HIVE Digital Technologies Ltd. Q3 FY2025 earnings call

Industry Macro - Discussed the DNA of volatility in different assets, including Bitcoin, Tesla, and HIVE Digital. Explained Metcalfe's law and its impact on Bitcoin's price growth. Mentioned President Trump's support for Bitcoin and related policy changes. - ### Paraguay Expansion - Announced acquisition of Bitfarms facilities in Paraguay, which will enhance operating capacity to 300 megawatts upon completion, increasing mining hashrate from 6 exahash to 25 exahash. Highlighted the use of green energy in Paraguay and strategic ASIC orders from Bitmain and Canaan. - ### HPC Business - Hit $10 million in annualized HPC revenue this quarter. Ordered 32 node H100 cluster and H200 cluster, expecting to add significant top-line revenue. Focus on building Nvidia reference architecture and preparing for next-generation compute. - ### Financial Performance - Recorded $29.2 million in revenue for the quarter ended December 31, 2024. Cash position was $9.8 million, with $260.8 million in digital currencies. Adjusted EBITDA was $17.3 million for the quarter, up from $5.6 million in the prior quarter.

In the quarter ended December 31, 2024, HIVE Digital Technologies reported $29.2 million in revenue. The gross operating margin was $6.1 million, which is 21% of revenue. Adjusted EBITDA was $17.3 million. The company had 2,805 Bitcoin on the balance sheet mined with green and clean energy, unencumbered. The annualized ROIC was 37%. The company's current existing footprint is 140 megawatts between Canada and Sweden, and with the acquisition of Bitfarms facilities in Paraguay, it will reach 440 megawatts, with installed hashrate of 6 exahash and a target of 25 exahash once completed.

- Target to hit 3% of the global hashrate by 2025, reaching 25 exahash by September 2025. ### - Projected cash flows with 25 exahash at different Bitcoin prices, expecting significant annualized mining margins. ### - Anticipate continued growth in hashrate and financial performance as the Paraguay expansion and HPC business scale.

- Volatility in Bitcoin price which can impact revenue and margins. ### - Regulatory changes in the crypto and mining industry which could affect operations. ### - Mining difficulty changes that may impact the profitability of mining operations.

Q: Curious about further expansion opportunities in Paraguay now that a 300 megawatt foothold is established.

A: There are potentially a lot of opportunities in Latin America, but the team is laser focused on getting the current Paraguay expansion done properly. The operations team is learning from the process and continuing to look at incoming opportunities, with access to green energy from large dams being a key factor.

Q: How to think about the ramp in SG&A expense going forward and impact of operating leverage as the business scales?

A: SG&A is going to be very lean. There will be economies of scale, and having larger facilities like the 200 megawatt one in Paraguay will keep overhead lower than having multiple smaller facilities. It won't be linear, and the team will continue to keep it lean while revenues scale.

Q: Thoughts on the Paraguay site closure from Bitfarms and obstacles to reaching 25 exahash target?

A: There are good relationships with Bitfarms, with numerous weekly calls. There are no big rocks or stumbling blocks seen, just continuing communication to get energization done. The team is working with existing teams and making sure operational people are ready.

Q: Impact of change in administration on owning operating assets in the US?

A: The new administration is more friendly to crypto, which benefits Bitcoin miners. There was discomfort operating in the US before due to unclear regulations, but now there's an opportunity for better regulation and mainstream adoption. Regulation is welcomed as it provides guardrails.

Q: Color on potential co-location opportunities and capex per megawatt estimates?

A: The team has looked at repurposing existing facilities like in Sweden and New Brunswick to do HPC. There has been analysis done with consultants, but specific numbers are deferred to the operations team, with the focus on making best use of available energy for HPC or mining.

Q: Thoughts on using debt as a funding mechanism moving forward?

A: There are potential opportunities for debt financing, but the team looks for the lowest cost of capital. Noted that some convertible debt deals had issues with use of proceeds, and currently, the company has a strong balance sheet with Bitcoin on the balance sheet and remaining capacity on the ATM.