WhiteFiber, Inc. (WYFI) Earnings Call Transcript & Summary

Hello, and welcome to the WhiteFiber Third Quarter 2025 Earnings Conference Call. Good afternoon, and thank you for joining us. We will begin with prepared remarks from management, followed by a question-and-answer session. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the call over to your host, Cameron Schnier, Senior Vice President of Capital Markets and Corporate Strategy at WhiteFiber. Cameron, please go ahead.

Thank you, and welcome to the WhiteFiber Third Quarter 2025 Earnings Call. Joining me today are Sam Tabar, our Chief Executive Officer; and Erke Huang, our Chief Financial Officer. Before we begin, I'd like to remind everyone that some of the statements we make on this call are forward-looking in nature and subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include, but are not limited to, those factors described in today's earnings press release, our Form 10-Q for the quarter ended September 30, 2025, filed today, as well as our other filings we may make with the SEC from time to time. Our remarks today may also include non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in our Form 10-Q and in the earnings press release posted on our website. Following our prepared remarks, we will open the call for questions. With that, I'll turn the call over to Sam to discuss our performance. Sam?

Thank you, Cam, and thank you all for joining us. The third quarter marked the WhiteFiber's first reporting period following our IPO in August. And therefore, it represents only a partial quarter as a stand-alone public company. This period reflects the natural lumpiness of a business in transition as we align operations and capital structure for our next stage of growth. Our focus remains on building long-term value by executing on our development pipeline, expanding customer relationships and advancing our financing initiatives. I will start with an update on NC-1, our flagship development project in North Carolina. The site remains our top priority. Design, utility interconnection and preconstruction work are advancing on schedule. We remain on track for initial deployments in the first quarter of 2026. We expect NC-1 to begin generating revenue in May of 2026. Over the past several months, we have seen a significant increase in demand for credible, near-term, high-density capacity. NC-1 is one of the very few sites in North America with meaningful availability in early 2026. That scarcity has made it a highly sought-after resource. As we expanded commercial engagements around the site, we received more than 10 firm proposals from leading AI labs and enterprise customers. Commercial terms for this delivery window has also improved meaningfully, both in pricing and in overall duration. We are now in the closing stages of negotiations with multiple highly creditworthy counterparties. These are large-scale, long-duration, billion-dollar commitments for our customers. By enterprise standards, the process has progressed at a rapid pace. We continue to work collaboratively through final diligence tied to project readiness and delivery timing. We remain confident in the path to execution. As a young company operating in a market that has seen its share of unproven entrants, credibility matters. Customers are making generational infrastructure decisions. Our responsibility is to demonstrate readiness, reliability and the ability to execute. We focus on delivering what we promise. We will not compromise on counterparty strength or deal structure simply to announce a transaction. Taking a disciplined approach now positions us to secure that partnership that maximizes long-term equity value and provides clear visibility on future cash flows. In parallel, we are working closely with our debt advisers, credit partners and prospective lenders to structure the agreement that will be ultimately finalized to be readily financeable on cost-effective terms. We expect the facility to target roughly 75% loan-to-value with the remaining equity portion funded through existing liquidity, operating cash flow or other available sources. Our goal is to secure financing that supports the full 99-megawatt campus. We also want to maintain balance sheet flexibility and align capital deployment with contracted demand. In short, NC-1 remains firmly on track. We believe the discipline that we've shown has strengthened both the commercial and financial profile of the project. We remain focused on execution and on building a cornerstone asset that will drive significant value for years to come. We believe the discipline and the patience that we've shown are now yielding a better result. We expect to finalize an anchor agreement in the very, very, very near term. The depth of demand we saw for NC-1 also reinforces how broad the opportunity set is for WhiteFiber. Several of the counterparties that engage with us on NC-1 have expressed interest in capacity in other regions where we do not yet have assets. Based on those conversations, we are narrowing in on a new development site that offers meaningful 2026 power availability and strong expansion potential. Client demand is guiding our site selection process. We are now actively progressing through diligence. Overall, our development pipeline remains very strong. We are currently evaluating more than 1 gigawatt of projects for the 2026 and 2027 timeframes. Our first priority remains finalizing the NC-1 anchor and moving that project through financing and construction. The interest we have seen underscores the scale of opportunity ahead. The actionable portion of our pipeline is growing rapidly. We're driving that growth by identifying and securing high-quality sites that others often overlook or can't access through traditional channels. This capability has become a key differentiator for WhiteFiber, as we build a platform for sustained growth. Turning to Montreal. Our Montreal-3 facility is now operational and began recognizing revenue from our contract with Cerebras in October of this year. The retrofit was completed on schedule and within budget. For the fourth quarter, we expect Montreal-3 to contribute slightly more than $2 million of revenue with a full quarter contribution beginning in the first quarter of 2026. Revenue for this site should be approximately $1 million per month depending on the Canadian-USD exchange rate. Completing this complex retrofit in under 6 months, from site control to revenue generation is a testament to the speed and precision of our development and operations team. That level of execution has not gone unnoticed by customers and partners. We are already receiving inbound inquiries to replicate this model at larger scale. Reliable delivery is often the best form of marketing in our industry. At Montreal-2, we continue to evaluate both colocation and internal cloud use cases. Activation has become -- has been deferred while we prioritize NC-1. The facility remains a flexible asset that can be deployed quickly once the commercial path is finalized. Turning to Cloud. The market narrative has shifted. Early last year, supply was extremely tight. Since then, supply chains have improved. New capital has also funded additional entrants. As a result, the tone has become more skeptical. This change has created pockets of price-led competition. Some providers are treating GPUs as a commodity. Our view is simple. Capacity that competes on price alone without matching performance, reliability or software capability will struggle to attract long-term financing. Over time, the market will reward operators that deliver real outcomes, not just low sticker prices. In that environment, our approach remains patient and selective. Our growing colocation business supports the broader platform. Because of that, we do not need to chase uneconomic growth. We only expand when contracts meet our return thresholds. That includes multiyear terms, upfront commitments and take-or-pay structures. We are also comfortable waiting through periods of market softness when that is the right call. When the economics are attractive, we face a different constraint. The challenge is often data center space within the customer's delivery window. Larger cluster opportunities appear regularly. The limiting factor is usually the availability of rack space at the required time. Today, we run our GPU cloud business from third-party facilities. We believe our capital is better used developing and owning data centers for colocation. The risk-reward profile is stronger there than building data centers solely for our own GPU clusters. Capital is finite, and we are disciplined on how we deploy it. We stay flexible, but we remain strict about returns. We have walked away from deals that did not meet our standards. That discipline has served us well. We continue to evaluate a wide range of opportunities. We are focused on deals with at least a 12-month term and pricing aligned with our target payback period. Recent smaller wins that have met those criteria have consumed much of our previously available inventory. Since quarter end, we began winding down a customer agreement. It represents a little over $20 million of our annualized cloud run rate. Discussions are ongoing, so we can't share details or identify the counterparty just yet. We expect a mutual termination once the documentation is complete. Even so, we believe redirecting this capacity to larger enterprise and institutional customers is the right long-term strategy. It also helps us avoid potential complications. We have already identified new counterparties to absorb this capacity. The commercial terms are comparable or frankly, even better. These contracts should begin contributing in early first quarter. Because of this transition, we expect a short term of underutilization in the fourth quarter. We still plan to partially monetize the capacity through on-demand pools. That should limit any temporary revenue impact. Looking ahead, we are exploring more capital-light models in cloud. Those include managed services, partnerships and enterprise private cloud deployments. These approaches use our software and operational strengths. They also expand our addressable market, while offering attractive returns on invested capital. We are also investing in technology that improves the long-term profile of the business. Our recent engineering hires are enhancing our software stack. They are improving deployment flexibility and enabling cluster performance that exceeds standard benchmarks. These investments help us compete on performance and reliability, not price. They support durable growth across the cloud platform. Overall, our Cloud platform remains a recurring high-margin business. It complements our colocation and development activities. As remarketing progresses and new contracts are signed, we expect to restore ARR and grow through the coming quarters. And now, I'd like to pass the line to Erke to discuss our financial results. Erke?

Thank you, Sam. Total revenue for the third quarter was $20.2 million, up 64% year-over-year from $12.3 million in the same period of 2024. Cloud services generated $18 million of revenue, an increase of 48% from $12.2 million a year ago. The growth was driven by the expansion of GPU capacity for new and existing customers, partially offset by a $2 million service credit recognized this quarter under a customer agreement. Colocation services contributed $1.7 million of revenue compared to none in the prior year period following the integration of our Enovum operations. We also recorded a $0.5 million of other revenue from equipment leasing activities, bringing total consolidated revenue to $20.2 million. Total gross profit was $12.7 million, representing a gross margin of approximately 63%. Cloud services accounted for $11.7 million of segment gross profit and colocation services for $1 million. Operating expenses were $34.7 million compared to $13.1 million a year ago. General and administrative expense was $21.3 million, which included approximately $11.3 million of non-cash share-based compensation. The share-based compensation was elevated this quarter due to the one-time initial grants for both existing employees and key hires. We expect this expense to be significantly lower in the fourth quarter in the low single-digit million range. We estimate our quarterly run rate core G&A to be around $6 million on a cash basis. In addition, there's around $1 million to $2 million overhead associated with new data centers coming online, project level costs tied to closing data center sites or negotiating customer contracts and certain discretionary items, such as events or incremental marketing spend. There were also a number of one-time or nonrecurring items in the third quarter, including costs related to public company readiness, deposits on data center sites, recruiting expenses as we expanded headcount and other miscellaneous items. We have expanded our organization to support a significantly higher revenue base, which should drive operating leverage as we scale. Several recent hires will also allow us to replace consulting expenses as those functions transition in-house. Excluding nonrecurring items, normalized G&A -- cash G&A would have been approximately $8 million for the third quarter. We expect the fourth quarter G&A to be around $10 million, including share-based compensation. Operating loss for the quarter was $14.5 million compared to a loss of $0.8 million in the third quarter of 2024. Net loss was $15.8 million or $0.47 per share compared to a net loss of $0.4 million or $0.01 per share in the period -- same period last year. On a non-GAAP basis, adjusted EBITDA was $2.3 million compared to $5.6 million in the third quarter of 2024. Turning to balance sheet. We ended the quarter with $166.5 million of cash and cash equivalents, up from $11.7 million at the year-end 2024, reflecting the IPO proceeds received in August. Capital expenditures totaled $13 million for the quarter, driven primarily by the completion of Montreal-3 and initial spend for North Carolina-1. We expect 4Q CapEx to increase materially based on budgeted work for the development of NC-1 and potential discretionary spend on GPU procurement. Potential GPU spend will be predicted on contracts rather than speculative inventory build. We remain a very strong liquidity position with working capital of approximately $179 million and no draws on our existing credit facility with the Royal Bank of Canada. I will now turn the call back to Sam for closing remarks.

Thank you, Erke. As we close today's call, I wanted to take a step back. WhiteFiber is still early in its journey as a stand-alone public company. This quarter marks our transition from launch to execution. Our current cost base reflects the upfront investments required to operate as a public company. It also reflects the cost of supporting a much larger business. We have built the foundation to scale. As revenue grows, we expect meaningfully operating leverage to follow. Our focus remains exactly where it should be. We are earning the trust of our customers, partners and shareholders by executing with discipline. We are building a business designed to endure beyond cycles. Our strategy is simple, develop and own data centers that generate long-lived cash flow, grow a high-margin cloud platform that scales responsibly and finance both in a way that protects shareholder value. NC-1 will be the cornerstone of that platform. The commercial process is now in its very final stages. We believe the discipline we have shown will lead to a stronger, long-term outcome for our shareholders. At the same time, the level of enterprise demand we continue to see gives us confidence. It tells us we're pursuing the right opportunities. It also confirms that high-quality capacity with near-term availability is increasingly scarce. Our priorities for the coming quarters are clear: finalize the NC anchor, secure financing for the full campus, and continued scaling colocation and cloud in a balanced, capital-efficient way. The opportunity in front of us is significant. We are positioned to execute with credibility and speed. I want to thank our employees for their focus, our partners for their collaboration and our shareholders for their continued support. With that, operator, please open the line for questions. As a note, Ben Lamson, Head of Revenue, and Billy Krassakopoulos, President of WhiteFiber, will be presented for Q&A. Please open the line.

[Operator Instructions] We'll now go to your first question that will come from the line of Darren Aftahi with ROTH.

Congrats on the progress. I guess, as you talk about the developmental power pipeline, I just had a question on that. Are you broadly sticking to kind of this overlooked asset strategy where you can kind of repurpose/retrofit sites and properties? Or is the strategy much broader than that? And then my second question is, I assume you've gotten inbounds, and you kind of hinted that at some other sites. Are you taking more of a strategy where you're trying to procure sites and power on behalf of customers? Or is this procure the site and then figure out the formal lease with a potential customer after the fact?

Yes, those are great questions. Easy to answer. Billy, do you want to take those questions?

Sure. So, Darren, we're doing both. We've got projects that are retrofits. We've got projects that we're looking at that are greenfields, and it's really customer interest and customer demand that will drive final decisions on those. Second part of your question, again, we're doing both. We've got properties that are specialized for specific situations, specific clients, depending on their timeline. We also have properties that we're looking at that we are taking the build it, and they will come approach. But again, very conservative and strategic in making those decisions.

We'll now go to your next question coming from the line of Nick Giles with B. Riley Securities.

I was hoping you could provide some additional color on why the customer agreement at NC-1 is taking a little longer. Is it really driven by additional parties coming to the table, maybe due diligence taking longer than expected? Or is it really down -- still down to ongoing negotiations on terms? Just curious at this point, how many parties you remain in discussions with for that initial capacity?

Yes. The answer -- what was the first part? Because the answer was yes to number one, yes to two and no to three. But can you remind me of the first question? There were 3 questions there.

Yes, sorry. Sorry, Sam.

Rather, there are 3 permutations. So if you could just remind me the permutations.

Yes. Maybe just at this stage, how many parties are you in discussions with? Are you really down to one party? And then -- yes.

Yes. So we had a tsunami of interest from very high-quality counterparties, counterparties you've heard of. We reduced it to 2. There are now 2 who are competing extremely hard in finalizing this. These agreements, by the way, required multiple steps. They include engineering work, commercial negotiations, internal approvals. These counterparties are giant, so they have to go through their own Board approvals. So that naturally extended the timeline a little bit. But we have very firm proposals in hand. I was expecting to sign one today. But now, it's just a little bit of due diligence and confirmatory due diligence on both parties. They're both equal in terms of attractiveness. I will be countersigning the one who signs first. But one factor behind the longer timeline is there were a lot of parties involved. Additional groups, as you suggested, entered the process during the quarter. The demand continued to build. And by the way, that did put upward pressure on both pricing and term length. So that was great to have. We also worked closely with our debt advisers. We wanted to avoid rushing into a structure that would be harder or more expensive to finance. So we wanted to be disciplined on that there. So that took a little bit longer given the multiple counterparties we're speaking with. So yes, we've been patient. We've been deliberate. We believe that's the right approach. We're now very close to the goal line. And as of this morning, I thought I was going to be signing one of the agreements just before this call, those very final steps did not align in time for this call. So we'll provide an update as soon as both sides finish their processes.

I appreciate all that detail. My follow-up would be, how much activity is going on at the site today? Are you -- it sounds like you've reiterated your timelines for May, for the initial phase. So are you still continuing with development or if things really at a stage where you're pausing until you sign that first customer?

Yes. I know the answer to that, but I'd love for Billy to take on that because he's on the front line.

Sure. So as of now, we're not -- we haven't paused anything. We're still continuing a lot of the demolition and the cleanup work of the site completed a couple of weeks ago. Municipal permitting and stuff like that is all in process. And nothing -- to date, nothing has slowed down.

Next question will come from the line of Brian Dobson with Clear Street.

Very positive news regarding the imminent contract signing. You mentioned that you were in negotiations with like 10 potential clients at the onset. And then, of course, that winnows down to a few. Are you seeing this similarly -- yes, are you seeing similarly robust demand at your other facilities? And are you seeing similarly robust demand for, call it, yet to be contemplated facilities that are being proposed by these clients?

The answer is yes. And Billy, do you want to take that on?

Sure. Our other facilities do not have the volume that North Carolina had. So the counterparties, "runner-ups" that we had for this property, are looking at our portfolio and asking what kind of availabilities we have for end of 2026, early 2027. So a lot of positive stuff came out from us just analyzing all the demand that we had and not signing with the first party that came to the table.

Also, probably, Billy, worth mentioning -- is it worth mentioning that a lot of these clients as we have been speaking with them are looking to future sites that we've identified?

That's right. They're looking in our portfolio. They're looking at our pipeline and trying to match what fits in their schedules of deployment. So like we said, we've gotten a lot of interest. The runners-up in the NC deals are looking to do projects with us in late 2026, early 2027.

And then, in the past, you've said that you would contemplate both large-scale and smaller-scale facilities. Do you still feel that way? And do you still see, call it, more attractive return on investment at the smaller ones, even if marginally so?

The environment that we're in, the shortage of inventory and capacity that we're currently going through, gives priority to both. We've got smaller sites that are 30 megawatts that we can execute much quicker on that are in the pipeline with attached customer demand. We also have 100-plus megawatt sites, again, with attached customer demand that we're looking and currently due diligencing and analyzing to execute on.

Next question will come from the line of George Sutton with Craig-Hallum.

First, just a quick question on North Carolina. So I think you're suggesting that either of the 2 customers would take the full site, is that correct?

Billy, do you want to take that since you're interacting directly with them?

That is correct.

Okay. On the GPU as a service market...

Probably worth mentioning the deal -- I know I mentioned this already, but I'll say it again, the deal did upgrade as the negotiations went on. So time was our friend. And so we've upgraded it in terms of profit and duration. So it's been a good problem to have. But of course, the negotiations went on a little bit longer as the deal upgraded.

Understand. So relative to the GPU as a Service market, Ben, I wondered if you could just talk more broadly about the pricing you're seeing, the contract duration you're seeing, the demand by the NVIDIA generations, what is different about that market today than perhaps a quarter ago? And then separately, can you just give us any details in terms of the timing of the wind down of the customer agreement you mentioned?

Yes. So to address your first couple -- there's a few things going back there. So I'm going to make sure I touch on all of it. Still extremely strong demand for H200, even H100, in fact. I just had an inquiry for H100s come through today. So still really strong demand for Hopper generation. B200s -- B300s are starting to get delivered. I think what we're seeing across the market is there -- some of our peers are taking large deals at price points that we just don't feel makes sense, and we feel that they're irresponsible. And to us, we feel that some of our peers are taking these deals to just to be able to announce a logo. When in reality, it's not financially responsible. And we're -- on the other hand, we're practicing pretty extreme financial discipline. And I think that's going to help us weather any upcoming storm. So yes, there's pricing pressure in the industry, but I think it's predominantly driven by some, what we call, irresponsible decisions that we're not going to participate in, where we're focused on longer-term agreements with healthy margins, where we are competing on performance and reliability and not competing on price. And in the long run, we're pretty confident that that's going to pay off. Did I unpack -- was there anything else I missed in that kind of first half?

No, I think that's good. I am curious if you're getting any benefit from some of the kind of first-to-market technologies that you're offering. Is that yet in market? And is that part of your discussions?

Yes. Yes, yes. So yes, we absolutely are getting some benefit there, not yet in market, but it has generated quite a bit of buzz and partnership inquiries. And we think once we get this white paper out early next year in Q1, it's going to open a lot of doors. I mean, there's already a lot of conversations happening behind the scenes right now that are early. Far, far too early to talk about, but we're certainly really excited and optimistic for what things like the cross data center workload are going to open up for us. Yes, I hope that answers your questions.

That does. Can you address the timing of the contract that is getting wound down just so we have some sense of the impacts?

Yes, that's still ongoing. That hasn't been completely finalized. So I don't have details that I can share on this call at this time.