Argo Blockchain plc: Q1 2022 Form 6-K Summary
Business context and reporting period
Argo Blockchain plc, a cryptocurrency mining company listed on the London Stock Exchange and Nasdaq, reported unaudited results for the three months ended 31 March 2022. The filing was submitted on 17 May 2022. All figures are in U.S. dollars unless stated otherwise.
Financial and operating metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $19.5 million | $17.8 million | +9% |
| Net income | $2.1 million | $25.3 million | Down materially |
| Adjusted EBITDA | $19.1 million | $15.4 million | +24% |
| Adjusted EBITDA margin | 98% | 86% | +12 percentage points |
| Bitcoin and equivalents mined | 470 BTC | 387 BTC | +21% |
| Mining margin | 76% | 83% | Down 7 percentage points |
| Average direct cost per BTC | $9,779 | Not clearly provided | Not determinable |
IFRS gross profit was $1.9 million, compared with $27.1 million in Q1 2021. The decline reflected a $6.1 million unfavorable change in the fair value of digital currencies in Q1 2022, compared with a $13.2 million favorable change in Q1 2021, as well as higher depreciation and operating expenses. The company reported a $5.7 million foreign-exchange gain and a $2.7 million fair-value gain on contingent consideration.
Cash and cash equivalents were $11.9 million at 31 March 2022, compared with $15.5 million at 31 December 2021. Digital assets were $104.8 million, compared with $106.0 million at year-end, and the company held approximately 2,700 BTC and Bitcoin equivalents. The filing does not provide a clear cash-flow statement or operating, investing, and financing cash-flow amounts.
Borrowings and bonds totaled approximately $117.1 million at quarter-end, excluding lease liabilities and contingent consideration, compared with approximately $70.5 million at 31 December 2021. Current loans and borrowings were $58.6 million, non-current loans were $23.2 million, and issued debt bonds were $35.3 million. Total liabilities were $155.2 million and total equity was $260.5 million.
Material changes versus the prior comparable period
- Revenue increased 9% and mined BTC increased 21%, reflecting growth in hash rate, partly offset by lower Bitcoin prices.
- Adjusted EBITDA increased 24%, but IFRS net income fell to $2.1 million from $25.3 million because of digital-asset valuation effects, higher depreciation, finance costs, and operating expenses.
- Mining margin declined to 76% from 83%, despite the increase in production.
- Cash declined by $3.6 million from year-end, while debt increased substantially to fund the Helios build-out.
- Total assets increased to $415.6 million from $377.8 million, while total equity decreased to $260.5 million from $265.0 million, primarily reflecting a $17.2 million currency translation loss in other comprehensive income.
Guidance, outlook, risks, and unusual items
- The Helios facility was energized and began mining on 5 May 2022. Argo continued to target 5.5 EH/s by year-end 2022, subject to machine deliveries.
- Argo agreed to exchange approximately 10,000 S19 machines hosted at Core Scientific for new S19J Pro machines for Helios. The staged swap began before the filing date and was expected to continue through July 2022. Completion would eliminate hosted machines and support a fully vertically integrated model.
- Argo entered into a March 2022 NYDIG financing arrangement for $26.7 million, secured against certain Helios electrical infrastructure. In May 2022, it agreed to additional borrowing of up to $70.6 million, subject to customary drawdown conditions and secured against certain Helios mining machines.
- Approximately 10% of the company’s crypto assets were allocated to Argo Labs for network participation and strategic diversification.
- Key risks include Bitcoin price volatility, digital-asset fair-value losses, mining difficulty and network conditions, power availability and costs, machine-delivery delays, Helios construction and ramp-up execution, increased leverage, liquidity requirements, and the ability to draw or service secured debt.
- Adjusted EBITDA and mining margin are non-IFRS measures. They exclude items including depreciation, finance costs, taxes, share-based compensation, and digital-asset valuation changes and should not be treated as substitutes for IFRS net income or gross margin.
Important facts for investors to verify
- Whether Helios reached planned operating capacity and whether Argo achieved the 5.5 EH/s year-end target.
- The final amount drawn under the additional NYDIG facility and the applicable interest rates, maturities, covenants, and collateral terms.
- The timing and operational impact of the S19-to-S19J Pro machine swap.
- Subsequent changes in Bitcoin prices, mining difficulty, digital-asset holdings, and cash liquidity.
- The filing’s full risk-factor disclosures and reconciliation of non-IFRS measures to IFRS results.
- The filing text does not provide clear Q1 2022 cash-flow amounts, so cash generation and capital-expenditure funding should be verified in subsequent financial statements.