ZUG, Switzerland and
VANCOUVER, Dec. 2, 2019 /CNW/ - HIVE Blockchain Technologies
Ltd. (TSX.V:HIVE) (OTCQX:HVBTF) (the "Company" or "HIVE") announces
its results for the second quarter ended September 30, 2019 (all amounts in US dollars,
unless otherwise indicated).
"I am pleased to report a healthy second fiscal quarter of
positive free cash flow contributing to an already strong balance
sheet and continued progress in restructuring our operations to
ensure sustainable future profitability," said Frank Holmes, Interim Executive Chairman of
HIVE.
"Since we assumed control in the latter part of 2018, the
current management team's focus has been on ensuring transparency
and accountability and assuming direct control of our operations to
improve operational efficiency. We have changed service providers,
assumed direct control of our supply chain in Sweden, and initiated reviews of the
profitability of our various business units.
"I am particularly pleased with the improvements we have seen in
our GPU Ethereum mining operational efficiency. During the second
fiscal quarter, we unwound our previous service provider agreement
in Sweden and assumed full control
of our supply chain in that jurisdiction. This transition, which
was completed in November, is anticipated to result in an
approximately 25% reduction in our operating and maintenance costs,
notably through direct relationships with local energy
suppliers.
"We are now focused on achieving a similar result for our
smaller Ethereum mining facility in Iceland, either by improving profitability or
relocating equipment there to a lower cost jurisdiction as
Iceland has become less price
competitive.
"During the quarter, our cloud mining operations for Bitcoin
benefited from a healthy coin price in the summer months but market
conditions worsened significantly into the fall. The price of
Bitcoin declined while the difficulty in mining Bitcoin increased
dramatically reaching a record high. As these operations operate on
a fixed cost basis, we have prudently decided to suspend 200
Petahashes of our cloud mining capacity as the current quarter has
become unprofitable for mining. We are currently reviewing various
factors including market conditions and the anticipated impact on
legacy ASIC miners from the halving of Bitcoin rewards expected to
occur in May 2020, to determine our
best path forward for this equipment.
"We currently have a healthy net cash balance and significant
digital assets portfolio. We are evaluating a pipeline of potential
investments including M&A to determine the best opportunities
to generate shareholder returns. Subsequent to quarter end, we
continued to build our brain trust through the appointment of
Dave Perrill, the CEO of rapidly
growing data center company Compute North, to our board of
directors. Dave will help us execute this next stage of our growth
strategy.
"The cryptocurrency market has continued to remain volatile, and
the share prices of digital currency miners in general has
underperformed the actual coins," Mr. Holmes concluded. "We have
not been immune to this as our share price, which previously was
highly correlated to the performance of cryptocurrencies, has
decoupled from them for the past six months as large, early
investors in HIVE have pared down positions. While we cannot
control such external impacts, we continue to remain focused on
improving the profitability of our operations and are hopeful that
our share price will ultimately reflect improving
fundamentals."
Q2 F2020 Highlights
- Generated record income from digital currency mining of
$12.0 million
- Generated gross mining margin of $(0.6)
million from mining of digital currencies, or approximately
$5.5 million, excluding certain
non-recurring charges including a value added tax provision in
Switzerland related to historical
periods, upfront energy costs paid during the quarter in
Sweden for which the Company
anticipates receiving energy rebates in the future, as well as some
overlapping service provider costs the Company paid related to its
transition to its new service provider, Blockbase, from its
original provider Genesis
- Increased mining output of newly minted digital
currencies:
-
- 586 Bitcoin
- 20,649 Ethereum
- 32,692 Ethereum Classic
- Incurred a net loss of $11.5
million for the period, reflecting the non-recurring charges
impacting gross mining margin as well as $6.1 million in non-cash expenses, $2.1 million in recorded foreign exchange loss,
and $1.4 million recorded loss on
sale of digital currencies and investments reflecting a decline in
certain coin pricing
- Generated $0.3 million in cash
flow from operations
- Increased net cash less loans payables to $5.3 million, with digital currencies assets at
$7.2 million, as at September 30, 2019
Financial Review
For the quarter ended September 30,
2019, income was $12.0
million, an increase of approximately 84% from the same
period in the prior year. Second quarter income from digital
currency mining was produced from an average of 24.2 MW of GPU
production capacity, and 300 PH of Cloud Mining capacity, as at
September 30, 2019.
|
Three months ended
September 30,
|
Six months ended
September 30,
|
|
2019
|
2018
|
2019
|
2018
|
Income from
digital currency mining
|
$
|
12,007,978
|
$
|
6,523,217
|
$
|
21,131,608
|
$
|
17,183,881
|
Operating and
maintenance costs of digital currency mining
|
(12,571,817)
|
(4,660,473)
|
(18,126,792)
|
(8,879,956)
|
Gross Mining
Margin1
|
(563,839)
|
1,862,744
|
3,004,816
|
8,303,925
|
Gross Mining
Margin %1
|
-5%
|
29%
|
14%
|
48%
|
|
|
|
|
|
Depreciation
|
(1,252,072)
|
(5,142,789)
|
(2,505,029)
|
(9,827,245)
|
Gross profit
(loss)
|
(1,815,911)
|
(3,280,045)
|
499,787
|
(1,523,320)
|
|
|
|
|
|
Revaluation of
digital currencies2
|
(4,806,346)
|
(7,832,211)
|
(1,912,515)
|
(9,169,129)
|
Gain (loss) on
sale of digital currencies
|
(589,404)
|
(1,161,385)
|
153,721
|
(1,099,713)
|
|
|
|
|
|
General and
administrative expenses
|
(1,366,341)
|
(718,666)
|
(2,665,456)
|
(2,258,206)
|
Impairment
|
-
|
(14,746,420)
|
-
|
(14,746,420)
|
Foreign
Exchange
|
(2,052,200)
|
(373,015)
|
(3,162,619)
|
(1,850,598)
|
Share-based
compensation
|
(15,019)
|
(160,361)
|
(308,899)
|
(258,362)
|
|
|
|
|
|
Realized gain (loss)
on investments
|
(828,044)
|
-
|
1,531,464
|
-
|
Finance income
(expense)
|
(53,557)
|
22,052
|
(107,522)
|
(16,742)
|
|
|
|
|
|
Tax
expense
|
-
|
(50,000)
|
-
|
(50,000)
|
Loss from
continuing operations
|
$
|
(11,526,822)
|
$
|
(28,300,051)
|
$
|
(5,972,039)
|
$
|
(30,972,490)
|
|
|
|
|
|
EBITDA3
|
$
|
(9,393,149)
|
$
|
(23,129,314)
|
$
|
(4,890,952)
|
$
|
(21,078,503)
|
Adjusted
EBITDA3
|
$
|
(4,571,784)
|
$
|
(15,136,742)
|
$
|
(2,669,538)
|
$
|
(11,651,012)
|
|
|
|
|
|
Diluted loss per
share
|
$
|
(0.04)
|
$
|
(0.09)
|
$
|
(0.02)
|
$
|
(0.10)
|
|
|
|
|
|
Net cash inflows
(outflows) from operating activities
|
$
|
343,753
|
$
|
(3,412,288)
|
$
|
1,188,093
|
$
|
4,864,978
|
Net cash inflows
(outflows) from investing activities
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
(7,305,432)
|
Net cash inflows
(outflows) from financing activities
|
$
|
34,384
|
$
|
122,144
|
$
|
306,712
|
$
|
336,184
|
|
|
|
|
|
|
|
|
|
|
As at
|
September 30,
2019
|
March 31,
2019
|
|
|
Total
assets
|
$
|
26,404,314
|
$
|
27,761,197
|
|
|
Total non-current
liabilities
|
$
|
318,636
|
$
|
-
|
|
|
|
|
|
|
|
__________________________________
(1)
|
Gross mining margin
equates to income from digital mining less operating and
maintenance costs and is a non-IFRS measure; see Non-IFRS Measures
in MD&A for reconciliation
|
(2)
|
Revaluation is
calculated as the change in value (gain or loss) on the coin
inventory. When coins are sold, the net difference between
the proceeds and the carrying value of the digital currency
(including the revaluation), is recorded as a gain (loss) on the
sale of digital currencies
|
(3)
|
EBITDA and Adjusted
EBITDA are non-IFRS measures; see Non-IFRS Measures in MD&A for
reconciliation
|
Financial Statements and MD&A
The Company's Condensed Interim Consolidated Financial
Statements and Management's Discussion and Analysis (MD&A)
thereon for the three and six months ended September 30, 2019 will be accessible on SEDAR at
www.sedar.com under HIVE's profile and on the Company's
website at www.HIVEblockchain.com.
Webcast Details
Management will host a webcast on Monday,
December 2, 2019 at 9:00 am Eastern
Time to discuss the Company's financial results. Presenting
on the webcast will be Frank Holmes,
Interim Executive Chairman and Darcy
Daubaras, Chief Financial Officer. IMPORTANT- Click
here to register for the webcast.
About HIVE Blockchain Technologies Ltd.
HIVE Blockchain Technologies Ltd. is a growth oriented,
TSX.V-listed company building a bridge from the blockchain sector
to traditional capital markets. HIVE owns state-of-the-art
GPU-based digital currency mining facilities in Iceland and Sweden, which produce newly minted digital
currencies like Ethereum continuously as well as cloud-based
ASIC-based capacity which produces newly minted digital currencies
like Bitcoin. Our deployments provide shareholders with exposure to
the operating margins of digital currency mining as well as a
growing portfolio of crypto-coins.
For more information and to register to HIVE's mailing list,
please visit www.HIVEblockchain.com. Follow @HIVEblockchain on
Twitter and subscribe to HIVE's YouTube channel.
On Behalf of HIVE Blockchain Technologies Ltd.
"Frank Holmes"
Interim Executive Chairman
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this news release.
Forward-Looking Information
Except for the statements of historical fact, this news
release contains "forward-looking information" within the meaning
of the applicable Canadian securities legislation that is based on
expectations, estimates and projections as at the date of this news
release. "Forward-looking information" in this news release
includes information about restructuring of the Company's
operations and sustainable future profitability; review of certain
business unit profitability; improvements in GPU Ethereum mining
operational efficiency; the Company's estimated 25% reduction in
operating and maintenance costs in Sweden; potential restructuring at the
Company's Iceland facility (either
through improving profitability or relocating equipment located in
Iceland); the review of conditions
for ASIC mining (and ASIC equipment use going forward), including
the expected impact of the halving of Bitcoin awards expected in
May 2020; potential investments
(including M&A) by the Company; shareholder returns; the impact
of early investors in HIVE paring down share positions; the
potential for the Company's long term growth; the business goals
and objectives of the Company, and other forward-looking
information includes but is not limited to information concerning
the intentions, plans and future actions of the parties to the
transactions described herein and the terms thereon.
Factors that could cause actual results to differ materially
from those described in such forward-looking information include,
but are not limited to, the efficiencies obtained through
restructurings may not lead to operational advantages or
profitability; the ongoing partnership with Genesis and
any of the third parties for which the Company relies for its
operations; early investors may continue to reduce their share
positions in HIVE; the digital currency market; the Company's
ability to successfully mine digital currency; the Company may not
be able to profitably liquidate its current digital currency
inventory, or at all; a decline in digital currency prices may have
a significant negative impact on the Company's operations; the
volatility of digital currency prices; and other related risks as
more fully set out in the Filing Statement of the Company dated and
other documents disclosed under the Company's filings at
www.sedar.com.
This news release also contains "financial outlook" in the
form of gross mining margins, which is intended to provide
additional information only and may not be an appropriate or
accurate prediction of future performance, and should not be used
as such. The gross mining margins disclosed in this news release
are based on the assumptions disclosed in this news release and the
Company's Management Discussion and Analysis for the quarter ended
September 30, 2019, which assumptions
are based upon management's best estimates but are inherently
speculative and there is no guarantee that such assumptions and
estimates will prove to be correct.
The forward-looking information in this news release reflects
the current expectations, assumptions and/or beliefs of the Company
based on information currently available to the Company. In
connection with the forward-looking information contained in this
news release, the Company has made assumptions about the Company's
ability to realize operational efficiencies going forward into
profitability; profitable use of the Company's assets going
forward; the Company's ability to profitably liquidate its
digital currency inventory as required; the Company's ongoing
partnership with Genesis and new partnership with Blockbase;
historical prices of digital currencies and the ability of the
Company to mine digital currencies will be consistent with
historical prices; and there will be no regulation or law that will
prevent the Company from operating its business. The Company has
also assumed that no significant events occur outside of the
Company's normal course of business. Although the Company believes
that the assumptions inherent in the forward-looking information
are reasonable, forward-looking information is not a guarantee of
future performance and accordingly undue reliance should not be put
on such information due to the inherent uncertainty
therein.
SOURCE HIVE Blockchain Technologies Ltd.