Mr. Frank Holmes reports
HIVE BLOCKCHAIN REPORTS FIRST QUARTER F2021 FINANCIAL RESULTS
Hive Blockchain Technologies Ltd. has released its results for the first quarter ended June 30, 2020 (all amounts are in U.S. dollars, unless otherwise indicated). The company's management will host a webcast on Oct. 16, 2020, at 10 a.m. Eastern Time, to discuss the company's financial results.
"The first quarter marked an important period of transition for Hive as we completed the assumption of direct control of our data centre operations from our former strategic partner and diversified our operations through the acquisition of our data centre facility in Canada to complement our Ethereum mining data centres in Europe, all of which are powered by green energy, which produce coins such as Ethereum and Bitcoin continuously in the cloud," said Frank Holmes, interim executive chairman of Hive.
"Our gross mining margins from Ethereum mining increased during the quarter due to the combination of an increase in our mining output of Ethereum and our lower cost to mine Ethereum, which has been driven by a significant reduction in energy costs in Sweden and lower operating cost structure in Iceland, achieved through our assumption of direct control of these operations.
"As the largest public miner of Ethereum, this improvement in operational efficiency proved beneficial as Ethereum prices have risen through the year, and the explosion of DeFi applications usage on the Ethereum network drove a significant increase in the fees paid to miners over the summer and resulted in a record amount of Ethereum mined for Hive during the most recent quarter ending Sept. 30.
"We have been utilizing the resulting positive cash flows from our Ethereum mining to support our Bitcoin mining operations as it continues to scale up with next-generation mining equipment post the halving of Bitcoin rewards in May.
"We have also undertaken a program to upgrade and expand our [graphics processing unit] equipment to maintain our Ethereum mining industry footprint. We are hopeful to complete this project by the end of 2020 though the negative impact on the global supply chain related to the COVID-19 pandemic does present challenges, including increased shipping costs, obtaining equipment from China on a timely basis and preventing the movement of technical teams across our locations in Europe. We will keep shareholders updated on our progress in our next quarterly update, anticipated near the end of November."
Q1 fiscal 2021 highlights:
- Generated income from digital currency mining of $6.6-million;
- Generated gross mining margin1 of $2.6-million, or 39 per cent of income from digital currencies;
- Mining output of newly minted digital currencies:
- 25,572 Ethereum;
- 154 Bitcoin;
- Generated adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) (1) of $2.6-million;
- Generated net income of $1.8-million for the period;
- Net cash less loans payables of ($1.4-million) plus digital currencies assets of $6.5-million, as at June 30, 2020;
- Working capital was $10.7-million as at June 30, 2020, with a $1.0-million sequential decrease due to cash used for the acquisition of the Bitcoin mining operation in Quebec and data centre equipment.
Q1 fiscal 2021 financial review
For the three months ended June 30, 2020, income from digital currency mining was $6.6-million, a decrease of approximately 28 per cent from the prior year. The decrease was primarily due to a decline in the production of Bitcoin due to the suspension of the company's cloud mining agreements with its former strategic partner after it became unprofitable in the third quarter of fiscal 2020, partially offset by an increase in the production of Ethereum.
Gross mining margin (1) during the quarter was $2.6-million, or 39 per cent of income from digital currency mining, compared with $3.6-million, or 39 per cent of income from digital currency mining, in the same period in the prior year. The decrease in gross mining margin of $1.0-million was primarily due to a decline in gross mining margin from the production of Bitcoin partially offset by an increase in gross mining margin from the production of Ethereum. The company's gross mining margin from digital currency mining is also partially dependent on various external network factors, including mining difficulty, the amount of digital currency rewards and fees it receives for mining, and the market price of the digital currencies at the time of mining.
Net income during the quarter was $1.8-million, or nil per share, compared with $5.6-million, or two cents per share, in the prior-year period. The decrease was primarily due to gains recorded on investments and digital currencies in the prior-year period.
(U.S. dollars except where noted)
Three months ended June 30,
Income from digital currency mining $6,580,282 $9,123,630
Operating and maintenance costs of digital currency mining (3,987,271) (5,554,975)
Gross mining margin (1) 2,593,011 3,568,655
Gross mining margin % (1) 39% 39%
Depreciation (1,629,869) (1,252,957)
Gross gain (loss) 963,142 2,315,698
Revaluation of digital currencies (2) 1,325,864 2,893,831
Gain on sale of digital currencies 747,466 743,125
General and administrative expenses (944,560) (1,299,115)
Foreign exchange 217,525 (1,110,419)
Share-based compensation (395,989) (293,880)
Unrealized gain on investments - 2,359,508
Finance expense (114,754) (53,965)
Net income (loss) from continuing operations 1,798,694 5,554,783
EBITDA (1) 3,543,317 6,861,705
Adjusted EBITDA (1) 2,613,442 4,261,754
Diluted income (loss) per share - 0.02
Net cash inflows (outflows) from operating activities 516,202 893,124
Net cash inflows (outflows) from investing activities (3,682,952) -
Net cash inflows (outflows) from financing activities (17,755) 223,544
(1) Non-international financial reporting standard measure. A reconciliation to its
nearest IFRS measures is provided under "Reconciliations of Non-IFRS Financial
Performance Measures" in the company's management's discussion and analysis.
(2) Revaluation is calculated as the change in value (gain or loss) on the coin
inventory. When coins are sold, the net difference between the proceeds and the
carrying value of the digital currency (including the revaluation) is recorded as a
gain (loss) on the sale of digital currencies.
Financial statements and management's discussion and analysis
The company's condensed interim consolidated financial statements and management's discussion and analysis thereon for the three months ended June 30, 2020, will be accessible on SEDAR under Hive's profile and on the company's website.
Management will host a webcast on Oct. 16, 2020, at 10 a.m. Eastern Time, to discuss the company's financial results. Presenting on the webcast will be Frank Holmes, interim executive chairman, and Darcy Daubaras, chief financial officer. Participants need to register for the webcast.
About Hive Blockchain Technologies Ltd.
Hive Blockchain is a growth-oriented, TSX Venture Exchange-listed company, building a bridge from the blockchain sector to traditional capital markets. Hive owns state-of-the-art green-energy-powered data centre facilities in Canada, Sweden and Iceland, which produce newly minted digital currencies like Bitcoin and Ethereum continuously on the cloud. Its deployments provide shareholders with exposure to the operating margins of digital currency mining, as well as a portfolio of cryptocoins.
(1) Non-international financial reporting standard measure. A reconciliation to its nearest IFRS measures is provided under "Reconciliations of Non-IFRS Financial Performance Measures" in the company's MD&A.
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