Earnings Labs

HIVE Digital Technologies Ltd. (HIVE)

Q2 2024 Earnings Call· Thu, Nov 16, 2023

$2.22

-3.47%

Key Takeaways · AI generated
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Same-Day

+2.74%

1 Week

+0.68%

1 Month

+31.16%

vs S&P

+25.70%

Transcript

Holly Schoenfeldt

Management

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?

Frank Holmes

Management

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…

Darcy Daubaras

Management

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…

Aydin Kilic

Management

Thank you, Darcy, for that excellent summary of our fiscal quarterly performance. I'm going to give a strategic outlook for the year ahead, talk about our production to date and recap our growth over the last year. It's been a phenomenal year for HIVE. Next slide, let's jump into it. So we are back to producing over 9 bitcoin per day as of mid-November 2023. Now 9 bitcoin a day is a very significant production figure. And this chart explains why. The entire Bitcoin blockchain has a block reward of 900 Bitcoin per day. And so 1% of that means you would be earning 9 Bitcoin per day. So we are earning upwards of 1% of the entire Bitcoin blockchain rewards. Now in addition to this, there are transaction fees, which fluctuate anywhere from usually 1% to 2%. And recently, we saw a rally at 9% to 10%. And that will vary with market demand, and that's gravy on top for the miners. But your core blocker award is 900 bitcoin a day. However, next slide, please. You do not earn 9 Bitcoin a day if you have 1% of the network as time goes on. And what I mean is there is a quantum called Bitcoin network difficulty. And this is just a refresher for all the enthusiasts out there. And if you're a new market entrant or a new high shareholder, and you want to learn, we'll just give you a quick primer, as difficulty rises, you earn less Bitcoin. For example, a difficulty was to double and your operating capacity, which we call hash rate, wasn't the same, you'd earn half the Bitcoin. So if difficulty goes up by 30%, you earn 30% less Bitcoin. Similarly, if difficulty falls, your production would go up by the same…