HIVE Digital Technologies Ltd.

Hello, everyone, and welcome to today's webcast reviewing Hive Digital Technologies financial results for the quarter ended September 30th, 2023. On slide number two, I would like to briefly note disclosures. Except for statements of historical fact, this presentation contains forward-looking information within the meaning of the applicable Canadian and U.S. securities regulations. These forward-looking statements are based on expectations, estimates, and assumptions as of the date of this presentation. On the next slide, I'm pleased to introduce today's presenters, Frank Holmes, Executive Chairman, Aidan Killick, President and CEO, and Darcy DeBarris, Chief Financial Officer. I would now like to hand the presentation over to Mr. Frank Holmes for a macro recap of the quarter. Frank?

Thank you, Holly, and thank you all shareholders and shareholders. Media, people that are listening to this webcast, we're very happy how we've been navigating this incredible rollercoaster year. And let's see if we can – but the bottom is behind us, and the future looks much better. So I always like to start off my presentations with, This beautiful little roller coaster of Bitcoin prices, and there's a reason for that, and I'm going to show you in a second. But most important is to understand the DNA of volatility of an asset class because each one has its own unique volatility. And Hive's daily volatility is six times the S&P 500 and six times gold prices. That means 70% of the time it's a non-event to go up or down 6%. Bitcoin is plus or minus 2% on a daily basis. So that's really sort of the volatility on a daily basis has slowed down. But over 10 days, it is quite large. So you can see that we are still three times the volatility over a 10-day, two-week period, Bitcoin to Hive. And I think part of that component of that additional volatility has to deal with we used to mine Ethereum, that's gone, and now we have this unique AI strategy, which we're going to talk about in a second. But before you invest, it's really important to appreciate and respect the standard deviation, Hive as a company versus the underlying Bitcoin strategy. now what happens with with bitcoin drives the price action and it doesn't really matter if you have good news or bad news on that day it is the bitcoin direction it appears to be a quant basket buys of citadels and other quants that trade these stocks as a basket around uh bitcoin prices it used to be by the day then by the hour and i think it's recalibrating actually by the minute But what you're seeing here is that we have a 97% correlation to Bitcoin. And you can see some of the other companies have a lower correlation pattern. And also you can see that Hive has a strong correlation to some of the other crypto mining stocks. Like to Riot, it's 99% of the time. To Hut, 8% is 95%. To BitFarms is 94%. And even though we have better uptime than Riot, that correlation as a basket move, we move in tandem. We move together. I think it's really important for investors to understand the real monster here is the price of Bitcoin action. So what is this importance of Bitcoin? Bitcoin is a decentralized asset. It's portable wealth. It fits into the alternative asset class, just like gold, silver, and art would show up as an alternative asset class. Private equity shows up as an alternative asset class. So from that point of view, it's in good hands, and it's a matter of how much do you have. In the world of gold, the Ray Dalios of the world, managing the largest hedge fund in the world, has always a witting in gold and has had nothing but positive statements that say, well, Bitcoin is like Mozart's symphony, Jupiter's symphony. I think it's really important to appreciate that the crypto ecosystem, even with the meltdown in the past 12 months, We have attended many conferences in America, in Europe, and they're packed. I was told today in Lisbon that there's one in Lisbon, Portugal, and it's in the football stadium. 100,000 people for a web summit. And you've got to think this never would happen with gold stocks. This would never happen with even a technology conference for the NVIDIA showing up. You're not going to get 100,000 people spending 700 euros to attend. It's just unquestionably not going to happen. But the crypto ecosystem is robust around the world. And what's important here is to recognize these nodes that are like close to 13,000, it goes up to 14,000, are decentralized and they're validating the network. And it's a global phenomenon. And that's one reason why even with all the negative news that's taken place by the Bank of International Settlements, which is biased towards fiat central banks, and regulatory regimes around the world is not appreciating that this new demographics of voters that are going to be coming in are relating to Bitcoin as an alternative asset class, and they have these huge conferences. So I think that something big is happening, and to recognize that there's centralized and there's decentralized, Bitcoin, like gold, is a decentralized asset class. Well, one of the other really interesting parts is this recently came out by something that Hive sponsors is education. And we sponsor a Bitcoin magazine and having their research and they come up with these beautiful graphics. And what this graphic here is really profound in showing you that even with the crisis in the past year and the immense volatility, the number of addresses holding more than $1,000 worth of Bitcoin hit an all-time high. So this recent change of tone coming up with an ETF, which is still yet to really happen, created all of a sudden more interest. And I think it's just important to recognize the uniqueness of Bitcoin capped at 21 million coins. Over 19 million have been mined. Less than 10% are to be mined. And as less and less supply is coming out and the adoption is rising, Metcalfe's law would suggest that 100,000, 200,000, 600,000. You can hear many of these speakers like Kathy Wood saying 600,000. Other people say millions of dollars. It's really based on this Metcalfe's Law and looking at other adoption processes. So I think it is very, very positive and constructive. But what we do have is we have more and more people coming in to mine Bitcoin. And Bitcoin right now, there's an opportunity to, if you have the fastest computers and you have most efficient computers and you have cheap electricity, you go out and you mine. But there's only 900 coins a day that you can mine. And Hive has basically been around 1% of that network. And that network is attracting still more and more miners, predominantly coming from Bitmain, who is now probably the biggest miner themselves, if they were public, for what they do with their own machines before they sell them off to other new miners. But I think it's really important for investors to understand this risk and opportunity. As the difficulty rises, the margins are going to fall. And what does that mean? If there's a fixed amount of 900 coins a day, it means that more and more people are coming in to compete, to be able to get a piece of those 900 coins. That means there's going to be less competition. could be less to share and you're going to just have a a difficulty on them on your margins now when crypto mining companies shut down because there's no profits then the difficulty falls that means there's less miners that means margins are rising and we've seen this happen and this will be have a big occurrence when we go to the halving at the end of april where the embedded model in the Bitcoin is that every four years, the half of amount of rewards are offered. So we're going to go from 900 coins a day to 450, and you're going to have all these machines competing. So basically, the revenue is going to halve. And you're going to either have more machines to be able to carry your costs, or you're going to have to have people fall off the grid, basically, no pun intended, for difficulty mining. But this concept is so important to understand the inverse relationship. And in capital markets, there's many inverse relationships. Like the price of oil falling is very bullish for airlines' profit margins rising. Rising oil prices hurts profit margins of the airlines' industry. So you have this strong inverse relationship. If you have rising government bond yields, well, that hurts dividend-paying stocks unless they're going to increase their dividend paying. So I think it's an important concept of cap markets to be able to identify This is an opportunity as a risk. Right now, for the past year, it has been a big risk. And Aydin is going to, our CEO, is going to go into more granular information and detail and showing you how we've tried to stay ahead of this and maintaining the World War I percent of the network. Clive is a green energy focus in Canada, Iceland, and Sweden. Very important. We've been innovators. First to go public in September 2017. First to basically create its own ASIC mining rig with Intel. First to buy data centers. First to be green energy focused. First to balance the grid. We know that the biggest in Texas, but most of the province the past year from balancing the grid. And we're first to have an AI strategy because of our expertise, because we're mining Ethereum. And when you're mining Ethereum, you need expertise in using GPU chips. I have an incredible team. Aidan Killick is our present CEO, electrical engineer. Also, Darcy DeBaris is the longest standing CFO in the crypto ecosystem. Guys, whether to bear markets, having acquisitions and a growth profile and the disappearance of Ethereum going from proof of work to proof of stake, which was for us was always a very, very attractive higher margin business. To weather those storms gives you lots of resiliency. And then we have Johanna Thornblatt as the president of Sweden. Sweden is an important part for us for many reasons. And so it's great to have someone from Sweden that's managing that country for us. And then we have Gabriel Ibgi, who's the general counsel, who speaks many languages like Johanna. And if he's not in Europe living, he's in Montreal. And so I have this incredible dynamic team. We also have an office in Bermuda for managing a lot of our financial reporting and getting stuff done from time zone difference between Sweden, Iceland. and then dealing with in canada so that we're always on top of our daily production so high was outperform bitcoin gold price and sap year to date as you can see 114 bitcoin was up 62 sap was up 12 gold is up one percent so the big push for gold is an asset class that continues to see that with central banks acquiring more and more. But gold still is related to interest rates in the US for that 40% demand as was that inverse relationship to the yields in the US. Bitcoin has got a complete different ecosystem, but it is recognized. as digital gold. It is another form of a portable asset and it's much more portable than gold is, but you can't wear like gold as jewelry. So you see there are strengths and weaknesses and I've always been an advocate as a well-known gold fund manager that Bitcoin is one of those beautiful things as an alternative asset class in a diversified portfolio. Hive has options of 3.4 million, ours is 1.9, and it has some warrants still standing, but still it's relatively a very tight float. Hive has a strong strategy of local community. Boden is 100 miles south of the Arctic Circle in Sweden. We basically sponsor the Hive Arena, helps the community. We have 12 kids teams learning and practicing, improving and being hockey players. There are three Stanley Cup champions, NHL pros from this little community. They've retired back in this community. So hockey is a very big sport. a part of the ecosystem of Bowdoin. And in the middle, you can see one of the photos is Darcy, lovely guy that likes to play hockey. And I don't think he's been playing recently, but that uniform looks like he's ready to put on the blades. But what's really important here is our community involvement with the Bowdoin Business Center for education and the same time for kids. They're not doing silly things in the streets. They're out there learning this great sport, hockey. I was very proud of when you take a look at the shareholder dilution, we've had the smallest amount of dilution that is issuing shares either for a bot deal or ATM. Some of the other companies have grown in their overall Bitcoin production and a lot of that's come at the expense of issuing shares. We try to manage our balance sheets, a delicate process. Do we sell from our holder position? When do we sell? When do we do the ATM? We have not gone down the path of predator lenders, which has gotten many of these other companies into big trouble in the past 18 months. We have avoided that path. So when you look at this, it's one of the most attractive parts of the shareholder solution. And then Hive has the lowest G&A per Bitcoin mine. We pay attractive. We have bonuses. But we have a different business model. Our model is to be much more like a royalty company. Rather than being Newmont or Barrick as a gold mining company, I'd rather be Newmont, which has a royalty on their assets in Nevada. And that's what we've done. So we have strategic partners and relationships in other countries, and that has helped us be able to stay lean and be able to weather these down graphs, the volatility, and maintain the payment, attractive compensation for the executive team. And so I'm very proud of that. As a money manager, this hat is very important. But it appears that that is not really key to when you leave the space of CFA, chief investment money managers, portfolio managers. What appears to attract the most interest is how big is your hotel position and what is your growth? We've had a different discipline. That's one reason why we love mining Ethereum, because it allowed us to have the highest gross margins and to be able to grow our business model with the least amount of shareholder dilution. So let's talk about macro stuff. You know, it's really important that you recognize that the imbalance of government policies is what historically made gold very attractive. It's also what makes Bitcoin very attractive. And it's a binary model like the Internet of zeros and ones. When you look at a macroeconomic model of any country's currency, you can see that there'll be lags and disappointments between their monetary policy and their fiscal policy. So once again, there's binary. Monetary is binary also. It's what are they doing with interest rates, that is real interest rates above the inflationary rate, and money supply, how much money they're printing. And when it comes to fiscal policies, tax and regulations and rising taxes and regulations is a real drag on the economy. And spending, where they're spending their money. Is it long-term infrastructure that will create sustainable jobs or is it just basically welfare payments? or boondoggy projects. So it's important to see that in this century, we have witnessed this concept of modern monetary theory, where just print more money as a solution to the problem. And that has led gold to outperform the S&P 2 to 1. And this century, but Bitcoin comes along little, about half of the century. If you recall, it was in 2008, the paper was submitted. 2009, Bitcoin is into the ecosystem and has far performed everything. And I think one of the things that's caught the imagination has been the limited supply that capped at 21 million coins. And as more people appreciate this digital portable wealth, And you have to make a brick of gold, you need electricity. And if you want to make a Bitcoin, you need electricity. So both require this financial capital spend on energy to be able to make an asset. One is tangible, that is gold, and one is intangible, that is Bitcoin. And what I'm seeing around the world is that the greater the imbalance between monetary and fiscal policy, the greater has been the price movement of Bitcoin in that country's currency. At the same time, I can say with gold, but in particular, Bitcoin has captured the imagination, especially demographics. As you can see, these two old guys out there are baby boomers like myself, and they have not adapted to, like the millennials and Generation XY and Zeds of the world have adapted to digital money from the gaming industry. So we do have a huge transfer of wealth that's going to go from baby boomers to millennials. There's a much greater propensity to use digital wealth, so I think that bodes very well for asset classes like Bitcoin. So positive corporate margins through the bear market. As you can see, last year of September 2022, we had Ethereum mining end, and that was a big benefit, too, even though Bitcoin had started to get sloppy because in that quarter we had the problems with Celsius and other hedge funds imploding. But still nothing compared to Sam Bankman, who fried the crypto industry. And the FTX implosion that took place last year in this quarter really impacted the margins. And you can see that it took about six months for it to slowly get a bottom. Then we had a bounce between March and June, and then it started to roll over during the summer this year. Bitcoin was down. But with the recent news of the ETFs, And the SEC losing cases in the federal court system to Ripple and to Grayscale has created a different tone. And most important, I really think, is Larry Fink has done a 180 from trash talking like he's a hip hop singer about Bitcoin. And now he's serenading about the greatness of Bitcoin. And whenever there's fear in the global economic world or geopolitics in war, there's a move to U.S. treasuries, there's a move to gold, and now another sanctuary, another alternative asset has become Bitcoin. And so now he's pushing for the Bitcoin ETF, and I think that all our brands between the regulatory regime and reaching out to BlackRock, a $10 trillion beast, is very positive and constructive in that adoption. I have seen this before. I have seen this with gold, a great concern on retail investors buying gold and bullion or even gold stocks. And when the GLD came out, tremendous adoption took place and money went into the GLD. And you saw that sort of a change attitude towards gold as an asset class was the adoption. I think when the ETF space comes over Bitcoin, we'll get that same type of a change, which is positive and constructive in that overall adoption perspective. We're very proud of going looking last year, and we'll see it this year. We'll be able to give you the numbers. But if you take out and strip out our depreciation, because the cycle is so competitive with ASIC chips every two years, new chips, and depreciation, And whenever you get a Bitcoin downturn, the auditors push to do a mark-to-market write-down of your equipment also. So if you backed out this depreciation, and we have an accelerated two-year depreciation, not four, it does impact your overall, your reported earnings significantly. But if you strip that out and you just look at corporate margins from running your business and your SG&A, I'm very proud of this visual, and I think you should too. And Hive continues to show the highest corporate margins. The only frustration is that people are more focused on what exahash are you promising going into the future and how much hold do you have in your balance sheet. we have a much more investment strategy of how we're looking at margins and cash flow. And we really focus our strategies to cash flow return on invested capital. But this is important, and part of that is how we manage our cost structure. And I think it's shown previous visuals that I'm very proud of these numbers. Well, the future looks great, and we're integrating the future of computing with the future of climate to promote sustainability and environmental conscientiousness. And I think that our HPC strategy fits into that. I did help fund a company called Gold Spot to go public. It was the first company. AI company, it was the first, and I learned a lot about the AI business, in particular, the hub of Montreal being a hub for the intellectual capital of so many PhDs in machine learning and AI. And it was using AI to help geologists look for gold and drop the high-risk capital of exploration down by using AI. And so it's always kept me – this is before COVID, and it's always kept me fascinated, this path – So we started down this path three years ago, a concept of spending money to build an HPC strategy. And then 18 months ago, we purchased a lot of NVIDIA chips. And we were unlike our peers. There was single purpose. Our peers were single purpose only to mine Ethereum. We wanted to have something that allowed us to pivot after mining Ethereum. We could go into the HPC. And that's what we did. And we spent close to $70 million buying NVIDIA chips. And the proof of work, the proof of stake, jump that Ethereum did, and I think was a big mistake for many reasons. But let's not talk about that. More important is what is our vision for HPC and AI. So we've slowly started building out. It's been a big learning. We've got a beta site that started earlier this year in the first quarter. It threw off cash flow of a quarter million dollars. And what's interesting is that there's many things that we've learned in this journey, and part of it was the servers and the CPUs and the basket you have to put them in. So having super micro servers, you can put 10 of these chips into them, and then you want to get special types of cable, and you get paid more for different cables. And so it's interesting if you look at for simplicity, let's say today you're making 15 cents mining Bitcoin an hour. So all our machines, ASIC machines, they're generating about 15 cents. Our HPC, as we're slowly building it, is more like $1.50. So it has a much higher gross margin. And so now we've been able to take that from a quarter million a quarter, which is a run rate of a million a year, we're now at a quarter million a month. And so it's a matter of getting all this equipment ready. putting it together, assembling it. We're in downtown Sweden and Stockholm, and we're downtown Montreal, and we're looking at other assets to expand and acquire. And so our goal is by our year end, hopefully this beta site can all be ready in the new year that we can get up to a quarter million dollars a week. and we see the potential to be a quarter million dollars a day a year from now. But there's things, there's risks there, what they'll pay for your various chips and as new chips come online. But we have seen several companies make announcements they're getting in the business. And I really think that it's just more about promoting their story that really don't understand how complex it is to provide an HPC strategy. The first thing is when you're mining Bitcoin and you're balancing the grid, that means that you're not 100% of the time or 99.9% uptime that you're mining, but you get paid for and you compensate for not being up 99% by the utility company. Well, when you're into HPC, you have to be up 99.9% of the time. You can't be balancing the grid. So you have to look at those other dynamics. And the cost per megawatt to build in Texas a facility is about $500,000 per megawatt. When it comes to HBC, it's $10 to $12 million per megawatt. So you have a much bigger capex spend, much more sophistication. And I'm just very blessed and in the luck that we learned with mining Ethereum and we have some of the sort of unique learning experience. And I like to always tell investors, it's like driving a Porsche. a client or a Ferrari versus driving a Ford 150 pickup truck. A6 is a Ford 150 pickup truck. A Ferrari is NVIDIA chips. So it's recognizing the mechanics, the technicians, all that stuff are much greater in that space. I'm going to turn it over now to who's going to give you much more granularity, and that is our Chief Financial Officer, Darcy. Thank you, Frank.

As usual, at this point to the presentation, I will be taking you through a snapshot of the period, looking at the most recently completed quarter and some financial indicators. First of all, I'd like to remind our listeners that our earnings are comprised of our operational earnings, or called cash flow usually, plus our investment earnings, which includes realized and unrealized earnings, which often includes non-cash charges. Mark-to-market accounting is a practice that involves adjusting the value of an asset to reflect its value as determined by current market value conditions. The market value is determined based on what a company would get for the asset if it was sold at that point in time. Mark-to-market losses are paper losses generated through an accounting entry rather than the actual sale of a security. The swings in digital assets impact paper profits and losses each quarter, so our Bitcoin digital assets do generate unrealized gains and losses each quarter. It is important that investors understand the differences in operating earnings or losses in addition to mark-to-market paper gains and losses each quarter. Moving on to slide 25, as we can see, the second part of this equation is the non-cash charges. A non-cash charge is a write-down or accounting expense that does not involve cash payment, such as depreciation, amortization, depletion, stock-based compensation, and asset impairments. These are common non-cash charges that reduce earnings, but not cash flows. If we move on to slide 26... You can take a look, seeing that during this most recently completed quarter of September 30th, 2023, we recorded $22.8 million of revenue and experienced a $1.5 million loss in adjusted EBITDA. It was driven by production of 801 Bitcoin equivalent mined tokens. As you can see on slide 27, we continue to be proud having a healthy balance sheet. Our cash position stood at 4.5 million at September 30th, 2023, along with an additional 46.9 million in digital currencies comprised almost entirely of Bitcoin. We also had $10 million in amounts receivable and prepaids. amounts receivable maintain mostly of sales tax receivables. The market value of our strategic investments is shown there also, and we remain having a strong net cash position and healthy working capital to fund our operations and growth objectives. Our Bitcoin holdings at September 30th, 2023 was 1,738 Bitcoin. This was down slightly from the June 30th to 2023 month end period of 1,957 Bitcoin. We have been strategically selling some of our Bitcoin over this quarter to continue to invest in higher efficiency ASIC machines to get prepared for the halving in the first half of 2024, which is expected in April. And also some investments we are making in our high performance equipment. Moving on to slide 28 and switching gears, taking a look at our gross operating margin on a year-over-year basis, comparing the second quarter of this year compared to the second quarter last year. Our gross operating margin, which equates to our total revenues minus direct operating and maintenance costs, decreased in absolute dollars to $4.6 million. or 20% gross operating margin in the most recent quarter compared to $15.9 million, or a 34% gross operating margin in the comparative year quarter. Gross mining margin is also partially dependent on various external network factors, including the high mining difficulty we continue to experience the amount of digital currency rewards miners receive, and the market price of the digital currencies at the time of mining, which were on average higher than the prior comparative period. In addition, the company is no longer mining Ethereum since the merge on September 14, 2022, which has contributed to the decrease in gross revenue from digital currency mining. In this most recent quarter, as you can see, we are reporting a net loss of $0.29 per share compared to the net loss experienced last year of $0.41 per share in that September 30, 2022 period. Moving to slide 29, taking a look at our year-over-year revenue, we generated a total revenue in the second quarter of fiscal 2024 recently completed of $22.8 million versus $29.6 million in the previous year's second quarter. This decrease in revenues versus the same quarter in fiscal 2023 can be attributable to two main headlines. There is the ever-increasing Bitcoin difficulty hash rates over the past year that continues to be an experience in this ecosystem. And two, to a significant extent, the Ethereum merge that happened on September 15th of 2022. As this current quarter unfolds, and operations moving quarter does not include any Ethereum revenues. That is reflected in our results. This double punch contributed strongly to the significant drop in revenues that we experienced. As mentioned previously, our gross mining margin, which equates to our revenues minus direct operating and maintenance costs, decreased in absolute dollars to $4.6 million in the most recent quarter compared to $15.9 million in the prior year comparative. Now taking a look on the next slide of our quarter-over-quarter fiscal Q2, we generated revenue in the second quarter of fiscal 2024 of $22.8 million, compared to $23.6 million in the previous Q1 quarter ended June 30, 2023. The decrease in revenues versus the previous quarter was impacted by an average stagnant price of Bitcoin, comparing the two quarters, and 33 less Bitcoin mined in this current quarter. Our gross mining margin decreased in absolute dollars to $4.6 million in the most recent quarter compared to $8 million in the prior year comparative. The decrease in gross mining margin versus the prior quarter was impacted for the same reasons as stated above for revenues. Moving to slide 31, our adjusted EBITDA decreased in the second quarter of fiscal 2024 to negative $1.5 million compared versus a positive adjusted EBITDA experience of $5.3 million in the prior quarter. I will highlight again that adjusted EBITDA is a non-IFRS figure. In the second quarter of fiscal 2024, we experienced a loss of $24.5 million compared to a loss of $16.3 million in the prior quarter. I'd like to thank you, our loyal shareholders and stakeholders, and at this time, I'd like to turn the presentation over to our CEO and President, Aidan Kellick. Aidan?