Hut 8 and HIVE Digital Technologies: Crypto Mining Giants Navigate Market Challenges

Earnings call: Hut 8 reports Q2 growth amid strategic shifts By Investing.com

Hut 8 Mining Corp. (HUT), a leader in Bitcoin mining, has disclosed its second-quarter financial results for 2024, revealing substantial revenue growth but also a significant net loss. The company's revenue surged 72% year-over-year to $35.2 million, yet it faced a net loss of $71.9 million, a stark contrast to the $1.7 million loss reported in the previous year. Despite the losses, Hut 8 emphasized its strategic efforts to expand its operations, including discussions of a major partnership in the Texas Panhandle and a focus on its vertically integrated platform. Hut 8 Mining Corp. remains committed to navigating the challenges of the cryptocurrency mining industry while pursuing strategic growth opportunities. With a focus on operational efficiency, cost reduction, and a robust development pipeline, the company is positioning itself for future success despite the current financial setbacks. Hut 8 Mining Corp. (HUT) has been navigating a complex landscape in the cryptocurrency mining sector, as reflected in their latest financial disclosures. To provide a deeper understanding of the company's financial health and market position, we turn to InvestingPro for real-time data and expert analysis. For investors seeking a comprehensive analysis, InvestingPro offers additional insights, including 11 more InvestingPro Tips for Hut 8 Mining Corp., available at https://www.investing.com/pro/HUT. These tips provide valuable context for understanding the company's performance and future prospects, helping investors make informed decisions. Operator: Good morning and welcome to Hut 8's Q2 2024 Financial Results Conference Call. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded and a transcript will be available on Hut 8's website. In addition to the press release issued earlier today, you can find Hut 8's Quarterly Report on Form 10-Q on the Company's website at www.hut8.com under the Company's EDGAR profile at www.sec.com and under the Company's SEDAR+ profile at www.sedarplus.ca. Unless otherwise noted, all amounts referred to during this call are denominated in U.S. dollars. Any comments made during this call may include forward-looking statements within the meaning of applicable securities laws regarding Hut 8 Corp. and its subsidiaries. The statements may reflect current expectations and as such are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. These risks and uncertainties include but are not limited to factors discussed in Hut 8's Form 10-Q for the three and six months ended June 30, 2024 and Form 10-K for the year ended December 31, 2023, as well as the Company's other continuous disclosure documents. Except as required by applicable law, Hut 8 undertakes no obligation to publicly update or review any forward-looking statements. During the call, management may also make reference to certain non-GAAP measures that are not separately defined under GAAP, such as adjusted EBITDA. Management believes that non-GAAP measures taken in conjunction with GAAP financial measures provide useful information for both, management and investors. Reconciliations between GAAP and non-GAAP results are presented in the tables accompanying the press release which can be viewed on Hut 8's website. I would now like to turn the call over to Asher Genoot, CEO of Hut 8. Asher Genoot: Good morning, everyone. Thank you for joining us today as we look back at an incredibly important quarter for Hut 8. In any market, businesses must navigate the inevitable ebb and flow of macro headwinds and tailwinds. In Bitcoin mining, the network having is amongst the most powerful of these forces. While we cannot control forces like we're having, we can't control how we respond to the challenges they create. We believe the hallmark of an enduring business is the ability to create value across market cycles. Today, our business is more resilient than ever. Our results this quarter demonstrate that we have delivered on the commitment we made six months ago, when I became CEO, to center the business on operational excellence and bottom line economics. I'll share the highlights now and Shenif will discuss our results in detail. As a reminder, the current period reflects the combined company's performance, while the comparison period reflects US Bitcoin Corp's performance as a standalone business prior to the merger. Our revenue grew 72% year-over-year to $35.2 million for the 3 months ended June 30, 2024. Net loss attritable to Hut 8 for the quarter was $71.9 million versus a loss of $1.7 million in the prior year. And adjusted EBITDA was a loss of $57.5 million versus $14.8 million in the prior year. Both net loss and adjusted EBITDA reflect a loss on digital assets of $71.8 million in accordance with the new FASB fair value accounting rules. But these figures only tell part of the story. Despite the impact of the housing on top line production and revenue, we achieved significant gross margin expansion in our digital assets mining business from 34% to 46% year-over-year. Even with the 71% increase in network difficulty over the same period our relentless focus on bottom line economics enabled us to deliver 12 points [ph] of gross margin expansion. This success stems from the ambitious restructuring program we launched 6 months ago, which included the shutdown of our underperforming Drumheller sites, the energization of our new Salt Creek sites, the relocation of our fleet from hosted to owned facilities, and the rollout of our proprietary energy curtailment software, reactor [ph]. These initiatives have materially improved our unit economics. In the first quarter, our blended costs across self-mining and hosted operations was $0.053 per kilowatt hour. In the second quarter after exiting third-party hosted facilities, implementing our operating technology and upgrading our infrastructure, this figure decreased to $0.032, a 40% reduction quarter-over-quarter. Furthermore, our average cost of energy per kilowatt hour which reflects self-mining only, decreased 21% over the same period. Assuming all other factors remained constant, the cost of mining Bitcoin would increase by 100% immediately after a halving event; we limited the increase on our average cost of mining in Bitcoin to just 7% quarter-over-quarter, bringing it to $26,232. What is most notable is that we accomplished this with one of the oldest fleets in the industry averaging 31.7 joules per terahash. Now, consider the transformational potential of a large scale fleet upgrade. Next-generation miners operating at 12 joules per terahash could revolutionize our economics, potentially increasing deployed hash rates across our existing infrastructure by more than 2.5x. I'll return to this idea later. If there's a takeaway, it's this; we prioritize fundamentals above all else, and we invest capital only when we believe it will create enduring shareholder value. This philosophy has guided us in the past and will continue to guide us in the future. Every quarter we step back to assess our performance and measure our progress. All the while, we continue to play the long game; building a resilient, generational business requires nothing less. In that vein, let's turn to our strategic priorities for the coming quarters. Our business is built on a vertically integrated platform spanning hard assets, products, services, capabilities and technology. We think about this platform as a stack of 3 interconnected layers. The foundation of our platform is the power layer, comprising assets like interconnects, land and electrical assets. The second layer is digital infrastructure, comprising purpose-built data centers and other load resources. And the third layer is compute, comprising application-specific hardware for energy intensive technologies like Bitcoin mining and AI compute. Think of the power layer as our operating system, the digital infrastructure layer as our app store, and the compute layer as the applications we power. Power, digital infrastructure and compute; each layer of our platform addresses a distinct market with unique challenges, opportunities, economics and return profiles. Together, they form a vertically integrated platform poised to see the much larger generational opportunity at the intersection of energy and technology. We aim to maximize long-term value creation by playing across the value chain and delivering a differentiated value proposition at each layer of our platform. This model is central to our approach to resource allocation, competitive differentiation and growth. The broader implication is that we do not view ourselves merely as a Bitcoin mining or AI business; we are a power business. Our aim is to maximize load capacity secured in our power layer for the long-term. What we do with that power to maximize returns across our digital infrastructure and compute layers will evolve overtime as markets and technologies evolve. With that in mind, let's discuss our strategic priorities at each layer. First, the power layer. We believe high quality power assets will become increasingly valuable as the demand for energy to support Bitcoin mining, AI and other emerging technologies continues to rise. Our goal is to build a scaled power portfolio capable of meeting this demand across existing and new technologies. To that end, we are aggressively advancing our gigawatt scale development pipeline. Our team strives to deeply understand the demands of our load profile and how they impact power markets. Deep domain expertise in both, power and technology, enable us to place load strategically, unlocking access to what we believe are the most attractive development opportunities in the market. In building our portfolio, we prioritize quality as much as scale. Our deep market connectivity and strong deal flow allow us to be highly selective. We optimize across critical drivers of value, including scale, cost of acquisition, cost of power, term of power and term of site control to construct a portfolio that commands a market premium and drives long-term value creation. Our gigawatt scale pipeline is evidence of the effectiveness of our strategy. Since the merger, we have converted 268 megawatts of high-quality greenfield capacity from this pipeline, expanding our total power footprint to 1,322 megawatts. In the second quarter, we energized 63 megawatts of this capacity at our Salt Creek site, and we are now finalizing plans for a recently announced 205 megawatt greenfield site in the Texas Panhandle. The Panhandle site exemplifies our approach to portfolio development. With 205 megawatts of immediately available power capacity, it can support digital infrastructure at scale. It is adjacent to a wind farm and benefits for some of the lowest locational wholesale power prices in North America. During periods of low wind generation, it will be able to draw powers directly from the aircraft grid, ensuring a reliable supply for use cases like Bitcoin mining and AI. Long-term power access and site control further enhance the site's potential value. Our power first thesis, differentiated strategy and scale development pipeline were instrumental in securing our recent partnership with Coatue. Their $150 million investment, together with their expertise, resources and relationships will enable efficient, high velocity growth of our power portfolio. The impact of this partnership is already evident in the enhanced quality and volume of our deal flow. We look forward to sharing updates on committed projects as they materialize. Next, let's turn to the digital infrastructure layer. Today, this layer of our platform comprises Bitcoin mining facilities and HPC data centers. In the future, it may include other forms of infrastructure as use cases for our power assets evolve. In this layer, we aim to extend the competitive advantage we have developed in the speed, capital efficiency, and quality of our infrastructure development. This means we will continue to strengthen our internal development capabilities with a focus on continuous innovation and value engineering. As demand for AI compute continues to rise, we see a clear opportunity to leverage our capabilities to capture this demand. We are actively exploring projects of multi 100 megawatt scales with potential JV partners and customers. At the same time, Bitcoin mining will continue to be an integral part of our strategy. The low cost and high velocity with which we can build Bitcoin mining infrastructure enables us to recoup our initial CapEx quickly and generate strong unlevered returns. This allows us to more aggressively underwrite and acquire large scale power assets, maximizing the volume of load capacity we secure for the long-term. In parallel, it creates the optionality to transition the capacity to use cases like AI which generally requires longer lead times commercialized. I want to emphasize once more that we are not merely a Bitcoin mining or AI business, we are a power business, and we monetize our power on an asset-by-asset basis with the focus on driving the highest returns on any given project. In this way, our strategy mirrors the model of a private equity firm managing a diverse portfolio of independent businesses underpinned by a single thesis and platform. With that said, we are currently in discussions for a large scale partnership for our site in the Texas Panhandle, which can power up to 205 megawatts of Nvidia Blackwell GPUs, or up to 16.5 exahash of next-generation ASIC miners. With engineering, procurement and construction efforts underway, we anticipate energizing the site in the first half of next year. Stay tuned for more. A brief note on our managed services business, which extends our expertise in the infrastructure design, construction and operations to third-party partners. Moving forward, we will pause business development in this segment as we focus on scaling our own portfolio, however, it remains a key driver of economies of scale. With this in mind, we have restructured our agreement with Ionic Digital to better align incentives. The revised agreement features a fixed fee of $15 million per year with future upside opportunities for every new site we build or manage. Finally, the compute layer. The third layer of our platform comprises application-specific hardware such as ASICs and GPUs. Building a business as a fast-moving compute layer requires significantly larger capital investments in assets with significantly shorter lifespans [ph]. While this entails greater risk, it also offers the potential for greater rewards. It is within this layer that we can capture the lucrative economics offered by emerging technologies like Bitcoin mining and AI compute. As technologies evolve, the compute applications that drive the highest returns on our power assets may also evolve. Building for the long-term means we are closely monitoring the development of nascent energy intensive technologies. Our objective is to remain agile and responsive as technologies advance so we can capture new market opportunities far into the future. That said, let's focus on the present. Today, we believe Bitcoin mining and AI compute generate the highest return on large scale load capacity and digital infrastructure. Given the scale of our power footprint and development pipeline, we are confident in our ability to establish a strong position in both markets. Across our platform, we adhere to disciplined capital deployment strategies, investing only when expected returns surpass a high hurdle rate. This discipline shapes how we scale our compute layer. In Bitcoin mining, this focus has driven our efforts over the last two quarters to optimize unit economics and maximize returns of our existing ASIC fleet. With the recent leap in machine efficiency from 18 to 12 joules per terahash, the slowing pace of chip evolution, we now believe it is the right time to upgrade our fleet. We are actively negotiating with manufacturers and project financing partners to formalize a plan. In AI, this commitment shaped the launch of our GPU-as-a-Service vertical, which is on-track to go live within the coming weeks. Our first cluster, 1000 Nvidia 100 GPUs, will be hosted at a tier 3 data center in Chicago, reducing the capital commitment required for market entry. Our customer and AI cloud developer have secured exclusive access to our first cluster under a 5-year agreement that provides for fixed infrastructure payments plus revenue sharing. Executing on our strategic priorities at every layer will require disciplined strategic capital allocation making a strong balance sheet crucial. At the close of the quarter, we held $175.5 million in cash, and $9,100 in [ph] Bitcoin valued at $570.5 million on our balance sheet, nearly $750 million in total. Equally central to our approach is the judicious use of debt to maximize returns while minimizing shareholder diversion. As we continue to build the business, our purpose is clear; to maximize shareholder value. This means we will continue to take a holistic approach to structure the business, drive down our cost of capital and deliver outsized returns. I'll end my remarks today on the top of our most important asset, our people. Intellectual capital fuels everything we do. We believe that capturing the generational market opportunity we see at the intersection of energy and technology will require exceptional intellect, discernment [ph] and grit. Because of this, building the right team is one of our highest priorities. Last week, we announced that Sean Glennan will join Hut 8 as Chief Financial Officer on August 21. During his 13 years with Citigroup, Sean advised on more than $80 billion in M&A and capital markets activity across power, utilities and renewables. We are thrilled to welcome him to the organization as we scale our platform with a focus on creative structuring and disciplined capital allocation. In May, we welcomed Victor Semah to the team as Chief Legal Officer. Before joining Hut 8, Victor was Chief Legal Officer of Cyxtera Technologies, a global data center company with 2,300 customers and 60 data centers across more than 30 markets as of its last full year financial report. His extensive experience at the intersection of digital infrastructure, M&A and corporate securities has enhanced our ability to grow aggressively while maintaining uncompromising standards for risk management and downside protection. Both, Sean and Victor, bring incredible sector depth and functional mastery to our management team. They recognize the urgency of our thesis, and they know what it will take to build a market-leading energy infrastructure platform spanning power, digital infrastructure and compute. We are excited to harness their talents to strengthen our team, propel our business forward, and create lasting value for our shareholders. These beginnings also mark an end. I want to thank Shenif Visram for his significant contributions to Hut 8 as CFO. Shenif has laid the crucial groundwork of operating excellence, financial discipline and prudent capital management required to build a truly great business. We are deeply grateful to him and wish him the best as he steps down to focus on his family. With that, I'll turn it over to Shenif, one last time, to review the financial results in detail. Shenif Visram: Thank you. Asher. Before we review the financial results, I wanted to remind you that US Bitcoin Corp. was deemed the accounting acquirer in the merger, and as a result, the historical figures in our income statement for Q2 2023 reflect US Bitcoin standalone performance. Results for Q2 2024 however, reflect the performance of the combined company. With respect to our balance sheet, Q2 2024 will be compared to year end 2023, both of which reflects the combined company's performance. Turning now to our results. We generated revenue of $35.2 million during the quarter versus $20.5 million in the prior year period, which represents a $14.7 million increase. The year-over-year increase was driven in part by growth in our managed services segment. Digital asset mining revenue was $13.9 million for the current period versus $15.9 million for the prior year period. Revenue decline was primarily driven by a decrease in Bitcoin mined due to having an increase in the network difficulty. Also during the second quarter, we relocated miners from the Kearney and Granbury [ph] sites to the Alpha and Salt Creek sites, and completed initiatives at Salt Creek to fortify the upstream electrical infrastructure supporting the facility. This led to temporary downtime which impacted our digital asset mining revenue in the quarter. Managed services revenue was $9 million in the current period versus $4.7 million in the prior year period, and includes $6 million in management fees, $1.6 million in cost reimbursement, and $1.4 million in the form of customer equity versus $3.1 million from fees and $1.6 million in cost reimbursement in the prior year period. The growth in managed services revenue was driven primarily by management fees related to our agreement with Ionic Digital. During the current period, we received only one month of management fees for Kearney and Granbury compared to the prior year period in which 3 months of management fees were received. We exited both, the Kearney and the Granbury sites during the quarter. High performance computing, co-location and cloud revenue was $3.4 million for the current period. The revenue for this segment relates to the legacy Hut 8 business that was acquired as part of the merger with Hut 8 Mining Corp. And as a result, the prior year period includes no revenue from these segments. Revenue for this quarter consists mainly of recurring revenue. Other revenue was $8.9 million for the current period versus nil in the prior year period. Current period other revenue consists of $3.6 million in equipment sales, $2.4 million in hosting cost reimbursements, $1.4 million in hosting services revenue, and $1.5 million in power revenues from our natural gas power plants in Ontario. I'll now review our costs and expenses. Cost of revenue for digital asset mining for Q2 2024 was $7.5 million versus $10.5 million in the same prior year period. The decrease of $3 million was driven by a decrease in cost after completing the relocation of our fleet from hosted to owned sites, including to our new site, Salt Creek, which has a favorable energy profile, the implementation of our proprietary curtailment system resulting in more efficient management of our energy costs, and credits from participation in ancillary demand response programs. Despite having an increased network difficulty, digital asset mining gross margins grew to 46% in the current period compared to 34% in the prior year period. Cost of revenues for managed services for the current period was $3.1 million versus $1.5 million in the prior year period. Cost of revenues consists primarily of reimbursable payroll and other site operating costs. The $1.6 million increase was driven by a $1 million increase in reimbursable payroll costs, and a $0.6 million increase in other site operating costs driven by the addition of the five Ionic sites. Cost of revenues for high performance computing co-location in cloud for the current period was $2.5 million versus nil in the prior year period. Finally, cost of revenue for other for the 3 months ended June 30, 2024 was $7.5 million and consists primarily of $3.2 million in cost of hosting services revenue of which $3.1 million is electricity costs, $2 million in cost of equipment sold, and $2.3 million in cost of power revenues. Cost of revenue for other was nil in the prior year period. Depreciation and amortization expense was $11.5 million for the current period versus $4.1 million for the prior year period. The increase was driven primarily by property and equipment acquired as part of the merger and as part of the Far North acquisition. Also as discussed last quarter, we adjusted the useful life of some of our mining equipment which led to an increase in depreciation expense of $1.5 million in Q2 2024. General and administrative expenses were $17.9 million for the current period versus $5.2 million for the prior year period. The increase in SG&A was driven by a $6.7 million increase in stock-based compensation, a $2.4 million increase in salary and benefits due to the headcount added as part of the merger and additional team members brought on to support the growth of the business. A $2 million increase in general marketing office and other expenses due primarily to the relocation of miners from Kearney and Granbury to Alpha and Salt Creek, and also driven by increases related to additional headcount and cost centers acquired as part of the business combination. A $1 million increase in insurance expenses, a $1 million increase in professional fees for corporate development related items, a $0.7 million in investor relations and regulatory related expenses due to becoming a publicly listed entity, and $0.7 million in restructuring costs. Losses on digital assets were $71.8 million for the current period and nil for the prior year period. The decrease was due to a decrease in market value of our Bitcoin holdings from the last reporting period to the current reporting period in accordance to ASU 2023/08 [ph] effective July 1, 2023 which requires us to recognize our digital assets at fair value with changes recognizing net income during reporting period. The price of Bitcoin on March 31, 2024 was $71,289 compared to the price of Bitcoin on June 30, 2024 of $62,668 such that the decrease in Bitcoin price during the quarter resulted in the loss of $71.8 million. Other income totaled $14.4 million in the current period versus an expense of $2.3 million in the prior year period. The increase of $16.7 million was due primarily to a $17.2 million unrealized gain on derivatives driven by a mark-to-market gain on covered call options sold during the second quarter, and a $0.7 million foreign exchange gain, partly offsets by a $0.9 million decrease in equity and earnings of an unconsolidated joint venture, and a $0.4 million increase in interest expense. Loss from discontinued operations was $1.7 million in the current period versus nil in the prior year period. On March 6, 2024 we announced the closure of our Drumheller site in Alberta, Canada, in connection with our restructuring and optimization initiatives designed to strengthen financial performance. The $1.7 million loss was related to the closure of Drumheller. Next, I will discuss net income. Net loss attributable to the company for the quarter was $71.9 million versus $1.7 million in the prior year period. The current period, net loss attributable to the company includes a $71.8 million loss on digital assets, as we previously early adopted the FASB accounting standards for crypto assets. Turning now to adjusted EBITDA. Adjusted EBITDA for the quarter was a loss of $57.5 million versus income of $14.8 million in the prior year period, a decrease of $72.3 million. The decrease was primarily driven by the $71.8 million loss on digital assets. Adjusted EBITDA stayed constant otherwise, as the impact of the having and the planned downtime at the Salt Creek site to fortify the upstream electrical infrastructure supporting facility was offset by the impact of optimization efforts and additional profitable revenue for managed services. Finally, I'll discuss our balance sheet. We closed the quarter with $175.5 million in cash. In Q2 2024 we entered into a convertible note purchase agreement with the fund managed by Coatue Management LLC, providing for the purchase and sale of a convertible note in the principal amount of $150 million. Our Bitcoin holdings are market fair value and total $570.5 million as at June 30, 2024 based on 9,102 Bitcoin held in reserve. Of this total, 5,022 Bitcoin valued at $314.8 million remained unencumbered at the end of the quarter. Our total debt excluding leases was $328.8 million as at June 30, 2024. During the quarter, we entered into the Coatue agreement for a principal amount of $150 million. Our Coinbase (NASDAQ:COIN) loan agreement was also amended during the quarter, extending the maturity date by one year. Of the $328.8 million of total debt outstanding, $114.3 million is debt that is to be repaid based on a sweep [ph] of cash generated from the assets acquired with the debt with no minimum monthly repayment. We believe this level of debt is manageable as we execute on our growth plans. During the second quarter, we continue to focus on improving our operational efficiency and driving down our cost base, and are beginning to see these efforts materialized in our financials. Subsequent to the quarter close, we announced the first conversion from our pipeline of development opportunities under exclusivity, with the announcement of a 205 megawatt site in the Texas Panhandle. With respect to AI and high performance computing, we expect to begin recognizing revenue in our new GPU-as-a-Service vertical in the third quarter. As we continue to convert our development pipeline and engage in discussions regarding our fleet upgrade, we will prioritize disciplined growth and capital allocation driving toward our North Star of maximizing shareholder value. I wanted to conclude my comments today on a personal note. As Asher shared, I have made the difficult decision to step down from my role as CFO for personal reasons. This decision was based solely on my need to dedicate more time to my family. My tenure at Hut 8 has been both rewarding and enjoyable, and I continued to have utmost confidence in the team's ability to execute on its ambitious vision for the future of the company. I want to thank Asher and our Board for their support as I made this decision. At the same time, I would like to welcome Sean to Hut 8. I believe the team and finance organization is in good hands with him as CFO, and look forward to following the company's continued success. I will now turn it over to Sean who will make some short remarks before we continue with Q&A. Sean Glennan: Thanks a lot, Shenif. I'm thrilled to hit the ground running with the Hut 8 team next week, and look forward to meeting many of you as I embark on my new role. After nearly two decades in financial services, including 13 years in the power, utilities and renewables group at Citi, transitioning to the corporate world was not a decision I made lightly. However, the opportunity to join what I believe is the best positioned company at the center of the mega trends shaping the power and digital infrastructure sectors was one I couldn't pass up. As I got to know the Hut 8 organization, I was incredibly impressed by the team's talent, drive and passion for what they are building. Under Asher's leadership, it is evident that every member of the team believes they are building a generational business. Having worked with hundreds of companies and management teams in my career, I can say with confidence that finding this type of environment is rare, but it jumps off the page once you see it. Building a generational business is no small feat in any industry, but building one in an industry that necessitates ingenuity, domain expertise, disciplined capital allocation and scale, is even more of a challenge. At Hut 8, I am confident that I am joining a team more than capable of rising to the occasion. From a strategic perspective, Hut 8 is defining a new market segment by harnessing large scale energy infrastructure to empower the acceleration of technological progress, particularly on the digital infrastructure front. My experience advising on transactions involving some of the largest players in power, utilities and renewables, brought me face-to-face with a tremendous market opportunity at the intersection of power and high performance computing. I was fortunate to have a seat at the table with executives shaping this landscape. As these discussions unfolded, it became increasingly evident that incumbent data center operators and developers do not have sufficient infrastructure nor resources to meet the power capacity required to facilitate the advancement of AI. More importantly, they are not well equipped to provide what hyperscalers demand, timely access to multi 100 megawatts worth of long-term reliable low cost power. I believe that Hut 8, however, is uniquely positioned to solve this critical challenge. Specifically, the Hut 8 team has positioned itself for this opportunity by executing on a thesis that prioritizes the acquisition of new load capacity. What further piqued my interest was learning that Asher and Mike had scaled the business pre-merger to 730 megawatts of power capacity with a little over $100 million in equity capital. It pointed to an extremely disciplined approach to allocating capital and generating returns on investment, the mentality I plan on upholding in my new role as CFO. As competition in the power markets intensifies, I'm particularly excited to work closely with the corporate development team as it continues to build and convert its pipeline of assets. Drawing on deep experience at companies like NextEra, Inbenergy [ph], JPMorgan (NYSE:JPM) and GE Energy, among others; this team has the expertise and track record required to sit across the table from counterparties that hold the keys to new load capacity, many of whom are the likes of my former clients, and speak their language. They understand the nuances of the commercial challenges faced by generation counterparties, and know how to structure partnerships that solve these challenges. This is the type of deal making environment I have prided myself on fostering throughout my career. More broadly, I believe the focus on discipline growth, operating excellence, and data driven decision-making that underpins this organization forms a strong foundation on which I plan to build. I am fortunate to enter the organization at a time when restructuring and optimization efforts are well underway, but will nonetheless bring a fresh set of eyes to identify areas for further improvement and efficiencies. And as the business continues to scale and diversify, I am confident that my skill set, rolodex [ph] and the strategic power focus blends through which I plan to approach my role will drive significant value to our shareholders. I want to thank Asher, Shenif, and the entire team for the opportunity to play an instrumental role in Hut 8's next chapter. I believe this is merely the beginning of a period of exponential growth for the company, and look forward to providing an update on our progress next quarter. Operator: [Operator Instructions] Our first question comes from John Todaro with Needham. Your line is open. John Todaro: Great. Thanks for taking my question guys and congrats on all the improvements going on here. First, on the HPC business. I guess I have two questions related to HPC. But the one on the 1.1 gigs in the pipeline; I guess, just where do we stand on grid interconnect approval for all of it? And then my second question; it seems like to me that that 205 megawatt site could be all for HPC, correct me, if not. And then, just what are we kind of thinking on timeline for ground-breaking on that site, as well as what's in the pipeline through the end of calendar 2024? Asher Genoot: Thanks, Sean. Good to hear from you. The pipeline -- all of the assets that we have in our pipeline and assets that we have today, even if they're behind the meter, are grid connected. I know there was some confusion when we announced the Texas Panhandle site that this was a behind the meter wind farm, and it didn't have great connectivity; that site is Air-Con [ph] approved, has a substation available, and can pull power as long as our data center is built and we have the connection into the substation. And so that site today, we're having conversations with customers about a HPC AI build, but we're also having discussions with them about other sites in our pipeline which maybe more interesting from them -- from a -- kind of fiber connectivity standpoint, that's a little less rural. And so, we're having active discussions in the multi 100 megawatt size in regards to AI expansion, and looking at both, our current fleet and also our expansion pipeline. Operator: Thank you. And our next question comes from George Sutton with Craig Hallum Capital. Your line is now open. Unidentified Analyst: Logan [ph], on for George. I wonder if we could just start with -- relative to that GPU-as-a-Service vertical. Has anything changed with the agreement there? I mean, the last you were talking about kind of a fixed income and then maybe a revenue share. And on top of that, is that something you guys will look to expand here in the future. Are you controlled where you at right now? Asher Genoot: We have the same structure that we announced with them. So it's on a 5-year contract with the customer. It's a fixed AC with a rev share model in terms of sharing on the economics in their real-time on-demand marketplace. We are currently looking at financing on a go-forward basis, and so as I kind of focus our business on growth, we're looking at what is the best way to finance this; not just parent [ph] level balance sheet, but also project level financing. So, we'll share growth plans aligning and in parallel with financing updates as well. Unidentified Analyst: Got it. And then I know on the press release, I think in your remarks you talked about upgrading the fleet. Any sense of -- you know, like, how much of the fleet you'll look to upgrade? And then maybe just give any ideas on the trajectory of the mining margin. I know you guys made some good progress here on the energy cost, but maybe just some thoughts going forward on that. Asher Genoot: We're really excited by the progress we've made since I took over in February. If you look our cost of power this last quarter was $0.032 per kilowatt hour; I think that's one of the most competitive in the market today. So our power cost mining of Bitcoin was $26,232 and that was based on a fleet efficiency of 31.7 [ph]. The newest generation machines from Bitman [ph] are 12 joules per terahash for micro BT (LON:BT) [ph], around 16 to 17 joules per terahash. So that's over a 50% reduction in efficiency from where we are today. And so with all else remaining equal, you'll see that same reduction in the cost of mining Bitcoin. So the fundamentals of what is our power cost, how is our infrastructure running; I think we continue to show the market and continue to optimize as a company, and now replacing machines with newer generation machines. And I think the most recent announcement on the 12 joules per terahash is a step function from where we were. The most kind of recent machine was around 17 to 18 joules per terahash; so 12 joules per terahash was a huge leap forward, and we're having active discussions today around a fleet upgrade as our machines kind of start going towards their end of life, and as we look at selling those and refreshing the fleet that is existing on our infrastructure. And then, net new growth for new machines for new sites that we have in our pipeline. And so, we've shared with the market that our intent is to continue to grow our power infrastructure, and that means being a leader, both in the growing an emerging AI sector in multi 100 megawatt builds, but also a leader within the Bitcoin mining sector which we've grown on our power footprint but we haven't grown on our overall exahash, and will continue to show growth there in the new near future. Operator: [Operator Instructions] Our next question comes from Mike Colonnese with HC Wainwright. Your line is open. Mike Colonnese: Hi, good morning guys. Asher and team, congrats on all the progress. Really good to see here. Just couple for me. You mentioned the release that -- and just spoke on it about the fleet upgrades. If you could just provide a little bit more specifics than what you just mentioned, as it relates to a timing perspective? Asher roughly, how long do you think it will take for a full upgrade of your sites after signing a purchase order? And if you can just remind us of the total developed megawatt in the portfolio that is wholly owned by Hut today? Asher Genoot: Thanks, Mike. We're in active discussions with the manufacturers today and different financing mechanisms in order to power the fleet upgrade that we think is the most economical way. If you look at hash price over the last little bit alone, I mean the last 3 months period you have hash price that has ranges in the $60 per hash per day, down to as low as $36. So right entry point, right pricing and right financing is critical to us as we look at this fleet upgrade with this new generation machine. If we look at the overall amount of megawatts that we have, we have a pretty robust pipeline today. In regards to our wholly owned megawatts, we have about a gigawatt, including the joint ventures, as you know, with King Mountain, it's a 50-50 joint venture ownership. And so we have a strong pipeline there, and then we have the natural generation facility. So today we have the four operating sites, including the expansion site plus the King Mountain joint venture that are active Bitcoin mining facilities, in addition to our pipeline. Mike Colonnese: Got it. And switching over to the HPC business. If you could just share what your utilization rate of your deployed GPUs is right now? And I think you mentioned previously that you're expecting a $20 million annual run rate revenue from the business; does that assume 100% utilization? Asher Genoot: That does not assume a 100% utilization, that's based on the demand rates we're seeing from our partner and the average utilization that they've had across their fleets. So we'll share more of those numbers as we go into the coming quarters, and their online and operational on the financials start hitting our reporting metrics. Mike Colonnese: Got it. And if I could just squeeze one more in Asher, on the HPC side. So, you talked about the GPU-as-a-Service model which you currently have operating; as we look at future expansion opportunities, I know you talked about evaluating all different types of opportunities, whether it be co-location or somewhat similar to what you're doing now with owning the GPUs. I guess, what does that look like in terms of your go-to-market strategy? Are you leaning to one side versus another based on some of the market dynamics today? Asher Genoot: We see it as two separate opportunities. The GPU-as-a-Service model, we have a full team that's running that business unit today. They are both, looking at expansions with customers, with the supply chain, with Nvidia, and also from a financing perspective, on a project level, equity and debt perspective. And so that's well underway; the team is building out, and they're growing. As the parent level, we're spending a lot of time working on these -- this demand pool that we see that a lot of the industry in the market is talking about which is these large scale customers with multi 100 megawatt demand for contiguous clusters [ph]. And we think a lot of our sites fit within those parameters of what they're looking for from a power availability perspective, it hits the fiber requirements that they have, and we have the ability to give them the land requirements that they need as well. And so we're in active discussion there, and that looks more like a co-location deal where we'd have a customer and a tenant lease, and we'd be providing them a data center built to suit for that customer on a long-term agreement. Mike Colonnese: Got it. I appreciate all the color and thanks for taking my questions. Operator: Thank you. I'm showing no further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.

HIVE Digital Technologies Ltd. (HIVE) Q1 2025 Earnings Call Transcript

Mike Colonnese - H.C. Wainwright Mike Grondahl - Northland Capital Markets Bill Papanastasiou - Stifel Good afternoon, everyone, and welcome to the HIVE Q1 2025 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions] And now at this time, I'd like to turn things over to Holly Schoenfeldt, Director of Marketing. Holly, please go ahead. Holly Schoenfeldt Hello, everyone, and welcome to today's webcast reviewing HIVE Digital Technologies' financial results for the quarter ended June 30, 2024. On Slide number 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 the next slide, I'm pleased to introduce today's presenters, Frank Holmes, Executive Chairman; Aydin Kilic, President and CEO; and Darcy Daubaras, Chief Financial Officer. On the next slide, I would now like to hand the presentation over to Mr. Frank Holmes for a macro recap of the quarter. Frank? Frank Holmes Thank you, Holly. And it's great to see how dynamic we are and that we're functioning in all these different jurisdictions from Vancouver to speaking for this conference. It will be Aydin actually from the Canaccord, small cap, mid-cap, biggest conference on the East Coast in Boston. I'm in San Antonio, Texas, and we function in nine time zones in Bitcoin mining and running and managing data centers. So I think it's really quite amazing how fluid this is. But as we jump into the next slide, the DNA of volatility is understanding the risk. And I think this is a very important visual for investors to recognize all these external forces that do impact the daily volatility. And one standard deviation for Bitcoin is plus or minus 2% is normal. But over 10 days, it's 8%, which is, you can see, four times greater over 10 days than the S&P 500.\ Nvidia is 9%, and MicroStrategy is 21%, and HIVE Digital Technology is 23%. On a daily basis, it is a non-event for MicroStrategy or HIVE Digital to go up or down 6% in a day. And that's predominantly because of external forces such as Bitcoin prices, geopolitics, geoeconomic events, which recently happened in Japan. But during all of this volatility in the next slide, I like to point out that HIVE is operating in nine time zones, four languages, soon to be five. We have locations in Switzerland and functioning facilities in Sweden, Iceland and Canada. We have offices in Bermuda and in Texas, and I'm calling in from San Antonio. And we are expanding into Paraguay in South America. Next slide. HIVE Digital is proud to be bolting ahead, in particular, sourcing green energy, which has been a big challenge to get sized, like 100 megawatts, which we've been able to do in Paraguay. But we're the first to go public of all the crypto mining companies in 2017. And actually, we're first to HODL. We launched HODL as Ethereum and then Bitcoin. We first developed our own ASIC mining rig with Intel, first to buy data centers, first to be green energy focused, first to balance the electrical grid, in particular, hedging currency volatility and electricity prices. And when we look in Sweden, and then we're first to have an AI strategy repurposing our GPU chips. HIVE announces plans to build, in the next slide, a 100 megawatt hydroelectric data center in Paraguay, targeting to double the revenue and increase the hash rate. And I think it's really important to recognize that when we look in this last quarter and the results, those results capture the halving. And how do they compare to the first quarter? And how do they compare to last year? It's really quite significant as we go through this presentation on the financial results, even with the halving taking place. That is the halving meaning that the amount of Bitcoin eligible to be mined each day is gone from 900 to 450. But what's really important is that Bitcoin during this period has gone from 30,000 to 60,000. And that's been much more significant when you run a lean G&A operation like we do. We also, we're very happy to see B. Riley Securities initiate coverage on HIVE and give a suggestion for a much higher stock price. And I think a lot of it has to take a look at the value metrics. And when you look at performance, 15 to 21 times EBITDA for data centers, especially with HPC. So if you take a look at this past quarter, even with the halving and you were to do a simple projection, it means that based on relative valuations to data center business that are not mining Bitcoin, HIVE is an extremely attractive asset to own in a portfolio. Look at this volatility from weak hands to strong hands. Understanding the yen Japanese carry trade. I've lived through it before. I saw what it did in '97. I was in Hong Kong at the time when it started to take place and all the countries in Asia had borrowed cheap money from Japan. Japan wanted $250 billion back, but the money had gone into buildings and skyscrapers. So countries had devalued their currency like Indonesia by 70%. The Philippines had devalued their currency by 25%. And so you saw this sort of currency devaluation emerging markets take place. And you saw any asset that was speculative all of a sudden be sold down. And we saw this only 10 days, not even 10 days ago, with Japan raising rates and its carry trade is estimated to be a trillion dollars. And a lot of Bitcoin was leveraged in owning. And all of a sudden Bitcoin falls from 60 to under 50 in this massive liquidation and panic. It was incredible last week for four days. I don't know if it's over. Historically, it doesn't all end in one day. But it's just one of those factors that Bitcoin ecosystem of almost 20,000 nodes around the world continue to mine and function 24/7. Brokerage firms in the U.S. basically couldn't take trades. They had shut down. But Bitcoin network, it continued to function. And so did HIVE. We continue through this storm like other storms is to continue to produce and function like we do every day. Recently, we were at the Nashville Bitcoin Convention, which was incredible for many reasons. This event was extraordinary. The Nashville Bitcoin Conference was epic. And I think it's because you have high profile speakers participating. The conference attracted, as you can see here, President Trump and Robert F. Kennedy Jr. and both endorsing and supporting Bitcoin as a strategic asset. Then you saw a global representation, a networking group of 20,000 people from 50 countries showcase their global reach and the adoption of Bitcoin. And many ideas and collaborations were taking place. And the focus on Bitcoin's future innovations, the conference, it featured cutting edge discussions on the future of Bitcoin. And I think it was an incredible, epic presentation by Michael Saylor, which is like 42 minutes. And we had Holly, who started this presentation off today. She has done a three minute YouTube summary. If you don't have time to watch the full 42 minutes off that slide presentation by Michael Saylor. And I think it's just fantastic and informative and timely. Last week, we saw during this volatility, Morgan Stanley on the next slide says it is allowing 15,000 wealth advisors to sell Bitcoin ETFs to their clients. This is all part of that slow adoption process that's significant in the Bitcoin ecosystem. And then we saw what really drives a lot of alternative asset classes on the next visual. The idea of owning an asset like gold or art from original painters, the growth of art like Andy Warhol or Picasso Prints is the original signed prints is gone up 30, 40 fold over time since the 60s and 70s. And I think it's important that a lot of that corporation has to do with money supply and a lot of the original gold bugs that went into gold as an alternative asset class. They articulated this and we've seen this growth in the Bitcoin ecosystem that the adoption of young, smart minds into Web3 all understand why you want to own an asset class like Bitcoin with a cap at 21 million coins and something like 93% has already been mined. But as the money supply continues to grow to all time high, that is just extremely bullish for the global network, for the Bitcoin global network. And as we see the adoption taking place, I think we can see Bitcoin trade at much higher prices over time. But during all of this, I mentioned earlier, we in the next slide, we function 24/7 and the team meets every morning in nine time zones to make sure that the machines are plugged in. And why do we do that? Well, when we look at Bitcoin mine to the average active hash rate, we show ourselves being up there in the highest rankings. And we're very proud of that. Now, there's a couple other companies that have shown up in this data set, but they're less than an exahash, not include them, or they have a lot of where they basically have other people using their data centers. So it's really not reflective of them mining Bitcoin for themselves. And that's something that HIVE does. And we HODL, as you can see, on a regular basis, as much Bitcoin or balance sheet as possible. And that has had a significant impact. Like I mentioned earlier, Bitcoin a year ago was 30,000 and now it's 60,000. But our total position has increased substantially. So that is creating wealth for the long term shareholders of HIVE. Ranked by utilization, we have a 95% ranking, and that is just from our self-mining, not from other people using our facilities. I think that that's just really important in this equation. And then revenues energized by petahash for July. As I said, I look at the big miners out there and HIVE is an incredible number and it's on a consistent basis being a leader in revenues that are energized for petahash. And we do it with green energy. We're not doing it with other sources of energy that are coal related. And it's been a big challenge to find reliable green energy. And that's a big reason why we said we're going to expand and double our footprint in Paraguay, because we're able to source competitive, inexpensive on a relative basis, but competitive green energy for our future. As you can see, ranked by BTG production per exahash but I find it interesting that Marathon, who I have the greatest respect for the company and the CEO, that their number would be bigger when you look at it. So they must have other sources of revenue showing up. But still, it really is important for investors to look at how lean our team is, having the lowest G&A to mine a Bitcoin. When you look at relative market caps with Aydin, we'll go into greater detail and granularity about for you and how we function, because most of these other companies function in one country or just in one state. They are not diversified and they do not have to rely on sourcing green energy. And during all this journey of being the first crypto mining company of September 2017 to-date, this visual highlights about being lean and functioning. And we have not had this experience of negative big losses. We do not leverage our equipment. We've never leveraged our equipment. We've not gone through the bankruptcies of many of our peers have. And we have been able to, even during the worst of times when FTX blew up, we were able to come in and buy machines at great, great prices because we had cash in the balance sheet. And we've already received our money back on buying them at a great, fantastic price. So this is an important visual that is not just last quarter. This is showing you going back quarter-in, quarter-out, year-in, year-out, up cycles, down cycles, Ethereum, which was a big profit center, leaving us and how we repositioned the company and to continue to prosper. Positive corporate margins through the bear market. This is just another visual highlighting the previous one, showing you quarter-over-quarter of what we've been able to do. And this is a important indication of our capacity to adapt to these external forces that happen. So you can see here that we have about 117 million shares outstanding. We've done analysis that our peers have in this time period in the past year, increased their number of shares out by 300%. So we have the amongst the lowest G&A and the number of shares issued to attract and retain great employees to expand and buy new equipment to increase our global footprint. Now, I'd like to turn over to the longest standing CFO in the Bitcoin industry, a snapshot for growth by our CFO, Darcy Daubaras. This part of the presentation, I'll be taking you through a snapshot of the period, as Frank had mentioned, looking at the most recently completed quarter and some financial indicators. We are providing certain non-IFRS measures in our presentation today, and the company believes that these measures, while not a substitute for measures of performance compared in accordance with IFRS, provide investors with an improved ability to evaluate the underlying performance of the company. These measures do not have any standardized meanings prescribed under IFRS and therefore may not be comparable to other issuers. Further details can be found in our management discussion analysis for the three months ended June 30, 2024. Moving on to the next page, I'd like to remind our stakeholders that our earnings are comprised of our operational earnings or cash flow, plus our investment earnings, which includes realized and unrealized earnings, which often includes non-cash charges. Taking a look at the next page, 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. 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 or gains are paper losses or gains generated through an accounting entry rather than the actual sale of the security. The swings in digital assets impact our paper profits and losses each quarter. So our Bitcoin digital assets do generate unrealized gains and losses each quarter. 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. Speaking about non-cash charges, those are the write-downs or accounting expenses that does not involve cash payment. Items such as depreciation, amortization, depletion, stock-based compensation and asset impairments are just a few of the common non-cash charges that reduce earnings but not cash flows. Moving on to the next slide, taking a look at a financial review during this most recently completed quarter of June 30, 2024, we recorded $32.2 million of revenue and $14.9 million profit in adjusted EBITDA. This was driven by a production of 449 BTC equivalent mined during this most recent period. And to remind our listeners, as Frank had mentioned, this is following the April happening event that we all experienced. Moving on to the next slide, taking a look at the healthy balance sheet that we continue to have, our cash position stood at $25.6 million as at June 30, 2024, along with an additional $153.9 million in digital currencies comprised almost entirely of our Bitcoin HODL position. We also had $4.4 million in amounts receivable and prepaid, a slight decrease from the prior period. The total market value of our strategic investment increased by 118% to $15.2 million at the end of the period. We maintain a strong net cash position and healthy working capital position to fund our ongoing operations and growth objectives, with a current ratio being our current assets divided by our current liabilities of 7.35. Looking at the next slide and switching gears, taking a look at our gross operating margin on a year-over-year basis, comparing the first quarter is completed to the first quarter of our fiscal 2024. Our gross operating margin, which equates to our total revenues minus direct operating and maintenance costs, increased in absolute dollars to $11.4 million in the most recent quarter, compared to $8 million in the prior year comparative quarter. 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 were on average higher than the prior comparative period. As you can see in this most recently completed period, we are reporting a net income of $0.03 per share compared to a net loss of $0.19 per share reported in June 30, 2023, last year. Moving on to the next slide, taking a look at our year-over-year revenue, we generated total revenue in the first quarter of fiscal 2025 of $30.2 million versus $23.6 million in the previous year's first quarter. The increase in revenues versus the same quarter in fiscal 2024 can be attributable mostly to the average Bitcoin price, which was double what it was last year, even with the ever increasing Bitcoin difficulty hash rate over the past 12 months. As mentioned previously, our gross mining margin, which equates to our revenues minus direct operating and maintenance costs, increased in absolute dollars to $11.4 million or 35% in the most recent quarter, compared to $8 million in the prior year comparative, which had a 34% operating margin. Turning to the next slide, comparing our current fiscal Q1 quarter to the previous Q4 quarter, we generate a revenue in this first quarter of $30.2 million versus $36.9 million in the previous quarter. As has been talked about previously, this decrease in revenues versus the prior quarter was impacted substantially by the April halving, leading to less Bitcoin produced. And this was partially offset by an increase in the price of Bitcoin. Our operating gross margin, also in absolute dollars, was $11.4 million in the most recent quarter compared to $16.3 million in the prior quarter comparative. This decrease in gross mining margin versus the prior quarter was negatively impacted by the halving that took place early in the quarter. As we continue to talk about, we have been extremely strong in our operations, but as a result of the halving, we have been able to adjust and we've done a very good job of that. Looking at the next slide, our adjusted EBITDA in this first quarter of fiscal 2025 was $14.9 million versus an adjusted EBITDA of $16.2 million in the prior quarter. I will highlight again that adjusted EBITDA is a non-IFRS figure. In the first quarter, we experienced a net income of $3.3 million compared to a net loss of $3.5 million in the prior quarter. I want to again thank our loyal stakeholders and shareholders that are listening. And at this time, I'd like to turn the presentation over to our president and CEO, Aydin Kilic, for an executive update. Aydin? It has been a solid quarter and we're going to start off actually by looking at our production of Bitcoin over the last 12 months. So we have mined almost 2,600 Bitcoin with green energy over the last 12 months. As Frank and Darcy both mentioned, this is a first fiscal quarter for all of the public miners where we are post-halving. And as you can see here, we've delivered solid and consistent production since the halving 119 Bitcoin in May, June and 116 in July. And this is a time when we've seen difficulty really maintain high levels in the 80 trillion to 85 trillion range. And how we continue to have consistent production is we had new machines coming in from our S21 and S21 Pro orders to reach our target 5.5 exahash install. Now, I do want to note, and we're going to start talking about this more, we are in a bearish cycle of crypto mining. It's obviously post-halving. We're seeing difficulty actually out of this last epoch, all time high to 90 trillion. And so, what that means is we're in a bear cycle where you really want to manage profitability and have the best in economics. So, we're actually now operating about 5.2 exahash where we've improved the efficiency of some of our older machines, by firmware optimization. And there's a very good reason why we do this. And that's on the next slide. Profit. Another quarter's with positive gross mining margins. As you can see, this is $32 million of revenue this quarter with $11 million of gross mining margins. So add another one to the chart. I think next quarter we should have a slide that shows, Hall of Fame jersey hanging from the rafters. So I'm not aware of any other public crypto mine that's mined profitably over the last three years. And so, the reason why we're so meticulous with how we manage our hash rate, our firmware, and we are extremely analytical, paying attention to hash rate economics and also energy markets, again, with transventions, hedge markets in Sweden, et cetera. This is how we have a multifaceted strategy, to deliver quarter-over-quarter positive gross mining margins, as a public company. And right now, we are in the $40 hash price range. So we're all time low for hash price, post-halving the $45 to $55 per petahash per day hash price range. And what's interesting is you'll notice our mining margin is actually better this quarter, than it was in the winter of 2022 bear market. And the reason why, is because this is more of a macro commentary now, for the Bitcoin mining industry. We have the new generation S21 and S21 Pro machines that exist in this post halving era that are allowing miners to generate better revenues on a dollar per kilowatt hour basis, compared to the mining economics in late 2022, which were in the $50 to $55 per petahash per day range. But back then, the best machines on the market were just the XP and maybe the K Pro. And so what does that mean? So you look at the advent of hardware innovation and we have machines now that are in the 15 to 18 joule per terahash efficiency range, whereas a couple of years ago, the best machines, which weren't that prevalent, by the way, right, like the S21 XP was very overpriced. Those were in the 22 joule per terahash range. We bought a bunch of K Pros. They were phenomenal. $11 a terahash, 23 joules a terahash. And so, that's just a little bit of, the some of the notes of how we would hit these cadences, of consistent profit through the quarter. So that's on the operating side of the business. Let's slip to the next slide. This is corporate margin. So I'm very proud of this slide as well. Our team works very hard in order to realize, the numbers that you see here. Corporate margin is our gross operating margin minus our G&A as a public company. So it's a public company. We have a lot of different costs. As you can imagine, there's all the executive costs. There's travel to go to conferences, sponsoring conferences, Investor Relations, marketing, lawyers, auditors, Directors and officers insurance. There's a lot of overhead. We have at HIVE Digital the lowest G&A per Bitcoin margin in the industry. Full stop. And so what you have is a company that is still making money fundamentally, after you subtract these corporate operating cash costs. And this quarter we did $8 million, right. And so year-over-year, by the way, we're up about 60%, right? A year ago, it's $5.2 million of corporate margin. And so, we believe that by having low G&A per Bitcoin mine. And by the way, this applies if you go back those three years, we've had positive corporate margin over the last few years as well. We believe this gives investors the best access to Bitcoin as an asset class. Almost functioning like a gold royalty streaming fund, which is a French vision when we really founded HIVE. And so, Strip Boy, all the unnecessary blow, have a high octane, high horsepower machine, consistently we're ranked with having the best cash rate utilization in the sector, green energy, globally diversified, low operating costs. And this is how you have a high value company, not just looking at it through the lens of Bitcoin mining stock, but really just as a company with great fundamentals. So if you hop to the next slide, we can look at this same ideology through a more accounting focused lens. So we talked about the depend news outflow to add what's out there. So super solid quarter, $14.9 million of adjusted EBITDA and $18.8 million of EBITDA. Now, if you tally that up for the year, what that works out to is an adjusted EBITDA of $47 million for the year, and an EBITDA of $40.7 million for the year. So these are great numbers, and it's been another solid quarter. Knowing how, we're performing on an adjusted EBITDA basis, which is a good apples-to-apples comparison amongst our peers, because some companies have different ways that they book non-cash charges. We try to look at the business, of how are you operating on adjusted EBITDA or at least that's what the analysts look at. And on the next slide, these are just the companies that reported to-date, right. So some companies are still going to report in the next couple of days. But for now, you could see that we are trading at an enterprise value, which, by the way, as of last Friday, August 9, when we updated all the data, our enterprise volume is only $154 million. Why? Well, our market cap is $300 million, but we're holding about $150 million of Bitcoin on the balance sheet. So when you look at that enterprise value of $154 million, and you realize we did $14.9 million EBITDA, adjusted EBITDA for the quarter, that's almost $60 million EBITDA annualized. That means they're easy to adjust EBITDA multiples only 2.6. Now, first of all, that from first fundamentals is already attractive. But when you look at where our peers are trading upwards of 10x, 15x, 20x and more, we are an absolute bargain. So why is this? I get asked often. I think it's because our office is headquartered in Vancouver. So having the U.S. address is very important for getting indexed on the Brussels 3000, et cetera. And I think a lot of our peers, spend a lot more money, which we can see from the G&A expenses on marketing and hiring PR. We're very proud of what we do. We do think, we go to the conferences, we tell the story. We meet with retail investors, institutions, et cetera. But nevertheless, we believe we're trading at a discount to our peers, and that provides a great opportunity, in my opinion. On the next slide, we look at easy to annualized revenue. And this is even more, what's the right words here? Attractive, maybe even mind boggling with $32 million of revenue for the quarter and enterprise value of 154. Our easy to annualized revenue is 1.2x. Again, an absolute bargain when our peers are trading it two, four, six times. So again, we just like to point out I'm an engineer, by the way. So I have clear numbers. We live and die by them. But consistently, I demonstrate high performance, high value, low overhead. I'd love to be at a higher multiple and sort of that's a nice place to be. I suppose the only way, if you're really high multiple is the only way you can maybe go down. So we're trading at a great discount right now. So, I think the only way it should go is up. Now, if we look at the next slide, I'm really excited about this one. So this is our growth profile for the next year. So we've signed a PPA in Paraguay for 100 megawatts. And with S21 Pros, this would add another 6.6 exahash to our 5.5 exahash installed today, which would bring us to 12.1 exahash. And by the way, our efficiency globally, if we were operating at 12.1 exahash with S21 Pros, we'd come down to 19.3 joules a terahash. Today we're at 24.5. So that would give us, I mean, we already - have one of the most efficient fleet of ASIC miners on the joule per terahash basis, which again, for all the enthusiasts out there, the better your efficiency on a joule per terahash basis, the lower your cost of Bitcoin production. So this, again, would take us to 12.1 exahash and a global fleet efficiency of 19.3 joules a terahash. So this is very exciting. Our target is Q3 of 2025. And by the way, our team was out there this year, hoping to find out. And that's what 100 megawatts look like, right? So dedicated substation. So really exciting. The other attractive thing there, of course, is green energy. As Frank mentioned, it is much tougher to find green energy at scale, than if you just are willing to get grid mix or carbon emitting. And so, what another very compelling and exciting merit of our site in Paraguay is that we expect the cost of Bitcoin production to be about $22,000 with new generation equipment at the site on a quarter of the low power cost. So very exciting. That's a little bit more color. We'll be providing more updates and news releases to come on the next slide. A little bit more commentary on the post-halving mining economics. So again, we've had solid production over the last three months. We're showing July here as well. Again, the interim year end was June 30, but we included the July production report as well. So our installed hash rate is 5.5 exahash. We received all of our shipments of S21s and S21 Pros. In total, those are 9,586 that have been installed from January through to the end of July. But as mentioned, we are operating our older machines, our three joule per terahash machines. We've actually down-clocked them to go below their rated operating efficiency and improvement to have better profitability and better unit economics. And again, when I show that slide that we've been mining profitably for the last three years, how we do that is we're very analytical and very granular on how we manage our ASICs. We're constantly looking at hash price, studying what our electrical price is at every facility relative to the break-even price of each machine. Can you improve the break-even price of that machine by adjusting its firmware? If you can, we absolutely do it. And when Frank talks about huddling in nine time zones, all our site captains, everyone's dialed into the program. And so that's how we function like a well-oiled machine. Next slide. So this is big news and this is great news. We have grown our huddle month-over-month since this happened, which I think is remarkable. So we are at 2,533 Bitcoin mined with green and clean energy. Again, it makes us have an incredibly attractive enterprise value of only about $150 million. And on the next slide, a quick update. But a great one on our milestone. So we reached $10 million in annualized run rate revenue. Everybody was $2.6 million for the quarter, which of course I would be $10.4 million for the year on an annualized basis. It was very exciting. We broadcast this would be an interim target of ours in some of our earlier press releases describing the growth of our AI businesses and our Nvidia chips. So, we have over 4000 Nvidia A-series cards, the A4000, A6000 and 5000, which we're running in Tier 3 data sets. In addition to that, we have 96 H100. So very glad that we reached this interim milestone of $10 million annualized run rate revenue. Our target for the second half of this year is still $20 million. And our target for next year, which is our blue sky, is $100 million annualized run rate revenue from the AI business. How are we going to get there? Stay tuned. We have some really exciting announcements. We've been very diligently pursuing expansions and procuring opportunities for having the absolute best GPU hardware available on the market for the next generation. And so, we will be providing the market more color on our plans for the second half of this year and 2025. So stay tuned for more. It's been a great quarter and we look forward for more to come. Thank you, Mr. Kilic. [Operator Instructions] We'll go first this afternoon to Mike Colonnese at H.C. Wainwright. Mike, please go ahead. Mike Colonnese Hi, good afternoon, guys. And congrats on signing the new site in Paraguay. Great to see that. A couple from me. First, I'm curious, which site will you guys be converting over to HPC from Bitcoin mining? And what will be your strategy for the 20 megawatts? Do you think you'll purchase and deploy your own GPUs as you've done in the past? Or will you focus more on a co-location model here? Aydin Kilic Hi Mike, it's Aydin here. I'll take that one. I just want to make sure. Can you hear me? Okay. Excellent. I'm just dialing in from Boston. So the sites we are building for New Brunswick and then one of our sites in Boden. So these are, I mean, all of our facilities are data centers. New Brunswick in particular and Boden. I mean, Boden used to be a GPU mining facility. And our facility in New Brunswick is, what I like to call a military grade data center. So, you know, you've got you've got a structure there. You've got great bones. And of course, all the power distribution from high voltage down to 415 volts is already been done. So it's a matter of adding UPSs, chillers, generators, et cetera. Everything you need to get to Tier 3 uptime. And the nice thing about the retrofit is a lot of the long lead time items are on the high voltage side. And so a Greenfield just in broad strokes might take two years. Retrofit is more than nine to 12-month range. And so the CapEx on a dollar per megawatt basis on a retrofit, you're looking at more in the $5 million to $8 million per megawatt range. Whereas in a Greenfield, you're more in the $10 million to $12 million per megawatt range. So that's that. Mike Colonnese Great. Great. Now, appreciate the color, Aydin. And as far as the go-to-market strategy there, do you think you'll fill that capacity up with self-owned GPUs as you've done previously? Or do you think you'll take more of, again, that co-location model approach? And how should we think about the unit economics there? Aydin Kilic All right. Yes. So to put it into context, like one, like, using the H100 as an example in broad strokes, about $30 million a megawatt to populate. Right. So it's very CapEx intensive. And the other ratio that's important to consider is that when you're building Tier 3, you have PV, power utilization ratio. And so, if you have 30 megawatts of power, you're going to end up with about 20 megawatts of IT load or compute. Whereas in crypto mining, if you have 30 megawatts of power, you're going to be using maybe 29 megawatts for mining. There'll be very little ancillary overhead. So with 20 megawatts, right, and $30 million, that would be approximately $600 million. Again, in broad strokes, there's obviously Blackwell architecture coming out next year. There's H200s coming out in Q4. I'm just talking about giving a high level understanding of the economics of it. Now, it is, of course, attractive to purchase and operate your own GPU cloud, because that's how you realize those $2.50 per kilowatt hour revenues when you're renting out H100s. On the colo side, we're seeing that rates could be anywhere from $0.25 to $0.50 a kilowatt hour. So there are two different business models akin to mining crypto, where if you offer hosting, margins are thinner, they're more stable. It's more of a long-term ROI. Whereas if you're self-mining, there's more CapEx involved. But you can realize potentially quicker ROIs based on crypto mining economics. So I think it would be a hybrid and we would want to bring the capacity on. We have been generating revenue. We hit $10 million of annualized revenue this quarter from leasing our own GPU. So, we do - plan to expand that. But 20 megawatts is a lot of CapEx to fill up with GPU. So we're evaluating the most secretive path forward right now. I just wanted to add, it's Frank here, if you can hear me. In Paraguay, we're about an hour and a half to two hours from the capital of driving, Valenzuela. And it's a nice, nice, beautiful green town. And we're so impressed with the infrastructure and the ease of being able to drive there. We took a chopper and visited all the other sites. And a lot of them, are just too far away for our initial. We want to be able to drive, and make it very functional and easy to build. Mike Colonnese Got it. Great to hear from you, Frank. And congrats again on the Paraguay site. Thank you. We take our next question now from Lucas Pipes of B. Riley. Unidentified Analyst Thank you very much, operator. And good afternoon, everyone. This is [indiscernible] asking questions on behalf of Lucas Pipes. And my first one is on your new third quarter '25 target. How should we think about cadence of deployment here? So is it going to be skewed towards the end of 2025, let's say quarter towards 2025? Or it's fair to assume a gradual ramp up? And where things stays on financing side of this expansion. Just how much do you plan to spend on these hundred megawatt data center this year? And maybe in 2025, if you can just provide additional color here would be great? Thank you. Frank Holmes So, we haven't disclosed the exact capital outlay plan. However, it is extremely attractive on a dollar per megawatt basis in Paraguay. And why we chose Paraguay was threefold. The attractive dollar per megawatt build out costs for us to complete a hundred megawatt site, the low cost of power, and of course, the fact that it's green energy at scale. And so, those three unique conditions are what make Paraguay very exciting. And we will be providing the market more details on capital allocation, and build out costs, et cetera as the project moves forward. Unidentified Analyst Thank you. And regarding the cadence just, is it fair to assume just gradual ramp up from now to all the way to third quarter of 2025? Typically, in the first six months, you're doing high voltage and substation work. And you'll bring on capacity in that second half, perhaps in the third quarter of 2025, is when we would expect hash rate to start coming online. Unidentified Analyst Got you. Thanks for that. And the second one is on AI cloud progress. Aydin Kilic I'd just like to add some color to that. Is that we will do like a New Brunswick to build a campus of buildings and then you start putting in equipment to start as fast as possible to get the cash flow. You don't wait till everything's finished and then turn on get the machines. But like I said, it'll take six months - to nine months. But as soon as a facility of these buildings are built, we will start stocking machines to plug them in. Unidentified Analyst Got you. Thank you very much. And my second one is on AI cloud. So with respect to the Paraguay expansion, will it affect your plans on purchasing latest gen GPUs for your AI expansion? Aydin Kilic So the response I was providing Mike earlier about some great questions. Those are actually the near term AI conversion opportunities, are actually in New Brunswick and Sweden. At existing operating facilities. And so, these have a six to 12-month construction timeline on a retrofit. And so, if we were to purchase, which we've talked about, we've been very carefully going through an engineering procurement exercise for next generation GPU compute, it would go to those locations. And currently 100 megawatt allocation in Paraguay is forecasted, to more than double the Bitcoin mining capacity from 5.5 exahash to 12.1 exahash. Frank Holmes And I think just to add to that, sorry to add, I want to explain about this continuous process that we're spending every month and taking equipment that's for delivery immediately, and upgrading the suite, lowering our cost and improving our exahash. We have a like - and I like the best example is that I'm in South Texas, is like oil and gas and gas when you're drilling and you're fracking, you have to always be drilling. So, we are always upgrading our suite of basic chips. And I think that after we've completed our spin, it'll add with the new more efficient machines Aydin. Is it about one and a half exahash? Aydin Kilic Yes, that's right Frank. So we have a, our global fleet average is 5.5 exahash installed with an efficiency of 24.5 joules per terahash. That constitutes, pardon me, approximately 8,030 joule per terahash machines. If we upgrade those three joule per terahash machines to S21 Pros, that would yield an additional exahash and bring our average efficiency down closer to approximately 22 joules a terahash. So that can be the upgrade within our existing facility. And by doing five, we always like, as Frank mentioned earlier, we like to have capital performing. So when we order machines, it's for immediate delivery so they can get plugged in. We have seldom, if ever, do large machine orders where they come in, six months later. We like to have rolling, if not immediate, deliveries of ASICs. So we, we always target a one year ROI. Now, of course, that's variable that stretches out a bit in a bear market, but it also shortens a lot in the bull market. So our whole business model is based on cash flow, return on invested capital. So, we see it as a success if the ASICs we purchase, or GPUs for that matter, when we run them, after you subtract your operating costs, have you made a profit? Have you made a handsome profit in the time that you've been running them? And if you even sell them, sometimes on the secondary market, you can add that back. And one golden example I'd like to point to in the bear market of 2022 is, we bought J-Pros, S19j Pro, for $10 a terahash. And even in that bear market, because we got them for such a great deal, they had fully repaid themselves off in a year and continued to free cash flow after that. So that's sort of the methodology of how we upgrade the site. We don't necessarily do massive orders. We're constantly evaluating the landscape. Yes, we talk to all the big three manufacturers, but we also talk to every broker in the industry. And whenever there's an attractive immediate delivery deal, we pull the trigger. That's why you'll notice we did 7,000 machines, another 1,000, another 1,000, another 500 to prep for the halving in the last six months. Unidentified Analyst Thank you very much for your perspective. Wish you best of luck in next quarter. Thank you. Thank you. We go next now to Mike Grondahl of Northland Capital Markets. Mike Grondahl Hi guys, thanks. I just wanted to follow-up on the HPC strategy. How have demand been from customers, and what type of customers have you talked to regarding the 20 megawatts? Aydin Kilic So the 20 megawatt is first and foremost, an infrastructure project for us. And as we work to build that out, typically larger customers like to see the project underway before you start negotiating pre-leases. So what we've been doing is focused on getting scheduling down. So customers who are wanting compute to come online will want to know when they can expect that compute to come online. And because there are so many new iterations of NVIDIA hardware, the engineering procurement exercise I alluded to earlier, you kind of have to have, it's like matching two puzzle pieces to make sure they're the right fit. So the data center capacity is going to be air cooled, it's going to be liquid cooled. Next generation stuff will likely be liquid cooled, if not all liquid cooled. And then are you going to be working with Blackwell, H200, et cetera? So we'll be able to provide more color on that as we provide more announcements. But that's just the methodology of the process that you go through when you're doing these larger build outs. I hope that's helpful. Mike Grondahl Yes, sure. And then just secondly, what are your top three priorities for the second half of calendar '24 now? Aydin Kilic So we hit our $10 million ARR for AI revenue this quarter, which I'm very proud of our team for realizing that milestone, which we broadcast previously. Our target for H2 this year is $20 million of ARR. So that is one target. And that's working with bringing more GPUs in our cloud business online. The other target is to have both Paraguay construction underway and the 30 megawatt conversion into 20 megawatts of HPC underway. So the completion of the latter two infrastructure projects will fall into 2025, of course. But to have those projects broken ground would be a goal that we would be very pleased with this year. I was just like that too. Oh, sorry. I was just trying to it's Frank here to add some color to what Aydin is saying, is that when people make these announcements from crypto mining, all of a sudden they're going to HPC. It's very, very complex. And it's much more complex than I ever expected. But what Aydin is saying is that we've hit $10 million. That's basically the same team that's been building that out and repurposing those chips. So that's a heck of an accomplishment, because that's almost like free cash flow what it throws off. And what we're finding is that when we go to order black wells, et cetera, the costs, the engineering is much different. It's much. You're building a brain. And it's like a bunch of neurosurgeons are brought into the room. The engineers at the beginning just don't believe how much energy is going to be consumed. How heavy is the steel infrastructure to hold up these black well servers? There's a litany of complexity that goes into these expansions. So one of the things which we said is that we have six megawatts of electricity and Boden. We own the land. We own the facility. Let's start. It's a military town. Let's start right away there. And then we said, hi, in New Brunswick, we have this additional electricity that we have ability to. We have variable and we have fixed. And let's take a portion of the fixed. And as we're in that journey of getting the engineering, et cetera, and we're discussing with Nvidia these various chips, all of a sudden it becomes that we're in conversation with Nvidia engineers that we have to rethink the structure, the building. Do you need reinforcement? Do you need this or that? So it is phenomenally fascinating, but it's much more challenging than what people think. But what's sweet about it is that you can be making $4 an hour versus $0.15 Bitcoin mining. That's the real big difference when you look at the business. Thank you. We'll go next now to Bill Papanastasiou at Stifel. Bill Papanastasiou Thank you. Good evening, gentlemen. Thanks for taking my questions. For my first one, I was hoping you'd be able to share your outlook for the Bitcoin mining landscape, and how that plays into your philosophy, to scale operations going forward, as you look to double the hash rate capacity here with Paraguay? Aydin Kilic Well, we have always tried to utilize cash flow from the business to grow the business and, of course, adhere to the green energy mandate, which makes it a lot tougher. I mean, we could have - there was a lot of opportunities we've looked at. We could have gone nuclear. We could have just gone grid mix. And even within the realm of renewable energy, we did look at some interesting opportunities in the U.S. where you could have gotten $0.025 power. But then you're spending $2 million a megawatt getting on the energy production side, contributing to the CapEx and the solar farm. When you look at those ROI, they really start to stretch out very long and - it doesn't make economic sense. And so getting back to the three pillars of why I think Paraguay is such a home run, is because you have the cheap dollar per megawatt CapEx to build out. You have the attractive electricity costs. We'll provide more details on these specifics in due course. And then, of course, the green energy at scale. Now, of course, to do a hundred megawatt site, that will require capital. But this is what we believe a truly accretive use of capital. So we're excited about this project. Bill Papanastasiou Appreciate the color there. And then just shifting gears to the GPU as a service business. How are you seeing or assessing the sustainability of prevailing market compute prices for the GPU hardware that HIVE has in the fleet over the next 12 to 24 months? And can you share some more color on utilization rates? Thank you. Aydin Kilic Yes, that's a good question. Like with all technology, whether it's your home computer, your iPhone, ASIC miner for Bitcoin or an NVIDIA GP, they have economic life cycles. Right. And really, the A100, right the [Ampere] series was still in use and is still in use, and is still considered very viable. And the H100 came out, the Hopper architecture. And so, what happened was people were paying a premium for the Hopper architecture, but they would still pay a lower amount to get compute using the A100. When the Blackwell comes out, we'll have the same effect. So I would say if you use a melting ice cube analogy, the hourly rate for GPUs melts at a much slower rate than Bitcoin mining ASICs, right. And I think that, a big part of being able to be a true player in this space that, we haven't really touched on yet on this call. So your question is a good one, because it brings it to light is uptime, right. So in crypto mining, when you look at the Bitcoin per exahash, HIVE is usually in the top three consistently, not usually, but consistently. And we're talking 98%, 99% uptime. That's a home run in crypto mining. And then, some of the peers are like 95%, 90% uptime. There's no room for 90% uptime in AI, right. Like, Tier 3 is 99.998% uptime. So I think what the aspiring crypto miners that want to get into this sector. Will wrestle with is delivering that uptime for people that want to train foundational models that do fine tuning. And we've done a lot of that. I mean, we serve 120,000 GPUs in the East mining era. And we've grown our AI compute revenue, from $1 million to $10 million ARR in the last year and a half. So, we've been building that - building on our pedigree of operating GPUs. And we do a ton of stuff on the R&D side, looking fine tuning data sets, et cetera. So making sure that when we work with researchers that, they have a good keyword is user experience, because you do have a user, right? You're not just submitting hashes, to the Bitcoin network. And if your server gets disconnected, reboots and then it tries again. So I think the key is good uptime and a good user experience. Will allow you to realize those long-term contracts, because once you sign a contract for a year or two, what have you, you've got to deliver. There's SLA service level - performance requirements. And we're seeing long term contracts for H100s roughly in the $2.50 per hour and some $2.20. It's all a negotiation, right. So I hope that answers the question, Bill. And gentlemen, it appears we have no further questions today. Mr. Kilic, I'd like to turn things back to you, sir, for any closing comments. Aydin Kilic Yes, I just want to thank my whole team. Frank pointed out we function across nine time zones. We are the longest standing crypto miner. We used to mine Ethereum. That business did $150,000 a day. It was a 90% profit marching business, and we never got a premium for it. Instead, we always contended with the FUD, fear, uncertainly, a doubt that the merge was coming. And then when the merge came, we pivoted, and we started mining all coins with the GPUs. And then, we started reversing some GPUs for HPC compute. This is now HIVE's second Bitcoin having event. And as Darcy pointed out, we've got $150 million of green and clean Bitcoin on the balance sheet, unlevered, unencumbered. We've not taken on any debt to purchase ASICs. So I think that we've really emerged as a best-in-class performer. But when you look at the comp tables, the enterprise value to EBITDA, we're trading at a discount. So for all the analysts that are here, thank you so much for dialing in, and asking these excellent questions. And I think that we really just focus on pound-for-pound, being the most profitable, best in economics. We realize scale is important. That's why I've been telling people we know the market doesn't care about five to six exahash. That's why we said, okay we need to go from five to 10 to 15. So stay tuned. And I think it's going to be an exciting year ahead. We always see that bull market come about nine to 12 months after the halving, if history is any indication, which it usually is. Thank you, everybody. Thank you, Mr. Kilic. Ladies and gentlemen, that will conclude the HIVE Q1 earnings conference call. Again, thanks so much for joining us, everyone. And we wish you all a great evening. Goodbye.