14.72 and repurchased approximately $84 million of common stock. Net proceeds were $434.5 million after expenses, with allocations of $84 million for share repurchases, $51.8 million for capped call transactions, and the remainder for general corporate purposes.

Positive

• Successfully raised $450 million through convertible notes offering
• Initial purchasers exercised full $75 million additional notes option
• Net proceeds of $434.5 million strengthen company's financial position

Negative

• Potential future dilution from convertible notes
• Increased debt liability with 2.75% interest rate
• Significant cash outlay of $84 million for share repurchases

Insights

Financial Analyst

This $450 million convertible notes offering represents a significant financial move for Applied Digital. The 2.75% interest rate is relatively favorable in the current market environment and the 2030 maturity provides substantial runway. The company has structured the deal thoughtfully with capped call transactions at $14.72 (a 100% premium) to limit potential dilution, while simultaneously executing $84 million in share repurchases.

The net proceeds of $434.5 million significantly strengthen the company's balance sheet. The allocation of funds shows strategic capital management: $84 million for share repurchases, $51.8 million for capped calls, leaving substantial capital for operations and growth. This financing provides Applied Digital with significant operational flexibility while managing dilution concerns through the repurchase program.

DALLAS, Nov. 04, 2024 (GLOBE NEWSWIRE) -- Applied Digital Corporation (Nasdaq: APLD) (“Applied Digital” or the “Company”), a designer, builder, and operator of next-generation digital infrastructure designed for High-Performance Computing applications, today completed its previously announced offering of 2.75% Convertible Senior Notes due 2030 (the “Convertible Notes”) in a private offering to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The aggregate principal amount of notes sold in the offering was $450 million, which includes $75 million aggregate principal amount of notes issued pursuant to an option to purchase additional notes granted to the initial purchasers, which the Initial Purchasers exercised in full on October 31, 2024.

In conjunction with the issuance of the Convertible Notes, the Company entered into capped call transactions with a cap price of $14.72 (representing a premium of 100% over the last reported sale price) and, pursuant to share repurchases and prepaid forward repurchase transaction, repurchased approximately $84 million of the Company’s common stock.

The table below illustrates the potential net dilution expectations from the overall transaction.

The net proceeds from the sale of the Convertible Notes were approximately $434.5 million after deducting the initial purchasers’ discounts and commissions and estimated offering expenses payable by the Company. The Company expects to use approximately $84 million of the net proceeds from the offering to fund share repurchases of the Company’s common stock (the “common stock”) in connection with the offering including (i) $52.7 million to fund the cost of entering into prepaid forward repurchase and (ii) $31.3 million to repurchase shares of the common stock, approximately $51.8 million of the net proceeds from the offering to pay the cost of the capped call transactions, and the remainder for general corporate purposes.

About Applied Digital

Applied Digital (Nasdaq: APLD) develops, builds and operates next-generation data centers and cloud infrastructure. Different by design, the company’s purpose-built facilities are engineered to unleash the power of accelerated compute and deliver secure, scalable and sustainable digital hosting, along with turnkey CSaaS and GPU-as-a-Service solutions. Backed by deep hyperscale expertise and a robust pipeline of available power, Applied Digital accommodates AI Factories and beyond to support the world’s most exacting AI/ML, blockchain and high-performance computing (HPC) workloads.

Forward-Looking Statements

This release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 regarding, among other things, the intended use of the proceeds and the effects of entering into, the capped call transactions and prepaid forward repurchase described above. These statements use words, and variations of words, such as “continue,” “build,” “future,” “increase,” “drive,” “believe,” “look,” “ahead,” “confident,” “deliver,” “outlook,” “expect,” “intend,” “hope,” “remain,” “project” and “predict.” You are cautioned not to rely on these forward-looking statements. These statements are based on current expectations of future events and thus are inherently subject to uncertainty. If underlying assumptions prove inaccurate or known or unknown risks or uncertainties materialize, actual results could vary materially from the Company's expectations and projections. These risks, uncertainties, and other factors include: decline in demand for our products and services; the volatility of the crypto asset industry; the inability to comply with developments and changes in regulation; cash flow and access to capital; and maintenance of third-party relationships. The Company cannot provide any assurances regarding its ability to effectively apply the net proceeds as described above. Information in this release is as of the dates and time periods indicated herein, and the Company does not undertake to update any of the information contained in these materials, except as required by law.

Investor Relations Contacts

Matt Glover and Ralf Esper
Gateway Group, Inc.
(949) 574-3860
APLD@gateway-grp.com

Media Contact
Buffy Harakidas, EVP and Jo Albers
JSA (Jaymie Scotto & Associates)
jsa_applied@jsa.net
(856) 264-7827

Source: Applied Digital Corporation

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/4892d38d-29e4-4243-89d3-18e692313154

FAQ

What is the interest rate and maturity of Applied Digital's (APLD) convertible notes?

Applied Digital's convertible notes have a 2.75% interest rate and mature in 2030.

How much did Applied Digital (APLD) raise in its convertible notes offering?

Applied Digital raised $450 million in total, including $75 million from exercised additional notes options.

What is the cap price for Applied Digital's (APLD) capped call transactions?

The cap price for the capped call transactions is $14.72, representing a 100% premium over the last reported sale price.

How will Applied Digital (APLD) use the proceeds from the convertible notes?

The proceeds will be used for $84 million in share repurchases, $51.8 million for capped call transactions, and the remainder for general corporate purposes.