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Argo Blockchain PLC (ARB)

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Wednesday 18 May, 2022

Argo Blockchain PLC

1st Quarter Results 2022

RNS Number : 8357L
Argo Blockchain PLC
18 May 2022
 

Press Release

18 May 2022

 

Argo Blockchain PLC

("Argo" or "the Company")

 

Q1 2022 Results (Unaudited)

 

Argo Blockchain plc (LSE: ARB; NASDAQ: ARBK), a global leader in cryptocurrency mining, is pleased to announce its unaudited financial results for the quarter ended 31 March 2022. All $ amounts are in United States Dollars ("USD") and all £ amounts are in British Pounds ("GBP"), unless otherwise stated.

 

Revenue of $19.5 million (£14.9 million) (+9% Y/Y)

Produced net income of $2.1 million (£1.6 million) and $19.1 million of Adj. EBITDA (£14.5 million of Adj. EBITDA) (+24% Y/Y)

Mined 470 Bitcoin and Bitcoin Equivalents in Q1 2022 (+21% Y/Y)

"HODL" of 2,700 Bitcoin and Bitcoin Equivalents as of 31 March 2022

 

 

Peter Wall, Chief Executive of Argo, said: "During the first quarter, our team has focused on working towards the completion of Helios Phase 1, while continuing to deliver strong performance from our existing fleet. To be a successful miner you need three components - power, miners, and capital. We already have a strong foundation for growth at Helios with our access to 800 MW of power capacity. This quarter, we improved our access to capital by establishing a financing relationship with NYDIG and strengthened our access to miners through our supply agreement with Intel for their new Blockscale ASIC chips. This will allow us to build custom-designed mining machines specifically to Argo's specifications and built for use in immersion-cooling technology.

 

"As mining operations begin this month at Helios, we are excited to be delivering on our commitment to shareholders to build a best-in-class Bitcoin mining facility." 

Q1 2022 Financial Performance

● The Company generated $19.5 million (£14.9 million) of revenue in the quarter, a 9% increase over the same period in 2021. This increase was primarily driven by Argo's growth in hash rate throughout 2021 and partially offset by lower Bitcoin prices in Q1 2022.

● The Company produced net income of $2.1 million (£1.6 million).

● Argo achieved Adj. EBITDA of $19.1 million (£14.5 million), an increase of 24% over the same period in 2021.

● Total Bitcoin mined in the quarter increased by 21% to 470 Bitcoin and Bitcoin Equivalents (together, "BTC"), compared to 387 BTC mined in the same period in 2021.

● The Company's mining margin for the first quarter was 76%, with an average direct cost per BTC mined of $9,779 (£7,448).

● The Company ended the quarter with 2,700 BTC in its HODL; this, combined with a cash balance of $11.9 million (£9.1 million), provides the Company with ample liquidity.

Q1 2022 and Recent Operational Highlights

● The Helios facility was energized and commenced Bitcoin mining activities on 5 May 2022. The Company held a grand opening ceremony to commemorate the event with elected officials, partners, suppliers, and members of the local community in attendance.

● The Company still expects to increase its hashrate to 5.5 EH/s by the end of 2022, subject to machine deliveries.

● In March 2022, the Company signed an agreement to swap approximately 10,000 S19 mining machines currently hosted at Core Scientific facilities for new S19J Pro mining machines to be delivered to the Helios facility. To mitigate any temporary loss of hashrate for Argo, the swap of miners will occur in stages as the machines are delivered, which has already commenced and will continue through July 2022. Upon completion of this mining machine swap, Argo will no longer have any hosted machines and will have completed its strategic pivot away from hosting to a fully vertically-integrated model.

● In January 2022, the Company formally launched Argo Labs, its in-house innovation arm established to identify opportunities within the disruptive and innovative sectors of the cryptocurrency ecosystem while supporting the decentralization of various blockchain protocols. Argo Labs is primarily focused on two key areas: network participation and strategic diversification through the efficient deployment of a portion of the Company's crypto treasury assets. Argo has allocated approximately 10% of the Company's crypto assets in its "HODL" to Argo Labs, which gives the Company the opportunity to integrate cryptocurrencies into existing financial infrastructure and gain exposure to the wider digital asset ecosystem.

Q1 2022 and Recent Financing Highlights

● Argo entered into two significant non-dilutive debt financing arrangements with New York Digital Investment Group LLC ("NYDIG").

● In March 2022, Argo signed loan agreements to borrow $26.7 million (£20.2 million at the 3 March 2022 exchange rate), with the proceeds to be used for the continued build out of Helios Phase 1. Under these loan agreements, the borrowings are secured against certain electrical infrastructure at Helios.

● In May 2022, Argo signed additional loan agreements to borrow up to $70.6 million (£56.3 million at the 3 May 2022 exchange rate), subject to customary drawdown conditions, with the proceeds to be used for the continued build out of Helios Phase 1. Under these loan agreements, the borrowings are secured against certain Bitcoin mining machines installed at Helios.

Q1 2022 and Recent Personnel Updates

● The Company strengthened its executive team by appointing Seif El-Bakly as Chief Operating Officer and Alana Marks as Vice President of People and Culture.

● Justin Nolan, who previously held the role of Vice President of Business Development, was promoted to the role of Chief Growth Officer.

● The Company appointed Raghav Chopra, a seasoned finance and investing professional, as a non-executive director.

Earnings Conference Call

 

Argo will host a conference call to discuss its results at 08:00 ET/12:00 BST tomorrow, Wednesday 18 May 2022. The live webcast of the call can be accessed via the Investor Meet Company platform.

 

Investors can sign up to Investor Meet Company and add Argo Blockchain via the following link: https://www.investormeetcompany.com/argo-blockchain-plc/register-investor

 

Investors already following Argo Blockchain on the Investor Meet Company platform will be invited automatically.

 

Inside Information and Forward-Looking Statements

This announcement contains inside information and includes forward-looking statements which reflect the Company's or, as appropriate, the Directors' current views, interpretations, beliefs or expectations with respect to the Company's financial performance, business strategy and plans and objectives of management for future operations. These statements include forward-looking statements both with respect to the Company and the sector and industry in which the Company operates. Statements which include the words "expects", "intends", "plans", "believes", "projects", "anticipates", "will", "targets", "aims", "may", "would", "could", "continue", "estimate", "future", "opportunity", "potential" or, in each case, their negatives, and similar statements of a future or forward-looking nature identify forward-looking statements. All forward-looking statements address matters that involve risks and uncertainties because they relate to events that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. Accordingly, there are or will be important factors that could cause the Company's actual results, prospects and performance to differ materially from those indicated in these statements. In addition, even if the Company's actual results, prospects and performance are consistent with the forward-looking statements contained in this document, those results may not be indicative of results in subsequent periods. These forward-looking statements speak only as of the date of this announcement. Subject to any obligations under the Prospectus Regulation Rules, the Market Abuse Regulation, the Listing Rules and the Disclosure and Transparency Rules and except as required by the FCA, the London Stock Exchange, the City Code or applicable law and regulations, the Company undertakes no obligation publicly to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. For a more complete discussion of factors that could cause our actual results to differ from those described in this announcement, please refer to the filings that Company makes from time to time with the United States Securities and Exchange Commission and the United Kingdom Financial Conduct Authority, including the section entitled "Risk Factors" in the Company's Annual Report on Form 20-F.

 

 

Non-IFRS Measures

 

Bitcoin and Bitcoin Equivalent Mining Margin and Adjusted EBITDA are financial measures not defined by IFRS. We believe Bitcoin and Bitcoin Equivalent Mining Margin and Adjusted EBITDA have limitations as analytical tools. In particular, Bitcoin and Bitcoin Equivalent Mining Margin excludes the depreciation of mining equipment and so does not reflect the full cost of our mining operations, and it also excludes the effects of fluctuations in the value of digital currencies and realized losses on the sale of digital assets, which affect our IFRS gross profit. Further, Adjusted EBITDA excludes interest income (expense), taxes, depreciation and amortization, change in fair value of digital currencies, and share based payments, which are important components of our IFRS net income/(loss). These measures should not be considered as an alternative to gross margin or net income/(loss), as applicable, determined in accordance with IFRS, or other IFRS measures. These measures are not necessarily comparable to similarly titled measures used by other companies. As a result, you should not consider these measures in isolation from, or as a substitute analysis for, our gross margin or net income/(loss), as applicable, as determined in accordance with IFRS.

 

 

Statement of Income

Three Months Ended 31 March, 2022

Three Months Ended 31 March, 2021

Figures in '000 except per share and BTC mined

$

£

$

£

Revenues

19,515

14,862

17,836

13,583

Direct costs

(4,596)

(3,500)

(2,562)

(1,951)

Depreciation of mining equipment

(6,961)

(5,301)

(2,869)

(2,185)

Change in fair value of digital currencies

(6,080)

(4,630)

13,248

10,090

Realized gain on sale of digital currencies

41

30

1,472

1,121

Gross profit

1,919

1,461

27,125

20,657






Consulting fees

(208)

(159)

(467)

(356)

Professional fees

(1,262)

(961)

(259)

(197)

General and administrative

(2,908)

(2,215)

(633)

(482)

Share based payment charge

(1,423)

(1,084)

(123)

(94)

Foreign exchange

5,705

4,346

(54)

(41)

Operating profit

1,823

1,388

25,589

19,488






Fair value gain (loss) of investments

(174)

(132)

-

-

Fair value revaluation of contingent consideration

2,742

2,088

-

-

Finance costs

(2,442)

(1,860)

(289)

(221)

Profit before taxation

1,949

1,484

25,300

19,267






Tax credit

117

89

-

-






Profit after taxation

2,066

1,573

25,300

19,268

 

Other comprehensive loss

 

 

 

 

Items which may be subsequently reclassified to profit or loss:





Currency translation reserve

(17,170)

(13,076)

-

-

Total other comprehensive (loss), net of tax

(17,170)

(13,076)

-

-

 

 





Total comprehensive (loss) income attributable to the equity holders of the Company

(15,104)

(11,503)

25,300

19,268






Earnings per share attributable to equity owners (pence)

 

 

 

 

Basic earnings (loss) per share

$0.004c

0.003p

$0.080c

0.060p

Diluted earnings per share

$0.004c

0.003p

$0.070c

0.050p

 

 

 


As at 31

March 2022

 

As at 31

December 2021

Balance Sheet

Figures in '000

$

£

$

£






ASSETS





Non-current assets





Investments at fair value through profit or loss

355

271

529

403

Investments accounted for using the equity method

18,143

13,817

18,143

13,817

Intangible fixed assets

11,655

8,876

7,359

5,604

Property, plant and equipment

156,765

119,386

146,546

111,604

Right of use assets

484

368

460

350

Total non-current assets

187,402

142,718

173,037

131,778






Current assets





Trade and other receivables

111,500

84,914

83,196

63,359

Digital assets

104,835

79,839

106,044

80,759

Cash and cash equivalents

11,904

9,066

15,498

11,803

Total current assets

228,239

173,819

204,738

155,921






Total assets

415,641

316,537

377,775

287,699






EQUITY AND LIABILITIES





Equity





Share Capital

614

468

614

468

Share Premium

183,282

139,581

183,282

139,581

Share based payment reserve

3,925

2,989

2,501

1,905

Fair value reserve

545

414

545

414

Currency translation reserve

(16,588)

(12,633)

44

33

Other comprehensive income of equity accounted associates

8,628

6,571

8,628

6,571

Accumulated surplus

80,075

60,982

69,381

52,838

Total equity

260,481

198,372

264,995

201,810






Current liabilities





Trade and other payables

18,122

13,803

20,018

15,245

Contingent consideration

7,856

5,983

10,598

8,071

Loans and borrowings

58,618

44,641

30,715

23,391

Income tax

10,568

8,048

10,083

7,679

Deferred tax

259

197

375

286

Lease liability

10

7

9

7

Total current liabilities

95,433

72,679

71,798

54,679

 

Non-current liabilities





Deferred tax

710

541

710

541

Issued debt - bond

35,322

26,900

35,333

26,908

Loans

23,188

17,659

4,453

3,391

Lease liability

507

386

486

370

Total liabilities

155,160

118,165

112,780

85,889






Total equity and liabilities

415,641

316,537

377,775

287,699

 

 

The following table shows a reconciliation of Bitcoin and Bitcoin Equivalent Mining Margin to gross margin, the most directly comparable IFRS measure, for the three months ended 31 March 2022 and the three months ended 31 March 2021.

 


2022

2021

Figures in '000

$

£

$

£






Gross profit

1,919

1,461

27,125

20,658






Depreciation of mining equipment

6,961

5,301

2,869

2,185

Change in fair value of digital currencies

6,080

4,630

(13,248)

(10,090)

Realized gain (loss) on sale of digital currencies

(41)

(30)

(1,472)

(1,121)

Cryptocurrency management fees

-

-

(434)

(330)

Mining profit

14,919

11,362

14,840

11,302

Bitcoin and Bitcoin Equivalent Mining Margin

76%

76%

83%

83%

 

 

The following table shows a reconciliation of Adjusted EBITDA to net income, the most directly comparable IFRS measure, for the three months ended 31 March 2022 and the three months ended 31 March 2021.

 


2022

2021

Figures in '000

$

£

$

£






Net income

2,066

1,573

25,300

19,267






Depreciation/amortization

7,166

5,457

2,914

2,219

Interest expense

2,442

1,860

289

220

Income tax credit

(117)

(89)

-

-

Share based payment

1,423

1,084

123

94

Change in fair value of digital currencies

6,080

4,630

(13,248)

(10,090)

Adjusted EBITDA

19,060

14,515

15,378

11,710

Adjusted EBITDA Margin

98%

98%

86%

86%

 

 

*Dollar values translated from pound sterling into U.S. dollars at the rate of £1.00 to $1.31 unless otherwise specified.

 

For further information please contact:

 

 

Argo Blockchain


Peter Wall

Chief Executive

via Tancredi +44 203 434 2334

 

finnCap Ltd


Corporate Finance

Jonny Franklin-Adams

Tim Harper

Joint Corporate Broker

Sunila de Silva

+44 207 220 0500

 

 

Tennyson Securities


Joint Corporate Broker

Peter Krens

+44 207 186 9030

OTC Markets


Jonathan Dickson

[email protected]

+44 204 526 4581

+44 7731 815 896

Tancredi Intelligent Communication

UK & Europe Media Relations


Emma Valgimigli

Fabio Galloni-Roversi Monaco

Nasser Al-Sayed

[email protected]

+44 7727 180 873

+44 7888 672 701

+44 7915 033 739

 

About Argo:

 

Argo Blockchain plc is a global leader in cryptocurrency mining with one of the largest and most efficient operations powered by clean energy. The Company is headquartered in London, UK and its shares are listed on the Main Market of the London Stock Exchange under the ticker: ARB and on the Nasdaq Global Select Market in the United States under the ticker: ARBK.

 

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