Ault Alliance, Inc. (AULT)·Q1 2024 Earnings Summary

Executive Summary

• Ault Alliance achieved profitability in Q1 2024, with total revenue of $44.9M (+55% YoY) and gross margin of 43%; income from operations was $0.4M and net income available to common shareholders was $2.5M, driven by Sentinum (Bitcoin mining) and a sharp rebound in lending/trading activities .
• Profitability was materially aided by non-operating items, including a $17.9M gain on conversion of investment in equity securities to marketable equity securities and elevated mark-to-market gains in Fintech; interest expense remained high at $4.9M, tempering operating improvements .
• Management highlighted an AI data center strategy at the Michigan facility (current ~30 MW, potential up to 300 MW with approvals and funding) and set a long-term target for 2027 of >$500M revenue and >50% gross margins, with an intent to minimize equity issuance and finance expansion primarily via debt .
• Outlook caution: results may fluctuate due to Bitcoin price/difficulty and evolving AI dynamics; 10-Q flagged substantial doubt about going concern and ongoing material weaknesses in internal controls, which are key risk considerations for investors .
• Wall Street consensus estimates via S&P Global were unavailable for comparison; the company did not provide formal near-term guidance in Q1 materials.

What Went Well and What Went Wrong

What Went Well

• Revenue growth and margin expansion: Revenue rose 55% YoY to $44.9M, driven by digital asset mining ($11.4M, +56% YoY) and lending/trading activities ($9.1M vs. -$4.9M prior-year), with gross margins improving to 43% and operating expenses declining 41% to $19.1M .
• Segment operating improvement: Sentinum, Technology & Finance (Fintech), and Energy all reported positive income from operations; management stated, “we are beginning to see the results of our commitment to focusing on and strengthening our key assets” .
• Strategic positioning in AI: Significant investment in the Michigan data center (34.5 acres, 617,000 sq ft, ~30 MW today; potential to 300 MW) with plans to lease to AI tenants for 7–10 years, positioning Sentinum as a long-term growth engine .

What Went Wrong

• Quality of earnings: Q1 profitability relied on non-operating gains, notably a $17.9M conversion gain and mark-to-market impacts; interest expense was $4.9M, indicating financing burden remains elevated .
• Volatility risk: Management cautioned that results will fluctuate due to Bitcoin volatility/difficulty and dynamic AI industry conditions; Fintech profitability is subject to wide swings due to mark-to-market .
• Financial risk posture: The 10-Q disclosed substantial doubt regarding going concern, negative working capital of $53.5M, and persistent material weaknesses in internal controls, raising execution and financing risks .

Financial Results

Consolidated Performance vs prior periods

Notes: Q3 2023 press release disclosed revenue by segment but did not provide EPS/margins; therefore those cells are N/A .

Segment breakdown – Q1 2024

KPIs – Q1 2024

Guidance Changes

Earnings Call Themes & Trends

No Q1 2024 earnings call transcript was found in the document set; themes below reflect management commentary in Q1 2024 press release and 10-Q and compare to prior releases.

Management Commentary

• “We are beginning to see the results of our commitment to focusing on and strengthening our key assets… Sentinum, Technology and Finance (Fintech) and Energy all reported positive income from operations” — Milton “Todd” Ault III, Executive Chairman .
• “The AI revolution is underway, and our investments in the MI Facility are positioning us to be a significant player… [We] plan to finance the significant expansion… primarily through debt” .
• Long-term vision: “By the end of 2027… we would expect revenues to exceed $500 million with gross margins in excess of 50%. The Company expects the large majority of this growth to be driven by Sentinum and its data center operations.” .

Q&A Highlights

• No analyst Q&A transcript was available in the document set for Q1 2024. Management’s materials emphasize AI data center strategy, Bitcoin mining dynamics post-halving, and caution on quarter-to-quarter volatility due to market factors .

Estimates Context

• Wall Street consensus via S&P Global was unavailable for AULT in this period; therefore, no comparisons to consensus EPS or revenue are provided. The company did not issue formal near-term guidance in Q1 materials .

Key Takeaways for Investors

• Q1 profitability is encouraging but was significantly influenced by non-operating gains; focus on underlying operating earnings (operating income $0.4M, gross margin 43%) to assess sustainability .
• Sentinum is the strategic fulcrum: BTC mining growth and AI colocation strategy at MI Facility (with a path to 300 MW) underpin the long-term target (> $500M revenue, >50% GM by 2027), but execution requires approvals and funding, likely debt-financed .
• Financing risk is non-trivial: interest expense remains elevated ($4.9M in Q1); going concern and internal control weaknesses heighten risk; watch capital raises, debt terms, and maturities .
• Fintech results can swing widely due to mark-to-market; segment posted $9.1M revenue and $9.0M operating income in Q1, but management warns of continued volatility .
• Post-halving BTC economics may pressure mining yields; Q1 benefited from higher BTC price offset by higher difficulty; monitor BTC price/difficulty and Sentinum’s energy cost and efficiency .
• Energy/Crane operations remain stable (Q1 revenue $12.9M), offering cash flow support amidst volatility elsewhere .
• Trading implications: near-term sentiment likely tied to AI data center leasing announcements, BTC trajectory, and financing actions; medium-term thesis hinges on converting MI Facility capacity into contracted AI tenancy and improving core operating profitability .