Soluna Holdings, Inc. (SLNH) Earnings Call Transcript & Summary

You have all the time you want. Go for it.

Yes, I can actually show you a bit of the like a simple depiction if you will, of sort of how to think about our business. So cloud is our solution for generative AI. It's our entry into that industry. It allows you to build and deploy fast without harming the planet. So we offer a host of AI computing solutions that are tailored for small enterprises. So small work groups inside of companies that are just starting their AI journey can use this platform for smaller workloads, young startups that are just getting started that need access to these high-performance GPU clusters can get that and feel comfortable that they're powered by sustainable energy. And so we like to say it's sustainable, scalable AI. We've had recent progress and initiatives underway at that holding company or operating company. The first is we reserved about 2 megawatts at our Dorothy 2 site for a 2-megawatt projects. That will be a proving ground, if you will, for a new data center design that we're developing. We did some microgrid design and some initial designs around what we call Helix, which is a data center design that's nearing completion. We are fitting that into sort of our classic behind the meter structure. So we want to prove that you can put data centers back there. And then the second thing we did is we formed that relationship with HPE. It's about 1-megawatt footprint up in a renewable energy power data center in Canada. It's hydropower, 100% powered by renewables. We signed a deal with HPE that makes a portion of a very large cluster available to us to sell to the marketplace. And we started selling it. We signed a couple of deals over the holidays. We signed another one recently here at the beginning of the year. And we also signed a term sheet for a very large reserve footprint that could consume the entire remainder of the cluster and expand. So we're sort of getting past the footprint and growing there. We also signed a partnership with a company called Gynger to offer us AI capabilities and financing for young startups. So young startups typically have that first funding, they've got to prove if they can make the model work for a specific application. And getting access to GPUs can be challenging, both from an availability standpoint and a cost standpoint. And so the Gynger partnership allows us to stretch that financing over a longer period of time for them while preserving our need to get cash upfront and have a strong credit profile for our customers. So Gynger sort of bridges that gap. We'll be sharing more updates on the AI business over the next several weeks. We're going to be releasing that this week. And to be honest with you, John, since the DeepSeek announcements or phenomenon or disruption, there are so many different headlines being used to describe what happened in the last couple of weeks, we've seen a growth in the pipeline and really an acceleration of activities on that business. So we're very encouraged. We have thousands of GPUs now in the pipe that are looking to leverage our H100s that we have available to us. So that's the cloud business. We're essentially offering GPU as a service, but that's not the only business we're building on the AI side. We've been quietly doing some work to look at our pipeline and look at the different projects in that 2.6 gigawatt pipeline, if you will, to do 2 things: one, identify projects that are perfectly suited for AI applications and potentially locations for everything from hyperscalers to Tier 2 AI companies to lease data centers that we might build there. But we're also looking at an interesting phenomenon in our pipeline. It's getting so big now that we're getting projects that are actually geographically closer and closer together, so you're getting these clusters, if you will, of campuses where you can get upwards of 500 megawatts to 1 gigawatt of energy in sort of one general location, if you will, they're probably like 10 to 100 miles away from each other. And that could be very exciting for some of these big initiatives like a Stargate or something like that, looking for great sustainably powered locations for AI data centers. Now if I may share my screen, John, I want to show you something which I think would be helpful to the audience here. Can you see that?

Yes, I can.

Okay. Great. Let me see if I can put it in a full screen. So this is an easy way for folks who are looking at this research, watching this webinar to understand what Soluna does and how our business is evolving. On the left, you have our 2.6 gigawatt pipeline. Here, we signed PPAs and we acquire land that's colocated with those renewable energy projects we talked about. And we're looking for projects that have high curtailment. So that's wasted energy we can get for a very low price. We combine that with grid power and that allows us to turn that into computing. On the top track here, that's what we've been doing today. We develop, own and operate BTC hosting data centers, and we provide that hosting service, as I said, this is high-end services for very large companies and then we deliver that service. What we're focusing on that's new, and the AI cloud business is a way for us to get our arms and understand that, is developing AI infrastructure, where we take those projects and develop AI data center projects. And our goal is to form joint ventures with data center operators and capital providers that can then help us build these next-generation facilities behind the meter. So these data centers will not look like our Bitcoin data centers. They'll be direct liquid-cooled, much larger facilities designed for some of the most demanding AI workloads. And together, if you look at that whole process, we're essentially furthering our mission to drive more renewable growth and make renewable energy a global superpower. And that's what we describe as renewable computing. Does that make sense, John?

Well, it does. I think one of the things that I know you pointed out to me when we were having our earlier discussions is that a Bitcoin data center is very different than a Generative AI data center and [ the only difference ] between them -- some companies may say, "Oh, yes, we could just convert it over." But you can't.

That's right. That's right. Right. You might be able to convert the site, so you would have to remove the Bitcoin hosting facility and then replace it with the AI facility. And it's a completely different design. But we're excited about this because this could essentially explode the monetization options for this very robust pipeline that continues to grow.

Right. Yes. And demand for data centers is continuing. Like you said, [ we have ] had a lot of discussions with a lot of people about it. And essentially, algorithms are always going to get improvements. And as they improve, guess what, more projects become financially viable, more projects become financially viable, you need more data centers.

That's right. That's exactly right. That's Jevons paradox at work. In my entire career, I've seen it happen so many times, right, as you have, I'm sure, and that is that technology continues to move forward. In fact, you can argue that on a global basis, humanity requires technology advancement in order to improve, right? We're constantly advancing. Now you have AI, you have advanced genetics and synthetic biology with things like CRISPR available. There is quantum computing around the corner. We're constantly moving forward when it comes to technology and technology waves just accelerate our ability as a species to solve big problems. And so that's what's exciting about AI is that's going to accelerate our ability to do all of that because we're sort of standing on the shoulders of all of those technology advancements.

Yes. Now certainly, the tools that mankind builds is always kind of the key for the next generation. AI, to me, is tool.

Exactly. Just another tool that we've long waited for, and it's now here at a level and a scale that can really help us advance a lot of initiatives.

So what are you seeing for in 2025 for Soluna?

2025 is all about -- Yes, it's all about growth for us, John. 2025, the last 2 years or so, we've been focused on rearchitecture, fixing broking aspects of the company so that we could scale and bring in capital to scale and grow the business. We've made huge progress on that. We still have some things to do, but we now have passed some pretty significant milestones that are going to push us forward. As I said, we have that growth capital line now available to us and fully cleared through the regulatory process. We have remove the convertible notes. So the restrictions around the movements and activities of the business are no longer outside of our control. They're now in our control. And so that sets us up well for 2025. We have a number of catalysts we're driving forward and building momentum around. The first is Project Kati. We've talked a lot about that project sort of moving through the regulatory process in Texas. We expect it to reach full shovel-readiness here very shortly, and we'll start to begin capital formation and construction activities for that this year. Project Dorothy 2 will start to exit construction activities to energization. We expect the first initial phase of that energize in early Q2 with capacity ramping up throughout the year and ending sometime in the fall. We have a number of new AI initiatives and partnerships that will emerge as we expand our strategic pipeline and do some of the activities I talked about earlier, which is to find new ways to develop our projects, so they're not just Bitcoin projects back there. And that's going to take partnering with folks that have expertise in these more complex advanced facilities and we've already started those discussions. So you'll hear some announcements about that this year as well. Customer expansion. We continue to grow the logos, if you will, of customers that we're working with, especially the hyperscale miners. As I said, we're keenly focused on the largest miners in the industry, the most professional, the folks that sort of have rigorous requirements, if you will, and they continue to be happy with our service. Our NPS scores are very high. And some of the anecdotal comments that we receive is that our team is wonderful. We do pay a lot of attention to detail and we treat their equipment as if they were our own. And we will continue to announce new renewable energy partnerships in 2025, John. We did Kati and Rosa last year. You can expect some new names hitting the board here in 2025, too. I think it's going to start to get hard for folks to keep track because we have so many projects sort of coming into the development pipeline. And then, of course, Soluna Cloud, we'll secure new deals as we expand that business and continue to experience growth and scale our AI hosting operations as we scale that AI part, the bottom of that diamond I showed, I think '25 is really set up to be a transformational year for the company.

Great. Well, John, I think we're going to have to leave it here. That was awesome. I really appreciate it. So to learn more about Soluna, please visit their website or access our research at WTR's website that's www.watertowerresearch.com, John, thanks so much again. And investors, and everyone, thank you for joining us. I have a quick disclaimer here at the end.

Thanks, John.

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