HIVE Digital Technologies Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
June 30, 2023

There are 4 speakers on the call.

Operator

This meeting is being recorded. Blockchain Technologies Financial Results for Year Ended March 31, 2023. On Slide number 2, I would like to briefly note disclosures. Except for statements of historical fact, this presentation It includes forward looking information within the meaning of the applicable Canadian and U. S.

Operator

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 Aydin Kilik, President and CEO and Darcy Duberis, Chief Financial Officer. I would now like to hand the presentation over to Frank Holmes, Executive Chairman for a macro overview. Frank?

Speaker 1

Thank you, Holli, and investors and shareholders for living through an incredible roller coaster year. I want to give a macro recap, where we've been and where I think we're going to go. And then Aydin is going to get into the granularity Of the operations and so much interesting opportunities for which we call blue sky potential. And Darcy is going to go through the financials and give you more color on it. So the DNA of volatility is understanding risk and it's so important that investors and shareholders and traders understand that one standard deviation Means approximately 70% of the time, it's a non event for an asset class to go up or down a certain percentage.

Speaker 1

And each asset class Has its own unique DNA of volatility. So gold pre COVID was was 2%. Now it's 1%. And in fact, it's less volatile than the S and P 500. Bitcoin is 3 times as volatile as gold.

Speaker 1

And you could see on the data and it's actually less than Tesla, and MicroStrategy is much more volatile than Bitcoin, more than 2 times and Hive Also, the most volatile of them all. And I think part of that is that last year we were mining Ethereum, And then we're cut over and we're mining just Bitcoin and we're positioned as we'll tell you the story for AI. Next please. So we're first to go public in September 2017 As a crypto mining company, 1st to develop its own ASIC mining rig, 1st to buy our data centers, 1st to be totally focused on green energy, And now reusing that energy, in addition to balancing the electrical grid. I've got a phenomenal team and I'm so happy that, I've turned over the CEO Responsibilities to Ireland has done a great job and I can say at the macro and stock strategy.

Speaker 1

And then we have Darcy De Beers, Our CFO, and Johanna Thornblad, who's right now in Sweden, and, Gabriel, who's our general counsel. Everyone's been working 60 hours a week, Sometimes in the crunch period, 80 hours, it's an incredible team. And this shows up because when you look at us versus our peers, Our revenue per employee is the highest of all of our peers. Hyve is a green energy focused in Canada, Iceland and Sweden. Sorry, this is looking at a greenhouse, another part of our unique strategy.

Speaker 1

And we've seen this and we've done the due diligence and this is a greenhouse that's in Amsterdam and it is basically 6 football fields And it's using 2 megawatts of electricity only. Now these are the robots that are used, to basically pick all the green the the peppers, the red peppers. And our vision for Sweden is going to be, cucumbers and tomatoes and peppers. But it's really remarkable what you can do with robotics. Also part of our ESG strategy is to be involved with the community.

Speaker 1

We've sponsored the hockey team and the Hybe arena, and we're donating money each year, And it's also creating more great hockey players. There's 12 teams, kids, little kids that are learning Out of fights. And this area of Bowdoin has delivered something like 3 NHL Superstars that have won the Stanley Cups. Next. Hyatt's vision to provide food security to local communities And the co creation of Project 8's in food sustainability.

Speaker 1

This is really important, especially after coming out of COVID. And this will also the recycling of that Electronable electricity from our data center to go into heating a 90,000 square foot facility, is just remarkable. And we actually could always say we create a carbon credit. Next, please. Hibo performance Bitcoin and gold in S and P year to date.

Speaker 1

But remember, it's extremely volatile. It moves at Bitcoin. We're up 2 21% this year. And spot gold is up, as you can see, Modestly 4%, S and Ps up 14%, Bitcoin is up possibly at 84%, but Hive is more than 2 to 1 here. So the BTC Hash rate, the BTC price, something that's really been odd, but it's a challenge that we've had to go through last year, Bitcoin prices falling, scandals galore, and the difficulty continued to rise.

Speaker 1

And this is a visual showing that. So that means that there's more people competing for the same 6.25 bitcoins every 10 minutes. And that's That's just one of those parts where we've been focused on how do we increase our hash rate so that we can remain at 1% of the network. Our goal in the next 3, sorry, 6 months is to, I will give you more granularity, but it's basically to take us up to 6 Exahash, which would be 2%. But I think as the difficulty continues, as Bitcoin rises, It's just the reality of more people wanting to participate in mining Bitcoin.

Speaker 1

Now interesting, Bitcoin has been the dominant leader. It's surpassed 50% of all the Altcoins. Many of them have been thrown off of exchanges due to regulatory reaching and pronouncements, etcetera. So, Bitcoin is no doubt is the leader of the pack. And Bitcoin is not marred with, the proof of stake.

Speaker 1

It remains a dominant digital asset focus as proof of work. I love this visual. It's just the fabonucci spiral and, and it basically shows you That every 4 years, the halving is gonna take place. And and Ivan is gonna give you more granularity on our strategy to manage this risk. So not only, if Bitcoin is not at 60,000 this time next year, but the halving, then, you'll start to lose money.

Speaker 1

So the thought process of Bitcoin is going to rise, and you have to have the most efficient Change, and if you buy new machines, you got to be so careful that you're going to get your money back. Capital structure. We're very, very frugal in what we do with options and with RSUs. And we have about 84,200,000 shares outstanding. We trade on the TSE.

Speaker 1

We trade the TSE Ventures, the NASDAQ and the German exchanges. So this is another visual of talking about, Bitcoin, as you can see. We follow with Bitcoin And it does impact your revenue as revenue has declined because Bitcoin has declined. One of the also significant factors here is the Ethereum, the impact Ethereum And it basically left from the you can see here on the QT of 23. That drift is falling to 14, not only Bitcoin prices falling, but Ethereum went to proof of stake.

Speaker 1

This is a nicer, cleaner visual for that. And it shows you that Bitcoin mined buy high per quarter, it hit 8.58. And that includes the equivalent of Ethereum being converted to Bitcoin and going into Q3 last year at the end of September, That revenue declined, and it declined again as Bitcoin prices fell dramatically over The FTX drama, we were

Speaker 2

able to

Speaker 1

increase our hash rate and so we were able to increase our Bitcoin production. Well, what I want to show you here this little swirling tornado Is that everything is basically trading in step with Bitcoin. And what's interesting is that all these companies have different fundamentals And, Aiden's gonna give you some granularity on the difference on the financials, but they seem to have a quant model out there They all moved by that minute with Bitcoin prices and some correlate higher than others. But this is just a classic visual showing you That that Hive correlates 86% of the time with Riot, 96% of the time with Bitfarms. With Bit Digital is 93, Hut 8 is 94, Marathon is 83.

Speaker 1

And, you can see that Hive's correlation with with with Bitcoin, it's just it's important to recognize that this happens in gold stocks. It's the price movement of gold that dictates the performance of the stock. But over time, we believe that the fundamentals will prevail. I've always believed that green and clean bitcoins would over time become more valuable as a digital asset because the supply is capped at 21 1,000,000 Bitcoins. And like Andy Warhol, Art, when supply is capped and adoption expands over time, the value of his prints have gone up substantially.

Speaker 1

Now with the explosion in ordinals, we're experiencing new growth with special number satoshis. And this is showing you the innovation and Bitcoin ordinals. All that does is just one of these opportunities In the Bitcoin network to enjoy more revenue as you're validating transactions. Now I'd like to turn the conference call over to Darcy DeBoerse, our CFO, to give you an idea of where financials are. And then Aydin is going to give you much more granularity on ordinals and HPC strategy, Where we're taking the company.

Speaker 3

Thank you, Frank. Now I'll be taking you through a snapshot Of the 12 month year, looking at the most recent quarter also and the indicators for the year. Next slide, please. Because it's been such a tumultuous year, I'd first like to remind our listeners that Earnings are comprised of our operational earnings, plus our investment earnings, which includes realized and unrealized earnings, A lot of which, especially this year have included non cash Moving on to the next page. The mark to market is an accounting practice that involves adjusting the value of an asset To reflect its value as determined by current market conditions.

Speaker 3

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 and previously Ethereum digital assets Do generate unrealized gains and losses each quarter depending on the movement of the current underlying currency. 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.

Speaker 3

Non cash charges are write downs or accounting expenses that do not involve a cash payment, Depreciation, amortization, depletion, stock based compensation and asset impairments are common non cash charges that reduce earnings, But not cash flows. During this current year just finished, we took significant non cash charges, The majority reports in prior quarters as a result of the continuing bear market that we experienced during fiscal 2023 and continues and these are required under accounting prescriptions. The first were impairments under IAS 36 on mining equipment of $70,400,000 which are required due to the indicators of impairment that were present in the continuing bear market, significantly The decline in the Bitcoin price. In addition, a provision against deposits on mining equipment of 27,300,000 Based on an assessment of these deposits made on purchase orders and the expected delivery of the equipment. Also with the overall bear market and the decline in Bitcoin and cryptocurrency prices in general, we experienced a non cash Downward revaluation of our digital currencies of $70,900,000 and impairment Of our investments, which are strategic cryptocurrency entities of 13,400,000 These combined non cash charges of $182,000,000 had a large effect on our reported net loss for the year.

Speaker 3

Moving on to the next page, please. This is a snapshot of our 4th quarter 2023 financial results. During the quarter, we had total revenue of 18,200,000 And adjusted EBITDA of negative $1,300,000 During the quarter, We produced 7.92 Bitcoin equivalents and currently the cost of Bitcoin produced in that Most recent quarter was $17,928 Moving on to the next page, please. These results for the year ended 12 months, March 31, 2023. We had total revenue of $106,300,000 adjusted EBITDA of 23,200,000 A strong balance sheet position with digital currencies of $65,900,000 a gross operating margin of 50,600,000 And during the year mined 3,258 Bitcoin and the equivalent mined Bitcoin was 3,000 503.

Speaker 3

Moving on to the next page, please. Even though it was a tough bear market, We ended the year of March 31, 2023 with a healthy balance sheet. Our cash positions stood at $4,400,000 along with an additional $65,900,000 in Bitcoin digital currencies. We also had $9,400,000 in amounts receivable and prepaid. The market value of our strategic investments Fell during the quarter as a result of the current general market instability spoken about previously, bringing it down to $2,900,000 We do maintain a strong net cash position and healthy working capital to fund our operations and growth.

Speaker 3

Next slide please. This is a summary of the Bitcoin that we hold on our balance sheet year over year. On March 31, 2022, we held 2,000 596 Bitcoin and at the current period ended March 31, 2023, we held 2,000 332 Bitcoin. Onto the next slide. Our gross operating margin, which equates to our total revenues minus direct operating and maintenance costs decreased in absolute dollars to $4,000,000 or 22 percent in the most recent quarter compared to 22.9000000 dollars in the prior year comparative.

Speaker 3

Gross mining margin is also partially dependent on various external network factors, Including the high mining difficulty we are experiencing, the amount of digital currency rewards miners receive And the market price of the digital currencies at the time of mining, which is significantly lower than it was in the prior year. In this most recent quarter, we are reporting a loss of $0.08 per share compared to a net loss of $0.43 per share reported in Q4 last year. In The next slide in looking at our year over year revenue, we generated total revenue in the Q4 of fiscal 20 23 of $18,200,000 versus $49,800,000 in the prior year 4th quarter. The decrease in revenues versus the same quarter in fiscal 2022 can be attributable to 3 main headlines. The ever increasing Bitcoin difficulty hash rate over the past year, the significant drop in the price of Bitcoin And to a significant extent, the Ethereum merge that took place in September of 2022 as this current quarter And our operations moving forward does not and will not include any Ethereum revenues.

Speaker 3

This triple 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 $4,000,000 in the most recent quarter compared to $22,900,000 in the prior year comparative. Turning to the next slide, comparing our current fiscal Q4 quarter to the previous Q3 quarter, We generated revenue in this Q4 of fiscal 2023 of $18,200,000 versus $14,300,000 in the previous quarter. The increase in revenues versus the prior quarter was impacted by a stronger price of Bitcoin. As mentioned previously, as the Ethereum merge took place in Q2, neither of these quarters had any Ethereum mining revenues in them.

Speaker 3

Our gross mining margin increased in absolute dollars to $4,000,000 in the most recent quarter compared to $3,600,000 in the prior year comparative. Proceeding to the next slide, our adjusted EBITDA decreased In this Q4 of fiscal 2023 to a negative adjusted EBITDA of 1,300,000 Versus a positive EBITDA of $11,800,000 in the prior year comparative quarter. I will highlight that adjusted EBITDA is a non High IFRS figure. In the Q4 of fiscal 2023, we experienced a loss Of $7,000,000 compared to Net loss of $34,000,000 in the prior year comparative. This change was driven predominantly by significant non cash charges experienced last year, the largest bearing impairment of goodwill and intangibles of 13,300,000 And a loss of investments of $13,100,000 Moving on to the next slide, our adjusted EBITDA decreased in this 4th quarter Of fiscal 2023, comparing it quarter over quarter to negative $1,300,000 versus a positive adjusted EBITDA of $1,500,000 in the prior quarter.

Speaker 3

I again highlight that adjusted EBITDA is a non IFRS figure. In the Q4 of fiscal 2023, we experienced a loss of $7,000,000 compared to a loss of $90,000,000 in the prior quarter. These prior quarter losses were driven predominantly by significant non cash charges experienced, The largest being impairment on minor equipment of $38,800,000 and provision of equipment deposits of 22,700,000 I'd now like to turn the presentation over to our President and Chief Executive, I didn't kill it.

Speaker 2

And thank you, Darcy for providing the financial overview. I'll now get into an executive update Some recent accomplishments and some exciting initiatives as we look forward. So now we're going to look at the operating income of our core business, which is mining Bitcoin for this last quarter. We're doing a quarter over quarter comparison. Now, this last quarter we produced 7 92 Bitcoin and again this represents our production from Sweden, Iceland and Canada Using Green Energy as we're a green energy focused company.

Speaker 2

So the average price of Bitcoin during this quarter is about 22,800. Our average cost to produce a Bitcoin based on our direct operating costs or cost of goods sold It's about 17,900. So that represents about a 22% gross mining margin. Now if you look at quarter over quarter, difficulty actually increased 17%, but we actually produce Slightly more Bitcoin. That's because we of course expanded during this period.

Speaker 2

We mined 792 Bitcoin this quarter 787 the previous quarter. Now, what's actually not included in this slide is the additional $250,000 of revenue from our GPUs, Which had been generating revenue from high performance computing. We had mentioned in a press release earlier this year that we're doing about $1,000,000 a year run rate. And so this Q1, we had about $230,000 Of income. Next slide, please.

Speaker 2

Now bringing it more current, We put out our May production and so that's summarized here. So we had 304 Bitcoin in May, an average of 3.3 exahash, Which brings us to a 92.4 Bitcoin for Exahash for the month of May, which again is amongst the top of our peers And best uptime in the sector, Bitcoin HODL of 1,000 And it's important to note all of our Bitcoin that we huddle is self mined. And again, green energy is focused. This is our Bitcoin line with our green energy. And in addition to this, what's very exciting As we did a scan of our HODL and we actually have 250 Uncommon Satoshis.

Speaker 2

So this is a very exciting new discovery and we're going to talk a little bit more about it. Next slide please. Now just to round out How we've been growing our Hash rate. We recently announced our when we were at 3x of Hash, our target our interim target was 4x of Hash And we are going to be at 6x the Hash at the end of the year. So we had about 11,200 ASICs that we announced.

Speaker 2

And To date, we've actually received delivery of over 7,600 of these ASICs and the remainder are actually arriving in July. So I'm very proud of my team Executing and for working with our suppliers and our vendors for promptly delivering the hardware that we've purchased In a very timely matter. Next slide. So Here today, we're actually at 3.6xahash and that includes about 150 petahash From our GPU mining. And once the remaining orders of ASICs From the previous slide arrived, in the month of July, we will be at Forex Ash and this will be Our Q3, 2023.

Speaker 2

And then at the end of the year, we'll be at our target is 6x a Hash. So This just shows where we are today, 3.6x a Hash. We expect to be at 4x a Hash in a little over a month And then by the end of the year, about 6x a Hash. And so this is an 11% increase from the current quarter, which is Period end June. Moving into the next fiscal quarter, which is starting in July.

Speaker 2

And again, this is all based on machines that have been ordered, that have been paid for and are literally in the process of being shipped and installed. Next slide, please. So in addition to having very measured growth where When we deploy capital, we do it with the intention of having the best cash flow return on invested capital. What that means is, are we actually going to repay the ASICs, Repay the investment we made into ASICs and then start free cash flowing from them. And all of these purchases were done at extremely competitive prices.

Speaker 2

So in December, for example, we announced that we bought a large amount of S19J Pros for about $11 a terra ash. And in our more recent order of 11,200 machines comprised of Buzz Miners, the new S19J Pro Plus And even some S19xPs, we do this based on prevailing mining economics, long term projections In a sensitivity analysis where we look at if what is the dollar per tera hash price we're paying, what is the efficiency of the machine that we're getting. And we all mathematically model this so that we're getting what is going to provide us the best cash flow return on invested capital. And in addition to this, how we deliver value to our shareholders is by having The lowest G and A in the sector. We also have amongst the lowest share based executive compensation and we Also managed to keep very low dilution as we have a hybrid strategy where we either sell shares in our ATM or When an accretive opportunity comes up, we might sell some Bitcoin.

Speaker 2

And so this is a quality, this is a mindset, our lean and agile strategy. On the Our lean and agile strategy. On the next slide, we're actually going to look at what this means when you take a look at the numbers. And so if you look at financial comparison of the calendar year 2022, This is from January to December of 2022. And why we built this slide, and this is all based on public filings, Go on to Yahoo Finance and look at the various public filings.

Speaker 2

Our year end is March 31st, but a lot of our peers' year end is December 31st. So if you wanted to, you could look at our quarterly filings for the calendar year of 2022, add them all up And you would actually get this total. So our calendar year revenue total was actually 138,000,000 Our fiscal year total because that was period end March was $100,000,000 and as you know, a little over $100,000,000 And as you know, crypto mining economics Very so much over time. In order to do a true apples to apples comparison, you have to look at different companies over the same time period. So this is what we do for calendar 2022 on this slide.

Speaker 2

And you look at our yearly revenue and then you look at our cost of goods sold, Right. And then in the 3rd column, we have the gross mining margins. We had 70,000,000 gross mining margin. You see our peers had gross mining margin Ranging from maybe $45,000,000 to about $80,000,000 $90,000,000 There was a couple outliers below that. And then you look at the gross mining margin as a percentage of revenue and you sort of see most of the companies in the 50% to 70% range With again a few outliers below that.

Speaker 2

But then you look at the G and A, which is the corporate operating expenses, your auditors, Your lawyers, your executive compensation. Do you know insurance? Going to conferences Sponsorships, etcetera, etcetera. And this is where it gets really interesting. Hyatt as a global company With subsidiaries in Canada, Sweden, Iceland, Bermuda, Switzerland was 14,100,000 For the entire calendar year, all of our peers had G and A costs over $50,000,000 U.

Speaker 2

S, Almost triple hours. And so when you take that G and A cost off the gross mining margin, Then you get to the very last column, which is your corporate income and say, so what is the company? And this is these we're not looking at non cash charges because everyone has different depreciation schedules,

Speaker 1

Everyone

Speaker 2

gets different impairments. It's sort of how the auditors choose to perform an accounting treatment. But if you look at the cash charges, Again, insurance, lawyers, travel, etcetera. And you take that off your gross mining margin, which again is a cash based metric. You see that we had $55,000,000 in corporate income this period.

Speaker 2

After that, 2 of our peers were in the $32,000,000 range. And then from there, it sort of drops off and you see a few companies in the minus. And so again, we strive to deliver value for shareholders. And so this is a key slide that I wanted to present alongside our fiscal year end so people can understand what a calendar year end looks like. Next slide, please.

Speaker 2

Now, earlier we talked about us having some Uncommon Satoshis. And this is very exciting because As Inscription Technology has prevailed for Bitcoin, now we can have information on the Bitcoin blockchain, Right. This is a moment in time. This is historically significant because you've got BRC20 tokens, you've got various ordinal projects, you've got All sorts of information that can now be encoded directly onto the Bitcoin blockchain. And so as a result of that, In May, we saw a huge rush, a huge rally whereby people were paying higher transaction fees to have their projects minted first On the Bitcoin blockchain and that resulted in a surge in Hash price almost double where we were around a $0.06 or 0 point 0 $7 Hash price in the month or 2 before and that doubled to almost $0.12 Hash price.

Speaker 2

And again, Hash price is dollar per terahash per day Revenue that you would be getting. And this is network wide. This is a network statistic. This chart is off of bid info charts, you could look it up. And so if you want to have further insight into the nature of the rarity of Satoshis, Well, there's 2.1 quadrillion common satoshis.

Speaker 2

And If you look at because again, if there's 21,000,000 bitcoins and there's 100,000,000 satoshis per Bitcoin, then you have a Total supply of 2.1 Quadrillion Satoshis. But if you consider the 1st satoshi of each block, Well, now that's a much smaller number. There's only about 6,900,000 of these. If you look at the first Satoshi, when there's a new difficulty epoch, there's even less of those 3,400. And you can see how the rarity increases.

Speaker 2

And of course, the most the mythic one is the very first satoshi from the Genesis plot. But we have 250 Uncommon Satoshis, which we've received offers, Bonafide offers from parties that are willing to pay a vast premium for these. And so to transact with Satoshis, you need to have control over Your UTXOs and it's some more involved technical process. Again, Hodge wants to be a leader and a first in transacting with Uncommon satoshis. Next slide, please.

Speaker 2

Summary, so we've got 70 megawatts In New Brunswick, 30 Megawatts in Quebec, about a little over 37 Megawatts in Sweden, 10 Megawatts in Iceland, Puts our global total at a little under 150 megawatts of green and clean, focused energy. Next slide, please. As mentioned, Building 4 is complete, just a nice photo of New Brunswick. And that's a 4 building campus. And now we're going to talk a little bit about HPC in our foray into Deriving value from our GPU fleet doing some really interesting things.

Speaker 2

This is actually a photo of our data center in Bowdoin and that's our country President Yohanna Walking the halls with Marion who runs our data center in Bowdoin. And we're going to talk about Where this is evolving to? So AI is an emergent technology that is growing extremely rapidly. And there are a few constituent components to AI. We have a fleet of 38,000 NVIDIA data center grade GPUs That we purchased a couple of years ago, which used to mine Ethereum.

Speaker 2

And since then they've been Purpose to mine Bitcoin through mining Altcoins where we don't take custody of Altcoins where we get paid in Bitcoin. And in addition to that, we actually rent the GPUs and we on GPU marketplaces where people could rent the GPUs for a few hours or a few days. And as mentioned, we had about $230,000 U. S. Of income.

Speaker 2

And that wasn't even operating for the full quarter, but nevertheless, that's what we call GPU as a service. And then in addition to that, we have Hyatt Cloud, which is our private enterprise cloud platform we've been building for the last year. So these are all components of Technology that supports AI computing workloads, this firmware, the software and the hardware. Next slide, please. So why this is all coming together is because the web as we know it is evolving, Right.

Speaker 2

Web3 is a term that many people have heard, but Web3 is a collective of technology and ideas To allow this new adaptive Internet, whereas Web2 is a semantic Internet. So In the adaptive Internet is peer to peer. There's privacy, you own your own data. It's very different than having In Web 2, a few big data companies that you're unwittingly submitting all of your personal info to and they're pending metadata and that's how you get all these targeted ads. Web3 will have components of AI, decentralized autonomous organizations, DAOs And which of course will contribute to technologies such as the metaverse, but these are all different pillars of Web3.

Speaker 2

And the 2 key ones that Hive is involved with is, of course, cryptocurrencies and AI. Next slide, please. So where do we fit in? Well, You might have heard of something called Chat GPT, right? In Chat GPT, we're going to discuss briefly.

Speaker 2

It's fundamentally an AI large language model. There's an immense amount of processing power needed for those. However, when you get into enterprise grade applications, There is sensitivity about security. And so companies now are mindful that they don't want to upload sensitive client data To company like OpenAI that has a public LLM. And so what we aspire to offer at Hive through Hive Cloud Is privacy where companies can have a service agreement in place, ownership of their data and privacy and still run AI compute workloads on our bank GPUs.

Speaker 2

And this stuff isn't just getting uploaded into the OpenAI large language model. It would be Your own large language model that we would train and then you can run inferences. And of course, for all of this, you need to have data center experience. And so we've got 6 years having been public since 2017 as a best in class crypto miner, running And building and operating data centers. And as mentioned earlier, right, we're doing $1,000,000 a year in run rate revenue for GPU as a service.

Speaker 2

Next slide. So, by the way, what is GPT anyways? Well, GPT stands for generative pre trained transformer. As a type of large language model, it's very prominent framework for generative AI. Now, GPTs have been around since 2018.

Speaker 2

And so you can refer to this slide at your own leisure, but let's look at the evolution. So GPTs are defined by the number of parameters, which is shown here on the next slide. And GPT-one for example had a little over 100,000,000 parameters. That was scaled by 10x, GPT-two had 1,500,000,000 parameters. GPT-three was over 100x with 175,000,000,000 parameters and GPT-four is about a trillion parameters estimated.

Speaker 2

So you see this exponential growth and these parameters require more and more processing power. You need more floating point operations Performed by your GPUs to train these large language models. Hence, there's been an immense demand for Processing power in order to run training on these, LLMs. And the thing is GPT, Chat GPT is a public general LLM, but enterprise specific large language models will be smaller, maybe 10,000,000,000 to 20,000,000,000. And you can train them yourself with, again, using a platform like Hive Cloud and your own dedicated bank of GPUs.

Speaker 2

So you have Vertical integration from the hardware to the software stack that's just bespoke for you And therefore, you have privacy and you can fine tune your own LLMs. And so we aspire to provide this service as we build out our HI sorry, our AI platform. Now just to get a pulse on where this is all going, GP5 is around the corner and they estimate that might be as much as 17,500,000,000,000 data points. Now we don't know this for sure, But these are what best estimates tell us. And I think there's been a lot of worry and concern about Skynet and robots taking over to people.

Speaker 2

They think you're going to be replaced by AI. Actually, you'll be replaced by somebody that uses AI. And so this As a company, we want to embrace this. And so this is why again, being the first company to the first public company that builds our own basic mining rate with Intel, right? The first split data center on the balance sheet, the first in NASDAQ, Frankfurt and the TSX.

Speaker 2

We are also amongst the 1st crypto mining companies that are meaningfully involved in AI. Again, we're getting $1,000,000 a year of branded revenue from GPU as a Service We started HiveCloud a year ago and the software is complete and we're actually doing beta testing now with clients. It's a very exciting time. And I think this year ahead, We'll have a lot of new initiatives that we look forward to sharing with the public. So just to put some context around this.

Speaker 2

So we have over 38,000 data center grade NVIDIA GPUs. But if we just focus on a small subset of that, so the A40 And the A6000 together we have about 4,600 of these cards and at $0.50 per GPU per hour revenue With a 75% usage ratio, because again, these GPUs need to be applied for Compute. It's not like crypto mining where everything just runs 20 fourseven all the time. But what we found in the marketplace is about 70% to 80% usage. That would equate with these 4,600 GPUs doing about $40,000 a day of revenue or $50,000,000 a year in revenue.

Speaker 2

Now, the profit margins on this right now are about 8%. So that would be about $12,000,000 a year A profit just converting our 4,600 A40s and A6000s to AI computing. And so this is a very strong supplement to our crypto mining offering. And so if you go to the next slide, You would say, well, what do you require? And so we already have the GPUs.

Speaker 2

And so what we do is we actually upgrade the servers. So the servers have the memory and the CPUs. And so each server holds 10 GPUs. And so to purchase 460 and we've been working with Super Micro, that would be about US6 $1,000,000 And again, that would get us to US15 $1,000,000 a year of revenue. So this is very exciting.

Speaker 2

It's blue sky and we actually have some super micro servers arriving next week And we have more super micro servers arriving next month as we run all this GPU computing out of Sweden. It's a very exciting time and we look forward to sharing more. Please check our social handles For more developments and of course our press releases. Have a great day. Thank you.

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Earnings Conference Call
HIVE Digital Technologies Q4 2023
00:00 / 00:00