Whitefiber Q3 2026 Earnings Call Transcript

Whitefiber (NASDAQ:WYFI) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Whitefiber’s third quarter revenue increased by 19% year-over-year, driven by a significant rise in colocation revenue and the initial contribution from NC1.

The company reached important milestones with NC1, achieving full operational status and beginning billing for a $865 million contract over 10 years.

Whitefiber secured a $300 million credit facility for NC1 and signed over $700 million in new cloud services contracts, including capital-light managed services agreements.

Future projects NC2 and NC3 have shown strong demand, with expectations for initial capacity by late 2027.

The company plans to recycle capital from NC1 into future projects and emphasizes structuring financing and customer agreements together.

Whitefiber reported a net loss of $101.4 million, largely attributed to a conversion expense from the repurchase of convertible notes.

The company targets significant growth in cloud services revenue, aiming for $365 million in annualized revenue by mid-2027, driven by new contract deployments.

Managed services are expected to generate over $50 million in annual recurring revenue by the end of the first quarter of 2027.

Whitefiber’s strategic focus remains on executing signed contracts, expanding infrastructure capabilities, and maintaining robust customer and financing agreements.

Full Transcript

OPERATOR

Hello and welcome to the Whitefiber third quarter 2026 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 during the Q&A. If you would like to ask a question, please press star one on your telephone keypad. As a reminder, today’s conference is being recorded. I would now like to turn the call over to your host, Cameron Schneer, Senior Vice President of Capital Markets and Corporate Strategy at Whitefiber.

Cameron, please go ahead.

Cameron Schneer (Senior Vice President of Capital Markets and Corporate Strategy)

Thank you, and welcome to the Whitefiber third quarter 2026 earnings call. Joining me today are Sam Tabar, our Chief Executive Officer, and Justin Zhu, 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, 2026 filed today, as well as other filings we 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’ll open the call for questions. With that, I’ll turn the call over to Sam to discuss our performance.

Justin Zhu (Chief Financial Officer)

Thanks, Sam. Third quarter revenue was 24 million, up 19% from a year ago, driven by colocation revenue which more than tripled to 5.6 million. The increase reflected Montreal 3, which was not yet building a year ago, and the initial contribution from NC1. Cloud revenue was 18.1 million, including 3.4 million from the previously disclosed customer termination. Excluding that amount, cloud revenue declined approximately 18% year over year, reflecting the transition from that customer to new deployments scheduled to enter service over the coming quarters.

NC1 contributed 1.1 million of lease revenue during the quarter, beginning when the first 20 megawatt data hall was placed in service on September 23rd. Earlier billings and installation fees are deferred and recognized over the lease terms. Gross profit excluding depreciation and amortization was 13.7 million, a margin of approximately 57% compared with 59% last quarter, mainly reflecting the smaller termination fee. G&A expenses were 18 million, down 16% year over year. That includes 3.8 million of share-based compensation. Lower consulting and transition service fee were partly offset by startup costs that cannot be capitalized. Adjusted EBITDA was approximately breakeven compared with positive 2.3 million in prior year quarter.

Sequentially, performance reflected the smaller termination fee and the startup cost at deployments not yet generating revenue. Net loss was 101.4 million that included an 80.8 million induced conversion expense associated with the August repurchase of convertible notes, which is excluded from adjusted EBITDA. Turning to liquidity, we ended September with 138.5 million of cash and cash equivalents plus 9 million of restricted cash. Deferred revenue, largely customer prepays, was 306 million, up from 80 million at year end. In August we issued 310 million of 5% convertible notes due 2032 and used part of the proceeds to retire most of our 2031 notes, netting approximately 180 million. We also retained our rights under the January zero-strike call to receive approximately 5.9 million shares, subject to the terms.

After quarter end, borrowing under the digital facility reached 100 million. We completed the 50 million acquisition of our NC2 and NC3 data center and signed a 300 million secured credit facility for NC1. Initial funding is expected later in November or in December, subject to extension as may be mutually agreed by the borrower and the lenders and to satisfaction of the remaining funding conditions. Turning to contracted revenue, remaining performance obligations were 729 million as of September 30th. During the quarter, we concluded that certain colocation agreements, including those at Montreal 3 and NC1, are classified as leases for accounting purposes, so their future payments are excluded from that figure, and future payments under those leases totaled approximately 421 million at quarter end, and that figure excludes the second 20 megawatt at NC1, as that lease had not yet commenced as of September 30th.

I’ll now turn the call back to

Sam Tabar (Chief Executive Officer)

Thank you, Justin. Before we take questions, I want to put the NC1 financing in perspective. Signing this $300 million facility is a major milestone for Whitefiber. It took longer than we expected, but it puts us in a much stronger position to fund our next phase of growth. Once funded, the facility will allow us to recover part of the capital that we invested in NC1. We can then put that capital to work in our next projects. That is how we intend to scale: arrange project debt at the outset, invest equity alongside it, deliver the infrastructure, then recycle equity into future deployments.

Together with the fully contracted building at NC1, this gives us a stronger base for growth. In less than a year, we’ve taken an existing industrial site through a complex retrofit, customer delivery, and institutional financing. That is the model we’re building on, and we’re bringing that experience to NC2 and NC3. We’re structuring customer agreements and financing together from the beginning. We have a clear understanding of what lenders require and how to build those requirements into our next leases. The capital we raised in August gives us the flexibility to keep advancing the business through this process.

It also reduced our dependence on accessing the markets at any particular moment. Together with the NC1 facility, it puts us in a stronger position to choose our next investments and decide when to make them. The market backdrop has been difficult. AI infrastructure shares have fallen sharply, including ours. We know that has been painful for shareholders and we take it seriously. From where we sit, the opportunity ahead has strengthened. Our signed cloud business is larger, customer interest in our next North Carolina developments is broader and stronger. Managed services gives us another way to grow recurring revenue with the potential for very high incremental margins while customers fund the underlying infrastructure.

Building and operating this infrastructure is hard. We believe that the ability to solve problems and deliver will increasingly distinguish operators in this industry. We now have a stronger platform and a clearer path ahead. Our first priority is delivering the business that we’ve already signed. Strong demand gives us choices about what comes next. We’ll pursue opportunities where customer quality, returns, and financing come together. We’re preparing for greater scale while keeping control over the pace of investment. We believe Whitefiber’s foundation is stronger and its growth prospects are better than at any point in our history.

Our job now is to turn that foundation into results: bring contracted capacity into service, turn it into recurring cash flow, reinvesting capital in attractive new opportunities. That is how we intend to build lasting value for shareholders. With that, we’ll open the call for questions. Whitefiber President Billy Krasikopoulos and Michael Francisco, Vice President of Whitefiber Cloud US, are also joining us for the Q&A. Operator, please open the line.

OPERATOR

Thank you. If you would like to ask a question, please signal by pressing star-1 on your telephone keypad. If you are using a speakerphone, please make sure the mute function is turned off to allow the signal to reach our equipment. Again, press star-1 to ask a question. We’ll pause for just a moment to assemble the queue. We will take our first question from Nick Giles with B. Riley Securities.

Nick Giles (Analyst at B. Riley Securities)

Great. Hi everyone. Thanks for taking my questions. I first just wanted to ask, just given some of the supply chain issues at NC1, kind of what the learnings are from that and what steps you’re taking to de-risk the supply chain. As we think about NC2 and NC3, just any color on how much is already on order, that would be great. Thanks.

Sam Tabar (Chief Executive Officer)

Billy, the President of Whitefiber, who’s on the front lines of that, is going to take that question. Billy.

Billy Krasikopoulos (President)

Thanks, Sam. Hi Nick. So, I mean, the NC1 construction build was a very aggressive timeline. Delivering a project at that scale in 10 months and a couple of days was a huge accomplishment for our team, including the supply chain issues. Lessons learned: the project timeline and scale for similar projects is going to be a little bit longer, a little bit in advance pre-ordering the long lead item equipment, and strengthening the project management team internally and externally with our contractors and subcontractors.

But the playbook that we’ve been describing for the last few months is the same playbook that we’re going to run in NC2 and NC3.

Sam Tabar (Chief Executive Officer)

I think it’s also worth mentioning there’s a lot of synergy with respect to what we’ve done at NC1 in connection to NC2 and NC3. Using the same workforce, NGC, and so on, we’ll be able to apply a lot of lessons learned from NC1, and we could apply that directly just 55 miles away to NC2 and 3.

Nick Giles (Analyst at B. Riley Securities)

Absolutely. Makes sense, guys. Appreciate that. And then, good to see the financing progress at NC1. I guess my question was just how much capital would you intend to recycle from NC1 as kind of equity for NC2 and 3?

Sam Tabar (Chief Executive Officer)

Cam, do you want to take?

Cameron Schneer (Senior Vice President of Capital Markets and Corporate Strategy)

I don’t know that there’s a precise figure we can provide on that. I think you can imagine the majority of the net proceeds from the facility we announced would be earmarked for the entire NC portfolio expansion. Ultimately, the equity contribution there will depend on the ultimate debt financing and the corresponding loan-to-cost. Speaking of lessons from NC1, I think we were pretty firm in the prepared remarks that we’re really endeavoring to structure financing for the next contract well in advance and making sure that it’s an investment grade project and that all the terms are very buttoned up and financeable and able to be underwritten in advance.

So ultimately, if we bring on the entire 105 megawatts, say a little over a billion dollars of a project, then if you pencil in a presumed LTV, presuming the credit markets don’t absolutely deteriorate further—generally I think they’re better than the headlines, getting our deal done today I think is somewhat of a testament to that—then I think you sort of infer, based on the potential LTC, what the equity contribution will need to be there.

Nick Giles (Analyst at B. Riley Securities)

Okay, I tend to agree. Thanks, guys. Appreciate the update.

OPERATOR

We will take our next question from Paul Golding with Macquarie.

Paul Golding (Analyst at Macquarie)

Hi, thanks so much for taking the question, and congrats on all the progress. I wanted to ask around the cloud business, and maybe this one’s for Michael. As we think about the commitments across these five contracts and the 750 million in revenue contracted, how should we think about who’s bearing the risk across the various constraints in delivery of that capacity as we think about potential reliance on colocation partners other than the deployment you’re doing in Montreal?

How should we look at that risk profile for delivering the cloud agreements there, and then maybe as a follow-on, just how the GPU supply chain is looking for the chips themselves, given you, Sam, you noted VR capacity, and just trying to get a sense of the backdrop there. Thanks so much.

Michael Francisco (Vice President of Whitefiber Cloud US)

Thank you. Yeah, so the way that we conduct our business somewhat insulates us from those risks. So in talking with our customers, we found that they’ve had challenges in the past with people promising delivery dates, but not at the outset of the deal putting everything together in a way that’s fully transparent to them. The way that we go to market is that we do not sign any customer agreements or MSAs until we have clear visibility into the RFS timeline for the data center colocation space, as well as commitments around the GPUs from the selected OEM, as well as the other components necessary to stand up those clusters.

So taking that approach sometimes means that we have to disappoint customers at the beginning by pushing our delivery date farther than they might want it in the first place. But it does allow us to actually hit the dates that we are intending to go after. The, you know, things like Paris happen. But typically, for the most part, as we go out and sell these deals, we only sell things that we are confident that we can deliver in. And having a strong set of colocation partners where we have built trust and have confidence in their ability to deliver really helps us meet those timelines.

Paul Golding (Analyst at Macquarie)

Great, thanks so much, Michael. Maybe just a quick follow-on on the supply chain there. Just given how much momentum the cloud business has, are you doing any, in terms of the buildout that you’re responsible for on the cloud side, are you doing any proactive long lead purchasing, or is this really specific to certain sites with a specific basis of design? And so you have to wait until you have more clarity there. How should we think about the long lead, whether it’s networking or cooling or any part of that, that’s your responsibility?

OPERATOR

We will take our next question from John Todaro with Needham and Company.

John Todaro (Analyst at Needham & Company)

Hey guys, thanks for taking my question. Hey Sam, how are you guys thinking about expected CAPEX for NC2 and NC3? And then specifically would cost be capped or if it comes in a bit higher, you know there’s a percentage that falls to the tenant or some other partner there

Sam Tabar (Chief Executive Officer)

That’s probably combined for Billy and Cam. Do you want to take a first crack either?

Billy Krasikopoulos (President)

Yeah. So we’re still in the initial processes of budgeting and depending on the client selection, the overall project cost could change. And we do expect any customization or additional costs that are required by the end user to be covered by the end user through payment, installation fees and prepayments.

John Todaro (Analyst at Needham & Company)

Okay, understood. And then my second question is just on the regulatory environment. I believe North Carolina, the elections, the state legislature moved a little bit further left with the with the state house going on towards Democrats. Given the obviously large presence in North Carolina, could you just give us a refresh and kind of the regulatory environment there, whether it’s power or permitting. So

Sam Tabar (Chief Executive Officer)

Go ahead Billy.

Billy Krasikopoulos (President)

NC2 and NC3 are zoned already for data center use. It’s part of our diligence process in selecting these projects, making sure that we can execute them in a timely fashion and minimize all of the risks associated to them. Again, the project is zoned for data center. There’s no special permits or use authorizations that we need to go out and get for these projects. Community, community pushback. I mean to give you an example of what we did in North Carolina 1, even though we were under no obligation to do so because we were fully permitted and we were actually in production at the time, we proactively organized a community event as part of our commitment to building positive relationships with the community. That event had just over 200 people that attended and we explained our retrofit strategy of repurposing older warehouse, our closed-loop water system which by the way was part of our standard practice before water use was even a talking point in the media.

And we also discussed our contribution to the community and all that was greatly appreciated. We plan to do the same thing in NC2 and in NC3.

John Todaro (Analyst at Needham & Company)

Okay, understood. Thank you for that gentleman. I appreciate it.

OPERATOR

We will take our next question from Michael Donovan with Compass Point.

Sam Tabar (Chief Executive Officer)

Hey Michael.

Michael Donovan (Analyst at Compass Point)

Hi Sam. Hi guys. Thanks for taking my question. Last quarter you mentioned late stage customer opportunities tied to cramboo. How have those discussions progressed and when do you expect the first capacity to be available for deployment?

Sam Tabar (Chief Executive Officer)

So those discussions have progressed very nicely. We expect first deployments to happening or we expect the first deals to close in early Q1, maybe late Q4 with deployments happening in Q1.

Michael Donovan (Analyst at Compass Point)

Appreciate that. And then on Continuum, since launching Continuum, how would you characterize customer interest and what types of customers are most engaged?

Sam Tabar (Chief Executive Officer)

So Continuum is an interesting product because it is relevant to a fairly niche audience outside of including folks such as ourselves, but also that there are some enterprise customer interests that we’ve seen as well. Most of the folks that we’re seeing are folks that are looking to solve for the distributed or fragmented power problem. And so we’ve been engaged with colocation providers that are focused on kind of regional data center setups who are interested in the technology to be able to bring those kind of regional hub and spoke solutions to bear, as well as some enterprise customers that have looked at this in terms of being able to provide a more robust kind of logical super cluster leveraging again, smaller sets of power. I anticipate that the first deal we close on this is going to take a little bit, just due to what it actually takes to deploy and plan and kind of make it a reality.

But we have seen good initial interest and have engaged in some very interesting conversations about scaling this over time.

Michael Donovan (Analyst at Compass Point)

That’s helpful. Are you thinking about using that to link NC1, NC2 and NC3 or would this be for other internal sites?

Sam Tabar (Chief Executive Officer)

It’s a consideration that we could make depending on customer interest, but I can’t comment on the structure of our current deals or current negotiations, whether or not that would be included in that.

Michael Donovan (Analyst at Compass Point)

Appreciate that that’s a lot moving forward.

Sam Tabar (Chief Executive Officer)

Thank you.

OPERATOR

We will take our next question from George Sutton with Craig Hall.

Sam Tabar (Chief Executive Officer)

Hi George. Thank you.

George Sutton (Analyst at Craig-Hallum)

Sam, you mentioned that your demand for NC2 and 3 is substantially stronger than what you were seeing for one. Can you just give us a sense? Is that a site specific situation, a market dynamic? Is that a comfort in your ability to deliver with a retrofit model? Just curious on that.

Sam Tabar (Chief Executive Officer)

I think it’s the first and third, but I’ll let Billy answer that question.

Billy Krasikopoulos (President)

Yeah, so multiple factors here. I mean what we did in NC1 resonated across multiple people that were looking at the project previously. The ability to deliver power in 2027 is a major factor. Many companies are delaying or canceling projects and we’ve shown that we can deliver in an extremely quick turnaround and looking to replicate that across our three projects in North Carolina in 2027. So potential customers appreciate that and they see the track record that’s been proven and that’s what’s driving the demand at those sites.

George Sutton (Analyst at Craig-Hallum)

Understand, Sam, you gave a pretty compelling statistic that in some cases you might see 100% upfront payments. I just figured it couldn’t go without being asked on this call what you meant by that.

Sam Tabar (Chief Executive Officer)

Michael, you want to take that?

Michael Francisco (Vice President of Whitefiber Cloud US)

Sure. So as we see the markets tightening, or at least see the headlines around the markets tightening, I tend to agree with Cam that the headlines paint a more dire picture than what the reality is. There’s a number of factors that come into play. There’s both the factor that a number of customers are looking at owning that hardware on their balance sheet as an advantage. So thinking about it in the context of traditional enterprise hardware acquisition, where they’re having it on the balance sheet actually helps them from a taxes and depreciation standpoint.

There’s some accounting benefit there. But at the same time, and we’re seeing that with enterprises as well as some of the larger foundational labs, some of the larger well funded AI startups are also, we’re seeing a trend in that on that front as well where they’re looking to take some of the capital that they’ve built up to invest in their own hardware to secure that over time and make sure that they have those assets readily available. At the same time, I think we are also seeing customers understand the reality of the market and understanding that by coming in and helping with the prepayment, it actually facilitates the transaction more rapidly, gets them up and online more quickly, and then kind of reduces the cash to cost of the OPEX across the term of the deal. So there’s a number of factors that are contributing to that. And as the market continues to mature and adjust, I think we’ll, we’ll see some, we’ll see both more of this, but I think people are also going to figure out some of the financing bits as well to get creative with how we deploy these things.

George Sutton (Analyst at Craig-Hallum)

Very insightful. Thank you for the thoughts.

Michael Francisco (Vice President of Whitefiber Cloud US)

You’re welcome.

OPERATOR

We will take our next question from Mike Colanese with H.C. Wainwright.

Mike Colanese (Analyst at H.C. Wainwright)

Hey Sam and team, good morning. Thank you for taking my questions. First one for me, I was just curious if you provide more color as to what the remaining milestones are outstanding that need to be achieved before you can convert existing LOIs at NC 2 and 3 into signed leases now that the acquisition is closed.

Sam Tabar (Chief Executive Officer)

Billy, do you want to take that?

Billy Krasikopoulos (President)

Sure. Technical revisions of the base of design for the customers that we are currently speaking with, validation of the delivery times for the long lead item equipment are the two main driving points, milestones that are currently being discussed with potential clients to execute on a service agreement.

Mike Colanese (Analyst at H.C. Wainwright)

That’s helpful color. Appreciate that. And then it was discussed a bit earlier around the aggressive deployment timeline. You guys were able to execute just over 10 months on NC1. Curious. Based on the basis of design under negotiation, what could the deployment timelines look like for NC2 and 3, especially given that, you know, the initial RFS is targeted for 2027. Just trying to better understand when you could actually monetize potential contracts once a lease is executed.

Billy Krasikopoulos (President)

Yeah, so right now we’re looking at end of 2027, giving ourselves a little bit more buffer on. Again, already aggressive timeline. I don’t see many companies executing these types of deployments in less than 12 months. We’re targeting the same playbook. Even though the base of design is a newer generation of chips or a different manufacturer altogether, depending on who the end user will be, we still are confident that we can deliver a project in 12 months.

Dan

And Mike, it’s Dan. I just had like, we’re just not really overly eager to optimize for time. Like I think we’re drawing a pretty firm line in the sand that we’re optimizing for holistic project returns and the ability to very easily and cleanly finance a project. So we’re just, we’re really not eager to compromise on any certain artificial timeline that we impose on ourselves, like customer demand. We know how sought after these assets are. So we’re just really trying to put ourselves in the best position to monetize that and succeed over time and sort of mitigate any perceived risk factors around it.

Mike Colanese (Analyst at H.C. Wainwright)

Makes sense. Thank you and congrats on all the progress, guys.

Sam Tabar (Chief Executive Officer)

Thank you.

OPERATOR

We will take our next question from Ben Summers with BTIG.

Ben Summers (Analyst at BTIG)

Hey, good morning and thank you guys for taking my question. So you made a comment on enterprises and government and whatnot becoming a bigger part of the demand mix moving forward potentially for colocation services. Just kind of curious how that dynamic is potentially playing a role and how you think about expanding the power portfolio from here.

Sam Tabar (Chief Executive Officer)

Is that for cloud or colocation? I think this is in reference to colocation.

Ben Summers (Analyst at BTIG)

Yeah, but for both. I mean for either or.

Sam Tabar (Chief Executive Officer)

Yeah, just depending on who you’re speaking to. So if we disrespect to colocation, we are looking at Fortune 100 companies and even public sector and clients. Is there any more that we can talk about, Billy, without giving away our current negotiations, probably not

Billy Krasikopoulos (President)

Little difficult, but I mean the scarcity of capacity again is a driving factor there. The larger, these larger portions of capacity are being taken by the hyperscalers and smaller colocation, smaller colocation megawatts, these clients are kind of left in the water without any available inventory in the market. So we have gotten a handful of potential clients that are in the top Fortune 100 that are looking for smaller deployments of 10, 20 megawatts.

Michael Francisco (Vice President of Whitefiber Cloud US)

So one of our primary guidance here is that we do not structure contracts that do not have a full payback within the term of the original contract itself. What we’re seeing from customers is actually an interest in longer-term contracts than what we saw last year or even earlier this year. And I think there’s a couple of dynamics there. One of the key dynamics is simply that I think it used to be believed that you could negotiate a two-year contract for GPUs and then have an out after two years to renegotiate and get those prices down.

I think what we’ve seen in the market is that’s not actually the reality — that sometimes, if you look at the cost of the H100s now, the cost of those GPUs is actually higher today than it was when they launched. And if I had negotiated a contract two years ago, I’d be paying more at the point of renegotiation. So those dynamics aren’t playing out for those folks that were looking for shorter-term deals. The other piece of this is that it’s difficult to find GPU capacity. And so the idea that you want to sign a shorter-term contract to go back through the process to maybe pay more, or maybe not even be able to find that capacity three years from now, is not a risk that a lot of folks are willing to take. So we’re seeing them push for longer terms, and with those longer terms, we’re able to be a little bit more creative with the structure of the contract to make sure that we get our payback, but then provide some relief in terms of the average cost for the customer across the term of that deal by kind of blending the rates across that lifecycle.

OPERATOR

We will take our next question from Brian Barachian with Ross Capital Partners.

Brian Barachian (Analyst at Ross Capital Partners)

Hey guys, thanks for taking my question. Hey, Sam. So great, like, tremendous progress on the quarter. Thank you for a really informative print. My main question when you’re talking about forward leases, which I fully agree with, by the way, is, you know, targeting more of an investment grade, or an investment grade, you know, wrapper as we think about, you know, your future capacity does — maybe you could talk a little bit, just so I understand.

Is that like the same format that you have at NC1, or do you mean for the wrapper situation — like, is that separate for what we’d expect to see at NC2 and NC3? Because obviously these are triple-net lease real estate assets, so your cap rate, your underwritten cap rate, is obviously going to be lower for a higher IG offtake. So could you give a little color on that?

Sam Tabar (Chief Executive Officer)

I’ll defer to Billy and Cam. I’m not sure I follow the question 100%, but perhaps Billy and Cam did.

Cameron Schneer (Senior Vice President of Capital Markets and Corporate Strategy)

Yeah, I mean, I could chime in. Hey, Brian, it’s Cam. Yeah, I mean, holistically, I think we’re just taking a much different approach than we took for our initial NC1 lease where, like, on a prevailing basis, there’s not a full investment grade credit wrap. It’s not directly with a non-IG counterparty. And as you can see, it was a longer process of putting in debt capital, and that’s clearly something we’re looking to solve. So one of our main goals, something we’re not really willing to compromise on, is ensuring the next lease we sign is rated investment grade and that we have, you know, a certain level of comfort pre-lease signing that there is some sort of committed debt at attractive terms.

Brian Barachian (Analyst at Ross Capital Partners)

Great, thanks, Cam. And then the other thing is, you know, in the face of rising costs that we’re seeing in supply chain, that we’re just seeing across the industry — a tougher AI infra backdrop — you know, you mentioned being able to, you know, pass on costs and achieve higher yields, or that spread to your cost of capital, to your yield on cost. Have customer conversations or preliminary customer conversations — have they been receptive to that, saying, hey, like, cost of capital is going up, our build costs are going up.

The demand for power is so strong that they’re saying, hey, you know, the dollar per kilowatt-month that you guys are charging, it’s fine, we can pay an extra 5, 10, 15, 20 of rent. Has that been received well by customers?

Sam Tabar (Chief Executive Officer)

Just before we answer that question, I just want to say that current negotiations are ongoing right now and we don’t want to disclose the current postures of various counterparties. So I would speak in generalities either Cam or… That’s what I. Right.

Brian Barachian (Analyst at Ross Capital Partners)

Yeah, that’s specifically what I mean.

Cameron Schneer (Senior Vice President of Capital Markets and Corporate Strategy)

Yeah. Generally we don’t see any problems there. Customers are actually offering better prepayments and installation fees, again as a sort of premium to delivering capacity in 2027 because of where we are at in the industry right now on available capacity and inventory. And everyone understands that the costs of labor, equipment, electricity — everything — all these costs have increased since, have outpaced normal increases in the last year and it hasn’t been a problem in negotiations.

Brian Barachian (Analyst at Ross Capital Partners)

Excellent. Congrats on

Cameron Schneer (Senior Vice President of Capital Markets and Corporate Strategy)

That’s the sweeping generalization picture, but the comparison that we’ve made is that year over year, as we evaluate customer proposals and our own budget at this time for the development, the implied yields are more attractive than what we were seeing when we signed our initial North Carolina lease.

Brian Barachian (Analyst at Ross Capital Partners)

Perfect. Outstanding. Outstanding quarter. And great progress, guys. Looking forward to next quarter.

Sam Tabar (Chief Executive Officer)

We are too.

OPERATOR

We will take our next question from Kevin Dede with Jones Trading.

Sam Tabar (Chief Executive Officer)

Hi, Kevin.

Kevin Dede (Analyst at Jones Trading)

Hey, Sam. Thanks for having me on. And great to see you in Singapore too. So thanks for dinner there. I’m curious about MTL2. Congrats on getting that one going, I guess. But it’s unclear what power you had available there. I’ve forgotten. Please excuse me. You also mentioned, I think, something about behind the meter, and I’m just kind of wondering how that process would work given pretty tight regulation strings in Quebec.

Sam Tabar (Chief Executive Officer)

You or the dog asking a question?

Kevin Dede (Analyst at Jones Trading)

Yeah, that’s the dog. That’s not me. But I guess that’s a good question. Depends on who you ask,

Sam Tabar (Chief Executive Officer)

Right? Billy, do you want to take that, or Cam?

Billy Krasikopoulos (President)

Yeah. So that was a smaller deployment from the get-go. There’s just about 4 megawatts available at the site, and we are evaluating natural gas fuel cells to help us produce a little bit more energy and a little bit more heat that we can recover, and some heat reject projects that we’re looking at in the area that would put us in a better spotlight to get higher allocations from the utility company as well. So it’s a kind of a two-in-one solution for us in implementing natural gas fuel cells at that facility.

Kevin Dede (Analyst at Jones Trading)

Okay, thanks, Billy. Thank you. The full 99 megawatts at NC1 — is there any change in the timeline when that could possibly be delivered, and maybe add some color in your negotiations with Duke and taking NC2 and NC3 from 60 to 200.

Billy Krasikopoulos (President)

The NC2 and NC3 is still in preliminary talks with engineering on the expansion capabilities. Like usual in our due diligence, we make sure that there’s a positive way forward to getting more power. So those are still in initial talks with Duke, and for NC1, same thing. We’re still looking at some supply chain issues on the Duke side where we’re working together where we can help and hopefully advancing that timeline. But right now it’s looking at the end of 2027.

Kevin Dede (Analyst at Jones Trading)

This might be a sore topic, but I’ll leave it to you, Sam, to add whatever you think is appropriate. Obviously there were some struggles with Microsoft dealings with Nscale, and I’m just wondering if any of that may have rippled through to — and the prospect of Nscale filling out all the available power as it comes to NC1.

Sam Tabar (Chief Executive Officer)

All right, go ahead, Billy. But that’s not sore. Go ahead.

Billy Krasikopoulos (President)

I mean, it’s hard to comment on a relationship that we don’t have any insight on. What we know is that Nscale is using the capacity at NC1, the expansion capacity. I mean, although we would, for continuity and for client relationship, we would like for it to be Nscale for the expansion, but we’re open to other users and, as Cam said, getting IG-type terms is the main driving factor in our selection process. But what we can say — what we do know — is that Nscale is using the current capacity at NC1.

Kevin Dede (Analyst at Jones Trading)

Perfect. Thanks, Billy. Thanks for taking the questions, gentlemen.

Sam Tabar (Chief Executive Officer)

Thank you.

OPERATOR

There are no further questions at this time. I will turn the conference back to Mr. Tabar for any additional or closing remarks.

Sam Tabar (Chief Executive Officer)

Thank you everybody for joining us today. We look forward to the next earnings call and have a wonderful day. Thank you.

OPERATOR

This concludes today’s call. Thank you for your participation. You may now disconnect.

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