HIVE Digital Technologies Ltd.

Good morning, everyone. I would like to welcome you to today's webcast reviewing Hive Blockchain Technology's financial results for the three months ended December 31st, 2021. Okay, but you don't hear me. On slide number two, disclosures, except for the statements of historical facts, this presentation contains forward-looking information within the meaning of the applicable Canadian securities legislation that is based on expectations estimates, and assumptions as the date of this presentation. You can see the full slide number two on your screen for the full disclosures. On slide number three, you will see one of our most popular visuals, the DNA of volatility. And I would like to hand the presentation over to Frank Holmes, Executive Chairman, at this point to explain more. Frank?

Frank Holmes Thank you, Holly, and thank you, Everyone and all shareholders that are listening.

Yes, this visual is an important one because volatility is a thing that always concerns a lot of people, especially if they're not traders. The traders love the volatility. But what's important here to recognize is this non-event for 70% of the time for the S&P to go up or down 1% in over 10 days, plus or minus 2%. Bold is the same on a one-day basis, but a little more volatile over 10 days. Well, then we started to go to technology stocks like Tesla, and we see all of a sudden it's four times more volatile than the S&P 500. At one time, it used to be 6% daily volatility of Tesla until it became part of the S&P 500. But what you can see here is that Tesla and Bitcoin have very similar DNA of volatility, and Ethereum is actually the most volatile when you compare it to the one day. It's 5%, and we see the 10-day is 17%. And MicroStrategy is plus or minus 6% on a daily basis and 10 days is 22. But Hive is even greater than all of them. It's seven times more volatile on a daily basis and over 10 day periods, 27%. So traders love that. What happens because of this for us, because we mine Ethereum and the volatility of Ethereum gets embedded. And we have seen this happen with gold stocks and we have seen gold stocks move with their gold-silver ratio that they can have a greater volatility because silver is more volatile than gold. Silver stocks are more volatile than gold. So Ethereum is like silver. It's more volatile than Bitcoin. And it shows up in the overall stock price. So I think it's important for investors to respect the DNA of volatility.

So today's presenters is myself.

I want to thank everyone again, and Darcy DeBaris, our CFO, and Aiden Killick, our President and COO. I want to give a macro overview before getting to the details and the granularity of our presentation and financials and operations by both Darcy and Aiden. So a big event that happened last year in 21 was in July, getting at the end of June, getting listed on NASDAQ. That was an important part, and we've seen a big increase in the daily volume picked up in the U.S., and this is also a disclosure of some of our strategic investments, DeFi, NTE, and Coin. Not all miners are created equal, and I think what's interesting at a conference I and I attended in Austin last week, one of the other companies was speaking, and they're also mining. They've been a mining Bitcoin, a green strategy. But what they said is that they're all moving together, basically. And so there's no differentiation between them. So even high, which has the strongest ESG strategy, gets lumped in with everything else that can have a high coal source of energy. But over time, I think this will separate itself. But what's important is the crypto miners' profitability It's based on energy prices, hardware prices, crypto prices, hashing difficulty, and lease expenses. And Darcy and I will get into some of these, more granularity on these and how they impact. But here's a simple number to take a look at Bitcoin over the past year. The difficulty is called the network hashing jump, a huge jump. We see more machines coming on. And basically there's 900 coins a day that people go and compete to be able to mine. And we were up to about 1% of that mining nine coins. If you look at extra hash, et cetera, but this is going to become more difficult. And I look forward to for everyone learning about this difficulty part. That's why you have to have stronger, more powerful computers, but this is no doubt a headwind. unless you're ramping up your production, even with this taking place.

And we've been able to do that so far this year.

The four headline risks facing miners. It's the electricity. And where is the electricity coming from? Supply line logistics. We've commented on this many times over the past 18 months of shipments coming from China. China's had more severe lockdowns, so it's been even more of a challenge getting stuff over on a timely basis. And then the winter, the winter storms come along and they impact source of electricity, especially for green and clean hydroelectricity that we get out of Quebec and New Brunswick and geothermal of Iceland and Sweden, also hydro. So you can have, this can have an impact. And even in Texas, when there was a big cold front that came in 10 days ago, a lot of the miners shut down for a temporary to allow source of electricity to go and to warm up people's houses. And the other big headwind that takes place on a regular basis is regulatory and that debate between centralized versus decentralized. And I think these are just these four factors do impact the stock price.

as a group, as an entity. Here's a young man who's a co-creator of the 27-year-old billionaire.

Vitalik Buterin is the founder, basically, of Ethereum. But a little humor here is his ecosystem, I don't think they really appreciate that because of the greater volatility that it attracts traders, which then actually facilitate liquidity. And then you have holders like Hive has been, and then you have gamers and gamers and computer designers that are using GPU chips, architects, et cetera. A lot of them turn on their machines and they're like, when I was a kid, I had a paper route for extra revenue and earnings. And these kids basically do gaming or crypto. They use their machines to mine at nighttime when they go to bed. or they use their design computers to mine because they have GPU chips. So that means there's millions and millions of users and wallets all around the world that add to the Ethereum global ecosystem. And this lends itself to the risk of going to proof of stake from proof of work. And we have heard about it all along. It still hasn't happened. And the humor we like to show, this is a picture of finally shipping. And not too long ago, he was mentioning that It's been pushed out again, this proof of stake versus proof of work debate. And proof of stake has tremendous risks to it. And I just thought this was pretty clever that it's not going to happen, has been our view. Because I think not only proof of stake has its own inherent risks, is that you would shrink your ecosystem, that the Ethereum would really hurt its global coin usage. Now, this is a nice, simple way of comparing proof of stake versus proof of work. Proof of stake is it allows for centralization, for validating. There's no real use of electricity. And there is a debate out there that under securities law, that proof of stake is really a security issue. Whereas proof of work is that you're using electricity to mine a digital asset. And Bitcoin and Ethereum are both at this stage a proof of work. And that means they are a real true digital asset. A, you have to spend money to buy the equipment. And B, you have to use energy to create this digital asset and this validation process. So I think these are very simple visuals for people to relate to as shareholders. I'm of the opinion. that proof of work for Ethereum is going to stay. So we're all over the world mining, Hive's mining facilities are in stable jurisdictions with key elements for optimized mining. They still can't get away from this sort of regulatory debate that takes place and Bitcoin is bad and sort of a gross generalization. But what we do see is that these are very stable compared to other jurisdictions around the world. And one of the last countries we would ever, we wouldn't even consider it, is going to Kazakhstan or to Russia. And they have hydroelectricity. We just wouldn't consider it because these are not stable jurisdictions. So we focused on low energy costs, low temperatures, fast internet. During COVID, the crisis, just as it really started to take off in March of 2020, we closed the transaction for 30 megawatts in Quebec. And then last year, we closed on a 50 megawatts capacity Bitcoin mining in New Brunswick. And we're expanding our footprint in Sweden, which went from 17 is going to be adding another 10. You can see that in Iceland, we have five megawatts. New Brunswick, on a regular basis, we post these visuals showing the activity on a weekly basis. that we're building even with the snow now, expanding our capacity, our ability to then finish these buildings, this construction, bring in new equipment and mining more coins, particular Bitcoin.

So in Bowdoin, we're expanding right now by 10 megawatts, which is basically a 50% expansion.

In New Brunswick, completed 20 megawatts here and then And down the road here this year, it'll be another 20 megawatts. So you're going to get much more detail on this expansion from Aydin. But these are the positive parts of where we're going. But what drives these stock prices? Well, the daily coin price is the biggest factor. It is the biggest factor that drives the DNA of volatility of these stocks. And we see that as a group, it must be quant funds that trade all these crypto stocks up and down by the minute on the direction of Bitcoin and Ethereum, in particular, the direction of Bitcoin. And now what creates value for underlying company is its current hashing power and current revenue and earning capacity, and then what you've announced for future potential hashing power That is, when will you go from 1x a hash to 2x a hash to 5x a hash or 10x a hash? And if you have these incredible big numbers that some companies have put out there, then you run the difficulty of not having electricity and having your machine sit on the ground. Or you have the difficulty of equipment not showing up in time. And that's something that I believe that most crypto mining companies have had that challenge of seeing that it's perfectly synchronized that electricity and machines and the infrastructure all show up on a timely basis. And I think that we're going to have to all be wrestling this going forward for the next 12 months. But so far, we've been pretty close on aligning our electrical build-out along with equipment coming on.

So this shows up in the revenue momentum.

If you go and look at a year ago in the fourth quarter, the revenue kind of grew with the 33 million, then 37 million, then 68 million. And that big increase that you've seen here in the Q3 is also because we increased our Bitcoin production. We increased our hashing power with the expansion in New Brunswick, which I think is important just to see this overall momentum. In year over year, the Bitcoin mining and hodling, as you can see, we've substantially increased this production, but also we've been hodling coins, and that's really very exciting. It does add to the volatility on your balance sheet, the income statement, mark-to-market rules, but it does create a huge upside of these green and clean Bitcoins that we have on our balance sheet. And here's something I'm very proud of, that last year in February, we launched 100 million ATM. We spent most of it, raised the money, and we upgraded all of our facilities. We expanded our footprint in New Brunswick. We bought more machines. We upgraded our memory and our GPU chips and the AMD chips. And then we bought a bunch of, I mean, a substantial amount of Nvidia chips. But even with all of that, we still, by mining and hodling, we went from an asset base of liquidity at December 31st of last year of 15 million to this year, or to 22, going to the end of 21. I got all these things confused because of fiscal and calendar years, but I apologize for this. But December 21, and Darcy can give you more of the details, But the asset grew to $161 million. This is 11x by hodling, both Bitcoin and Ethereum. And interesting enough, the Ethereum more than appreciated on a relative basis the Bitcoin production. And we have sold Ethereum and mined it back again.

And we will continue to be much more active in using Ethereum as a way to expand our footprint. My 2022 hash rate growth outlook is just so exciting.

I'm just going to get more detail along with Darcy on this, but three extra hash of Bitcoin mining, six terahash of Ether mining, 4.5 extra hash of BTC mining equivalent. And when you put that equivalent, it really goes to show how big our revenue is compared to our peers and where the relative ranking and where we're extremely undervalued And I think a big part of that is a misunderstanding of the benefits of Ethereum mining for us to be so profitable and have very high efficiency. Now I want to turn it over to an operational update by Aydin Killick.

Thank you, Frank, for that introduction. Indeed, it has been a very productive and active fiscal quarter. So I'm going to be providing a update on what the calendar year production looked like for Hive amongst our peers. As well, recently, the January updates went out for the industry and the market. And so that's a more current snapshot of where things are. And of course, Darcy will follow up with the fiscal period results. So, again, thanks for that excellent introduction, Frank. And yeah, let's jump into the operational updates. So, As you can see here, we've got our infrastructure layout. So as of today, Hyde is operating 119 megawatts globally of green and clean energy. And so that's comprised of 50 megawatts at our flagship facility in New Brunswick. We actually had CBC News come out and do a video documentary in December, which was a great way to commemorate the completion of our third building, bringing the campus to 50 megawatts. Quebec, our long-standing facility in La Chute, holding steady at 30 megawatts. In Sweden, we've actually recently completed a 10-megawatt expansion. Originally, our building facility was 20 megawatts, so that brought it to 30. We also have another facility in northern Sweden that's an additional four. So we've got 34 megawatts in Sweden plus five in Iceland. So that's just today. and always keeping busy always expanding so in spring and again these are infrastructure projects you could see here um you know these uh our most recent building miners were being installed you could see the thermal isolation walls uh with uh other staff you know doing the cutouts for the miners that's how part of our part of our efficiency comes from whether it's uh you know our networking team our coders our our staff at the mine uh remedying and repairing machines We have people all over the world in all time zones, so 24-7, you know, the HIVE team is making sure our hash rate is tip-top. And so, anyways, just a beautiful photo there of the internals of one of our facilities. So, New Brunswick is going to be expanded to 75 megawatts this spring. Building 4 is coming online, which is an extra 20 megawatts, and we've done an optimization yielding an extra 5 megawatts within the existing structures, as well as further optimization at our Sweden facility, which will bring our total to 155 megawatts of operating capacity of clean energy in spring of this year, in a couple months. Next slide. So that's the infrastructure footprint. In terms of our hash rate, today Hive is at 1.9 exahash of Bitcoin mining capacity, 4.5 terahash of Ethereum, which puts us at an equivalency of 2.9 exahash of Bitcoin mining. In just a couple of weeks, as evidenced by the ongoing expansions we have, will be at 2.2 exahash of pure Bitcoin mining capacity. We've got a large delivery of Nvidia GPUs coming that will put us at 5.4 terahash of Ethereum hash rate. So just within a few weeks, we'll be at an equivalency of 3.4 exahash. So it's over a 10% increase in the weeks to come. So that's the near-term snapshot. Next slide. Okay, so January production. January was an interesting month. As Frank mentioned, we've seen all-time highs in the Bitcoin difficulty. And so what we've got here, we hit our 2.9 extra hash equivalent in January. and we produced an equivalent of 425 Bitcoin in the month of January. So that puts us near the top amongst our peers who have much larger market caps and much larger footprints. What you'll notice is Our BTC per exahash, 147 Bitcoin per exahash is what Hive produced. We're at the top of the class. And so again, this talks about having pound for pound the best efficiency. And so when you look at this and take a step back from the capital market, we also have the lowest multiple right now amongst all the both bracket crypto miners. So at $383,000 per petahash market cap, you know, hide a great value proposition for investors right now. And so on to the 2021 production, you know, taking a look at the entire year, what was accomplished. So I'll actually focus on the right-hand side of this table. How was the only miner that was public, how they didn't release it, their annual figures. But from everybody that did, the big four, we were the only ones that cracked 4,000. So we cracked over 4,000 Bitcoin produced in 2021. And so that was a huge accomplishment. Again, you know, Hive being the first crypto miner period, you know, our hash rate didn't just come online in July or October. You know, Hive has had a big footprint and continues to grow. The other part of this story is our HODL position that we announced as part of our January update. which we do monthly operational updates now at the beginning of each month. I've had a huddle of 2,043 Bitcoin. In addition to that, I've had 2,000, sorry, 25,400 Ethereum, which on an equivalency basis is about 3,800 Bitcoin. The highest huddle position for the investors out there just so we can do an apples to apples. Our BTC and Ethereum equivalent is $3,800 auto position. So again, when you look at the annual production, highest amongst our peers for all of calendar 2021, we had the best Bitcoin per exahash efficiency production through the month of January. and the lowest revenue multiple, we see that time is at a great juncture for investors looking for exposure to the best counterpart of the miner, in my opinion. So next slide. So now let's take a step back and just understand where the industry is at large. This is actually a zoomed out three-year Bitcoin mining. So this goes back to early 2019. So what we've seen for bull rallies in the last year so summer 2019 of course 2021 people rallies we had an all-time high in February in terms of Bitcoin price and then again in November and so these are the this chart that you're looking at is actually on the cents per terahash per day that you get so for example right now we're about 20 cents per terahash per day which is actually better than where we were three years ago. Three years ago, it was about 15 cents per terahash per day. So even though difficulty is an all-time high, Bitcoin is showing support in the low $40,000 range. The health of the mining economics is still substantive, although we've cooled off a little bit. So again, it's about having good efficiency, low operating costs, and being very effective with deploying your capital to realize a good return on investment. But on the side, we also have a big Ethereum mining footprint. And so what's really interesting is when you look at Ethereum mining over the last period, you'll notice right now, again, this is cents per mega hash per day, right? So right now, Ethereum mining economics are about four to six cents per mega hash per day. Well, you know what? Three years ago, it was about one and a half cents per day. So the point here is that Ethereum mining economics are actually three to four times more profitable today than they were three years ago. And so how do you get exposure if you're like, well, that looks great. I mean, I wish I was mining Ethereum. Yeah, I've mined Ethereum. We've got the biggest Ethereum mining footprint of all the publicly traded crypto mining companies. So again, it comes down to having that good value proposition for investors. You know, as all these Layer 2 applications grow, we've just seen more and more of an underpinning for the need of a proof of stake Layer 1 Ethereum token to support all these, sorry, proof of work Ethereum Layer 1 to support all the Layer 2s. which are proof of stake. So anyways, it's, and, you know, as we pointed out before many times, you know, the London hard fork was actually a good thing that happened in August and mining economics for Ethereum very healthy thereafter. The recent cooling is more just in terms of crypto prices overall. So that's the snapshot of Ethereum. And I'll turn it off, turn it over to Mr. Darcy DeBaris, CFO, iBlockChain.

Great. Thank you very much, Aidan. And again, as Frank had mentioned, thank you very much to all the investors and shareholders that are interested in listening to us today. We're going to run through the financial statements for the third quarter, ended December 31st, 2021. As we've had for many quarters. We have a very strong and healthy balance sheet. We have $63.7 million cash on hand, over $26 million in investments, and what we're really proud of is the total current assets we've got of $268 million. The largest part of that with the benefit we've had with the increased production that we've got through our Bitcoin mining operations from Quebec and New Brunswick being able to build up that whole little position and have digital currencies of over $168 million at the end of December 31st, 2021. That's just in a great position moving forward. And we can also use that to fund our operations if we need to through the sale of coins. But as I've mentioned, we're hodling quite a bit. This is taking a look at our gross mining margin. year over year comparing Q3 of 2021 fiscal to the Q3 fiscal 2020 that we just completed. As you can see, we've got over a close to a six-fold increase moving from 10.1 million or 10.6 million up to 61.6 million. Just the increase in the production we'd be able to get has just been astronomical. We're so proud of being able, what we've done, as Frank had mentioned, being able to close those transactions during the COVID period has just strengthened Hive moving forward. Taking a look at our actively as with these new additions, buying new miners, we continuously increase our hash rates. In the last three months, since September 30th, we've increased our Bitcoin mining hash rate by 35%, and the Ethereum, which has been our bread and butter and what Hive started out as in 2017, we've increased that now over the last three months by 14%. As I mentioned before, that well capitalization that we've got with a portfolio of crypto assets just puts us in a great stance moving forward through into calendar 2022. One of the challenges, as Frank and Aydin had mentioned, is just the difficulty rate. We've continuously to see the difficulty rate rising, but as a result, we do have a drop in the Ethereum mind. The great thing that we've been able to achieve, though, is being a very low-cost producer of our Ethereum. We've been able to do it very low, as you had seen earlier slides, with that gross margin. But the revenue we've been able to get from that mining of the Ethereum has continued to increase. So even though we're mining less coins, with the difficulty rate going up, as everyone in this market has seen, the price of Ethereum is going up, so we're getting more revenue. And you can see this trend over the last five quarters in terms of the number of Ethereum that we have been able to mine.

It's all mined productively, so that's the great thing.

And this just demonstrates what I was talking about in terms of the mining revenue continuing to increase due to the higher prices, even though the difficulty that we've been experiencing in both the Ethereum and Bitcoin has been affecting the market. Moving from $13.7 million a year ago to $68.2 million, and our gross mining margin from $10.6 to $61.4. taking a look quarter over quarter from the quarter ended September compared to the one that we're talking about right now in December 31st 2021 moved from 52.6 million up to 68.2 million so continuing to increase quarter over quarter has been shown in the earlier slides by Frank and also our gross mining margin is continuing to increase moving from 45 million The quarter ended September 30th, 2021, to $61.6 million in the most recently finished quarter. And here we've got a look at what the adjusted EBITDA has done year over year, $13.7 million up to $75.3 million, and our net income increasing, again, very largely from $17.2 million up to $66.2 million. And I also want to mention to our listeners here that adjusted EBITDA is a non-GAAP measure, and I just always like to put that in there so that people don't get confused. Once again, we can visually see how the Ethereum margins are driving the growth within the company, taking a look at the change that's happened quarter over quarter. We talked about 52.2%. $3 million in our adjusted EBITDA, moving up to $75.3 in the most recently finished quarter, net income increasing again by about $7 million, and our gross profit margin moving from $45 to $61.6 million in the most recently completed quarter ended December 31st.

Thank you very much.

And thank you, Darcy, and thank you, Aydin. And we just wanted to show you here that we have lots of rich content on information that helps people make an informed decision. And one of the big parts which we noticed the past quarter, there was a fair amount of FUD, as they call, the spreading of fear, uncertainty, and doubt regarding crypto mining sources of energy. The big shift that took place last year, tectonic shifts, if you think of it, is the move to North America, in particular the state of Texas, has been a recipient, is trying to close down everything in mining. And what we've also seen in other jurisdictions is sort of disinformation that's out there regarding how much energy is being consumed. So what we did is we put it, took Michael Saylor's presentation, which is about 30 minutes, condensed it to three minutes with visuals and slides, and put it in French, in Swedish, as you can see in Spanish and in English for investors around the world, that the consumption of energy by the crypto industry, A, is substantially less than originally reported, and B, a much greater percentage now is from much cleaner sources of energy. And still the bad locations for is Kazakhstan, And I think some other sort of rogue nations that are out there, it's, I guess, I would think it's their only source of cash flow. But as a whole, the crypto mining industry has excellent CEOs today than what took place when high first went public. And it's ushered in a great pushback for a less carbon footprint. And I think that's only going to continue to grow. So we're happy to be part of the Bitcoin Mining Council and being part of education. So I highly recommend that we have investors from all over the world that you take these visuals and share them. And do follow us. And if you have questions, please email them in to Darcy.Eiden and myself and So I do answer those as best we can. I want to thank everyone, especially all the loyal shareholders that have lived with us through this volatility. Those who have believed in our vision that continue the mining theory because they're so profitable. And then our vision to expand our footprint. And hopefully we can have, in a very short order, more exciting news in our profile for growth. We're always working. 24-7 for the shareholders. Thank you, ladies and gentlemen, and thank you very much, Darcy and Aydin, for a spectacular year.