Mr. Frank Holmes reports

HIVE DIGITAL ANNOUNCES QUARTERLY REVENUE OF $22.8 MILLION WITH A GROSS OPERATING MARGIN OF $4.6 MILLION AND PRODUCTION OF 801 BITCOIN

Hive Digital Technologies Ltd. has released its earnings report for the second quarter ended Sept. 30, 2023 (all amounts are in U.S. dollars, unless otherwise indicated).

Hive achieved revenue of $22.8-million this quarter by mining 801 bitcoin with a 20-per-cent gross operating margin representing $4.6-million of income from operations. This quarter was a challenging quarter with bitcoin prices remaining weak on a quarter-over-quarter basis while difficulty increases were experienced. Looking at bitcoin prices following quarter-end, it may have seen a bottom in prices with some upward movement taking place.

The company notes that Hive's production of 801 bitcoin this quarter represents a decrease of 6.6 per cent year over year, having mined 858 bitcoin last year. This is in large part due to the increase in bitcoin mining network difficulty of approximately 82 per cent, which suggests more miners are competing and with more efficient equipment for the same daily opportunity of 900 coins. Hive increased its average quarterly bitcoin mining ASIC hash rate from 2.1 exahashes per second to 3.5 EH/s in this same period, for an increase of bitcoin mining hash rate of approximately 66 per cent.

"Management has been cautious by not borrowing from predator lenders or creating massive dilution like many other miners as we strive to upgrade our suite of ASIC chips and run the business by selling our bitcoin production and 200 of our hodl position. Further, we have been spending capital to build out our HPC strategy for the boom in [artificial intelligence]. This revenue stream by repurposing our suite of Nvida chips for AI is gathering momentum. This business channel has much higher margins than mining bitcoin," said Frank Holmes, Hive's executive chairman.

"We wish to again thank our loyal shareholders for believing in our vision. Our HPC strategy is now growing rapidly on a month-over-month basis. While we booked approximately $250,000 of revenue for the three-month [second quarter] 2024 period from HPC beta site operations, as of today, I am pleased to announce our beta tests are generating approximately $250,000 of revenue per month. We are happy to report that our beta test growth appears to be scalable. Demand for our high-quality chips has risen due to the huge global demand for AI projects like ChatGPT, medical research, machine learning and rendering. Hive was the first data centre to use its software to help balance the electrical grid and resell back energy whenever there is a spike in demand. This strategy has been good for Hive, but more importantly for the communities in which we operate. Hive is well positioned despite challenging fundamentals such as rising mining network difficulty. Strategically, we have not borrowed expensive debt against our mining equipment or pledged our bitcoins for costly loans; thus, our balance sheet remains healthy to weather the upcoming halving. Also, Hive uses an accelerated depreciation of ASIC equipment over two years, which is highly conservative considering that the useful life of this equipment is usually more than four years. What this means is, every time we make a purchase of ASICs machines, there is a straight depreciation over two years to $0, so every quarter for eight quarters in a row, 12.5 per cent of the value of each ASIC equipment purchase is booked as depreciation on our income statement. Notably, we are pleased that our various batches of Bitmain S19j Pro purchases from December, 2022, totalling 3,570 units have already earned [a return on investment] of approximately 80 per cent to 105 per cent as of period-end Sept. 30, 2023, after accounting for operating costs. Therefore, it is worth noting that our aggressive depreciation schedule of two years implies a non-cash charge on our income statement, even if on a cash flow basis, our machines pay themselves off in this period."

Aydin Kilic, president and chief executive officer of Hive, added: "Hive's executive management team has skillfully navigated the recent bear market and are proud of achieving a gross operating margin of $4.6-million this quarter. We produced 801 bitcoin this quarter, in a period where bitcoin mining difficulty increased 9 per cent quarter over quarter, reaching a then all-time high of 57T. Hive produced 834 bitcoin in the previous quarter; thus, our quarter-over-quarter bitcoin production represents only a 4-per-cent decrease despite a 9-per-cent increase in difficulty, the reason being that Hive's operating hash rate increased substantially quarter over quarter."

Mr. Kilic continued: "As of June 30, 2023, Hive's operating hash rate was 3.5 EH/s, which increased to 4.0 EH/s as of Sept. 30, 2023, representing a 14-per-cent increase in period-end hash rate, quarter over quarter. On an average operating basis, Hive's average hash rate during the three-month period ended Sept. 30, 2023, was 3.66 EH/s, compared to an average operating hash rate of 3.35 EH/s for the three-month period ended June 30, 2023, which represents a 9-per-cent increase in average operating hash rate quarter over quarter. These figures are total bitcoin equivalent hash rate, which includes ASICs and GPUs. Relative to our peers in the industry, Hive management believes we have operated with healthy profit margins during periods of market volatility thanks to its global presence in Sweden, Iceland and Canada and their attractive sources of hydro and geothermal electricity with competitive pricing."

Hive's average cost of production per bitcoin was $22,639 (including cost of goods sold, not including selling, general and administrative costs) for the quarter ended Sept. 30, 2023, a 21.15-per-cent increase in cost from the previous quarter ended June 30, 2023. The company notes that with bitcoin mining hash rates and difficulty at all-time highs, it is expected that the cost of production for bitcoin will increase for the industry at large, as less bitcoin per terahash is being rewarded at these difficulty levels. Hive remains focused on acquiring new ASIC machines in an opportunistic way from cash flow and managing its balance sheet. It is busy preparing for the halving as it did in 2020.

Notably, the average hash price for the bitcoin mining network (a measure of the U.S.-dollar daily revenue earned per operating petahash of bitcoin hash rate on-line) was $68 per PH per day for the period-end Sept. 30, 2023. The average hash price for the bitcoin mining network for the previous quarter period-end June 30, 2023, was $77 per PH per day. Therefore, the average bitcoin mining network hash price was 12 per cent lower on a quarter-over-quarter basis. What this means is for all bitcoin miners, they would earn on average 12-per-cent-less revenue for the same quantity of hash rate on-line for the period-end Sept. 30, 2023, compared on a quarter-over-quarter basis to the period-end June 30, 2023.

Second quarter summary: Sept. 30, 2023:

• Generated revenue of $22.8-million, with a gross operating margin of $4.6-million;
• Mined 801 bitcoin during the three-month period ended Sept. 30, 2023;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) loss of $1.5-million for the three-month period;
• Working capital decreased by $12.6-million during the three-month period ended Sept. 30, 2023, for investing in data centre equipment and ASIC equipment;
• Digital currency assets of $46.9-million, as at Sept. 30, 2023;
• Average cost of production per bitcoin was $22,639, where the average bitcoin price was $28,045, during the three-month period ended Sept. 30, 2023; this also represents a 21.2-per-cent increase in production costs of bitcoin from the previous quarter of $18,687 for the three months ended June 30, 2023 (average price of bitcoin was $28,067 during this period);
• Net loss from continuing operations of $24.5-million for the three-month period, due greatly to the accelerated depreciation of ASIC equipment and share-based compensation.

Q2 fiscal 2024 financial review

For the three months ended Sept. 30, 2023, revenue was $22.8-million, a decrease of approximately 23.1 per cent from the prior comparative period primarily due to the ethereum merge and significant mining difficulty growth.

Gross operating margin during the three-month period was $4.6-million, or 20 per cent of revenue, compared with $15.9-million, or 54 per cent of revenue, in the same period in the prior year. The company's gross operating margin is partially dependent on external network factors, including mining difficulty, the amount of digital currency rewards and fees it receives for mining, as well as the market price of digital currencies.

The company notes that, while adjusted EBITDA this quarter was a loss of $1.5-million, because of higher operating costs and realized loss on sale of digital currencies, net loss from continuing operations during the quarter ended Sept. 30, 2023, was $24.5-million, or a loss of 29 cents per share, compared with a net loss of $33.7-million, or 41 cents per share, in the same period last year. The improvement from the prior comparative period was driven primarily by lower non-cash charges such as depreciation, unrealized valuation losses on digital currencies and investments, and impairment charges on equipment. Adjusted EBITDA is a non-international financial reporting standard measurement, and should be read in conjunction with, and should not be viewed as an alternative to or replacement of measures of, operating results and liquidity presented in accordance with IFRS.

Mr. Holmes noted, "At Hive, we strive to maintain a high performance culture, which means that we always adapt to unexpected headwinds and maintain operational excellence in the process."

                 FINANCIAL HIGHLIGHTS
            (in millions of U.S. dollars)

                                       Q2 2024    Q1 2024  

Revenue                                  $22.8      $23.6  
Gross operating margin                     4.6        8.0  
Gross operating margin %                    20%        34%  
Adjusted EBITDA                           (1.5)       5.3  
Depreciation                              16.6       16.5  
Net (loss) from continuing operations    (24.5)     (16.3)
                                         -----       -----

Financial statements and management's discussion and analysis

The company's consolidated financial statements and management's discussion and analysis thereon for the three and six months ended Sept. 30, 2023, will be available on SEDAR+ under Hive's profile and on the company's website.

At-the-market offering

Pursuant to the at-the-market equity program established by the company's prospectus supplement dated May 10, 2023, as required pursuant to National Instrument 44-102 (Shelf Distributions) and the policies of the TSX Venture Exchange, the company announces that, during its three-month quarter ended Sept. 30, 2023, it has issued an aggregate of 1,452,837 common shares over the TSX-V, for aggregate gross proceeds to the company of $9,282,909 (Canadian). The ATM shares were sold at prevailing market prices for an average price per ATM share of $6.39 (Canadian). Pursuant to the equity distribution agreement associated with the ATM equity program, a cash commission of $209,345 on the aggregate gross proceeds raised was paid to the agent in connection with its services under the EDA during the second quarter ended Sept. 30, 2023.

Pursuant to the EDA, the company may, from time to time, sell up to $100-million of common shares in the capital of the company. The company intends to use the net proceeds of the ATM equity program, if any, primarily to support the growth and development of the company's existing mining operations, as well as for working capital and general corporate purposes. Additionally, the company wishes to be in a position to capitalize on opportunities which may exist or may be brought to its attention relating to distressed asset sales of mining equipment throughout the mining ecosystem.

About Hive Digital Technologies Ltd.

Hive went public in 2017 as the first cryptocurrency mining company listed for trading on the TSX Venture Exchange with a sustainable green energy focus.

Hive is a growth-oriented technology stock in the emergent blockchain and high performance computing industry. As a company whose shares trade on major stock exchanges, it is building a bridge between the digital currency and blockchain sectors and traditional capital markets. Hive owns state-of-the-art, green-energy-powered data centre facilities in Canada, Sweden and Iceland, where it endeavours to source green energy to mine digital assets such as bitcoin on the cloud. Since the beginning of 2021, Hive has held in secure storage the majority of its treasury of BTC derived from mining rewards. Its shares provide investors with exposure to the operating margins of digital currency mining, as well as a portfolio of bitcoin. Because Hive also owns hard assets such as data centres and advanced multiuse servers, it believes its shares offer investors an attractive way to gain exposure to the cryptocurrency and high performance computing space.

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