HIVE - NASDAQ

Hello, everyone, and welcome to today's webcast reviewing HIVE Digital Technologies financial results for the quarter ended September 30, 2023. On Slide #2, I would like to briefly note disclosures. Except for statements of historical fact, this presentation contains forward-looking information within the meaning of the applicable Canadian and U.S. securities regulations. These forward-looking statements are based on expectations, estimates and assumptions as of the date of this presentation. On the next slide, I'm pleased to introduce today's presenters. Frank Holmes, Executive Chairman; Aydin Kilic, President and CEO; and Darcy Daubaras, Chief Financial Officer. I would now like to hand the presentation over to Mr. Frank Holmes for a macro recap of the quarter. Frank?

Thank you, Holly, and thank you all shareholders and media people that are listening to this webcast. We're very happy how we've been navigate. It's going to be an incredible roller coaster year, and let's see if we can -- but the bottom is behind us and the future looks much better. So I always like to start off my presentations with this beautiful little roller coaster of Bitcoin prices. And there's a reason for that, and I'm going to show you in a second, but most important is to understand the DNA of volatility of an asset class because each one has its own unique volatility and high daily volatility is 6x the S&P 500 and 6x gold prices. That means 70% of the time, it's the non-event that go up or down 6%. Bitcoin is a plus or minus 2% on a daily basis. So that's really sort of the volatility on a daily basis has slowed down. But over 10 days, it is quite large. So you can see that we are still 3x the volatility over a 10-day 2-week period, Bitcoin to HIVE. And I think part of that component of that additional volatility has to deal with, we used to mine Ethereum, that's gone, and now we have this unique AI strategy which we're going to talk about you in a second. But before you invest, it's really important to appreciate and respect the standard deviation, HIVE as a company versus the underlying Bitcoin. Now what happens with Bitcoin drives the price action. And it doesn't really matter if you have good news or bad news on that day, it is the Bitcoin direction, and it appears to be a quant basket by the Citadels and other quants that trade these stocks as a basket around Bitcoin prices. It used to be by the day, then by the hour, and I think it's recalibrating actually by the minute. But what you're seeing here is that we have a 97% correlation to Bitcoin. And you can see some of the other companies have a lower correlation pattern. And also, you can see that HIVE has a strong correlation to some of the other crypto mining stocks like to RIOT, it's 99% of the time; to HUT8 it's 95%; to Bitfarms it's 94%. And even though we have better uptime than RIOT, that correlation as a basket move, we move in tandem, we moved together. I think it's really important for investors to understand, real monster here is the price of Bitcoin action. So what is this importance of Bitcoin? Bitcoin is a decentralized asset. It's portable wealth. It fits into the alternative asset class just like gold, silver and arc, which show up as an alternative asset class. Private equity shows up as an alternative asset class. So from that point of view, it's in good hands. And it's a matter of how much do you have. In the world of gold, the rate down of the world, managing the largest hedge fund in the world, has always a wedding in gold and has had nothing but positive state, as I say, about Bitcoin is like Mozart's Symphony, Jupiter Symphony. I think it's really important to appreciate that the crypto ecosystem, even with the meltdown in the past 12 months, we have attended many conferences in America, in Europe and they're packed. I was told today in Lisbon that there's one in Lisbon, Portugal, and it's in a football stadium, 100,000 people for a web summit. And you're going to think this never would happen with gold stocks. So it never happened with -- even a technology conference with NVIDIA is showing up, you're not going to get 100,000 people spending EUR 700 to attend. It's just unquestionably not going to happen. But the crypto ecosystem is robust around the world. And what's important here is to recognize these nodes that are like close to 13,000, it goes up to 14,000 are decentralized, and they're validating the network, and it's a global phenomena. And that's one reason why even with all the negative news that's taken place by the Bank of International settlements, which is biased towards the central banks and regulatory regimes around the world is not appreciating that this new demographics of voters that are going to be coming in are relating to Bitcoin as an alternative asset class and they have these huge conferences. So I think that something big is happening and to recognize that there's centralized and there's decentralized, Bitcoin like gold is a decentralized asset class. Well, one of the other really interesting parts is just recently came out by something in the HIVE sponsors is education, and we sponsor a Bitcoin Magazine and having their research and they come with these beautiful graphics. And what this graphic here is really profound and showing you that even with the crisis in the past year and the immense volatility, the number of addresses holding more than $1,000 worth of bitcoin hit an all-time high. So this recent change of tone coming up with an ETF, which is still yet to really happen, created all of a sudden more interest. And I think it's just important to recognize the uniqueness of Bitcoin, cap the 21 million coins, over 19 million been mined, less than 10% are to be mined. And as less and less supply is coming out and the adoption is rising, Metcalfe's law would suggest that $100,000, $200,000, $600,000. You can hear many of these speakers like Kathy Wood say $600,000, other people saying millions of dollars. It's really based on this Metcalfe's law and looking at other adoption processes. So I think it is very, very positive and constructive. But what we do have is we have more and more people coming into mine bitcoin. And Bitcoin right now, and there's an opportunity to -- if you have the fastest computers and you have most efficient computers and you have cheap electricity, you go out and you mine, but there's only 900 coins a day that you can mine and HIVE has basically been around 1% of that network. And that network is attracting still more and more miners predominantly coming from Bitmain who is now probably the biggest miner themselves if they were public for what they do with their own machines before they sell them off to other new miners. But I think it's really important for investors to understand this risk and opportunity. As the difficulty rises, the margins are going to fall. And what does that mean? If there's a fixed amount of 900 coins a day, means that more and more people are coming in to compete, to be able to get a piece of those 900 coins, that means there's going to be less, there's going to be less to share, and you're going to just have a difficulty on them, on your margins. Now when crypto mining companies shut down because there's no profits, then the difficulty falls, that means there's less miners, that means margins are rising. And we've seen this happen, and this will be -- have a big occurrence when we go through the having at the end of April, where the embedded model in the Bitcoin is that every 4 years, the half amount of rewards are offered. So we're going to go from 900 coins a day to 450, and you're going to have all these machines competing. So basically, the revenue is going to half and you're going to either have more machines to be able to cover your costs or you're going to have to have people fall off the grid, basically no pun intended for difficulty money, but this concept is so important to understand the inverse relationship. And in capital markets, there's many inverse relationships, like the price of oil falling is very bullish, for airlines profit margins rising. Rising oil prices hurts profit margins of the airlines industry. So you have this strong inverse relationship. If you have rising government bond yields, well, that hurts dividend paying stocks unless they're going to increase their dividend paying. So it's -- I think it's an important concept of capital markets to be able to identify this is an opportunity as a risk. Right now, for the past year, it has been a big risk and Aydin is going to -- our CEO, is going to go into more granular information and detail in showing you how we've tried to stay ahead of this and maintaining the world [indiscernible] of the network. HIVE is a green energy focus in Canada, Iceland and Sweden, very important. Now we've been innovators, first to go public in September 2017. First of all, basically create its own ASIC mining rig with Intel, first to buy data centers, first to be green energy focused, first to balance the grid. We know that the biggest in Texas, most of the profits the past year from balancing the grid. And we're first to have an AI strategy because of our expertise because we were mining Ethereum. And when you're mining Ethereum, you need expertise in using GPU chips. I have an incredible team. Aydin Kilic as our President and CEO, Electrical Engineer; also Darcy Daubaras is the longest-standing CFO in the crypto ecosystem. Guys, whether 2 bear markets are having acquisitions and a growth profile and the disappearance of Ethereum going from proof of work to proof of stake, and which was for us was always a very, very attractive, higher margin business to whether those storms gives you lots of resiliency. And then we have Johanna Thornblad, who's the President of Sweden. Sweden has been an important part for us for many reasons. And so it's great to have someone from Sweden that's managing that country for us. And then we have Gabriel Ibghy, who is the General Counsel, who speaks many languages like Johanna. And if he's not in Europe living, he's in Montreal. And so I had this incredible dynamic team. We also have an office in Bermuda for managing a lot of our financial reporting and getting stuff done from time zone difference between Sweden, Iceland and then dealing with in Canada, but that we're always on top of our daily production. So HIVE has outperformed Bitcoin, gold price and S&P year-to-date, as you can see, 114%. Bitcoin was up 62%. S&P was up 12%, Gold is up 1%. So the big push for gold as an asset class that continues to see that with central banks acquiring more and more. But gold still is related to interest rates in the U.S. for that 40% demand as was that inverse relationship to the yields in the U.S. Bitcoin has got a complete different ecosystem, but it is recognized as digital gold. It is another form of a portable asset, and it's much more portable than gold is, but you can't wear like gold jewelry. So you see there are strengths and weaknesses and have always been an advocate as a well-known gold fund manager that Bitcoin is one of those beautiful things as an alternative asset class and a diversified portfolio. HIVE has options of $3.4 million, RSUs of $1.9 million, and it has some warrants outstanding, but still is relatively a very tight float. HIVE has strong strategy of the local community. Boden is 100 miles south of the Arctic Circle in Sweden. We basically sponsored the HIVE arena helps the community. We have 12 kids teams learning and practicing and proving it being hockey players. There are 3 Stanley Cup champions, NHL Pros from this little community. They retired back in this community. So hockey is a very big a part of the ecosystem of Boden. And in the middle, you can see one of the photos is Darcy, a lovely guy that likes to play hockey. And I don't think he's been playing recently, but that uniform looks like he's already put on the blades. But what's really important here is our community involvement with the Boden business center for education and at the same time for kids, they're not doing silly things on the streets. They're out there earning this great sport hockey. I was very proud of -- when you take a look at the shareholder dilution, we've had the smallest amount of dilution that is issuing shares, either for a bought deal or ATM. Some of the other companies have grown in their overall Bitcoin production, and a lot of that's come at the expense of issuing shares. We try to manage our balance sheet. It's a delicate process. Do we sell from our holder position? When do we sell? When do we do the ATM? And we have not gone down the path of creditor lenders, which has gotten many of these other companies to big trouble in the past 18 months. We have avoided that path. So when you look at this, like it's one of the most attractive parts of the shareholder dilution. And then HIVE has the lowest G&A per bitcoin mine. It's -- we pay attractive, we have bonuses, but we have a different business model. Our model is to be much more like a royalty company rather than being Newmont or Baric as a gold mining company. I'd rather be Newmont, which has a royalty on their assets in Nevada. And that's what we've done. So we have strategic partners and relationships in other countries, and that has helped us be able to stay lean and be able to weather these downdrafts the volatility and maintain the payment, attractive compensation for the executive team. And so I'm very proud of that as a money manager, this part is very important. But it appears that, that is not really key to when you leave the space of CFA, Chief Investment -- money managers, portfolio managers, what appears to attract the most interest is how big is your total position and what is your growth? We've had a different discipline. That's one reason why we love mining Ethereum, because it allowed us to have the highest gross margins and to be able to grow our business model with the least amount of shareholder dilution. So let's talk about macro stuff. It's really important that you recognize that the imbalance of government policies is what may historically made gold very attractive. It's also -- it makes Bitcoin very attractive. And it's a binary model like the Internet or 0s and 1s. When you look at a macroeconomic model of any country's currency, you can see that there'll be likes and disappointments between their monetary policy and their fiscal policy. So once again, there's binary. Monetary is binary also. It's what do they do with interest rates, that is real interest rates above the inflationary rate and money supply, how much money they they're printing? And when it comes to fiscal policies, tax regulations. And rising taxes and regulations is a real drag on the economy and spending. Where they're spending their money. Is it long-term infrastructure that will create sustainable jobs? Or is it just basically welfare payments or [ boondoggle ] project? So it's important to see that in this century, we have witnessed this concept of modern monetary theory where just print more money as a solution to the problem. And that is like gold outperform the S&P 2:1 and -- in this century, but Bitcoin comes along little about half of the century. If you recall, it was in 2008, the paper was submitted in 2009, Bitcoin is into the ecosystem and has far outperformed everything. And I think one of the things has caught the imagination has been the limited supply that capped at 21 million coins. And as more people appreciate this digital portable wealth and you have to make a brick of gold, you need electricity and if you want to make a Bitcoin, you don't need electricity. So both of them require this financial capital spend on energy to be able to make an asset. One is tangible, that is gold; and one is intangible, that is Bitcoin. And what I'm seeing around the world is that the greater the imbalance between monetary and fiscal policy, the greater has been the price movement of Bitcoin in that country's currency. And at the same time, I can say with gold. But in particular, Bitcoin has captured the imagination of especially demographics. As you can see these 2 old guys out there are baby boomers like myself and they've not adopted to like the millennials and Generation X, Y and

Thank you, Frank. As usual, at this point to the presentation, I will be taking you through a snapshot of the period, looking at the most recently completed quarter and some financial indicators. First of all, I'd like to remind our listeners that our earnings are comprised of our operational earnings or call it cash flow usually, plus our investment earnings, which includes realized and unrealized earnings, which often includes non-cash charges. Mark-to-market accounting is a practice that involves adjusting the value of an asset to reflect its value is determined by current market value conditions. The market value is determined based on what a company would get for the asset if it was sold at that point in time. Mark-to-market losses or paper losses generated through an accounting entry rather than the actual sale of the security. The swings in digital assets impact paper profits and losses each quarter. So our Bitcoin digital assets do generate unrealized gains and losses each quarter. It is important that investors understand the differences in operating earnings or losses in addition to mark-to-market paper gains and losses each quarter. Moving on to Slide 25. As we can see, the second part of this equation is the non-cash charges. A non-cash charge is a write-down or accounting expense that does not involve cash payment, such as depreciation, amortization, depletion, stock-based compensation and asset impairments. These are common non-cash charges that reduce earnings, but not cash flows. If we move on to Slide 26. You take a look seeing that during this most recently completed quarter of September 30, 2023, we recorded $22.8 million of revenue and experienced a $1.5 million loss in adjusted EBITDA. It was driven by production of 801 Bitcoin equivalent mined tokens. As you can see on Slide 27, we continue to be proud having a healthy balance sheet. Our cash position stood at $4.5 million at September 30, 2023, along with an additional $46.9 million in digital currencies, comprised almost entirely of Bitcoin. We also had $10 million in amounts receivable and prepaids. Amounts receivable maintain mostly of sales tax receivables. The market value of our strategic investments is shown there also, and we remain having a strong net cash position and healthy working capital to fund our operations and growth objectives. Our Bitcoin holdings at September 30, 2023, was 1,738 Bitcoin. This was down slightly from the June 30, 2023 month-end period of 1,957 Bitcoin. We have been strategically selling some of our Bitcoin over this quarter to continue to invest in higher efficiency ASIC machines to get prepared for the having in the first half of 2024, which is expected in April and also some investments we are making in our high-performance equipments. Moving on to Slide 28 and switching gears. Taking a look at our gross operating margin on a year-over-year basis comparing the second quarter of this year compared to the second quarter last year. Our gross operating margin, which equates to our total revenues, minus direct operating and maintenance cost, decreased in absolute dollars to $4.6 million or 20% gross operating margin in the most recent quarter compared to $15.9 million or a 34% gross operating margin in the comparative year quarter. Gross mining margin is also partially dependent on various external network factors, including the high mining difficulty we continue to experience, the amount of digital currency rewards miners received and the market price of the digital currencies at the time of mining, which were on average higher than the prior comparative period. In addition, the company is no longer mining Ethereum since the merge on September 14, 2022, which has contributed to the decrease in gross revenue from digital currency mining. In this most recent quarter, as you can see, we are reporting a net loss of $0.29 per share compared to the net loss experienced last year of $0.41 per share in that September 30, 2022, period. Moving to Slide 29. Taking a look at year-over-year revenue, we generated a total revenue in the second quarter of fiscal 2024 recently completed of $22.8 million versus $29.6 million in the previous year's second quarter. This decrease in revenues versus the same quarter in fiscal 2023 can be attributable to 2 main headlines. There is the ever-increasing Bitcoin difficulty hash rates over the past year that continues to be an experience in this ecosystem; and two, to a significant extent, the Ethereum merge that happened on September 15, 2022. As this current quarter and operations moving quarter does not include any Ethereum revenues, that is reflected in our results. This double punch contributed strongly to the significant drop in revenues that we experienced. As mentioned previously, our gross mining margin, which equates to our revenues, minus direct operating and maintenance costs, decreased in absolute dollars to $4.6 million in the most recent quarter compared to $15.9 million in the prior year comparative. Now taking a look on the next slide of our quarter-over-quarter fiscal Q2. We generated revenue in the second quarter of fiscal 2024 of $22.8 million compared to $23.6 million in the previous Q1 quarter ended June 30, 2023. The decrease in revenues versus the previous quarter was impacted by an average stagnant price a Bitcoin comparing the 2 quarters and 33% less Bitcoin mined in this current quarter. Our gross mining margin decreased in absolute dollars to $4.6 million in the most recent quarter compared to $8 million in the prior year comparative. The decrease in gross mining margin versus the prior quarter was impacted for the same reasons as stated above for revenues. Moving to Slide 31. Our adjusted EBITDA decreased in the second quarter of fiscal 2024 to negative $1.5 million versus a positive adjusted EBITDA experienced of $5.3 million in the prior quarter. I will highlight again that adjusted EBITDA is a non-IFRS figure. In the second quarter of fiscal 2024, we experienced a loss of $24.5 million compared to a loss of $16.3 million in the prior quarter. I'd like to thank you, our loyal shareholders and stakeholders. And at this time, I'd like to turn the presentation over to our CEO and President, Aydin Kilic. Aydin?