Mr. Aydin Kilic reports
HIVE DIGITAL ANNOUNCES QUARTERLY REVENUE OF $31.3 MILLION WITH A GROSS OPERATING MARGIN OF $11.3 MILLION AND PRODUCTION OF 830 BITCOIN
Hive Digital Technologies Ltd. has released its earnings report for the third quarter ended Dec. 31, 2023 (all amounts are in U.S. dollars, unless otherwise indicated).
Hive achieved revenue of $30.1-million this quarter by mining 830 bitcoin with a 38-per-cent gross operating margin, representing $11.3-million of income from digital currency mining operations. This also represents a 146-per-cent increase in gross operating margin from the previous quarter of $4.6-million. This quarter, bitcoin mining economics were stronger due to the rally in bitcoin, possibly as a result of the news surrounding the bitcoin exchange-traded funds in the United States and subsequent Securities and Exchange Commission approval on Jan. 10, 2024. Additionally, the company realized $900,000 of revenue this quarter from the GPU powered high performance computing business unit, where the company's GPUs are utilized for artificial intelligence computations, including inference and fine tuning of large language models.
The company notes that Hive's production of 830 bitcoin this quarter represents an increase of 5 per cent year over year, having mined 787 bitcoin in the same period last year. This is a result of increasing Hive's global hash rate to over four exahashes per second while there was an increase in bitcoin mining network difficulty of approximately 82 per cent, which suggests more miners are competing with more efficient equipment than in the past for the same daily opportunity of 900 bitcoin. Accordingly, earning nine bitcoin per day equates to having 1 per cent of the hash rate of the entire bitcoin mining network. On average this quarter, Hive mined 9.0 bitcoin per day. Hive had an average operating hash rate of 4.01 EH/s for this quarter, representing a 10-per-cent increase over the average hash rate from the previous quarter of 3.66 EH/s.
"At this stage in the four-year halving cycle, which is embedded in the bitcoin algorithm to slow the supply and eventually cap the total supply at 21 million bitcoin, we are focused on being prepared for the upcoming halving in April, 2024, while building our HPC AI revenue strategy with our Nvidia chips. We have experienced the last halving and know it is key to have additional sources of revenue growth and a very strong balance sheet with a current hodl position of over 2,000 bitcoin," said Frank Holmes, Hive's executive chairman.
Aydin Kilic, president and chief executive officer of Hive, added: "This was a very strong quarter for Hive as we were well positioned with our global operations, earning approximately nine bitcoin per day and exceeding the growth of the bitcoin mining network hash rate in the process. We mined 830 bitcoin this quarter, a 2.5-per-cent increase over the previous quarter of 810 bitcoin. This is a commendable feat considering bitcoin mining difficulty increased by 26 per cent this quarter, ending with a then all-time high of 72 trillion as at Dec. 31, 2024. Also, I am pleased with our growing GPU powered AI business unit realizing over $5-million of revenues on an annualized run rate basis as of Dec. 31, 2023, effectively representing five times growth during the 2023 calendar year. Our team has done a phenomenal job learning and advancing our position in the HPC and AI industry, being aligned with technology leaders such as Nvidia and Dell. We are currently using our GPUs to allow our contest winner to perform research on advanced LLMs at the vanguard of AI advancement."
Hive's average cost of production per bitcoin was $22,607 (including cost of goods sold, not including selling, general and administrative) for the quarter ended Dec. 31, 2023, a 2.37-per-cent increase in cost from the previous quarter ended Sept. 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. The cost of production per bitcoin is driven primarily by the cost of electricity to mine, and also the efficiency, in joules per terahash, of the ASIC miners. Hive has made strides to lower its cost of bitcoin production with a substantive fleet upgrade of ASICs. Its target global fleet efficiency is 25 joules per terahash once all of its Bitmain S21 Antminers are delivered and installed, as the company previously announced the purchase of 1.4 EH/s of machines, being delivered from January through June, 2024. It 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 $81 per PH per day for the period-end Dec. 31, 2023. The average hash price for the bitcoin mining network for the previous quarter-end of Sept. 30, 2023, was $68 per PH per day. Therefore, the average bitcoin mining network hash price was 20 per cent higher on a quarter-over-quarter basis. What this means is, for all bitcoin miners, they would earn on average 20-per-cent-more revenue for the same quantity of hash rate on-line for the period-end of Dec. 31, 2023, compared on a quarter-over-quarter basis to the period-end of Sept. 30, 2023.
Q3 quarterly summary -- Dec. 31, 2023:
- Generated digital currency mining revenue of $30.1-million, with a gross operating margin of $11.3-million;
- Mined 830 bitcoin during the three-month period ended Dec. 31, 2023;
- Adjusted earnings before interest, taxes, depreciation and amortization of $17.3-million for the three-month period;
- Working capital increased by $36.4-million during the three-month period ended Dec. 31, 2023;
- Digital currency assets of $71.9-million, as at Dec. 31, 2023;
- Average cost of production per bitcoin was $22,607, where the average bitcoin price was $36,119, during the three-month period ended Dec. 31, 2023; this also represents a 2.37-per-cent increase in production costs of bitcoin from the previous quarter of $22,084 for the three months ended Sept. 30, 2023 (average price of bitcoin was $28,045 during this period);
- Net loss from continuing operations of $6.95-million for the three-month period, due greatly to the accelerated depreciation of ASIC equipment and a provision on sales tax receivables.
Q3 fiscal 2024 financial review
For the three months ended Dec. 31, 2023, revenue was $31.3-million, an increase of approximately 118 per cent from the prior comparative period primarily due to the increase in bitcoin price, and $1.1-million of revenue from its HPC business segment.
Gross operating margin during the three-month period was $11.3-million, or 36 per cent of revenue, compared with $3.6-million, or 25 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, adjusted EBITDA this quarter was $17.3-million because of higher operating costs and a provision on sales tax receivables, and net loss from continuing operations during the quarter ended Dec. 31, 2023, was $6.95-million, or a loss of eight cents per share, compared with a net loss of $93.5-million, or a loss of $1.13 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 statements and management's discussion and analysis
The company's consolidated financial statements and management's discussion and analysis thereon for the three and nine months ended Dec. 31, 2023, will be accessible on SEDAR+ under Hive's profile and on the company's website.
On May 10, 2023, the company entered into an equity distribution agreement with Stifel GMP and Canaccord Genuity Corp. Under the May, 2023, equity distribution agreement, the company may, from time to time, sell up to $100-million of common shares in the capital of the company. The May, 2023, equity distribution agreement was terminated as of Aug. 16, 2023, to proceed with the August, 2023, equity distribution agreement (as defined below).
For the period ended Dec. 31, 2023, the company issued 1,374,700 common shares pursuant to the May, 2023, ATM equity program for gross proceeds of $9.0-million (Canadian) ($6.8-million). The May, 2023, ATM shares were sold at prevailing market prices, for an average price per May, 2023, ATM share of $6.55 (Canadian). Pursuant to the May, 2023, equity distribution agreement, a cash commission of $200,000 on the aggregate gross proceeds raised was paid to the agent in connection with its services under the May, 2023, equity distribution agreement. In addition, the company incurred $162 in fees related to its May, 2023, ATM equity program.
On Aug. 17, 2023, the company entered into an equity distribution agreement with Stifel GMP and Canaccord Genuity. Under the August, 2023, equity distribution agreement, the company may, from time to time, sell up to $90-million of common shares in the capital of the company.
For the period ended Dec. 31, 2023, the company issued 6,175,140 common shares pursuant to the August, 2023, ATM equity program for gross proceeds of $32.9-million (Canadian) ($24.4-million). The August, 2023, ATM shares were sold at prevailing market prices, for an average price per August, 2023, ATM share of $5.33 (Canadian). Pursuant to the August, 2023, equity distribution agreement, a cash commission of $700,000 on the aggregate gross proceeds raised was paid to the agent in connection with its services under the August, 2023, equity distribution agreement. In addition, the company incurred $246 in fees related to its August, 2023, ATM equity program.
The company is using the net proceeds from the May, 2023, equity distribution agreement and the August, 2023, equity distribution agreement for the purchase of data centre equipment and strategic investments, including building BTC assets on its balance sheet and general working capital.
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 green-energy-powered data centre facilities in Canada, Sweden and Iceland, where it endeavours to source geothermal and hydroelectric 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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