HIVE Digital Technologies Ltd.

Hello, everyone. Welcome to today's webcast on Hive Digital Technologies' financial results for the quarter ended September 30th, 2024. My name is Nathan Fast, Director of Marketing and Branding at Hive, and I'll be your moderator for today's call. Before we get started, on slide number two, I would like to briefly note the disclosures for today's presentations. Except for statement 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. Further, in addition to discussing results that are calculated in accordance with International Financial Reporting Standards, or IFRS, we will also make references to certain non-IFRS financial measures, such as adjusted EBITDA. For more detailed information on our non-IFRS financial measures, please refer to our management's discussion and analysis of our financial results that was published earlier today, which can be found on our investor relations website. On the next slide, I'm pleased to introduce today's presenters, Frank Holmes, Executive Chairman, Aydin Gillick, President and CEO, and Darcy Dubaris, 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, Nathan, and thank you, shareholders. I'm going to try to give a macro and then turn over the more granular material information to the Hive team, Darcy and our CEO, Aydin. Next, please. I always like to start this off because it's been a heck of a week since the elections. I think our stock has surged about 56%. but it's a non-event for the DNA of our volatility over a 10-day period to be up or down 17%, which is significantly higher than the S&P 500, like a 5X. And the same thing on the down corrections. The volatility is much greater. And this changes over time. Microstrategy used to have less volatility, and now it has more volatility than what we have for shareholders. Next, please. But one of the big factors driving all this besides the enthusiasm of President Trump winning has, as you've seen this for many alternative asset classes like Bitcoin, it's the all-time rising global debt. And as the all-time global debt rises, more and more countries are greatly concerned. In particular, you see the central banks are buying gold. The U.S. government maybe now as a policy will start buying Bitcoin. All that enthusiasm relates to and alternative assets, global debt climbing. And I don't see anything changing this for this century because too many of the G20 countries are still practicing what's called MMT, Modern Monetary Theory, which believes that you can use monetary policies to right-size an economy. You can throw any type of socialistic policies, just print more money. And that really is a process and a stepping stone for devaluing a country's currency. So this is what makes Bitcoin in particular high position so well in the rising debt levels. Next, please. One of my favorite books that I've always, and I had this opportunity over like 20 years ago to have dinner with James Serecki. He wrote a book called The Wisdom of Crowds. And there are times when the crowds are very wise. And that's the opposite of groupthink, where everyone is reading the same textbook and reading or watching one news station. This can happen much more often where there is centralized control of information flow. And that's what happens in a lot of the G20 countries. We see this in Canada with CBC, in England, BBC, same thing in Sweden. In particular, when we go to countries like China or in Venezuela, all the media is controlled. So the groupthink is very different than when the crowd is wise. The stock market is a mechanism that the average price is pretty wise. And the stock market is usually six months ahead of the economic activity. And with that has come out new methodologies of predicting the politics and election outcomes so when if you've not read the book i highly recommend you read it next please so we've seen a positive response to president trump winning and you can see particularly the financial sector a lot has to do with the sec which has had policies not only anti-crypto but really has created a big backlog for the formation the creative process of the formation of capital IPOs, SPACs, funding, et cetera. So we've seen that a lot of news came out last week that the major banking firms and brokers, et cetera, feel that there's going to be a lot of capital formation. And this is led with the financials. And we can see other categories here. They've all participated in that boom. Hive shows up as this alternative asset class, but also in information technology and small cap. Next, please. Well, Trump's triumph wins the presidential race. So what is interesting about this visual is what you see, the blue states is where Harris has won. These are states where you did not have to have photo ID. And that's what is really a big part, which it appears to us that the Democratic Party didn't really grasped the great concern over border security. It didn't grasp wokeism and what it was doing to public companies from ESG and DEI. There's many incidents that the far left of the Democratic Party was not aware of what was going on across the country because it was a pretty broad sweep by the Republicans. Next, Blaise. So when you're a Bitcoiner like we are, America voted for Bitcoin. And it's pretty ubiquitous across all the state lines, Democrats and Republicans. And I know a lot of great Democrats who are pro-Bitcoin. And you can see that it's very positive for the ecosystem and the thought leadership that's going to take place in America with Bitcoin. Next, please. Now we're seeing that 99.9% of Bitcoin addresses are now in the profit. This is psychologically very important. Hive Digital took leadership a couple of years back in sponsoring education by the numbers for Bitcoin magazine. And we're also seeing that more and more people have bought Bitcoin besides the ETFs and record unprecedented fund flows into these ETFs has been separate wallets. So the psychology behind this is very, very positive for this industry. Next, please. So one of the challenges is the Bitcoin hash rate has risen. And that just means the profit margins are not expanding as fast. Even with Bitcoin rising, more people are coming in with better machines. And that's a reason for our press release today. that we have increased our exposure to buying Canon machines that are much more energy efficient so that we can maintain this ambition that we have of maintaining this 1% of the footprint of Bitcoin mining and to be able to expand over the next 12 months where we're going to be 2% of the global network. Next, please. So Trump is America's Bitcoin president. This is a big event that many celebrated in Nashville and his position behind it. I want to thank all the Bitcoiners that actually supported the president and Democrats, too, that were really pro-Bitcoin ecosystem. And I think that that was a big sway, that there was lots of marginal people in the middle that swing their vote from election to election. And it swung in the direction. They voted Republican, but really, they were big cheerleaders of Bitcoin. And that's what swayed that decision. So I think it's a tip my hat off to all their support. Next, please. So Bitcoin climbs to a record high following Trump's win. The Republican Party vows to defend the right to mine Bitcoin. And this is America's most pro-crypto Congress ever, says the Coinbase CEO. And the pro-Bitcoin Senator Cynthia Loomis reaffirms Bitcoin will become a national reserve asset. And that is propelling Bitcoin to higher prices. And that is very positive for high prices. who not only mines Bitcoin using green energy, we hold as much Bitcoin as possible. Next, please. Hive is operating in nine time zones and five languages. And to me, that's really impressive team that we've been able to build because we don't function in one state, in one language. We function individually. in many time zones, in many languages, in many translations, but we still have been able to be in the top of the breed when it comes to efficiency as miners. Next, please. We have many firsts. First to go public is a crypto mining company in September 2017. First to develop its own ASIC mining rig. First to buy data centers and own the real estate, which gives us a competitive advantage for the AI boom and build out. first to be green energy focused, first to balance the grid, which we've been doing for many years now in Sweden, and first to have an AI strategy utilizing our GPU chips, where we're able to pivot from Ethereum mining into the AI universe. Next, please. Hive's mission is to help integrate the future of computing with the future of the climate to promote sustainability and environmental consciousness. Next, please. Hive uses green energy. Canada, Iceland, Sweden, soon to be Paraguay, low electricity costs, low temperatures, fast Internet connections. Next, please. This is a visual of our data center in Sweden, 100 miles south of the Arctic Circle. We have five data centers, and it's all the – you can't see it, but it's just behind that red building over there, the hydro dam. Next, please. Something we did in sort of the concept of recycling our electricity, and this is in Lachute, just north of the city of Montreal in Canada, where we mine with 30 megawatts of electricity, mine Bitcoin, we heat a liquid that goes across the heats of building five times our size. We have about a 40,000-square-foot building. We're heating a 200,000-square-foot building from the same electricity, hydroelectricity, same molecules of energy, using a radiator system in that building, which makes whirlpools with 170 workers. So we're thrilled about being a leader in the concept of reusing these molecules of electricity. Next, please. This is a visual to show you what we do, the 40,000-square-foot data center across the Heats at 200,000-square-foot factory. Next, please. Hive is listed in Canada, NASDAQ in Germany. Issue notes standing basically 118 million shares of options, 3.4 million. RSU is 3.8 and 3.2 million shares. This is as of September the 30th, 2024. Next, please. The future. The future is Bitcoin mining in Paraguay, where we will double, more than double our production and HPC for AI in Canada and Sweden. Next, please. Earlier this year, I had the opportunity of meeting Jensen Hong, NVIDIA CEO and visionary. Hive has made significant investments to acquire the most powerful GPUs and expand our suite of chips. And we are platinum buyers. And I think that positioning gives us a huge advantage as we build out our data centers. Next, please. So our 100-megawatt Paraguay expansion in our recent press release, we show that we've broken ground. In Paraguay, that's myself with the president of Paraguay, it's 100% green hydroelectricity. We've purchased the land. We're moving as fast as we can in building out this vision we have. And I think it's interesting because Hype really is a function like what would be a good central bank or a bank that can basically assure the government is going to get paid every month. Right now they sell their electricity to Argentina. Argentina has only paid them 50% of their money after two years. In other countries and surrounding, they need U.S. dollars. So we are a natural currency hedge, mining Bitcoin, using green energy, and the electrical company owned by the government gets paid in a timely fashion every month in U.S. dollars. So this is a win-win for the Hive shareholders and a win for the government. Next, please. So this is another type of visual showing a combination of getting more efficient machines, which Aydin will give you more granularity on, and our goal to increase our exahash and to double our footprint globally. Next, please. Hive, I'm so proud of this visual. If you take a look, it's earlier this year, but Hive is the lowest GNA, and I think that All the recent for the end of September data points for our peers hasn't shown up. But clearly, when we look at the past quarter of not having an ATM and the rest had an ATM, the majority of them, we just demonstrated a much greater discipline in how we give out our RRSUs, how they're earned. We've commented that it's using nonlinear strategy. And we also very cognizant as myself being the co-founder and executive chair on the cash flow return investor capital model. And so that means our concept of building the business is very thoughtful as a money manager. And so shareholders should be very happy with this visual. Next, please. Operational excellence, Anthony Power does this competitive analysis and And this is really important, the efficiency that we demonstrate. And on a consistent basis, we have been this high level. Most often, Bitfarms is beside us, or they're number one. But it seems to be that it's a disciplined approach. Whereas we can see some of these other miners, they consume much more energy than us. They produce less Bitcoin than us, and they are substantially less, as you can see in the far right side, efficient as operational excellence would show of the utilization of the machines. So I'm very proud of what the team has been able to do, and it's a great value proposition for the Hive shareholder. Next, please. So research coverage is picked up during the summer and going this quarter. from A.C. Wainwright to B. Riley to Northland to Stiefel to Canaccord and to Cantor. Next week we'll be in Miami at the, sorry, this week at the Cantor Fitzgerald Conference in Miami speaking. And the average says is 625. I believe that Stiefel believes that we have the potential as a technology company and in the data center business to hit $9. So That's at the upper range of the goal. Next, please. So now I'd like to turn over to Aidan Killick, our executive, give you an executive update as the CEO of Hive.

All right, Frank, thank you for that excellent macro and strategy overview. Now I'm going to kick off an executive summary for this quarter, period end September 30th. We ended this quarter with $22.6 million of total revenue, of which $20.8 million was from our Bitcoin mining business unit, and $1.9 million came from our HPC business unit, where AI compute is run on our fleet of NVIDIA GPUs. We generated an overall gross operating margin this quarter of $1.1 million, which I think is commendable considering the very bearish mining economics of this last quarter, which have been the toughest on record, where half price has been between $40 to $50 a petahash per day. on average. This is the first full post-halving quarter that the Bitcoin mining sector has navigated. As the previous quarter peered in June, part of April was still pre-halving economics. This quarter, July, August, September, all post-halving. And even still, we generated a very respectable $5.6 million of adjusted EBITDA. And moreover, ended the quarter with over 2,600 Bitcoin mined with green and clean energy on our balance sheet. Furthermore, we've realized an annualized ROIC of 15% this quarter. And as of November 11th, our share price includes $2 of net cash and Bitcoin value per share, which is very, very attractive, I would say. And we're going to dive into that a little bit more. Next slide. So overview of the Bitcoin mining business. Again, we are a pioneer in using green energy for Bitcoin mining. We lead the sector with best-in-class uptime and efficiency. We reached 5.6x a hash in October, and we have very exciting plans to expand to 12.5x a hash by summer of next year. Again, we do this all with our very disciplined capital allocation strategy. We strive for optimized ROI, so every investment that Hive makes, we seek to be accretive. We do not scale for the sake of scale. We invest for the sake of profit. All the while, we run the business with the lowest GNA per Bitcoin mined. So we strive to have the best ROI, the leanest operation, and the best performance. Next slide. And by the way, Frank and I have been the longest standing executives in the Bitcoin mining sector. We've weathered through thick and thin, having a very prudent and fiscal approach. And we've both been in the sector since 2017. No other company has had continuous executive management since the beginning. And by the way, Hive, of course, was the very first Bitcoin mining publicly traded company. And so with that wisdom and the battle scars, we're weathered and we're excited about this next bull market. This will be the third bull market that we've experienced. Next slide. So Frank touched on the very exciting Paraguay expansion. So now I've prepared some slides for the analysts that will break it down on a quarter-over-quarter basis of how this growth is going to improve, not just our margins, but our overall production. Next slide, please. So this is a quarter over quarter projection of both our hash rate and our improvement in efficiency. So in Q1 of 2025, calendar Q1 that is, our target will be 6x a hash from a recent announcement of 6,500 K and 1566s. That will also improve our efficiency to 20.5 joules a terahash globally as we're upgrading our our fleet of remaining 30 joule per terahatch machines. Moreover, the first two exahash from Paraguay are going to come online in Q2 of 2025, which will further increase our global efficiency to 1921 joules per terahatch. And finally, when Paraguay is complete in summer of 2025, our global total hatchery production will be 12.5 exahash with a global efficiency of 17.6 joules per terahash. That's over 120% growth in the next nine months, which is very exciting. Next slide. And by the way, as of November 11th, Bitcoin reached a new all-time high of $88,000, which is incredibly exciting. And so this has had some very positive impacts on our business and the Bitcoin mining sector overall. Let's have a look. Next slide. So with Bitcoin at $85,000, that quarter-by-quarter analysis we provided, where we scaled to 6x a hash, then 8x and then 12x a hash, over the next three quarters, our annualized mining margin will grow all other things being equal, the current difficulty, but with our improving efficiency, our annualized mining margin will grow 70 million by next quarter, calendar Q1, 95 million by calendar Q2, and 150 million when Paraguay is complete by summer of next year. So that is incredibly exciting. And when you look at the potential of where Bitcoin can go, Let's have a look. Next slide. Now, we cannot predict the price of Bitcoin, but just to model it, and we'll look at some historical examples, if Bitcoin were to rally to 120,000, our quarterly projections with our growth from six to eight to 12x a hash show an annualized mining margin of 120 million, 160 million, and $250 million a year based on current difficulty. Now, of course, Bitcoin price may fluctuate and difficulty may fluctuate. However, we are in current bearish mining economics, and this reflects an improvement to more bullish mining economics. Let's see the next slide. As a result of the recent rally of Bitcoin to $86,000, we have seen the value of our hodl in six weeks grow by 37%. At the end of this period, on our balance sheet, September 30th, our hodl was worth $165 million. And that's based on our total hodl of 2,624 Bitcoin. And as of November 11th, that $86,000 Bitcoin price, that is almost a quarter of a billion dollars, $226 million. And it actually rallied to $88,000 later in the day, but We're just showing it based on 86,000. So this is great upside and it's a very exciting time. And it shows how keeping a balance with clean and clean Bitcoin really is in the best interest of our shareholders who want exposure to Bitcoin as an asset class. Next slide, please. So here we look at some historical data to notice patterns of what bull market economics might look like. So as you can see, if you go back four years ago, post-halving in April 2020, we saw Bitcoin rally to the then all-time high in the 60,000 range in February, and then later in November of 2021, the 70,000 range. And you saw Hive's share price go from approximately $2 to over $20. per share. And so you can see, because there is implicit volatility in crypto mining stocks, more so than Bitcoin, you'll notice the rallies in the share price can exceed even the rallies in Bitcoin price. So we've seen our share price rally to over $5. And this is with Bitcoin going from $60,000 to over $80,000 in the last few weeks. So time will tell where the Bitcoin price goes from here. But you can also notice that last cycle, four years ago, we only had about $10 million of HODL on the balance sheet, September 30th, 2020. This bull market, we're going in with $165 million of HODL on September 30th. And by the way, again, as of november 11th it's over 220 million dollars total value so it's very exciting next slide please this is another overlay where we actually show hash price relative to hives share price so again you saw hash price rally in that last bull market and so what we noticed is that our share price continued to perform even though hash price fell through the bear market. And the reason why is through strategically upgrading our basic fleet and improving our machine efficiency, even though hash price dropped for the Bitcoin mining network, we were able to preserve and in some cases even improve our Bitcoin mining margins. And I believe that has been reflected in our share price, which remained quite steady over the last couple of years since the last bull market. So as we expect the potential for half price to rally if there was another bull market, it would seem that with a strong hodl and some very exciting growth opportunities, there's a lot of potential upside if Bitcoin continues to rally the way it has, both for the overall sector and with respect to share price. Next slide. So really this summarizes the value propositions of Hive. We have demonstrated best-in-class ROIC, very disciplined and conservative capital allocation. We always purchase ASICs with the best ROI, and we're constantly analyzing the market. We're data-driven. We're heavily analytical, very rooted in math. We've got a very strong technical team, and that's further evidence for our best-in-class uptime. And so this is an overview slide, but we're going to step through the analytics and all the comp data. the next few slides to back up this summary next slide please so our recent announcement of 6500 canons we decided to purchase this fleet of asics over 1.2 exahash of asics because the roi of these asics was over 30 percent faster than other asics available on the market we scoured all the opportunities we ran sensitivity analysis we always look at our multivariate math equations, and we found that this was the most attractive buy on the market. We've already received 500 of them. The remainder will be shipped 1,500 a month between December and March, and that will get our overall fleet efficiency down to 20.5 joules a terahash. So that's exciting. Next slide. Our cash flow return on invested capital Again, leading the sector, an implied 15% annualized ROIC. Again, coming from a very disciplined CapEx and capital allocation approach, we use our ATM to accretively scale our business. The dollar per megawatt build cost in Paraguay is incredibly attractive compared to other jurisdictions, notably in North America. Furthermore, green energy, low power costs, and again, we purchase ASICs, we are always looking for immediate delivery with the most attractive dollar per tera hash and ROI for all of our ASICs. And in our recent order with Canaan, it allows us to scale with cashflow as well. We're not taking one massive order all at once where we have to do a bot deal to dilute the stock. Nothing like that. Our ATM has performed and has been very efficient and low cost of capital. And so this is how we believe that we've been able to lead the sector. And this is not a once in a quarter phenomenon. As you could see, we have led the sector quarter over quarter for the last year. Next slide, please. Similarly, we have the lowest GNA per Bitcoin mine. So how do we have that? Well, we have high revenue per employee. We huddle over nine time zones. Frank likes to call us the Navy SEALs. So it's a high-performance work culture at Hive. Everyone is extremely proficient. I'm very proud of my executive team that I get to work with every single day. We attend the conferences. We're always working when we're at conferences, making sure operations are in tip-top shape, always looking at new R&D initiatives. What is the best utilization of our data centers? Is it AI? Is it upgrading Bitcoin ASICs? And so we do this all with a very lean team because we've weathered bear markets. And that's why I have that slide that showed that Frank and I and our executive, Darcy Duberis, is the longest standing CFO in crypto mining for publicly traded companies. And so we understand the importance of having low overhead. So we're not just low overhead. We're low overhead, low cost, and high performance. So we really want to deliver the best of both worlds. and high value for our shareholders. Next slide, please. Again, operational excellence. Anthony Power, industry analyst. He's a CPA out of London. He's been covering the industry for years. Highly respected and highly renowned. As you can see, our hash rate utilization leads the sector for this calendar year Q3 2024. Next slide. And in terms of Bitcoin mined per exahash, you could see that we are amongst the best performers in the industry. And you'll still notice that now you've got the top two or three crypto miners in Bitcoin for ExaHash have comparable performance, but there's still quite a discrepancy across the entire industry. And we're talking variances of 5, 10, even 20%. on a Bitcoin per exahash basis. And Bitcoin per exahash really is a reflection of how good is your uptime? How are you managing your fleet of tens of thousands of basics? And this gets much more difficult as you're in the multi-exahash scale of crypto mining. And so when you think about tier three in AI, where you have to have 99.98 plus uptime, if a company is struggling to have 90% uptime in crypto mining, it would suggest that it's going to be pretty tough for them to get 99.998% in AI. But anyways, I think everyone is out on their own path, and we just try to lead by example. Next slide. Now, this is one of my favorite slides here. So as a Canadian domicile crypto miner, we think we trade at a very attractive valuation. This slide here looks at the market cap as of November 11th. then it looks at the fair market value of the hodl position what we do there is we look at the value of each company when you subtract the value of hodl it's not quite enterprise value but similar to of course everybody's financials this quarter haven't come out yet so we can't calculate enterprise value but using what i like to call the market value excluding hodl is a good way to compare the premium that companies are trading at at any given moment in time, because, well, we know what October production is for everybody. It just came out. And so then you can look at the amount of Bitcoin that everybody's produced, what they have on their hodl, and look at the value per Bitcoin mined. And you can see we're trading at a value of about $3.6 million per Bitcoin mined, or on a annualized basis, about $300,000. If you normalize that ratio, as you can see, high trades is the most attractive value. You could see our peers trade anywhere at a premium of 30 to 50 to 500% of what Hive trades at. And so with over 2,600 green Bitcoin on the balance sheet, strong operating margins, quarter over quarter, the leanest GNA in the industry for Bitcoin mine, the best uptime in the sector. I really think Hive is a great company. I think our team has done a phenomenal job of delivering value for shareholders, and it's going to be a very exciting year as we scale to 12.5x a hench with our deal in Paraguay and upgrading our ASIC fleet along the way. And in addition to that, of course, our AI strategy. Next slide. So, To summarize, we have over 2,600 Bitcoin mined with green and clean energy as of October 2024. We've demonstrated prudent and stable growth across cycles. The management team that has been in the industry since 2017, we have the most attractive enterprise value to Bitcoin mined, as well as the best ROIC in the industry. We have a target to be 2% of global hash rate by summer of next year. And we're in the process of evaluating conversion of our data centers from crypto mining to tier three to power GPU cloud services and AI. Now, we're also an NVIDIA cloud partner for AI, and we're going to end this section by looking at our AI strategy. Next slide, please. So this quarter, we did 1.9 million of revenue. If you look at the first half, H1 of 2025 for the calendar year, $4.5 million, which is $9 million annualized. So we're right around that $9 to $10 million annualized rate. We have, however, seen a resurgence in the last month. So in October of this year, which of course is the month after this reporting period, we did get back to $10 million in annualized revenues. Now, having a B2B model where the GPUs that we've been renting, the over 4,000 A-series NVIDIA GPUs that we've listed on four different marketplaces, we don't control the demand as there's a little bit of market fluctuation in demand as people might run training on models, et cetera. And so we've seen growth and we just know that With our future expansions, as we have some exciting announcements upcoming, we are focusing and targeting larger contracts with single clients for fixed terms. But it was great because we're managing almost 500 nodes. We are managing 480 nodes, super micro service, 8 to 10 GPUs per node. In addition to that, we have 12 nodes of H100s. It's almost 500 nodes, 492 nodes to be exact. which is a lot of GPU nodes to be managing across two data centers, one in Sweden and one in Quebec. So let's have a look at the next slide. We have a really exciting couple months ahead of us. Our target for 20 million annualized revenue is still on track. We're gonna estimate that for calendar Q1. as we have some incoming hardware that we will be deploying and press releasing to the market as well. Our strategy to get to a hundred million dollars by the end of calendar 2025 is intact. And that is infrastructure driven by high being vertically integrated, not just building GPU clusters, but delivering on tier three data centers. And again, What we've done is we've demonstrated quarter after quarter the ability to service the tier three AI compute business unit by maintaining the uptimes that are required in this sector, which are different and much more stringent than crypto mining. So we've demonstrated consistent revenue. And I think it's going to be a very exciting year ahead. Stand by for updates from Hive on our AI business. And on that note, I'm going to turn it over to Mr. Darcy DeVaris, longest serving CFO in crypto mining.