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MC

MGT CAPITAL INVESTMENTS, INC. (MGTI)·Q1 2018 Earnings Summary

Executive Summary

  • Q1 2018 was a transition quarter: revenue from bitcoin mining was $0.956M, up 206% year over year but down ~47% sequentially from $1.8M in Q4 2017, driven by relocation of operations to Sweden and a sharp decline in bitcoin prices .
  • Net loss improved year over year to $(4.549)M from $(5.891)M, with operating expenses rising due to cost of revenues, stock-based compensation, and payroll as the company scaled mining and added leadership .
  • Liquidity tightened: cash fell to $0.461M with no debt; management flagged substantial doubt about going concern mitigated by plans to fully deploy miners in Q2 and potential capital raises .
  • Operational ramp is the near-term catalyst: management expects Sweden facilities to be “fully operational” in Q2; CEO guided timeline in “weeks not days and also not months,” emphasizing 90 PH/s at full deployment and 15 MW power secured .

What Went Well and What Went Wrong

What Went Well

  • Year-over-year growth: Revenue rose 206% to $0.956M on expanded mining capacity; net loss narrowed by $1.342M year over year .
  • Balance sheet simplification: Debt reduced to zero; stockholders’ equity of $9.892M at March 31, 2018; Company invested ~$7M in miners and prepaid ~$1M for electricity/hosting to drive capacity .
  • Strategic expansion: At full deployment expected in May, capacity targeted at ~90 PH/s with ~4,200 owned miners and ~2,100 managed in Sweden; power secured via 15 MW lease .
    • CEO: “We are debt-free, asset-rich… operating at about one-third of our theoretical capacity in Sweden… we’re talking about weeks not days and also not months” .

What Went Wrong

  • Sequential revenue compression: Revenue declined from $1.8M in Q4 2017 to $0.956M due to lower production amid relocation and bitcoin price decline; difficulty remained high .
  • Margin pressure: Gross margin fell to ~7.8% (cost of revenue $0.881M vs revenue $0.956M), and operating loss was $(4.236)M; net income margin was approximately −476% given fixed costs and lower BTC pricing .
  • Controls and liquidity: Material weaknesses in internal controls were identified; cash fell to $0.461M and management noted substantial doubt about going concern absent ramp and/or additional capital .

Financial Results

MetricQ1 2017Q4 2017Q1 2018
Revenue ($USD Millions)$0.312 $1.800 $0.956
Net Income (Loss) ($USD Millions)$(5.891) —$(4.549)
Basic & Diluted EPS ($USD)$(0.20) —$(0.12)
Operating Income (Loss) ($USD Millions)$(2.945) —$(4.236)
Gross Profit ($USD Millions)$0.111 (calc from revenue $0.312M and cost $0.201M) —$0.075 (calc from revenue $0.956M and cost $0.881M)
Gross Margin %35.6% (calc) —7.8% (calc)
EBIT Margin %−943.8% (calc: $(2.945)M / $0.312M) —−443.0% (calc: $(4.236)M / $0.956M)
Net Income Margin %−1887.5% (calc: $(5.891)M / $0.312M) —−476.0% (calc: $(4.549)M / $0.956M)

Notes:

  • Sequential revenue down ~47% from Q4 2017 to Q1 2018 .
  • EPS and detailed Q4 2017 margin data not disclosed in retrieved documents.

Segment breakdown: Company reports primarily cryptocurrency mining; no separate segments disclosed .

KPIs

KPIQ1 2017Q4 2017Q1 2018
Bitcoins Mined (units)——91.5
Owned Miners (units)——~4,700 total owned (4,200 Sweden, 500 WA)
Managed Miners (units)——~2,100 (Sweden)
Hash Rate Capacity (PH/s)——~90 PH/s at full deployment expected in May 2018
Cash & Cash Equivalents ($USD Millions)—$9.519 (Dec 31, 2017) $0.461
Stockholders’ Equity ($USD Millions)—$11.895 (Dec 31, 2017) $9.892
Working Capital ($USD Millions)——$0.722

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operations timeline (Sweden facility)Q2 2018NoneFacility expected to be fully operational during Q2 2018 New
Deployment timeline (CEO)Near-termNone“Weeks not days and also not months” New
Hash rate capacityMay 2018None~90 PH/s at full deployment New
Power availability24-month termNone15 MW uninterrupted power via Beacon lease (fees $0.810M annually; $1.620M prepaid first/last months) New
Liquidity outlookNext 12 monthsNoneBelieves able to meet operating expenses for one year; may need capital if delays persist; substantial doubt alleviated by plans New
Revenue/EPS guidanceQ1/Q2 2018NoneNone providedMaintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 2018)Trend
Operational relocation & logisticsTransition to Sweden began late Dec 2017; ramp ongoing CEO: operating at ~1/3 capacity; delays from “shipments, customs, labor, rates”; timeline “weeks not days… not months” Improving deployment pace but constrained by logistics
Bitcoin price/macro2017 revenue growth but BTC volatility highlighted Sequential revenue decline compounded by sharp BTC price drop and high difficulty ; BTC high/low ~$17K/$7K in Q1 Macro headwind vs Q4; volatility elevated
Capacity expansion2017: planned growth in miners Target ~90 PH/s at full deployment; ~4,200 owned + ~2,100 managed miners in Sweden Positive capacity trajectory
Legal/regulatorySecurities class action dismissed with prejudice; derivative action stayed; partial claims in contract case dismissed No new adverse developments; remaining unjust enrichment claim proceeding Reduced legal overhang vs prior periods
Internal controlsNot highlighted previouslyMaterial weaknesses disclosed; remediation in progress; new CFO hired Controls strengthening but still weak

Management Commentary

  • CEO (Robert Ladd): “We have characterized the first quarter as a transition quarter… we are debt-free, asset-rich… operating at about one-third of our theoretical capacity in Sweden… we’re talking about weeks not days and also not months” .
  • CFO (Rob Lowrey): Revenue $1.0M Q1 2018 vs $312K Q1 2017 and $1.8M Q4 2017; decline driven by relocation to Sweden and sharp BTC price drop with difficulty remaining high; operating expenses up primarily due to cost of revenues, $0.928M stock-based compensation, and ~$0.5M payroll/recruiting; non-operating expenses $0.313M; net loss $(4.5)M; ~$7M spent on miners and ~$1M prepaid electricity/hosting; cash ~$0.5M; debt-free .
  • 10-Q: Mined 91.5 BTC for $0.956M revenue; expects full Sweden facility operations in Q2 2018; power secured (15 MW); highlights liquidity plans and going concern language .

Q&A Highlights

  • The company emphasized deployment pace and logistical constraints (customs, infrastructure hardware), reiterating near-term timeline and intent to accelerate prudently .
  • CFO clarified revenue drivers: relocation-led production shortfall and BTC price/difficulty headwinds; detailed OpEx composition and capital invested into miners and power/hosting .
  • Note: Additional Q&A detail was not available in the retrieved transcript beyond prepared remarks due to a document retrieval inconsistency; management’s statements above reflect the available call content .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 2018 revenue and EPS was unavailable due to missing company mapping in SPGI/Capital IQ; therefore, we cannot provide a beat/miss comparison versus consensus for this quarter [GetEstimates error: Missing CIQ mapping for MGTI].

Key Takeaways for Investors

  • Near-term stock narrative hinges on execution speed in Sweden: a “weeks” deployment timeline and Q2 full operation target are key catalysts; a slower ramp or continued BTC weakness would pressure revenue/margins .
  • Sequential revenue decline (−47%) and gross margin compression to ~7.8% highlight sensitivity to BTC price/difficulty and fixed power/infrastructure; watch realized BTC prices, difficulty trends, and uptime metrics .
  • Liquidity is tight (cash $0.461M); management may need additional capital if ramp is delayed—monitor financing activities and dilution risk alongside warrant/stock issuance mechanics .
  • Legal overhang diminished (class action dismissed), but an unjust enrichment claim proceeds—limited incremental risk evident; continue to monitor outcomes .
  • Internal controls: material weaknesses acknowledged; hiring of CFO and remediation underway—progress here supports future uplisting ambitions and investor confidence .
  • Capacity story remains intact: ~90 PH/s at full deployment with 15 MW power secured and thousands of miners owned/managed; once stabilized, revenue trajectory should improve, subject to crypto market volatility .
  • No formal financial guidance or Street estimates available; frame expectations around operational milestones (hash rate online, miners deployed) and BTC environment; traders should focus on ramp headlines and BTC price moves as primary drivers [GetEstimates error].