Argo Blockchain plc: Q1 2024 Results
Filing: Form 6-K dated 23 May 2024, reporting unaudited results for the three months ended 31 March 2024. Argo is a cryptocurrency mining company with operations in Quebec and Texas and dual listings on the LSE and Nasdaq.
Key financial metrics
| Metric | Q1 2024 | Comparable period |
|---|---|---|
| Revenue | $16.840 million | $11.264 million in Q1 2023; 4% higher than Q4 2023 |
| Mining margin | $6.401 million; 38% | $5.206 million; 34% in Q4 2023 |
| Gross profit | $1.861 million | $(0.886) million in Q1 2023 |
| Operating loss | $(4.200) million | $(5.910) million in Q1 2023 |
| Net loss | $(3.155) million | $(9.192) million in Q1 2023 |
| Adjusted EBITDA | $3.847 million | $1.572 million in Q1 2023 |
| Bitcoin mined | 319 BTC, or approximately 3.5 BTC per day | Not provided in the filing text |
| Cash and cash equivalents | $12.444 million | $7.443 million at 31 December 2023 |
| Bitcoin and Bitcoin equivalents held | 11 BTC | Not provided in the filing text |
Cash flow, debt and liquidity
- Operating activities generated $3.279 million of net cash, compared with $2.889 million of cash used in Q1 2023.
- Investing activities generated $7.139 million, including $6.119 million from the sale of the Mirabel subsidiary and investments.
- Financing activities used $5.234 million, including $12.617 million of loan repayments and $1.966 million of interest paid, partly offset by $9.349 million of net share-issuance proceeds.
- The balance sheet reported $12.680 million of current loans and borrowings, $38.346 million of issued bond debt and $0.800 million of non-current loans at 31 March 2024.
- Management stated that debt was reduced by $12.4 million during the quarter, representing a 19% reduction from 31 December 2023.
- Total equity increased to $7.738 million from $0.158 million at year-end 2023, while total liabilities declined to $62.945 million from $75.782 million.
Material changes and unusual items
- Revenue increased 49.5% year over year, while the net loss narrowed materially from $9.192 million to $3.155 million.
- Gross profit improved from a loss of $0.886 million to profit of $1.861 million, helped by higher revenue and a $0.293 million favorable change in the fair value of digital currencies.
- Adjusted EBITDA increased to $3.847 million from $1.572 million. This non-IFRS measure excludes, among other items, depreciation, share-based compensation, restructuring costs, foreign exchange and certain gains or losses.
- The company recorded a $3.397 million gain on the sale of the Mirabel subsidiary, described in the headline results as a $3.0 million gain net of tax.
- Share-based compensation was $1.911 million, restructuring and transaction-related fees were $0.561 million, and finance costs were $2.317 million.
- Property, plant and equipment declined to $53.771 million from $59.728 million, while digital assets increased to $0.810 million from $0.385 million.
Outlook, commentary and risks
Management characterized Q1 as strong in revenue and earnings, highlighting financial discipline, more than $12 million of debt reduction, cash of more than $12 million after the Bitcoin halving, and streamlined Quebec operations following the Mirabel sale. Management stated that it remains enthusiastic about Argo’s future growth and development but provided no quantitative forward guidance in the filing.
- Results remain exposed to Bitcoin prices, network difficulty, mining economics and the effects of the Bitcoin halving.
- The filing warns that Argo may be unable to obtain sufficient additional financing or generate sufficient working capital to fund operations for the next twelve months.
- Benefits expected from transactions with Galaxy may not be realized.
- Adjusted EBITDA and mining margin are non-IFRS measures and exclude material costs, including depreciation of mining equipment; they should not be treated as substitutes for IFRS profit or gross margin.
- The filing contains customary forward-looking statement risks and refers investors to Argo’s SEC and FCA filings, including the risk factors in its Form 20-F.
Facts investors should verify
- Reconcile the cash-flow statement: it reports a $5.185 million net decrease in cash, but cash increased from $7.443 million to $12.444 million before the stated $0.184 million foreign-exchange effect. The filing text does not provide a clear explanation for this apparent inconsistency.
- Confirm the final debt balances and repayment terms, including the $38.346 million bond and remaining loans.
- Assess the sustainability of the 38% mining margin after the Bitcoin halving and under different Bitcoin-price and network-difficulty scenarios.
- Evaluate the effect of the Mirabel disposal on future operating capacity, revenue and cash generation.
- Review the company’s working-capital outlook, financing requirements and the terms and dilution implications of the $9.349 million net share issuance.
- Distinguish IFRS earnings from Adjusted EBITDA and mining margin when assessing profitability and cash-generation capacity.