Executive Summary

Revenue fell to $0.41M in Q2 (–57% q/q; +5% y/y), reflecting severe bitcoin mining headwinds and a shift in reported revenue that excludes partner-owned machines; net loss widened to $6.5M, including a $2.5M restructuring charge tied to taking control of the Sweden facility .
Operations ramped materially despite heat-related curtailments: total bitcoin produced including investor-owned machines rose to 162 vs 94 in Q1, and nearly all miners were brought online by early July, with ~4,700 owned S9 miners and ~2,100 managed units running in Sweden and Washington .
Balance sheet tightened: cash was $2.30M, digital currencies $0.251M, notes payable $3.82M, and equity $5.90M as of 6/30; management subsequently had its $150M S-3 shelf declared effective (8/10) and indicated proceeds could help repay notes and fund expansion .
Strategic updates: appointed a COO (7/11), launched a collaboration with Bit5ive on 1MW containerized “POD5” mining pods (royalty model), and is exploring North American expansion and potential additional power in Sweden, setting up 2H execution catalysts .

What Went Well and What Went Wrong

What Went Well
- Production ramp despite harsh conditions: “Including partnerships with investor-owned machines, the company produced 162 Bitcoins in the quarter… compared to 94 Bitcoins the first quarter” .
- Full deployment and ops stabilization: “By early July 2018… the remaining 298 have been added… all of our bitcoin miners… are fully operational” .
- Strategic optionality: collaboration with Bit5ive (royalty on POD5 sales) to diversify toward infrastructure solutions; “fixed single digit royalty based on gross sales… capital commitment is pretty small” .
What Went Wrong
- Sweden vendor failure and restructuring: $2.5M restructuring charge (deposit write-off and assuming unpaid vendor obligations) after Beacon failed to deliver a turnkey facility; MGT took direct control .
- Economics deteriorated: “difficulty has tripled” YTD and BTC price halved, which “mathematically [reduced] revenue 80%” for a fixed fleet, crushing mining margins .
- Liquidity pressure: cash fell to $2.30M and notes payable reached $3.82M by quarter-end; management acknowledged likely use of S-3 equity to repay debt absent a sharp BTC rebound .

Financial Results

Income statement comparison (oldest → newest)

Metric	Q2 2017	Q1 2018	Q2 2018
Revenue ($USD Thousands)	388	956	409
Operating Loss ($USD Thousands)	(4,120)	(4,236)	(6,388)
Net Loss ($USD Thousands)	(4,235)	(4,549)	(6,505)
Diluted EPS ($)	(0.12)	(0.12)	(0.10)

Operating expense breakdown (oldest → newest)

Operating Expenses ($USD Thousands)	Q2 2017	Q1 2018	Q2 2018
Cost of Revenue	188	881	1,015
General & Administrative	4,172	4,209	3,283
Restructuring Charge	0	0	2,499
Sales & Marketing	65	55	0
Research & Development	83	47	0
Total Operating Expenses	4,508	5,192	6,797

KPIs and balance sheet (oldest → newest; period-end unless noted)

KPI / Balance Sheet	Q2 2017	Q1 2018	Q2 2018
Bitcoins Produced (incl. investor-owned) (Units)	—	94	162
Owned S9 Miners Operating (Units)	—	~4,700 (500 WA + 4,200 SE)	~4,700 (500 WA + 4,200 SE)
Managed Miners (Units)	—	~2,100	~2,100
Cash and Cash Equivalents ($USD Millions)	—	0.461	2.298
Digital Currencies ($USD Thousands)	—	22	251
Notes Payable, net ($USD Millions)	—	0.000	3.817
Stockholders’ Equity ($USD Millions)	—	9.892	5.903

Context: Q4 2017 revenue was $1.8M (from Q1 materials), illustrating a revenue decline from Q4→Q1→Q2 as difficulty rose and BTC prices fell .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Quantitative Revenue/EPS/Margins	FY/Q3	None provided	None provided	Maintained: no formal numerical guidance
Capital/Financing Plans	2018-2019	S-3 filed (6/13)	S-3 declared effective (8/10); potential use of equity to repay notes and fund expansion	New/Updated
Capacity/Power	Ongoing	Ramp in Sweden underway	Exploring +10MW “rolling transformer” in Sweden (no assurance, 2019 timing) and North America expansion	Updated qualitative
Uplisting	2018+	Application to Nasdaq Capital Market filed	Needs stock to $4 initial listing (target $2 pre 1-for-2 split); no timeline	Clarified requirements
Dividends	—	None	None	No change

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4’17 and Q1’18)	Current Period (Q2’18)	Trend
BTC Difficulty vs Price	Q1: “decline in the price of bitcoin” and increased difficulty pressured revenue	CEO: difficulty tripled YTD; ~55% increase in Q2 while price halved, driving ~80% revenue compression on a fixed fleet	Worsened economics
Sweden Facility Execution	Q1: transition to Sweden; operating at ~1/3 capacity; weeks to ramp	Vendor non-performance; $2.5M restructuring; MGT takes direct control; payables/current with utility	Took control; near full deployment
Production/Utilization	Q1: ramp constrained; BTC mined 91.5; revenue $0.96M	162 BTC including partner-owned vs 94 in Q1; all miners fully operational by early July	Improving output
Capitalization	FY17: debt-free YE	$3.7M unsecured notes in June; S-3 $150M effective; equity likely to repay notes absent BTC rally	Leverage up; financing optionality up
Strategic Initiatives	—	Appointed COO (7/11); collaborate with Bit5ive on 1MW POD5 (royalty)	Broader infra positioning
Uplisting	—	Needs $4 initial price; 1-for-2 split authorized; internal target to get stock to ~$2 pre-split	Requirement clarified

Management Commentary

“Make no mistake, current business conditions in bitcoin mining is stink... difficulty has tripled [and] the price of bitcoin has been cut in half… [reducing] revenue 80%” – Robert Ladd, CEO .
“By early July 2018… all of our bitcoin miners… are fully operational” – Stephen Schaeffer, COO .
“We did a fixed single digit royalty based on gross sales [for POD5]… capital commitment is pretty small” – Robert Ladd, CEO .
“Marginal cost of production… about $4,000 right now per coin” – Robert Ladd, CEO .
“Plan for paying down the notes would be likely to use some amount of [the] S-3… to sell equity” – Robert Ladd, CEO .

Q&A Highlights

Bit5ive POD5 strategy: hedge cyclicality of pure mining; turnkey 1MW pods, royalty to MGT with modest capital outlay; aim to be “more of [an] infrastructure company for the digital age” .
Expansion footprint: after Sweden, next expansions likely in the U.S./North America; evaluating Canada; Swedish grid may add a 10MW “rolling transformer” in 2019 (no assurance) .
Washington vs. Sweden: shipping older batch S9s from WA to Sweden doesn’t make economic sense; WA power deal “pretty fair,” plan to run through life or redeploy to newer tech later .
Cost and liquidity: one-time Sweden restructuring in Q2; ongoing G&A under review; plan to repay $3.6M note via S-3 equity if needed; maintain operations at full power .
Uplisting: Nasdaq initial listing requires $4; only 1-for-2 reverse authorized; internal target to reach ~$2 pre-split; not pursuing larger reverse at this time .

Estimates Context

Wall Street consensus (S&P Global) for MGTI Q2 2018 revenue and EPS was unavailable; thus, beats/misses versus consensus cannot be assessed. We would anchor estimate comparisons on S&P Global consensus if it existed for this OTC micro-cap; in its absence, investors should focus on sequential/y/y trajectories and disclosed drivers [GetEstimates error shown; no available S&P Global mapping].

Key Takeaways for Investors

Structural mining headwinds (difficulty up, BTC price down) drove a revenue collapse from Q4→Q1→Q2 and a wider Q2 loss; the $2.5M restructuring was a material one-time drag but also reset the Sweden cost structure under direct control .
Execution improved: fleet essentially fully deployed by early July; quarterly BTC output (incl. partner-owned) rose to 162 from 94, indicating production leverage if BTC/difficulty converge more favorably .
Liquidity tight but with levers: $2.30M cash, $3.82M notes payable at 6/30; S-3 shelf is in place and likely to be tapped for debt service and expansion, implying potential dilution if BTC does not rebound .
Strategic pivot to infrastructure (Bit5ive POD5 royalties) provides an incremental, less capital-intensive revenue stream and diversification beyond pure self-mining .
Geographic mix likely to tilt back toward North America as power dynamics shift; Sweden may still add capacity pending utility action (no assurance) .
Near-term trading set-up: catalysts include sustained full utilization, any BTC/difficulty convergence, concrete U.S./Canada site announcements, POD5 order traction, and progress toward uplisting prerequisites; risks center on BTC volatility, network difficulty, capital access, and remaining operational execution .

Other Relevant Press Releases in Q2

$3.7M in non-dilutive expansion capital via unsecured promissory notes; progress update on Sweden ramp (June 7, 2018) .
$150M universal shelf registration filed (June 13, 2018); later declared effective on Aug 10 (Q3) .
Stephen Schaeffer named COO (July 11/17, 2018) .
Collaboration with Bit5ive to produce 1MW POD5 mining pod (Aug 14, 2018; disclosed with Q2 results) .

Source Documents

Q2 2018 press release (8-K Item 2.02; EX-99.1) .
Q2 2018 earnings call transcript (8/15/2018) .
Q2 2018 10-Q (filed 8/14/2018) .
Q1 2018 press release and call (for prior-quarter comps) .
FY 2017 press release (for Q4 2017 revenue reference) .

MGT CAPITAL INVESTMENTS, INC. (MGTI)·Q2 2018 Earnings Summary