AirJoule Technologies Corporation (AIRJ) Earnings Call Transcript & Summary

Welcome to the AirJoule Technologies Investor Update Call. I'll now turn the call over to Tom Divine, Vice President of Investor Relations and Finance. Please go ahead, Tom.

Thank you, and good morning, everyone. With me today are Matt Jore, our Founder and Chief Executive Officer; and Stephen Pang, our Chief Financial Officer. During this call, we will be referring to a presentation, which is available on the webcast platform and on the Investors section of our website at airjouletech.com. The press release announcing the transaction is also available on our website. I would like to point out that many of the comments made today are forward-looking statements that involve risks and uncertainties that could affect our actual results and plans. Many of these risks are beyond our control and are discussed in more detail in the Risk Factors and the forward-looking statements sections of our filings with the SEC and in today's presentation. Although we believe the expectations expressed are based on reasonable assumptions, they are not guarantees of future performance, and actual results or developments may differ materially. And now if we turn to Slide 3, I will turn it over to Matt.

Thanks, Tom. Good morning, everyone, and thanks for joining us on short notice. This is an important day for AirJoule Technologies. This morning, we announced the acquisition of BitSink, and we want to spend the next few minutes on why we did it and what we bought and what it means for AIRJ's shareholders. BitSink is a U.S.-based designer and manufacturer of cooling, electrical and modular infrastructure for AI and high-density data centers. With a heritage rooted in providing cooling systems for cryptocurrency mining facilities, the BitSink team has spent years building the equipment that keeps power dense computing running in some of the most demanding operating environments in the country. This is an important step forward in AIRJ's strategy and creates a strong foundation for the next phase of our growth. There are 3 things we'd like you to take away from today's announcement. First, this acquisition puts us directly in the market for cooling, electrical and modular infrastructure supporting AI and high-performance computing, one of the fastest-growing areas of infrastructure spending in the country. Second, it provides AIRJ with a profitable operating business. BitSink brings revenue, customer relationships, equipment in the field and U.S. manufacturing capability. And third, it expands our commercial opportunities to bring the AirJoule atmospheric water generation technology into that market alongside BitSink's cooling and electrical products. So why now? On our last 2 earnings calls, we spent some time on the macro. The growing demands that AI data centers place on power, water and their communities have moved from a local issue to a national one, and the policy response has followed. We talked about New York's moratorium on new data centers larger than 50 megawatts and the Texas pause on grid-connected data centers. Well, in the last few weeks, Pennsylvania and New Jersey followed suit and implemented new permitting rules and disclosure requirements for power and water usage. These constraints are real, and they're reshaping how and where new computing capacity gets built. At the same time, the equipment itself is changing. AI racks now draw 40 to 150 kilowatts compared with 5 to 10 kilowatts for traditional servers. That density has pushed the industry past the limits of air cooling and into liquid cooling, and it requires far more electrical infrastructure per rack: switchgear, power distribution and higher voltage equipment. The supply chain for that equipment is tight and smaller operators are being quoted lead times of 12 to 18 months by the largest suppliers. These dynamics are creating a growing role for modular factory-built infrastructure that can be deployed faster and repeated site after site, particularly at small inference and edge facilities that are being built closer to population centers. BitSink's not targeting large hyperscale campuses or attempting to displace the largest incumbent suppliers, its near-term opportunities are among emergency AI operators, Neo Clouds, modular deployments and existing high-density computing sites that are transitioning from cryptocurrency mining to AI and HPC. These customers value rapid deployment, integrated cooling and power infrastructure, domestic manufacturing, and responsive support. BitSink has the product architecture, operating history and relevant certifications and installed base to serve that segment today. Water is the third constraint and is the one that AirJoule technology was developed to address. In many markets, developers and communities are focused not only on how much power a data center needs, but on how much water it will consume. That makes cooling architectures that minimize water usage increasingly valuable. It creates a natural application for the AirJoule technology, which can use the waste heat rejected by closed-loop cooling systems to produce water on site. Starting on Slide 4, Stephen will cover the transaction in greater detail.

Thank you, Matt. Turning to Slide 4 and the key terms of the transaction. AirJoule Technologies acquired 100% of BitSink for $27 million of upfront consideration, consisting of $18 million in cash and $9 million in AIRJ stock. There's also an earn-out component of up to $40 million in additional equity contingent on achieving revenue milestones in 2027 through 2029, meaning 60% of the total potential consideration is back-end weighted towards future performance. BitSink's operations have been funded entirely organically with no debt and their historical gross margins have been approximately 40%. With $45 million of cash on hand as of August 31, AIRJ retains a strong balance sheet following this transaction. On the next slide, I will walk through the strategic rationale in more detail. At its core, this transaction transforms AIRJ from a pre-revenue technology company into a revenue-generating AI and HPC infrastructure platform with a proven deployment track record. BitSink brings an established operating history, while AIRJ contributes differentiated atmospheric water generation technology, strategic relationships and the resources to support future growth. Together, we believe we can build a broader platform that addresses cooling and water constraints facing data center operators. There are 3 main reasons why we believe BitSink is the right fit for AIRJ. First, our product offerings are complementary. BitSink's closed-loop cooling systems reject heat without the water consumption of traditional evaporative cooling. The AirJoule water technology can take low-grade waste heat from the servers rejected through the cooling system to produce pure distilled water from air. For a data center operator managing rising cooling demand and tightening water constraints at the same time, this is a powerful combination. Second, BitSink gives us an immediate operating entry into the data center infrastructure space. It decreases the time and capital needed to build a manufacturing capability, UL certifications, customer relationships and deployed track record that BitSink brings us today. Third, we are entering a market benefiting from powerful secular trends. AI is driving demand for liquid cooling, advanced heat rejection and higher capacity electrical infrastructure. There's also a shift towards smaller and more distributed edge facilities, often below 50 megawatts in total capacity, driven by access to power, increased inference workloads and a priority on rapid deployment time. Additionally, many cryptocurrency miners are also converting their facilities into AI data centers. Bitcoin miners have announced more than $70 billion of AI and HPC contracts and analysts estimate 10 to 15 gigawatts of mining capacity available to convert into HPC and AI. We expect this trend to continue as miners chase higher margins. Many of the conversions are happening at smaller sites at a fraction of the cost of greenfield data center development. In this respect, BitSink's heritage is a tremendous asset. Its prior deployments were built largely for cryptocurrency mining operators who are now making that active transition. These operators have access to power, but they will need to upgrade their cooling infrastructure to support the higher density GPU chip architecture. BitSink's existing relationships in the sector facilitate a natural commercial channel for these opportunities. Collectively, the acquisition provides AIRJ with enhanced commercial and operating capabilities while also creating a broader opportunity to build a differentiated cooling and water infrastructure platform. The next slide illustrates why we believe cooling power and water constraints are converging. On cooling, higher rack densities are accelerating the shift to liquid cooling and advanced heat rejection. On power, AI compute draws 3x to 4x electricity of conventional servers, which is driving higher demand for switchgear, PDUs and related equipment. And on water, traditional cooling can consume significant volumes, which is becoming a permitting and community issue. Closed-loop liquid cooling can reduce facility cooling water usage to near 0 and lower PUE, and the AirJoule technology also brings the ability to generate water on site. Together, that is a path towards water neutral and potentially water positive operations in markets where the leading operators have publicly committed to replenish more water than they consume by 2030. That convergence of cooling, power and water requirements is what makes the combination of BitSink's product offering and the AirJoule technology strategically complementary for us. Turning to Slide 7. Let's talk about what BitSink brings to the platform today. As we've discussed, BitSink is a U.S.-based designer and manufacturer of cooling, electrical and modular infrastructure for AI and high-performance computing data centers. From the headquarters in South Carolina, BitSink has deployed more than 220 megawatts of cooling capacity across North America. Its systems have delivered 99% uptime even through the demanding Texas climate. This portfolio includes UL-listed switchboards and control panels, power distribution units and equipment racks, along with dry coolers and a modular containerized infrastructure supporting high-density computing environments. Our diligence included independent technical reviews of BitSink's products and manufacturing capabilities, visits to operating sites and direct conversations with our largest customers. What we heard was consistent. The equipment was very reliable, customer service is top-notch and BitSink compares favorably to competitors operating even side-by-side on the same sites. That feedback reinforced our confidence in BitSink's products and the team's ability to design, manufacture and support mission-critical infrastructure in demanding environments. Combined with the new 65,000 square foot facility in Chesnee, South Carolina, BitSink gives AIRJ an operating base that can be scaled to meet the evolving requirements of AI infrastructure. And another important part of BitSink's value and something you can't see on this slide is the breadth of its product offering. Rather than supplying a single component, BitSink provides most of the cooling, electrical and modular infrastructure that a high-density site needs: dry coolers, switchgears, PDUs, racks and field deployment. For AI and HPC applications, they will offer an integrated modular block that can combine cooling and electrical equipment in a single enclosure. For the customer, that means one supplier, one design package and one point of accountability rather than coordinating cooling electrical systems from separate vendors. It simplifies procurement and speeds deployment, which is critical. BitSink's equipment is running today for many digital infrastructure operators. One example is Genesis Digital Assets, which operates hundreds of megawatts of Bitcoin mining sites. After the recent acquisition by SWI Group, they have announced that they will be converting their sub-50-megawatt sites totaling around 200 megawatts from crypto mining to AI compute. We believe BitSink's field deployed infrastructure capability gives AIRJ an ideal platform from which to participate in the transition towards modular liquid-cooled AI infrastructure. That existing operating platform is what creates a path to an additional layer of value around water. Turning to Slide 8. Matt will talk more about the opportunity to combine their cooling capabilities with our AirJoule water technology today.

The transition toward liquid cooling matters here. As AI compute density increases, liquid-cooled systems are being designed to run at higher coolant temperatures. For example, NVIDIA's latest AI server architecture uses outdoor dry coolers in a closed loop to reject heat from a 45-degree Celsius liquid system, reducing water consumption to near 0 and improving PUE by reducing reliance on chillers. That is third-party validation of the architecture BitSink already builds. BitSink's dry coolers are designed to support exactly these high-density liquid-cooled environments. The AirJoule water technology, meanwhile, is designed to use low-grade waste heat to produce pure distilled potable water from air. Put those 2 together and you get a relationship that is hard to ignore. BitSink supports water-efficient closed-loop liquid cooling and AirJoule uses the heat that system rejects to generate water on site. Over time, we believe this will support water neutral and potentially water positive operation. The water opportunity is one example of what this acquisition can enable. On Slide 9, we step back and look more broadly at the complementary capabilities AIRJ and BitSink each bring. Put simply, BitSink brings the operating platform, products, customers, manufacturing, and deployed infrastructure. AIRJ brings differentiated water technology, capital, strategic relationships and a public company platform. The BitSink acquisition builds on the commercialization progress for our AirJoule water technology. Our joint venture with GE Vernova commissioned the first full-scale AirJoule Prime system earlier this year, and that system is being prepared for a first-of-a-kind deployment at a European data center in the fourth quarter through our partnership with the Net Zero Innovation Hub. BitSink accelerates that strategy with additional entry points into the data center market. And importantly, it positions the combined platform to address a broader set of cooling, power and water requirements for data center operators. To wrap up, let's close with 4 key takeaways from today's announcement. First, BitSink expands our data center opportunity set to the full cooling electrical and modular stack, backed by vertically integrated U.S. manufacturing and UL listed equipment. Second, the dual product offering is differentiated. Pairing BitSink's closed-loop cooling with the AirJoule water technology creates a pathway to water-neutral AI infrastructure. Third, as of today, AIRJ becomes a revenue-generating AI infrastructure platform with more than 220 megawatts deployed and $15 million of binding 2027 purchase orders in hand. And fourth, the transaction is structured to align with our shareholders. 60% of the consideration is contingent on revenue milestones. We have no debt, and we retain a very strong balance sheet. We're excited to welcome the entire BitSink team to AIRJ, and we look forward to updating you all on our progress on our next earnings call. Thank you very much.

Thank you. This concludes today's call. You may disconnect your lines at this time. We thank you for your participation, and have a wonderful day.