HIVE Digital Technologies Ltd.

good morning i'd like to welcome everyone to today's webcast for hives q3 fiscal 2020 financial results for the quarter ending december 31st 2019. my name is darcy de baris the chief financial officer for hive i'm joined on today's call by frank holmes interim executive chairman of hive before we begin i'd like to remind you that during today's presentation we will be making comments containing forward-looking information. I invite you to read our financial disclosure for some of the risks and uncertainties that may affect HIVE's performance in the future. And as such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult our most recent MD&A and filings on CDAR. We will also be referencing non-IFRS measures Reconciliations of these measures are included in our MD&A. Unless otherwise indicated, please note all figures are in U.S. dollars. I'd like to now turn the call over to Frank Holmes.

Thank you, Darcy, and good morning, everyone. I want to thank all the shareholders who have been loyal through what they call the Crypto Winter, that basically bottomed in prices a year ago, approximately on February the 14th. It was a Valentine's gift from JP Morgan of February 14th, 2019. when they rolled out the first U.S. bank-backed cryptocurrency to transform payment to business. And that seemed to be the big surge that we started seeing. And then comes out Libra, and we also then have a backlash against Libra from Facebook. But what's interesting is that the currencies rallied, but the enthusiasm for a lot of the stocks was really muted compared to the overall price change in the bottom. And that's a classic bottom. And I think what we've seen in the beginning of this year is a lot of selling pressure for Hive last year took place until the end of December, and that seemed to abate. And then we started seeing now we're back to following tracking the price of particular Ethereum. So as Darcy commented that I am this interim CEO and it saves the company a fair amount of cash and money because the company is basically being run by three people. And so it's very lean and that's as important as that's how you survive through what's called the crypto winter. So let's talk about some of these highlights on slide four. During Q3, we generated $5 million in income from digital mining of both Ethereum and Bitcoin. Gross mining margin was $3.8 million. However, as Darcy will discuss in more detail, excluding certain items, underlying gross mining margin was approximately $1.1 million. As I've noted previously, our priority since we assumed management in the latter part of 2018 has been on strengthening our operational control. And that real control took place when we set an agreement signed in June of 2019. But since then, we've done everything to strengthen our operational control of Ohio, including improving transparency, accountability, and financial controls, and improving our operational efficiency, including optimizing cost structures to set the foundations for profitable growth. These efforts have begun to bear fruit. For the first nine months of fiscal 2020, our gross mining margin was 26% or 37%, excluding upfront energy costs, compared to 24% in the same nine months of 2018, with an increase by improvements to the mining profitability of our facility in Sweden due to our assumption of direct control over relationships with the local energy suppliers and our move to a new service provider arrangement for our GPU mining facility in Sweden, which was completed in November. And our decision to prudently suspend Bitcoin mining in Q3 after a sharp increase in mining difficulty that resulted in our cloud mining operations becoming unprofitable. This appeared to be because of the S17s, the new ASIC chip was being sold and being applied. And all of a sudden we had what's called an increase in the difficulty or the cost of mining Bitcoin mining. And so the S9s were not as profitable unless you had extremely cheap electricity. But what we want to go on with is talk about the post quarter and we entered into hedging agreements. I think this is important related to our electricity prices in Sweden for 2020. Combined with our service provider change in November, we anticipate a 40% reduction in our operating and maintenance costs in 2020 versus under our previous service provider arrangement. We have much better control, setting up hedging and negotiating, and Darcy, our CFO, and Tobias are, excuse me a second, sneeze. Tobias Evel, who's been a very loyal director, is also a classical musician and tax lawyer, has been very helpful in the whole transition and managing everything for us in Sweden and all the relationships. And so that idea, that concept of being able to hedge your electrical costs is very, very vibrant in Sweden. And so we were able to take advantage when the warm, let's call it unusual warm winter, the price of electricity fell to a couple of pennies approximately. And so we started the process of putting up capital necessary to lock in that hedge so we have more stability in our cost structure for the next year. We ended the quarter with a $6.2 million cash position and cryptocurrency inventory of $3.4 million with working capital of approximately $11.8 million. Our strength and balance sheet and greater cost certainty enables us to make appropriate investments to drive future growth. We continue to look at ways to optimize our other areas of operations, and we are assessing expansion opportunities and the best use of our capital going forward. Now I'd like to turn it over to Darcy for our deeper, deep dive into the financial results.

Great. Thank you, Frank. As you can see on slide five, we generated income from digital currency mining in the third quarter of $5 million, with coin production of 23,000 Ethereum, 33,000 Ethereum Classic, and 127 Bitcoins. This decrease was driven by our suspension, as Frank had mentioned, of Bitcoin mining in the third quarter as part of our focus on improving mining profitability. The significant increase in Bitcoin mining difficulty resulting in our mining operations, which operated on a fixed cost basis, becoming unprofitable. Turning to slide six. Gross mining margin during the third quarter of fiscal 2020 was 3.8 million or 77% of income. However, it was approximately 1.1 million excluding the reversal of a value added tax provision originally recorded in the second quarter of fiscal 2020, as well as upfront energy costs paid during the quarter in Sweden for which the company anticipates receiving energy rebates in the future. This compares to 2.2 million or a negative 27% in the same quarter of fiscal 2019 in the prior year. The increase in gross mining margin was driven by an improvement in the profitability of our company's Ethereum mining operations in Sweden due to a change in its service provider relationship as partially offset by a reduction in Bitcoin mining profitability. I will highlight that gross mining margin. It is a non-IFRS figure which is calculated as the value of coins received at the time of mining, less operating and maintenance costs. Flipping forward to slide 7, net income for the third quarter was $3.4 million. The year-over-year increase was driven primarily by the improvement in gross mining margin. an impairment charge taken in Q3 of fiscal 2019, and a decrease in depreciation expenses in fiscal 2020 stemming from impairments taken in the prior fiscal year. Turning to slide eight, we increased our working capital during the quarter. Our cash position stood at 6.2 million at December 31st, 2019, along with an additional 3.4 million in digital currencies and 7.9 million in accounts receivable and prepaid, which includes the energy tax rebates in Sweden that I previously noted. We maintained a strong net cash position and healthy working capital to fund our operations and growth. Turning to slide 9, we outline our current coin inventory, which we hold in so-called cold storage. During the quarter, our inventory decreased as we suspended mining of Bitcoin during the quarter. On slide 10, we outlined the dollar value of our coin inventory at December 31st, 2019, which has decreased this fiscal year, partially due to the decline in Ethereum price from March 31st to December 31st, 2019. I would like to now turn the call back over to Frank Holmes.