Ault Alliance Achieves Profitability in the First Quarter of 2024; Revenue Increases by 55% to $45 Million

Rhea-AI Summary

Ault Alliance (NYSE American: AULT) reports a profitable Q1 2024, with total revenue rising 55% to $44.9 million from the previous year's $28.9 million. Excluding revenue from its discontinued Ault Global Real Estate Equities, revenue growth remains strong. Digital asset mining revenue increased 56% to $11.4 million, and lending/trading revenue surged to $9.1 million from a prior loss of $4.9 million. Gross margins improved to 43%, and operating expenses fell 41% to $19.1 million. Net income for common shareholders reached $2.5 million compared to a $48.9 million loss last year. Investments in the Michigan data center aim to capitalize on AI industry growth, with potential expansions contingent on approvals and funding. Management remains optimistic but cautions about potential fluctuations due to market conditions.

Positive

• Total revenue increased by 55% to $44.9 million.
• Digital asset mining revenue surged 56% to $11.4 million.
• Lending and trading revenue jumped to $9.1 million from a negative $4.9 million.
• Gross margins improved significantly to 43% from 9%.
• Operating expenses dropped 41% to $19.1 million.
• Net income for common shareholders was $2.5 million, recovering from a $48.9 million loss.
• The MI Facility has the potential to significantly enhance sales and profitability.
• Company plans to finance facility expansion primarily through debt, minimizing equity issuance.

Negative

• Revenue from Ault Global Real Estate Equities, amounting to $3 million, was excluded due to reclassification as discontinued operations.
• The Michigan data center expansion is contingent on receiving necessary approvals and funding, which may not be guaranteed.
• Future results may fluctuate due to Bitcoin volatility and evolving AI industry dynamics.
• The Fintech segment continues to face wide profitability fluctuations due to market conditions.

Insights

Financial Analyst

Ault Alliance has shown a marked improvement in its financial health, which is quite impressive. A 55% increase in revenue to $44.9 million and a shift from a net loss of $48.9 million to a net income of $2.5 million indicates effective cost management and operational efficiency. An operational income of $0.4 million compared to a significant loss last year is a positive sign for stakeholders. The company has also effectively reduced operating expenses by 41%. Improved gross margins from 9% to 43% show that Ault has managed to either increase its pricing power or reduce its production costs.

However, the reliance on continued positive performance in the volatile Bitcoin and AI sectors suggests a level of risk that potential investors should consider. The company's decision to expand the Michigan data center to 300 MW, assuming they get the necessary approvals and funding, underscores their commitment to AI but also carries the inherent risk of capital expenditure. Given these factors, while the current report is promising, cautious optimism is recommended for potential investors.

Market Research Analyst

The shift towards AI and the expansion of the MI Facility highlights a strategic pivot that could position Ault Alliance favorably in the future. The mention of entering into long-term leases with AI tenants is significant, as it suggests predictable and recurring revenue streams which can stabilize earnings over the long term. However, the AI market is highly competitive and rapidly evolving, necessitating continuous investment and innovation. This strategic move aligns with industry trends, where AI infrastructure is in high demand, but the success of this initiative will depend heavily on effective execution and market adoption.

The performance in other segments, such as digital assets mining and fintech, also reflects a diversified revenue stream. Yet, the company notes the potential fluctuations in fintech profitability, which suggests that market conditions could significantly impact results. This diversification can be seen as both a strength and a risk; while it provides multiple revenue streams, it also exposes the company to various industry-specific risks.

Technology Expert

Sentinum's investment in the Michigan data center is a strategic move towards capitalizing on the AI boom. The facility's current capacity of 30 MW with potential expansion to 300 MW is significant. It underscores the company's intention to become a key player in the AI infrastructure space. The ability to attract long-term AI tenants will be important to maximizing the facility's value. However, the expansion is contingent on obtaining necessary approvals and funding, which introduces an element of uncertainty. The focus on AI is a prudent move given the burgeoning opportunities in this sector, but success will depend on execution and the ability to stay ahead in a fast-paced industry.

LAS VEGAS--(BUSINESS WIRE)-- Ault Alliance, Inc. (NYSE American: AULT), a diversified holding company (“Ault Alliance,” or the “Company”), reported its financial results for the first quarter ended March 31, 2024, which were disclosed on a quarterly report on Form 10-Q filed yesterday with the Securities and Exchange Commission.

First quarter 2024 highlights include:

• Total revenue increased 55% to $44.9 million, compared to $28.9 million in the prior year’s first fiscal quarter;
• Revenue of approximately $3 million from Ault Global Real Estate Equities, Inc. (“AGREE”), was not included in the total revenue of $44.9 million as the assets of AGREE were classified as discontinued operations as they were previously held for sale;
• Revenue from digital assets mining increased 56% to $11.4 million, compared to $7.3 million in the prior year’s first fiscal quarter;
• Revenue from lending and trading activities increased to $9.1 million, compared to negative $4.9 million in the prior year’s first fiscal quarter;
• Gross margins improved to 43%, compared to 9% in the prior year’s first fiscal quarter;
• Operating expenses declined 41% to $19.1 million, compared to $32.3 million in the prior year’s first fiscal quarter;
• Income from operations improved to $0.4 million, compared to a loss from operations of $29.9 million in the prior year’s first fiscal quarter;
• Total assets of $299.8 million as of March 31, 2024; and
• Net income available to common stockholders of $2.5 million, compared to a net loss available to common stockholders of $48.9 million in the prior year first fiscal quarter.

Milton “Todd” Ault III, the Founder and Executive Chairman of Ault Alliance, expressed optimism about the Company’s trajectory, noting, “We are beginning to see the results of our commitment to focusing on and strengthening our key assets, as three of our main reporting segments, Sentinum, Inc. (“Sentinum”), Technology and Finance (“Fintech”) and Energy and Infrastructure (“Energy”), all reported positive income from operations for the fiscal quarter ended March 31, 2024. Only the Energy segment reported positive income from operations during the comparable period for the prior quarter. However, we recognize that the next few quarters may present fluctuations in our results, due to variables such as Bitcoin volatility and difficulty as well as the dynamic, evolving artificial intelligence (“AI”) industry, which we anticipate will significantly impact our future operations.”

Further emphasizing its commitment to technological advancement, Sentinum has made substantial investments in its Michigan data center (the “MI Facility”), aiming to extract the maximum possible value from the growing AI industry. This state-of-the-art facility spans 34.5 acres with 617,000 square feet, including 14 acres under roof, and boasts a current capacity of approximately 30 megawatts (“MWs”) of power. However, the MI Facility has the opportunity to expand to 300 MW, subject to the Company’s receipt of necessary approvals and adequate funding, which it may or may not obtain. The Company expects the MI Facility to dramatically enhance sales and profitability. Sentinum is seeking to enter into long-term leases with AI tenants for the MI Facility, which will be expected to range between seven and ten years, positioning this center to be a long-term major growth engine for the Company.

Ault Alliance is strategically positioning itself to capitalize on technological advancements in AI, with its Sentinum business segment expected to be a key growth driver. “The AI revolution is underway, and our investments in the MI Facility are positioning us to be a significant player in this burgeoning industry,” added Mr. Ault.

Ault Alliance is committed to minimizing equity issuance and currently plans to finance the significant expansion of the MI Facility primarily through debt. This strategy aligns with the Company’s fiscal goals and supports the expanding AI industry, ensuring capital efficiency and sustainable growth.

The Company also notes that its Fintech segment continues to experience, and is expected to continue to experience, wide fluctuations in its profitability as its positions are marked to the market.

Reflecting on the strategic plan launched in 2017 to acquire assets and grow the Company’s topline across multiple sectors, Mr. Ault highlighted the long-term vision, “It has been a bumpy road, but we remain steadfast in our mission to build on our core businesses and capitalize on emerging opportunities. By the end of 2027, assuming that we leased the Michigan data center and the power generated there were upgraded to 300 MW, 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.”

For more information on Ault Alliance and its subsidiaries, Ault Alliance recommends that stockholders, investors, and any other interested parties read Ault Alliance’s public filings and press releases available under the Investor Relations section at www.Ault.com or available at www.sec.gov.

About Ault Alliance, Inc.

Ault Alliance, Inc. is a diversified holding company pursuing growth by acquiring undervalued businesses and disruptive technologies with a global impact. Through its wholly and majority-owned subsidiaries and strategic investments, Ault Alliance owns and operates a data center at which it mines Bitcoin and offers colocation and hosting services for the emerging artificial intelligence ecosystems and other industries, and provides mission-critical products that support a diverse range of industries, including metaverse platform, oil exploration, crane services, defense/aerospace, industrial, automotive, medical/biopharma, hotel operations and textiles. In addition, Ault Alliance extends credit to select entrepreneurial businesses through a licensed lending subsidiary. Ault Alliance’s headquarters are located at 11411 Southern Highlands Parkway, Suite 240, Las Vegas, NV 89141; www.Ault.com.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as “believes,” “plans,” “anticipates,” “projects,” “estimates,” “expects,” “intends,” “strategy,” “future,” “opportunity,” “may,” “will,” “should,” “could,” “potential,” or similar expressions. Statements that are not historical facts are forward-looking statements. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties.

Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update any of them publicly in light of new information or future events. Actual results could differ materially from those contained in any forward-looking statement as a result of various factors. More information, including potential risk factors, that could affect the Company’s business and financial results are included in the Company’s filings with the U.S. Securities and Exchange Commission, including, but not limited to, the Company’s Forms 10-K, 10-Q and 8- K. All filings are available at www.sec.gov and on the Company’s website at www.Ault.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240521220491/en/

Ault Alliance Investor Contact:

IR@Ault.com or 1-888-753-2235

Source: Ault Alliance, Inc.

FAQ

What was Ault Alliance's total revenue for Q1 2024?

Ault Alliance's total revenue for Q1 2024 was $44.9 million, a 55% increase from Q1 2023.

How much did Ault Alliance's digital asset mining revenue increase in Q1 2024?

Ault Alliance's digital asset mining revenue increased by 56% to $11.4 million in Q1 2024.

What was the net income available to Ault Alliance common stockholders in Q1 2024?

The net income available to Ault Alliance common stockholders in Q1 2024 was $2.5 million.

What was Ault Alliance's gross margin in Q1 2024?

Ault Alliance's gross margin improved to 43% in Q1 2024.

What are the future growth expectations for Ault Alliance's Michigan data center?

Ault Alliance anticipates significant growth from its Michigan data center, with potential revenue exceeding $500 million by 2027 if the facility expands to 300 MW.

What challenges does Ault Alliance face regarding the Michigan data center expansion?

The expansion of Ault Alliance's Michigan data center is contingent on receiving necessary approvals and funding, which may not be guaranteed.