Digi Power X Inc. (DGXX) Q3 FY2025 Earnings Call Transcript & Summary

Good morning, and welcome to Digi Power X Inc.'s Third Quarter 2025 Financial Results Conference Call. Please note that this event is being recorded, and a transcript will be available on Digi Power X Inc.'s website. [Operator Instructions] Unless noted otherwise, all amounts referred to during the call are denominated in U.S. dollars. Certain comments made during this call may include forward-looking statements or forward-looking information within the meaning of applicable U.S. and Canadian securities laws. Such statements and information reflect current expectations and as such, are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. Those risks and uncertainties include, but are not limited to, factors discussed on -- in Digi Power X Inc.'s report on Form 6-K for the 3 and 9 months ended September 30, 2025, and the annual report for the year ended December 31, 2024, as well as the company's other disclosure documents. Except to the extent required by applicable law, Digi Power X undertakes no obligation to publicly update or review any forward-looking statements or information. During the call, management may make reference to certain non-IFRS measures that are not separately defined under IFRS, such as EBITDA and adjusted EBITDA. Management believes that those non-IFRS measures when considered in conjunction with IFRS financial measures provide useful information for both management and investors. Reconciliations between IFRS and non-IFRS measures are presented in the tables accompanying the press release highlighting Digi Power X financial results as of the quarter ended September 30, 2025, have been filed and made accessible under the company's continuous disclosure profile on SEDAR at www.sedar.ca and are also available on the SEC's EDGAR website at www.sec.gov/edgar. I would now like to turn the call over to Michel Amar, CEO of Digi Power X. Please go ahead, sir.

Good morning, everyone. Q3 2025 was a transformational quarter for Digi Power X as we strengthened our balance sheet, accelerated our shift into AI infrastructure and delivered positive net earnings. Quarter highlights. Working capital went from $0.5 million in Q3 2024 up to $15 million this quarter. Net income, positive $300,000 versus $6.4 million last year. EBITDA, $1.9 million positive, adjusted EBITDA $0.8 million positive. Digital assets, BTC holdings up 143% to 97 Bitcoin, Ethereum 1,000 tokens. Total digital currency value $15.4 million, up 213% year-over-year. Warrants reduced from 8.8 million warrants to 2.6 million outstanding. Debt, no long-term debt. CapEx $3.1 million in Q3, $9.5 million year-to-date, primarily tied to Tier 3 AI data center conversion. Strategic and operational progress. Our first ARMS 200 Tier 3 AI-powered assembly began in Q4 2025 and and will be online in Q1 2026. Approved 60-megawatt load study in New York, enabling future AI expansions. First, NVIDIA B200 cluster built with Super Micro on track for Q1 2026 activation. Advancing long-term co-location and AI compute agreement with multiple potential customers. Beginning January 2026, ARMS 200 modules will be deployed across all Tier 3 sites. Energy revenue grew 112% year-over-year to $8.7 million. Cost of revenue and depreciation reduced by $9.3 million year-to-date. NeoCloudz or GPU-as-a-Service platform launching January 2026. Financial position today. Over $90 million in cash, BTC, ETH and equivalents, the strongest liquidity in company history. Our liquidity equals more than 1/3 of our market cap. This capital fully supports the 2026 AI infrastructure build-out. AI transition across power assets Phase 1 deployment. Q1 2026, 5 megawatt; Phase 2, Q2 2026, 15 megawatts; Phase 3, Q3 2026, an additional 30-megawatt. So by Q4 2026, we would have deployed 55 megawatts, which is 40-megawatt critical IT load. Current power availability: Alabama 55 megawatts, New York, upstate, 141.7 megawatts for a total of close to 200 megawatts of power available for 2026. North Carolina, an additional 200 megawatts anticipated in 2028. Digi Power X is now firmly positioned at a next-generation Tier 3 AI infrastructure company. With the ARMS 200 platform, the NeoCloudz platform, major power capacity and Tier 3 deployment underway, we are building a scalable, high-density AI compute ecosystem ready to serve both emerging AI companies and enterprise customers. We've never been better positioned for growth.

Our first question comes from [ Jeremy Hayes. ] What are your expectations in AI revenues in 2026 and 2027.

Great question, Jeremy. So related to the scaling up of our first model infrastructure ARMS 200 in Alabama, which we intend to complete quarter-after-quarter up to 40 megawatts of IT load, mostly 75% to 80% will be co-location. And the co-location range is about $140 to $150 a kilowatt hour per month to give you a little bit of a size of income. If we average 20 megawatts because we are scaling up, we estimate roughly about $50 million in revenues average for the year 2026 in co-location. The second part of the AI revenues will be our GPU-as-a-Service through our NeoCloudz platform, which we built with Super Micro. And that we anticipate about 2024, B200, B300 NVIDIA chips, GPUs online, generating with a scale up about $15 million. So the growth estimate for 2026 related to the execution of the infrastructure through our ARMS 200 system solution, should be roughly about $65 million. On top of that, we will have the existing Bitcoin mining, which should be even with last year. And we have to add a fourth stream of income, which is our energy sales to the grid through our power plant which, to give you a sense for this year so far, we are at $8.9 million year-to-date selling energy, which is -- for Q3 was about $3.1 million energy sales, which represents on this quarter Q3 over 35% of our revenues.

What are the current debts?

We do not hold any long-term debt. We are current. We have no obligations, no trigger that could hurt the company, we are completely debt-free. So I think we have the lowest payable ever in our company.

How is your current cash holdings?

So we are holding a little bit more than $90 million total. Most of it is in cash. And we have few holdings of crypto Bitcon mining, about 115 or 116 Bitcoins, and we have a 1,000 Ethereum. And everything else is in cash. And that accounts today a little bit above $90 million, which allow us to really develop our modular system. We actually, this year, year-to-date already spent close to $10 million. So the first development of Q1 have already been paid for the first ARMS 200, which is -- will be assembled in the next few weeks in Alabama, and that's rated 3, will be on end of December, tested the first week of January along with Super Micro team as we plan to have this ARMS 200 system on the partnership book of Super Micro, so -- which will be a very interesting development for us.

Our next question comes from the line of Patrick Gray. Can you please describe the ARMS AI-ready Modular Solutions platform?

Great. So Digi Power X, wholly owned subsidiary, U.S. Data Centers, Inc. has developed a proprietary ARMS platform, ARMS for AI-ready modular system. We developed that platform early this year, I would say, 10, 11 months ago with Super Micro. And it's really an incredible product system that we can only -- we can also develop for our own sites and for other people sites. We can deliver this system within 180 days. And it's built for all kinds of chips, primarily for the NVIDIA B200, B300. It can be customized for other servers or other chips. It's really a modular system, but has 3 product line, 1 megawatt, 5 megawatts and 10 megawatts, and we can expand it much faster than a hyperscale building that takes a couple of years. In our opinion, for 2026, this is an incredible demonstration of what we can do at the speed we can do. Of course, the reason why we can develop it in a faster way than a hyperscale is that we already have the high-voltage substations. We already have the connection with the grid power plant to generate power as well. So we are connected already with power. All we need to do is to insert this modular system that are rated 3, ready for redundancy and uptime and standard in compliance with the Tier 3. I think you're allowed to 1.6-hour of downtime a year. So we're ready -- we got ready to be -- 2026 is going to be a real transformational year for us. And we expect to enter our full cycle of developing AI.

Can you please go into some detail on your relationship with Super Micro Computer, Inc.

So we developed a very interesting relationship with Super Micro. They are a pretty large company. They have a very good relationship with NVIDIA. And in order to leverage their human resources and resources, we chose Super Micro, and we integrated the optimize service rack directly to our ARMS system pads. And we designed it that way. So Super Micro doing a very big part of the job by supplying racks ready to go. They also -- we also partner with them on all the software integration. And it's really very, very helpful that allows us to have a very big team on our side with a very small G&A because we have a very low SG&A, and we are leveraging the Super Micro team. They will be a long -- they are coming to our site at the end of this month, November 28, they will come and start to prep with our people the setup of our modular systems, both in upstate and in Alabama.

Our next question comes from the line of Anthony [ Sphere. ] Can you please describe the retail compute platform, NeoCloud, who the potential customers or end users will be?

So we developed that platform. Actually, Alec Amar developed it, along with again Super Micro. And it's geared for the smaller players, not for the hyperscaler customers. It's for the AI developers or ML engineers, start-up companies, there's plenty of start-up companies now that need access to an infrastructure, and it's hard for them to get access to a hyperscaler. Research institutions and universities, non-hyperscale cooperation, priced out of AWS, Azure or NVIDIA cloud capacity. HPC workloads for simulation, modeling and data processing. So we will serve some of our retail service, GPU-as-a-Service, and we expect to develop that portal or a direct vertical GPU service to be 20%, 25% of our total revenue. So the breakdown would be 75% co-location with longer contracts, and we are in negotiation now anywhere from 5- to 10- to 15-year contracts. And there's a lot of demand for 2026, early 2027. We are trying to get the best scenario or the most solid contract, 15-year contract. It's like -- it's a modified lease on AI infrastructure. And simultaneously, we are developing this -- it's ready with the online January. We are developing this platform, NeoCloudz, backed by Super Micro. And we will be able to integrate multiple customers, all kind of customers for deep learning for any kind of applications. And that will result in a much higher margin. One is pretty -- co-location margins are pretty set and revenues. The direct GPU at service provides very high margin. So blended, we will have a very healthy margin in the AI business.

Thank you. This concludes our Q&A session, and this concludes our call today. We thank you for your interest and participation. You may now disconnect your lines.