Digi Power X Inc. ($DGXX)

Good morning, and welcome to Digi Power X Inc.'s First Quarter 2026 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 otherwise noted, 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 in Digi Power X Inc.'s report on Form 10-Q for the 3 months ended March 31, 2026, and the annual report for the year ended December 31, 2025, 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-GAAP financial measures that are not separately defined under GAAP, such as EBITDA and adjusted EBITDA. Management believes that those non-GAAP measures when considered in conjunction with GAAP financial measures, provide useful information in both management -- for both management and investors. Reconciliations between GAAP and non-GAAP measures are presented in the table accompanying the press release highlighting Digi Power X financial results as the quarter ended March 31, 2026, have been filed and made accessible under the company's continuous disclosure profile on SEDAR+ at www.sedarplus.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. Thank you. Please go ahead.

Good morning, everyone, and thank you for joining us today. Q1 2026 results underscore a transformational year in which the company strengthened its balance sheet, commenced the ramping down of its cryptocurrency mining and positioned itself as a capital-light infrastructure scale AI computing platform with a clear path to 9-figure annual revenues. First quarter 2026 financial highlights, 3 months ended March 31, 2026. Positive adjusted EBITDA of $1.1 million from a negative $1.3 million last year, Q1 2025. Revenue of $6.8 million, reflecting the planned wind-down of legacy operations as the company transitions to AI compute and colocation revenues. Balance sheet and liquidity as of March 31, 2026, cash and cash equivalents of $71.4 (sic) [ 73 ] million, working capital of $67.2 million compared to negative $0.8 million at March 31, 2025. Digital asset holdings of $13.6 million, up 208% year-over-year. Net fixed assets of $26 million, up 29% year-over-year, reflecting capitalized investment at the Columbiana, Alabama facility. No long-term debt. Balance sheet and liquidity as of May 15, 2026, approximately $125 million in cash and cash equivalents, about $15 million in digital assets and approximately $45 million in year-to-date capital expenditure deployed towards GPU equipment and data center buildout, principally at the Columbiana, Alabama facility. Operational highlights, Columbiana, Alabama AI campus. The company is targeting Phase 1 ready for service December of 2026 and completion Q1 2027. NeoCloudz GPU-as-a-Service. NeoCloudz, the company's GPU cloud business will recognize its first revenue in May 2026 from its initial fleet of NVIDIA B200, B300 GPUs deployed at the company's Alabama facility. Closing message, Q1 2026 marks an inflection point for Digi Power X. Adjusted EBITDA turned positive even as we deliberately run down legacy revenue to make room for a much larger AI compute business. Our balance sheet is the strongest it has ever been. We hold approximately $125 million in cash and $15 million in digital assets as of today with no long-term debt. And we have already deployed approximately $45 million of CapEx year-to-date into GPUs and infrastructure at Columbiana. That is the firepower to execute Phase 1 and the operational platform that follows. Thank you for joining us today. We will now take questions.

We will now discuss some questions we had from shareholders with Digi Power X CEO, Michel Amar. For Q1 2026, can you please discuss the financial results, specifically your cash and cash equivalents as of March 31, 2026.

Good morning, everyone. So as stated earlier, we ended up with actually $73 million cash March 31 with an adjusted EBITDA of positive $1.1 million compared to negative last year. And the adjusted EBITDA is basically all the noncash item deducted from the net loss. We actually -- it reflects a disciplined capital management and provide us with enough cash to execute on our Phase 1 Columbiana commissioning. It also allows us to leverage our balance sheet to get better debt financing for the future.

Do you have any debt?

So as of today, we continue to maintain a zero-debt capital structure as of March 31, '26. As of May 15, we still maintain that zero-debt. We are in discussion with different lenders in order to mitigate dilution. And with the strongest balance sheet we've ever had in the history of the company between cash and cash equivalent of $125 million and digital assets that are unencumbered of about $15 million, we basically have $140 million cash, cash equivalent and digital assets that we can leverage to get comfortable financing, debt financing, some future data center developments. So we don't tap into the equity dilution.

Can you discuss the decision that company made in 2025 to strategically pivot and transition from crypto mining to AI data centers?

So that was the greatest decision we made. The decision to transition from Bitcoin mining to AI infrastructure was the most consequential strategic decision in the company's history. In 2025, 2 realities have converged. First, the economics of Bitcoin mining has become increasingly compressed and cyclical, while demand for AI compute infrastructure was entering a generational growth phase driven by frontier model training and inference scaling. But most importantly, we have spent years assembling a portfolio of power-rich sites in Alabama, Niagara Falls, North Carolina, Buffalo, and they were uniquely suited to hyperscale AI workloads. It took us about 10 years to accumulate these assets that are fully owned by the company and that are very, very valuable today in twofold. One, speed to market. We don't need to wait for an interconnection with the utility. We own the substation. We have utility interconnections. We also generate power through our combined cycle gas power plant that we acquired in 2022 and that allow us to build a very, very strong position in terms of speed to market. And that's why one of the reasons that we were able to get a major contract from a major frontier AI company and deliver in a basically record time period by the end of this year.

How is the company positioned to capture AI infrastructure demand at scale as compared to conventional colocation and cloud competitors?

So we're not a traditional colo operator. We're not a hyperscale cloud. We believe in the structural advantage for the current AI demand environment. A few points to underpin. We own and control our power. We have a total footprint of power of about 393 megawatts over 4 sites. And we have 2 streams of businesses. One is NeoCloudz GPU-as-a-Service, which, by the way, we are live as of today, which derisk greatly our ability to execute. We are actually live and getting AI revenues as of today through a contract that we signed and announced a few weeks ago. And this is our first NVIDIA B200, 300 GPU-as-a-Service offering that we tend to scale up. And then we have the colocation strategy, which is basically a modified lease structure where we basically signed a -- we signed a 10-year deal for $1.1 billion that ensure stability and income without the enormous CapEx of GPUs. So our business model today is to develop both businesses, colocation because we do have the power and sizable power and GPU-as-a-Service because we are vertical and the -- we try to optimize every megawatt of power we own and being vertical give us a much bigger revenue stream.

How is the company planning to fund its expansion in 2026 and beyond?

So we went through the painful last 6 months of raising capital, therefore, diluting the company. But now that we have basically $125 million cash and no debt, we can leverage that balance sheet, and we are able now to avoid future dilution or mitigate dilution by financing the growth of our future data centers through debt financing. And having a strong balance sheet helps you to get better terms in terms of financing. We are thinking about a 70%-30% LTC, loan to cash. So instead of going from 100% self-financing, we're going to go to 70%-30% loan-to-cash financing. We already signed a term sheet with a lender in order to grow our business through smart debt financing.

How much available capacity does the company have in terms of power MW at its various sites?

So, so far today, we have connected to the grid about 200 megawatts, 210-megawatt live connected to the grid that we can turn into AI revenues. And we are coming up basically another 180 megawatts where we should get back our load study by 2028 -- end of 2028, which will give us a total of about 393 megawatts of secure capacity across our sites that we own. We also have an LOI that we announced a few months ago with a massive power plant in West Virginia of 1.3 gigawatts that now we are better positioned to explore and come to terms, if possible, in order to scale up our business exponentially for 2028, '29, 2030.

Can you discuss some of the company's key accomplishments year-to-date, specifically surrounding site expansion, 24-month contracts signed with SubQ AI and current balance sheet and liquidity...

So the year-to-date was an execution achievement. We executed bare metal GPU rental agreement with Sub-Quadratic, a new upcoming lab, and we delivered in a very short period of time and on time. Our contract was as of May 15 RFS, and we delivered on time. So we believe it was a very incredible teamwork. We teamed up with the NVIDIA team and Supermicro team and our team in Alabama, and we delivered the -- our first GPU bare metal rental as of today. So that was one major accomplishment. The second, we financially developed a very strong balance sheet that we can leverage for our future. And we do not have any concerns of lack of cash today. We can grow. Third, we signed a massive contract with one of the top chip maker, a world top chip maker of $1.1 billion, expandable to -- up to $2.5 billion, and that gives us a steady, predictable revenue for the next 10 years and also a lot of credibility as -- now we are in discussion with many, many top players for our expansion in the next 3 years.

When does the company expect to begin generating its first AI revenues?

Today. We started today. We handed over last night the first GPU -- bare metal GPUs to our customer and been working very hard in the last few weeks, we received the GPUs from NVIDIA in first week -- first few days of May. And we tested it, commissioned it and delivered the GPUs to the customer. So we are starting our AI revenues as of today.

How many MWs of total live AI infrastructure across the company's multisite portfolio does it expect to activate in 2026 and 2027?

So '26, we expect to expand our GPU bare metal with another few megawatts. Today, that first contract that we delivered was a little bit under 1 megawatt, and we expect to deliver by the end of the year an additional 6 megawatts, and we get the revenues potentially last quarter of this year or early quarter next year. And we're going to deliver the first quarter -- the first phase of this colocation contract December 2026. It's about 15 megawatts, and we'll end up finalizing the second phase Q1 2027, which would be an additional 25 megawatts for a total of 40 megawatt which will be a running $8 million, $9 million a month run rate for colocation. And it's about -- in GPU, it will be about $7 million, $8 million a month first quarter of 2027.

What are the company's revenue projections for the next 3 years?

So -- we don't have an issue with power. We do have the most -- one of the most important bottleneck for most of the companies to get access to power. We do have access to power. So our strategy is to turn that power into AI revenues. And our goal is to, for '27, be active with 90 megawatts worth of colocation and basically 10, 12 megawatts of GPU-as-a-Service that would give us a total run rate of $300 million a year. In 2028, we plan to add an additional 50 megawatt of colocation and 20 megawatt of GPU bare metal that would give us a $450 million to $500 million a year run rate. And in 2029, an additional 100 megawatts of colocation, an additional 50 megawatt of GPU bare metal that would give us an $800 million to $1 billion run rate per year. So this is our goal. It can be accomplished as long as we get the financial strength and the debt financing instruments in place, which we are executing now on the financial side. Our stock is very liquid, so very attractive to the different institutions. So we are getting a lot of interest in funds to partner or lenders to partner with us and support our growth. But this is our plan for the next 36 months.

Thank you. That brings us to the end of today's question-and-answer session. We would like to thank everyone for their participation and interest in today's conference. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.