- Q2 revenue of US$29.6 million
- Bitcoin production increased by 4.5 per cent quarter over quarter
- HIVE’s production of 858 Bitcoin this quarter represents an increase of 31 per cent year over year
- Adjusted EBITDA of US$18.8 million for the three-month period
- HIVE Blockchain Technologies provides infrastructure solutions in the blockchain industry, including the mining of digital currencies
- Shares of Hive Blockchain Technologies Ltd. (HIVE) opened trading at C$3.30
HIVE Blockchain Technologies (HIVE) has released its earnings report for the second quarter ended September 30, 2022.
HIVE achieved Q2 revenue of US$29.6 million by mining 858 green and clean Bitcoin and 7,309 Ethereum, which were subsequently sold to reinvest in new ASIC mining equipment.
HIVE’s production of Bitcoin has increased by 4.5 per cent quarter over quarter, while the company’s average daily production of Ethereum increased from 84.3 ETH per day to 94.9 ETH prior to September 15th, when the company ceased mining Ethereum.
HIVE’s production of 858 Bitcoin this quarter represents an increase of 31 per cent year over year. This is in large part a result of our New Brunswick facility expanding from 30MW last year to approximately 60MW of capacity. This large increase in the quantity of Bitcoin production stands even as network difficulty has effectively doubled during this one-year period, and prices have fallen approximately 60 per cent.
Frank Holmes, HIVE’s Executive Chairman, commented on the news.
“We wish to again thank our loyal shareholders for believing in our vision to mine both Ethereum and Bitcoin. We are sad to see the higher margin from mining Ethereum gone, and now will be more easily compared to our Bitcoin mining peers. It was an extremely challenging quarter for the global digital asset ecosystem. We saw the capitulation of crypto prices due to the Proof of Stake ‘PoS’ Luna token blow-up in the spring and subsequent contagion from over-leveraged ‘shadow banks,’ hedge funds and offshore exchanges. Strategically, we have not borrowed expensive debt against our mining equipment or pledged our Bitcoins for costly loans. Thus, our balance sheet remains healthy to weather this storm. We believe our low coupon fixed debt, attractive green renewable energy prices and high-performing energy efficient ASIC chips will help us navigate through this crypto winter.”
HIVE achieved a gross mining profit margin of $15.9 million for the quarter, a 41% decrease over the prior quarter of $27.0 million due to lower Bitcoin prices. This decline in gross profit mining margin was predominantly driven by significantly lower average cryptocurrency prices during this period which negatively affected us as well as the Bitcoin mining industry.
Additionally, the company’s gross mining margin of 54 per cent this period is also a decrease from the gross mining margin from last quarter of 61 per cent. On a relative basis, HIVE has been able to mine with healthy profit margins during periods of market volatility because of being globally diversified and enjoying low power costs in Sweden, Iceland, and Quebec.
Furthermore, HIVE’s average cost of production per Bitcoin was $9,894 for the quarter ending September 30, 2022, a 23 per cent reduction in cost from the previous quarter ending June 30, 2022.
According to Anthony Power’s monthly industry research, HIVE has achieved and maintained the best operational uptime amongst all its peers, with HIVE repeatedly emerging as one of the most efficient crypto miners based on digital assets mined per Exahash (commonly measured as the quantity of mined Bitcoin per Exahash of reported hashrate).
Q2 summary- September 30, 2022
- Generated revenue of $29.6 million, with a gross mining margin of US$15.9 million
- Mined 858 Bitcoin and 7,309 Ethereum, equating to 1,380.2 Bitcoin Equivalent during the three-month period ended September 30, 2022
- Adjusted EBITDA of US$18.8 million for the three-month period
- Increased working capital by US$3.3 million during the three-month period ended September 30, 2022
- Digital currency assets of US$64.9 million as of September 30, 2022
- Average cost of production per Bitcoin was $9,984, where the average Bitcoin price was $21,237, during the three-month period ended September 30, 2022. This also represents a 23% decrease in production costs of Bitcoin from the previous quarter of $12,823 for the three months ended June 30, 2022 (average price of Bitcoin was $32,511 during this period).
- Impairment on miner equipment of $26.2 million during the three-month period ended September 30, 2022
- Net loss before tax of $37.2 million for the three-month period attributable to impairment from the value of ASIC chips declining with the drop in Bitcoin and Ethereum prices and the mark-to-market Bitcoin HODL position
Q2 F2023 financial review
For the three months ended September 30, 2022, revenue from digital currency mining was $29.6 million, a decrease of approximately 45 per cent from the prior year primarily due to significant global hashrate growth combined with much lower average cryptocurrency prices, offset partially by the increased production of Bitcoin because of the Quebec and New Brunswick facility acquisitions, in addition to expansions at the company’s operation in Boden, Sweden.
Gross mining margin during the period was $15.9 million, or 54 per cent of income from digital currency mining, compared to $46.0 million, or 86 per cent of income from digital currency mining, in the same period in the prior year. The company’s gross mining margin from digital currency mining is partially dependent on external network factors, including mining difficulty, the amount of digital currency rewards and fees it receives for mining, as well as the market price of digital currencies. The decrease in gross mining marginis greatly affected by the price of digital currencies, which is approximately 50 per cent of what it was in the prior year’s quarter.
The company notes that, while adjusted EBITDA this quarter was $18.8 million, because of mark-to-market accounting practice, net loss during the quarter ended September 30, 2022, was $37.0 million, or a loss of $0.45 per share, compared to net income of $38.9 million, or $0.51 per share, the same period last year. The decline from the prior year was driven primarily by higher non-cash charges such as depreciation, unrealized valuation losses on digital currencies and investments, and impairment charges on equipment and equipment deposits, which in turn were all affected by lower Bitcoin and Ethereum prices seen in the current quarter. Adjusted EBITDA is a non-IFRS financial measurement and should be read in conjunction with and should not be viewed as an alternative to or replacement of measures of operating results and liquidity presented in accordance with IFRS.
Mr. Holmes noted, “At HIVE, we strive to maintain a high-performance culture, which means that we always adapt to unexpected headwinds and do our best to maintain operational excellence in the process.”
EBITDA and Adjusted EBITDA
The company uses EBITDA and Adjusted EBITDA as a metric that is useful for assessing its operating performance on a cash basis before the impact of non-cash items and acquisition-related activities.
EBITDA is net income or loss from operations, as reported in profit and loss, before finance income and expense, tax and depreciation and amortization.
Adjusted EBITDA is EBITDA adjusted for removing other non-cash items, including share-based compensation, non-cash effect of the revaluation of digital currencies and one-time transactions.
Shares of Hive Blockchain Technologies Ltd. (HIVE) opened trading at C$3.30.