HIVE Blockchain Technologies Ltd

XTSX:HIVE

Earnings Call Transcript 2023-Q3

[Holly Schoenfeldt]

Hello, everyone, and welcome to today's webcast reviewing HIVE Blockchain Technologies financial results for quarter ended December 31, 2022. On Slide #2, I would like to briefly note disclosures. Except for statements 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.

On Slide #3, I am pleased to introduce today's presenters: Frank Holmes, Executive Chairman; Aydin Kilic, President and CEO; Darcy Daubaras, Chief Financial Officer; and Adam Sharp, Editor of the HIVE Newsletter.

I would now like to hand the presentation over to Frank Holmes, Executive Chairman, for a macro overview of the quarter. Frank?

[Frank Holmes, executive]

Thank you, Holly, and thank you, our shareholders, and the team for pulling this together what has been, as I'll recap for last calendar year, and it's really amazing how pulling through that and trying to give you color on the macro scene and what we see is going on. But what's really important for all of us before, what I think is an important disclosure and just to appreciate, the DNA of volatility. So often gold is compared to Bitcoin. A big reason for it is a decentralized asset. And when as you can see, gold bullion's daily volatility means 70% of the time it's a nonevent, they go up or down 1%. But over 10 days it's 3%. And in fact, gold is less volatile than the S&P 500, which on a daily basis is going up or down 2% and over 10 days 4%.

When we go to Bitcoin, it's 4x greater on a daily basis. It is not a -- a nonevent to go up or down 4% and over 10 days up or down 10%. And when we come to Tesla, over 10 days, you can see it's much greater, much greater than the S&P 500, and HIVE Blockchain is 6% and a 10-day is 19%. MicroStrategy, a unique company, a technology company that is -- continues to buy and accumulate Bitcoin, on a 1-day, its volatility is plus or minus 7%, and over any 10-day, it's 21%. So before you ever think of going into this space, you have to understand the DNA of volatility of an asset class. HIVE is a big proxy for a lot of people that do not want to go to exchanges like FTX and lose all their money or invest in yield and Celsius and lose all your money. So what we see here is that it is a proxy that has the DNA of both crypto and the stock market.

Our strategy. Well, we believe that we're in this great digital transformation. Every year, I spend a week in Harvard with a group of 150 CEOs from 80 countries. And to this past year, it was phenomenal because it was all about the digital transformation and the subsets and sub stacks of the -- this great digital transformation. And it's a great business for investors to understand that HIVE Blockchain is part of this digital transformation. And with that digital transformation, you need to have data centers, and those data centers allow you to participate in the huge pent-up demand.

So where do we compete? We compete, and as you can see that we've had many first-mover advantages: first crypto mining company to go public, first to mine Ethereum and Bitcoin on a great scale. And so we always want to try to be what's first to move. We were first to move using our software to balance the grid. We were first to buy our own data centers and build our own infrastructure and own them. And with that, we've done so many things. So we believe that we have to be in that position. So we compete with other crypto mining companies. And what unique value do we bring is that we do something that's different than other people. We don't HODL 100% of everything and then keep selling shares with -- in public markets. We also believe that we have to deliver you a profit. So at times, we'll buy equipment and we'll be very opportunistic. So we provide a proxy for investors in -- that want to be involved, but they're very conscientious of risk, in particular, the Celsius risk or the collateral damage of the FDXs.

So this is the unique value. And what resources we offer is that we have -- we are always green. That's been part of our unique strategy is to always be -- have green and clean coins. Everything that we do is we try to recycle that molecule. We are doing that hydroelectricity and recycling energy in Montreal at Lachute from -- into a manufacturing building from our crypto mining. So this is our unique strategy of continuously looking at how do we get involved with local communities and how do we evolve with education in supporting these communities because we believe that we have this GPT chat, this phenomena that's taking place, and you need to have these data centers and you need to have our high-quality chips like NVIDIA. And that's what we're seeing is tremendous growth in this space.

So I have a great team. Aydin Kilic is -- after being with us for 18 -- over 18 months of learning our culture and our values, is electrical engineer with capital markets experience, but really technical experience in building data centers and Bitcoin mining. So he's taking on the responsibility. This is so good for me because I can stand back and stay focused on macro themes. And then we have Darcy Daubaras who's our CFO. And we have Johanna Thornblad, our President of Sweden, and Gabriel, who's done a great job taking on the responsibilities as General Counsel.

So we've been first to go public in 2017, first to develop our own ASIC mining rig, first to buy a data center, first to buy a green energy focus -- to be green energy focused, first to be interlisted with Canada, U.S. and Germany. So we're lean and mean. This to me was [ opo of ] Anthony Power's, and I thought it was very, very fitting that what we've seen in our peers is tremendous dilution of selling shares and huge stock grants. And -- but most important was just the dilution of shares to grow their business model. And so HIVE for the shareholders is -- has been the leanest of all these entities. And I think we just have that discipline. We still give out stock options. We do RSUs and we make sure our compensation is very competitive, and we try to -- we focus using the agile mindset to adapt to all the external forces and the unique issues that are coming up with all these different geographic locations we lead in.

But for you, we have this discipline, and this discipline has allowed us to have, for the shareholders, generate the highest cash flow returns on invested capital. And what we find also is that the auditors of the world and the crypto space are very fast to try to write down all the assets. It seems just to be a propensity not to believe it is sustainable, but I believe that Bitcoin is very sustainable. And I do believe that our thesis of having our own data centers and our thesis of acquiring and building our own facilities, et cetera, give us a long-term opportunity in this industry.

Capital structure. HIVE has options of about 3.1 million RSUs, 1.3 million issued, and about 83 million shares outstanding. So it is relatively a tight float compared to our peers. And even though last year, we went through a 5 to 1 rollback, we still, I think, we can take a look at our returns on invested capital, that's what's the most important. It doesn't matter if we are 5x these number of shares or at 83 million shares, we still are generating the highest cash flow returns on invested capital. We did roll it back on the concern of the crisis that was happening external and the winter that was evolving, then the stock price stays down too long, then you're forced to have to go and roll it back as some of our peers have been told that they have to go and roll back their stock.

Total crypto market cap [ thell ] appears to be leveling off and has had a bounce this year. What's interesting is that the crypto mining stocks and HIVE have outperformed the bounce in Bitcoin. But what's important, in addition to understanding the DNA of volatility, which the Bloomberg machines and almost every Internet trading facility offer you, what's called the relative strength, which is a sentiment indicator over 14 days, which is a little over 2 weeks. And what this says is that there is a positive tension and negative tension. There's a excitement and euphoria and then there's fear and redemption, and you get this incredible opportunity. And the traders that use this tool, as you can see, in the past 3 years, they've had 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 great buy opportunities where you go to an extreme oversold, and we've had 1, 2, 3, 4, 5, 6, 7, 8, 9 oversold.

So you can make great trades, and sometimes these trades take 3 months or 6 months to go from a tremendously overbought to oversold. So to me, it's really interesting to see how Bitcoin's volatility and HIVE are very strongly connected, and a lot of traders use the system. So, what, we've had a great rally, we've sold off, we've come back to the mean. It means we could fall, but you could see several times it's come off and then it rallies back up again.

But the next visual is showing you HIVE. So HIVE itself has had oversold conditions and gone to overbought conditions. It seems it's had a bias to overbought several times. It's corrected back to the mean year over this 14-day strength period. But if you overlay those 2 charts, you will see the correlation of HIVE to Bitcoin is extremely high. So what does that mean? It means that HIVE has become a proxy for investors and traders that are reluctant to go to these exchanges, which fortunately they've gone to HIVE, they've not gone to these exchanges where people have lost hundreds of millions of dollars like FTX.

So what has happened in our space at a macro basis is that we have seen Bitcoin fall over 50%. And what's really fascinating but painful is that the difficulty that is more people are mining Bitcoin. And that means that every 10 minutes, when there's an opportunity to get a piece of the Bitcoin network, there's more players so people are getting less. But we are slightly over 1% of the global network. Every day, there's about 900 Bitcoins that you have the availability to mine, and that is do the encryption with your technology and energy. And so I'm happy to say that even though the difficulty has increased 60%, HIVE has been able to bring on more machines and more efficient machines. And during November, December, we bought a lot of S19 Pros. A year ago, they were trading over $100. We refused to buy them. That is why we end up doing our own Intel deal at a lot lesser price and [indiscernible]. And during the bear crisis that took place last quarter, we saw these machines come down to an opportunistic buys.

So what are the -- why did we do that? We spent millions of dollars upgrading our facilities so that we have more potential to mine more coins with using less energy every 10 minutes. So HIVE is a green energy focused company, and that is part of our strategy. We focus on low-cost energy where the temperature's are cool and there's fast Internet connection. So that takes you to Canada. That takes you to Iceland and Sweden.

What's -- this is visual is to show you what HIVE has been doing this research because we're trying to recycle, find ways to recycle our energy. And one of the parts here is this is a greenhouse. And we are working on the opportunity of building a 90,000 square foot greenhouse behind our facilities in Boden, which would then supply all the -- would supply, basically, all the produce coming from cucumbers and tomatoes, et cetera, in the northern region. That would remove a carbon footprint of shipping food from Spain and from Italy to Northern Sweden, and we would be able to do that from the same molecule of energy. So these are the sort of value propositions that we are putting on the table for communities, for HIVE shareholders, and always continuously looking for ways to innovate.

This visual here is showing you this is the robot that goes around this facility. And they basically have 8 football field heated with only 2 megawatts of electricity. So it always amazes me what can be done with this. And it's also interesting is that with the energy crisis in Europe that they've been selling back the energy to the community and they stop the producing produce, and it just shows you how big it is and scalable. But I think and I believe that when you have hydroelectricity and geothermal, that these type of facilities are going to be very important, so if there is another COVID in the next 15 years or something, that people will be able to get great quality food from their local area.

HIVE has been very much involved in the community. There are 6 kids have gone on to become superstars from this region of Boden and go all the way to the NHL. Some have been -- have 2 NHL Stanley Cup rings, so it is everything, like in Texas, it's Friday Night Football; in Sweden, it's hockey. So the arena, we have funded a -- branded with the arena, and this money has helped the community that we've invested in this and in the training of 12 hockey teams for young kids. So parents drop off their kids, and they learn how to skate better, how to play hockey better, how to play like teams. So we're thrilled about being able to be a strong part of the community of Boden.

This is a visual that HIVE provides food security to local community. The co-creation of this project aids in food sustainability efforts. Boden is in discussion of the greenhouse at Boden. We hope to be completing this transaction shortly. This company is already building now. We've been doing our due diligence in other buildings. So we got -- so we can really put our arms around what the issues are, but we're thrilled about the ability to take that molecule and offer HPC, high-performance computing, and then take that heat and then recycle it for a greenhouse is just so productive use of energy.

So financial results, as you see, we're going to have -- the rest of the team will give you more granularity, but we did $14.3 million in revenue. It was a very challenging quarter. We had the merge take place with Ethereum, but we still produce Bitcoin. We reinvented using AI where we started to using --mining what they call these alternative coins and immediately converting to Bitcoin, which we then sell to turn around to build and expand. But through all that mess, none of our peers that we're aware of really had positive EBITDA. And on an adjusted basis, with $1.5 million, I was thrilled to see what we produced. I also took a look at the cost of Bitcoin produced. When you look at all the unique things we did with balancing the grid, selling back energy, that our cost of producing was $13,634. So this is what allowed us to be able to weather a merge of Ethereum, pivoting from that, then FTX imploding, and we just basically grinded through with our management and our philosophy.

There's another way of looking at this. You can see the Bitcoin price has been falling. You can see that, therefore, our revenue declines. Even though we maintain about 1% of the network, it does impact our gross margins in addition to the revenue, but we have been lean and mean without massive dilution of how we run our business. This is Bitcoin mined by HIVE per quarter. And this is the Bitcoin in our balance sheet. On a year-over-year basis, we increased our HODL position. We did sell Bitcoin when we felt that we could buy machines at ten cents on the dollar and get rid of machines that are not as energy efficient. We upgraded our suite and this, we believe, puts us in a very strong position because from those lows of $15,000 and change in this quarter of September to December, Bitcoin has now rallied to $25,000.

Bitcoin bull run begins 500 days after the halving is what they like to share on this visual, and you can see from this is that, get ready for more exciting times. That's if the cycle repeats itself. We're not betting that the cycles -- past performance is no guarantee of future results. I think it's just a wise philosophy to have as an investor. I love Reddit humor. There's a kid now working at McDonald's. He likes to say, they don't know I used to be a crypto millionaire.

This is what took place last year for investors to recap and that humor relates to this, is a lot of the crypto kids that made a lot of money early on only Bitcoin and Ethereum and these other coins, they were -- got involved in going into places like Celsius to get a yield, and Voyager. And what you're seeing is almost all these interconnections of Three Arrows Capital. It's just amazing to see that the counter risk was so great. I remember being criticized because we never pledged our $200 million or onetime $170 million worth of clients with someone like Celsius and we would have been making an extra $20 million a year. Guess what? Everyone that went, ran out and did that in the ecosystem lost their shirt.

And our -- we were just cautious about the counterparty risk. We never went and did a convertible or a security into something that was going to take our coins or against our equipment because the yields were too difficult, too high. But this visual is to tell you that most of the wipeout, as this article in the Wall Street Journal was, was within the crypto people. Most of the crypto people lost betting on these other companies, but still, a lot of retail people started coming into the space, looking for these higher yields. But I think it all really started with this Terra LUNA implosion. It affected Celsius, it affected Three Arrows Capital, and now it's coming out that FTX Alameda, that they were involved back last year because a lot of these issues have to do with what's called proof of state coins and the -- versus proof of work, which is Bitcoin is a proof of work, and Ethereum used to be proof of work but it's a proof of stake, and proof of stake are the coins that the SEC and regulators want to regulate as a security, not as a digital asset. At this stage, Bitcoin is deemed a commodity or a digital asset. It's deemed as like an ounce of gold that trades in the futures market.

Well, Congress and FTX problems, 1 in 3 members. That's almost 100 and, I don't know, 60-some-odd politician -- 196 U.S. lawmakers -- politicians took direct contributions from Sam. The bulk of it were Democrats, which has now made a big political backlash. And so it's just tragic to see that the anti-Bitcoin is more political than what its economic benefits are. In particular, it's banking the unbankable. I mentioned earlier with my Harvard case, there was a bank that was able to use mobile phones. And people in Kenya could not open a bank account, the KYC and it was just so severe and they were very poor, but along came the ability to do digital and on a phone. And all of a sudden, you have 40 million new people setting up banking and doing banking, then opening bank accounts, learning how to save, invest.

It's a remarkable story. And Bitcoin is part now of the next wave, and you're seeing the exercise of coming out with digital money and wiping out your other paper money in Nigeria, and people are rioting. The bank is saying that the government is saying that any $100 bills you have for Ben Franklin on them, they're worthless. All they're going to accept is the new digital coin. And it makes the government want to be able to track everything and there's a big pushback about abuse because they could turn around and say, well, if you don't save that money right away, we're going to wipe it out. So you have to run out to spend and try to manipulate your spending behavior. These are all these negative news and narrative, but it's interesting for me to see that, and what's painful is this political backlash. There is a global phenomenon that HIVE is just moving along and doing everything it can to stay profitable for the shareholders and look for having that first-mover advantage of new opportunities.

This is another visual showing the relationships, Silvergate Exchange Network. All these companies had -- in Coinbase had accounts with each other, and this classic of contagion, where one going bankrupt starts impacting or harming other people. And you saw many file for bankruptcy, so try to protect themselves. You've seen the regulators come in to go after various names. And the sad part is that Sam Bankman has made it political. This just should be economics and a decentralized asset, just like art is a decentralized asset, gold is a decentralized asset and Bitcoin is a decentralized asset. But now it's gone on to another wave, and so investors just have to be aware of it. But this sort of happens when you have new technology and so many doubters that believe it's just -- it's not good, but I believe that it's so big when you travel globally around the world.

Here's another great visual. And at Bitcoin now, with no CEO, no management team, no Board of Directors, no marketing budget, its market cap is greater than Visa, greater than Facebook, greater than JPMorgan, greater than Samsung and greater than PayPal. Now that is a phenomenon that it tries to explain to people, it being all over the world and in places like Nigeria, digital banking is very easy with phones. And now they're going to -- that banking with Bitcoin is going to explode. And one of Bitcoin physical, like they call it ATM machines where you can download a Bitcoin with cash, there's a shortage. And so the cash trade for that in Nigeria exploded. So you can go on Twitter and these other social media. There's lots of video clips of how upset people are about seeing their money being confiscated.

Weekly settlements on the Bitcoin network. I mean it's just remarkable of seeing how much trading takes place. And this is -- I share this with you also because we have a strategic relationship with Bitcoin magazine, who host the largest crypto conferences in the world and that we are funding the data. We are basically buy the numbers and just weekly data, and you can see at the bottom, this is sponsored by HIVE Blockchain on NASDAQ.

Another visual, global asset universe. Bitcoin is actually very tiny. It's 0.05%. If you look at the global world, $0.37 trillion, whereas gold is $11 trillion, real estate is $32 trillion, global GDP is $84 trillion, equities are $100 trillion, debt securities are $123 trillion and real estate, [ it would all be ] residential, is $258 trillion. So Bitcoin is pretty small in that context. And as more people adopt it, it means -- and the supply is capped at 21 million coins, it has the higher probability of going higher. Gold exploration, gold will hit an inflection point. Like when it runs to $3,000, $4,000, we'll probably see huge amounts of money going to exploration. They'll look for new ounces of gold. This is not going to happen with Bitcoin.

Now I want to turn it over to hardworking, Mr. Dynamite of our financial company, running these -- all these numbers and dealing with all these issues, a snapshot of growth by Darcy Daubaras.

[Darcy Daubaras, executive]

Thank you. And I will now talk about our snapshot of growth for HIVE. Just want to start talking about, at the beginning, in spite of the recent effects of contagions like FTX that's affecting our community, nonetheless, HIVE has had other sources of revenue to help us weather this uncertainty. Some of these items are through the sale of energy back to our Sweden electricity provider and the ability to load balance and some of the strategies we've taken in Sweden where one of our major facilities is located. Unfortunately, some of our peers didn't have these other sources of revenue. And as you've seen in the news, many of them have been having some struggles.

To begin with, I'd like to remind listeners about 2 accounting practices that can have a material effect on HIVE's results, one being mark-to-market accounting and the second being noncash charges. Mark-to-market accounting is a practice that involves adjusting the value of an asset to reflect its value as determined by current market conditions. The market value is determined based on what a company would get for if the asset 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 digital assets do generate unrealized gains and losses each quarter depending on the movement of the price of Bitcoin, and 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.

The second big thing, as I've mentioned, is noncash charges. A noncash charge is a write-down or accounting expense that does not involve a cash payment. Depreciation, amortization, depletion, stock-based compensation and asset impairments are common noncash charges that reduce earnings but not cash flows. During this current quarter just completed, we took 2 noncash charges as a result of the continuing bear market that we are experiencing, as required under accounting prescriptions.

The first was an impairment under IAS 36 on mining equipment of $38.8 million, which was required due to indications of impairment that are present in the continuing bear market we are experiencing, and also a provision against deposits on mining equipment of $22.7 million based on an assessment of these deposits made on purchase orders and the expected delivery of the equipment.

Now jumping into the core of my presentation. We've got an overview of the results for the 9-month period ended December 31, 2022. As you can see, for the 9 months, we had revenue of $88.1 million, a mining margin of $46.6 million, adjusted EBITDA of $31.6 million. Digital currency is on the balance sheet of $39 million. And during the 9-month period, we mined 2,466 Bitcoins, and the equivalent BTC mined, taking into account a conversion of other coins such as Ethereum into Bitcoin equivalents, was 3,503 Bitcoin.

As you can see, we had a very healthy balance sheet. Our cash position stood at $8.6 million at December 31, 2022, along with an additional $39 million in Bitcoin digital currencies. We also have $13.6 million in amounts receivable and prepaids. The market value of our strategic investments fell slightly during the quarter as a result of the general market instability, but remained at a relatively strong $5.5 million. We maintain a strong net cash position and healthy working capital to fund our operations and growth with very little debt on our balance sheet.

On the next slide, our gross mining margin, which equates to our revenues minus direct operating and maintenance cost, decreased in absolute dollars to $3.6 million or 25% in the most recent quarter compared to $62.3 million or 91% in the prior year comparative. Gross mining margin is also partially dependent on various external network factors, including the high mining difficulty we are experiencing and the amount of digital currency rewards miners receive and the market price of the digital currencies at the time of mining.

In this most recent completed quarter, we are reporting a loss of $1.09 per share compared to a net income of $0.66 per share reported in Q3 last year. In looking at our year-over-year revenue, we generated revenue from digital currency mining in the third quarter of fiscal 2023 of $14.3 million versus $68.8 million in the prior year third 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 rates over the past 6 months; the continuing drop in the price of Bitcoin that we are experiencing; and to a significant extent, the Ethereum merge, as this current quarter does not include any Ethereum revenues since the merge took place on September 15, 2022. 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 $3.6 million in the most recent quarter compared to $62.3 million in the prior year comparative.

Taking a look at comparing our current fiscal Q3 quarter to the previous Q2 quarter, we generated revenue from digital currency mining in this third quarter of fiscal 2023 of $14.3 million versus $30.0 million in the previous quarter. The decrease in revenues versus the previous quarter was impacted by the continuing low prices of Bitcoin and the Ethereum merge, as already noted. This current quarter does not have any Ethereum revenues compared to the prior Q2 quarter, which did prior to the merge taking place. Our gross mining margin decreased in absolute dollars to $3.6 million in the most recent quarter compared to $15.9 million in the prior quarter comparative.

Taking a look at financial metrics. Our adjusted EBITDA decreased in the third quarter of fiscal 2023 to $1.5 million versus $69.6 million in the prior year comparative quarter. I will highlight that adjusted EBITDA is a non-IFRS figure. Additionally, in the third quarter of fiscal 2023, we experienced a loss of $90 million compared to a net income of $51.2 million in the prior year comparative quarter. As mentioned at the top of my presentation, this decrease was driven predominantly by the noncash charges and impairments that we took in this period of $38.8 million on minor equipment and a provision for equipment deposits of $22.7 million. This, combined with the lack of Ethereum revenues in the Q3 quarter, has resulted in this differential.

Taking a look at our quarter-over-quarter. Our adjusted EBITDA decreased in this third quarter of fiscal 2023 to $1.5 million versus $18.8 million in the prior quarter. Again, as I always do, I would like to highlight that adjusted EBITDA is a non-IFRS figure. In the third quarter of fiscal 2023, we experienced a loss of $90 million compared to a loss of $37 million in the prior quarter. These losses are driven predominantly by significant noncash charges experienced in the current Q3 quarter, the largest being that impairment on minor equipment of $38.8 million and provision for equipment deposits of $22.7 million, again reiterating that these are noncash charges and are just accounting metrics that are required.

Just want to remind everybody, later on in this presentation, a well-respected newsletter writer, Adam Sharp, will be giving a comparative analysis of our peers so that he can take a look at how we rate compared to our compadres within the industry.

I would like to now turn the presentation over to Aydin Kilic, HIVE's President and CEO.

[Aydin Kilic, executive]

Hello, everybody. I'm going to give you an executive update. I'm Aydin Kilic, the President and CEO of HIVE. And on that note, I was actually appointed to CEO this quarter, which was a very exciting milestone. I'm very grateful to Frank and the Board of Directors for this amazing opportunity. And this is a picture with me and the lovely Johanna recently at the European Blockchain Convention in Barcelona, Spain. So our team, we're spread out across the globe. We're always in touch and it's a great journey.

Next slide. And so being that this is our quarterly earnings presentation, I'm going to do a quarterly efficiency analysis. Again, you could see that HIVE led our peers in the highest Bitcoin for exahash, 115, 105 and 114. Nets will vary month by month with network difficulty, but what's important is to see how the peers stack up against each other each month. And again, you could see HIVE consistently leading the pack. Now this is a very important figure to understand because as miners scale, people talk about economies of scale, we'll note this is a game of economies of efficiency because you see some of the companies that have scaled their uptime and their Bitcoin for exahash is in the 60 and 70 range, right, whereas the top performers are north of 100.

Next slide. But it's not just about your efficiency. That is a marker of performance. However, profit ultimately is what we are striving after as a public company and delivering value to our shareholders and having good cash flow return on invested capital. And so this is how we were very agile. We pivoted this quarter when there was a lot of red, and it was a very tough quarter for a lot of companies, a lot of insolvency, a lot of people going under. So our average cost to produce a Bitcoin was $13,600. The average price of Bitcoin during this quarter was $18,000. That's a 25% profit margin on our operations. And this is very notable because difficulty even increased 20% this quarter alone.

Now you might notice, okay, we produced 44% less coins, but we did that very strategically. And the reason why is because when any of our indexed power costs went up, we would curtail that production strategically to avoid incurring any unprofitable production. We always want to mine for profit as any crypto miner should, we won't just mine for scale. That's what I mean about the economies of efficiency. And even still, we were faced with an increased cost in production this quarter. But nevertheless, by focusing on economies of efficiency, we down clocked some of our machines to improve their operating efficiency. We avoided mining when we had any indexed power that was expensive. We were able to come through this quarter, which I'm very proud of team, 25% profit margins.

And let's have a look at the next slide. Now to provide you a little bit more insight into that, into our energy consumption, we actually have over 140 megawatts of power infrastructure globally that HIVE owns and operates. And we produced about 220 million -- sorry, consumed about 220 million kilowatt-hours of energy, okay? But what is remarkable is that we only used on average 100 megawatts this quarter, and why? Because that allowed us to keep our blended cost in dollars per kilowatt-hour are down to $0.034 globally. HIVE's global electricity costs on average is $0.034 this quarter, which is an astounding figure, especially when there's a global energy crisis. And this is, again, what I mean about economies of efficiency, how are we tackling -- making sure that we're mining with the best uptime and the best profit margins. And in some case, we strategically contract the scale of our operations for profit. And so I was very proud to see that this is where we landed this quarter.

Next slide. Now bringing it a little bit more up-to-date. January, our production figures came out recently. We did 260 Bitcoin, which, again, 110 Bitcoin for exahash. Now during the month, we were at an average of about 2.37 exahash, and we ended the month at 2.68 exahash. And this is very notable because our energy prices are starting to come down in New Brunswick. So we're able to start scaling up and plugging in more machines again. We scaled down a little bit in Q4 to focus on efficiency and production. Now we're starting to scale back up, ramp that production to about 2.7 exahash, ended the month with over 2,400 Bitcoin on the balance sheet, very strong balance sheet, and we did a massive deployment of new generation ASICs, about 3,200 bus miners and over 3,500 S19j Pro [ Cs ] all been fully deployed in Sweden, New Brunswick and Lachute. So it was a banner month for HIVE coming off of a very strong quarter.

Next slide. And so where we're at today, and by today, we mean mid-February, are about 2.8 exahash of operating capacity. And we have enough ASICs in our inventory that we can plug in through our infrastructure such that we could be at 3.25 exahash in March 2023. That's a 15% increase in hash rate this quarter alone. Now we're focusing on how to best optimize it. We will always watch Bitcoin prices. We will always watch network difficulties, and we'll always focus on plugging in machines in our infrastructure in the most profitable manner possible. So while we can certainly target and realize a scale of 3.25 exahash, we will navigate the most profitable and efficient manner through the rest of this quarter, as we always do. And by the way, this includes 160 petahash Bitcoin mining capacity from our GP fleet as well. Those are still firing away. Our NVIDIA fleet has been doing wonderful for us.

Next slide. And of course, a big part of that scale in that growth is a HIVE BuzzMiner. We announced our commercial deployment, again, the first public Bitcoin miner effort and the first globally to deploy its own Bitcoin mining ASIC rig. We wanted to vertically integrate. It was a strategic collaboration with Intel. So a lot of engineering development from our team. This was an early prototype last year.

Next slide. And of course, you could see them actually deploy it. Now a lot of people asked me along the way, hey, when is it going to be deployed? How do they run? Well, they run great and you could see them here in one of our deployments. So very proud of my team.

Next slide. Now it's not just about being -- just staying in one lane. We look at the market very opportunistically, right? We run a lot of analytics at HIVE. I think we're known for that now. And again, most efficient miner, most profitable. And it doesn't happen by fluke, right? We do the math day in and day out. That's what our job is, right? We want to deliver value for shareholders. And so what this graph tells you, the story of it, is that ASIC prices at an all-time low, and your ASIC price and the dollar per terahash that you pay is your primary determinant in the return on investment when you're plotting out your actual profit from mining.

So more over than your electricity price, more than your machine efficiency, your dollar per terahash acquisition price will determine your ROI in the number of days by the biggest influence. And so that's why we provide all the S19j Pros, it was an immense time to buy, and we bought over 3,500 in December, as we mentioned. All have been deployed and we continue to look at opportunities to expand. It's a great time for HIVE. We've got a phenomenal balance sheet. No debt. We haven't incurred any debt on our Bitcoin balance sheet. We don't finance. We don't get expensive 18% debt to buy ASICs. We buy with cash, and we buy at the right time when they're cheap. And you could see how much they've come down over the last year. People were paying over $100 a terahash as a year ago, right? So again, we want to be profitable, and we want to scale with intent.

Next slide, please. As we mentioned, we did an average of about 100 megawatts of operational infrastructure in Q4. Again, because we were focusing on profit, we actually scaled down a little bit. However, we have 147 megawatts built out which we operate globally. And so we could scale right back up and turn those ASICs on opportunistically. So that's an update.

Next slide. And of course, our flagship facility in New Brunswick, all 4 buildings are complete. You could see the beautiful dual [indiscernible] cathedral design and all the louvers and kind of fun engineering details for any of the analysts who would like to discuss that stuff. I'm always available.

Next slide. Now this is a really cool pilot project that we've launched, and we updated the photos of this. So people thought we were just piping cold -- warm air from the Bitcoin miners. No, we actually have a glycol heat exchange. It's a very advanced system. And so what we're doing is we're heating our industrial neighbor. That's a 200,000-square-foot swimming pool manufacturer. And you can see on the right here, that's actually the heat exchanger. And so what it's doing is that's getting the warm air for the Bitcoin miners, that's been heat warming the heat exchange fluid, and that fluid gets pumped into our neighbor's building. And you could see the entire very sophisticated heat exchange hardware her, that's how we actually heat. So very methodical. So we are doing -- we're already doing heat recapture. We see a lot of people telling our story, but HIVE is doing the sort of stuff, right, whether it's demand response heat recapture, this is stuff that HIVE is actually doing.

Next slide, please. And that's in Lachute, of course. Another cool thing that we're doing is we were grid balancing. We're the first to do it. We started grid balancing in Sweden over 2 years ago. And then moreover, we started hedging our electrical contracts in certain jurisdictions, buying fixed-price energy contracts. And then we decide opportunistically what is the best use of our energy resource. Do we mine Bitcoin with it or do we sell it back to the grid? Well, in December, we sold it back to the grid and we made $3.1 million profit. That's profit, not revenue. And so that contributes to when we say, well, we reduced our operating capacity to 100 megawatts because we were busy making money selling the power back to the grid. And in January, we still made $180,000 selling back to the grid. We increased our production. So it's always about optimizing, the keyword is optimizing here. That's fully focused on HIVE's agility mindset day in, day out, week by week, month by month, what is the best way to run the business, managing our technology, our capital and our energy.

The next slide. Mr. Adam Sharp, who's going to take you through a little industry analysis. Thank you.

[Adam Sharp, executive]

All right. Those of you who have been around a while know that HIVE went through the bear market of 2018 as a public company. And that experience really instilled a sense of discipline and restraint in the company, which remains strong today. Let's look at some charts that demonstrate this. This first chart shows administrative costs as a percentage of revenue since 2021. Administrative costs include things like executive compensation, legal and consulting fees, insurance, et cetera. As you can see, HIVE has the lowest admin costs as a percentage of revenue at 9%. And this bar chart really tells the story here. HIVE is a pretty lean company. This is research from hashrateindex.com. They put out some great stuff, so check them out.

Next slide, please. All right. Now let's look at stock compensation as a percentage of revenue. So this is a key metric for really determining return on invested capital, right? Once again, HIVE is looking good here with just 4% of revenue as stock comp for 2021 and 2022. You can see where we compare to our peers here, and HIVE once again stands out for being lean and mean. This research was put together by Anthony Power over at Compass Mining. Check his stuff out. It's excellent.

Next slide, please. All right. Finally, let's look at shareholder dilution in 2022. So HIVE really stands out here once again with just 5% share dilution in '22, which was a trying year for miners with difficulty rising and the price declining. This chart is also from Anthony Power at Compass Mining.

All right. Now next slide, please. Let's pull it all together in a nice Venn diagram. HIVE has the lowest administrative cost, the lowest stock comp as a percentage of revenue and among the lowest shareholder dilution during the periods covered by these charts.

Thank you all for tuning in today. As a reminder, you can find us on social media as shown below or e-mail us at [e-mail].