Soluna Cloud Contract Unleashes New Business Line with Significant Near-Term Revenue Contributions
Soluna Cloud has entered into a three-year managed services agreement with Hewlett Packard Enterprise (HPE), with $38-80 million in expected revenue over the contract, with the first 512 GPUs available today. Soluna will manage a hydro-powered datacenter in collaboration with its strategic OEM partner and has secured NVIDIA H100 GPUs that will allow it to offer Generative AI workloads for enterprise customers and Generative AI labs. The Soluna Cloud subsidiary has been funded by a non-dilutive $12.5 million credit facility, which the company expects will be the first tranche of funding for the growing business line. Launch of the new business line and its near-term financial contributions significantly expand options to address legacy balance sheet challenges. The initial capacity is available today and the company expects the cloud contract to generate annual revenue of $16-26 million (Soluna’s consolidated revenue was $21.1 million in 2023). We note that the company’s Earnings Power Presentation published in May 2024 forecasts ~$15 million in 2025 consolidated EBITDA (base case) but does not include any contributions from either the HPE cloud agreement or the 166 MW Project Kati that is in development. Soluna had $8.1 million in cash at 1Q24 (not including $2 million in restricted cash), up from $6.3 million at YE23. Soluna Cloud agreement solidifies the company’s position as a leader in AI green datacenter solutions and expands and diversifies its revenue and EBITDA growth. The HPE agreement builds upon the company’s AI-related actions over the past year, which includes AI hosting at Project Sophie and the development of Project Helix, a 2 MW purpose designed pilot facility under development at Project Dorothy 2. The cloud delivers on the company’s stated goal to diversify its end market and opens a market opportunity well in excess of the still-growing Bitcoin mining market. Convertible loan balance now reduced to $4.5 million. In a recent update, Soluna announced the debt reduction from $7.7 million through the conversion into common shares and also that warrant holders have exercised $2.0 million. As of July 8, common shares issued and outstanding stand at 5,381,104. We see multiple potential catalysts in coming months. These include further progress at the 48 MW expansion underway at Project Dorothy 2, completion of agreements and approvals for the development of the 166 MW Project Kati, and a further update on the company’s balance sheet. We also expect to hear further updates on the growth of the Soluna Cloud subsidiary and the Project Helix pilot.
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