HIVE Digital Technologies Q2 2027 Earnings Call Transcript

HIVE Digital Technologies (NASDAQ:HIVE) reported second-quarter financial results on Tuesday. The transcript from the company’s second-quarter earnings call has been provided below.

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View the webcast at https://us06web.zoom.us/webinar/register/WN_ugagkASDSp-5AEFRbwc_kQ#/registration

Summary

HIVE Digital Technologies reported $85 million in total revenue for Q2 FY2027, with a gross operating margin of $30 million and adjusted EBITDA of $24.8 million.

The company experienced a net loss of $78.7 million, primarily due to a $31.2 million non-cash impairment of equipment and additional depreciation costs.

HIVE’s strategic focus is on expanding its HPC AI capabilities, with $40 million in annual recurring revenue from HPC and a target of 80% EBITDA margins for new GPU clusters.

The company holds a strong cash position with $139 million in cash and $22.6 million in Bitcoin, totaling $160 million in liquid assets.

Strategically, HIVE is expanding its data center presence in Canada and Paraguay, with significant partnerships and governmental support, while maintaining a cautious approach to capital expenditure amid market volatility.

Management highlighted the importance of protecting the balance sheet and focusing on projects with strong ROI, particularly in the HPC and AI sectors.

Future outlook includes achieving $200 million in GPU cloud annual recurring revenue by early 2027, with ongoing expansion in Canada and Paraguay.

Full Transcript

Nathan Fast (Director of Marketing and Branding)

Hello and welcome to HIVE Digital Technologies earnings webcast for the second quarter of fiscal 2027. I’m Nathan Fast, Director of Marketing and Branding at HIVE, and I’ll be moderating today’s call. Before we begin, please turn to slide two for our disclosures. Today’s presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, forward-looking information under applicable Canadian securities laws, any statement that is not a statement of historical fact is forward-looking. Words such as expects, believes, anticipates and similar expressions identify these statements. These statements speak only as of today’s date.

Actual results may differ materially and we undertake no obligation to update them except as required by law. For a full discussion of risk factors, please refer to our most recent filings at sec.gov and on SEDAR+. We will also reference certain non-GAAP financial measures including Adjusted EBITDA, Adjusted Net Income and Free Cash Flow. Management uses these measures to evaluate operating performance and believes they give investors additional insight. They are supplemental only. They should not be considered in isolation from or as a substitute for GAAP results. Reconciliations to the most directly comparable GAAP measures are included in the appendix to this presentation and in our earnings press release furnished to the SEC on Form 8-K on the next slide.

It’s my pleasure to introduce today’s presenters Frank Holmes, Executive Chairman, Aydin Kilic, President and CEO and Darcy Daubaras, Chief Financial Officer. With that, I’ll turn the call over to Frank for a macro recap of the quarter.

Frank E Holmes (Executive Chairman)

Thank you, Nathan. As usual, I try to give, as Executive Chairman of HIVE Digital Technologies, a macro recap and interject some of my macro commentaries that, as a money manager, in what I’ve seen for the company and how it fits into the global scene. So before we do this, I always like to talk about volatility, and it’s so important for investors to recognize that different factors over time change with the volatility. The S&P 500 daily volatility is plus or minus 1%, and the 10‑day is 2%.

It’s interesting because gold used to be the same as the S&P 500 and now it’s much greater. Nvidia is also greater than the S&P 500, and Bitcoin, as you can see, is three times the daily volatility of the S&P 500 and almost three and a half times the daily volatility. MicroStrategy, Michael Saylor’s incredible company, even has greater volatility, and CoreWeave, because of its extremely leveraged balance sheet, seems to get more volatility as the poster child in the AI business.

People used to say it’s got all kinds of financial problems, but at this stage I think so much is greatly exaggerated. But there is still a pretty strong negative narrative on both Tier 1 to Tier 3 data centers, and I’ll give you more commentary on that. HIVE Digital Technologies’ volatility has expanded, as you can see with CoreWeave, and the 10‑day gets exacerbated even more so because of Bitcoin and the movements in Bitcoin. But I will walk you through some of the numbers so you can get a better understanding about the great value proposition.

Next please. But before we get into that, I want to thank the investors. I want to thank you for being loyal with this volatility: Invesco, Citadel Advisors, Millennium Management, Situational Awareness, and Vitant Advisory for believing in our vision and recognizing the great value we provide to this industry and the team. Most important is the quality and the depth and breadth of the team. As you can see, Aydin Kilic and Craig Tavares. Aydin is the CEO for HIVE Digital Technologies, and Craig is the President and Chief Operating Officer of BUZZ, which is our HPC AI factory strategy, in particular sovereign data centers.

Craig is doing a phenomenal job in Canada and also going back and forth to visit Johanna Thornblad in Sweden to expand that footprint. And Darcy Daubaras is the longest‑standing CFO. Gabriel Lamas is our president, electrical engineer that’s in Paraguay. And Gabriel Ibghy, as you can see here, is General Counsel and he goes between Germany and Canada. So we do function over many time zones and provide interesting skill sets. The world’s first publicly listed digital asset miner on the TSX in 2017. You can see last year with a big growth was our exahash and Bitcoin. We’re so happy we put that on the balance sheet and the income statement because it’s given us economies of scale as Bitcoin went through a big correction this year, and I’ll give you more color on that in a minute. It’s important to recognize that HIVE Digital Technologies functions over nine time zones, five languages, and three continents.

As you can see from Sweden to Vancouver to Montreal, and Bermuda is in there right in the middle, and Texas, the head office is here where I am. We continue to be very efficient as miners for Tier 1 data centers or a bare‑metal AI business model. So HIVE Digital Technologies is turning hydroelectric power into computing power. We’ve been doing this when we started in Iceland and Sweden. The hydro dam is very close to our facility in Boden, Sweden, and the same thing in Canada and in Paraguay.

This photograph is incredible. The largest dam in the Western Hemisphere. It is like 5 km in length, massive, and generates about 15 gigawatts of electricity—half for Brazil and half for Paraguay. Paraguay, with a small population of 7 million people, is predominantly exporting beef and produce. They feed the world—about 70 million buyers of their products around the world. But now it’s accelerating compute power, and I’ll give you more color in a second.

Next please. What’s really important intellectually to grasp—because we find the frustration with regulators and banks in Sweden or Canada—is that we transform electrons from hydroelectricity into the value chain, what they like to call it, and we export compute power. We don’t export beef or food or iron ore. We export compute power. This is very significant because you can’t export hydroelectricity 5,000 miles, but you can transform it and export. So we export this compute power to Bermuda, which then goes to New York State for Bitcoin mining Tier 1 data centers, where we’re paid in Bitcoin, and for bare metal we get paid in US dollars.

That is a big reason why we’re in Bermuda. When the company first started, we started in Switzerland. Why Switzerland in 2017? Because it had the most advanced regulatory model and structure. Me, as co‑founder and putting up capital and reputation, I wanted to make sure we’re in the most regulated world—who had some guardrails up early—and Switzerland was much further ahead than other jurisdictions. In 2018, Bermuda came out with regulatory arms and basically a whole digital crypto set of rules.

From an accounting point of view, it made it much easier to go from Switzerland into Bermuda to be the comptroller, not in Zug, Switzerland. That’s where we’ve been for many years now. It’s a very important global design to be tax‑effective for investors and also for ourselves. We end up paying a lot of taxes. We have paid a lot of taxes in Sweden, a lot in Paraguay, and a lot in Canada. What it does do is it allows us to be in a regulated world. Now the US has set up a regulatory regime for the crypto industry, and I think that the Genius Act is a very important stepstone for America now. HIVE Digital Technologies uses only green energy, low electricity cost, low temperature—except for when we go to Paraguay; it’s much hotter. So we have a different type of chip in our Tier 1 data center there. HIVE stock price was above the 50‑day, fell below it, and now it’s below it.

A lot has to do with the summer and the Japanese yen—it was going through what we saw earlier this year in June, the carry trade. It first impacted Korean semiconductor—massive selloff—that impacted U.S. stocks and impacted HIVE. You can see this. These external events, such as Bitcoin pricing or the unwinding of Japan, have had this incredible multiplying effect and amplification of volatility. But through all this noise, we just continue to plod along and make sure that we’re doing the most effective mining or bare‑metal expansion program.

What’s important for investors is that the central bank of Paraguay now recognizes Bitcoin as an export. As I mentioned at the beginning, they export a lot of food for the world, and now we’re showing up as exporting compute power. It’s very important for the country, and we’re talking about more than a couple hundred million dollars of value that goes through the central bank now. You can see on the map this visual I mentioned earlier. The map shows you how the compute power goes from Sweden and from Paraguay and from Canada to Bermuda.

All of this is really, I think, something we’re going to see going forward where more central banks are going to start adding that as an important component of GDP. HIVE Digital Technologies was the first to build Tier 1 data centers in Paraguay, and there are long‑term Tier 3 AI factories. The rally is a massive event that’s like Formula One in Texas and Mexico and Miami and Las Vegas and all over Europe—in Paraguay it’s car racing and it’s a big event—but us being the first to build these unique data center constructions, HIVE has led the way. Now Stargate is heading to Paraguay. We’re in the Corsair that is opening.

Caruso is partnered with locals to do 100 megawatts, going up to higher, for a long‑term energy contract. HIVE has also been going through the formal process for our data center for HPC for the 100 megawatts. But we’ve been going through this drama that’s happened just recently in Paraguay, which everyone knows, regarding conflicts of interest, betrayal by the president of the country who’s now in jail. But the country shows that it has great stability—what’s important for investors—because it has the checks and balances of power and accountability.

The institutions there have been able to create this stability, and I’m so impressed with it. But in addition to characters that would happen and disconnect the short term with Paraguay, which will resolve, it doesn’t matter—there are always these bad characters, and it’s how fast you can deal with it. Precious metals in China—83 metric tons of gold‑plated copper bars for collateral—it just doesn’t matter where you go; there are bad characters, and there have got to be checks that try to unravel this.

And then Binance again. Last year they blamed it on algo. This year, interestingly enough, just before the American elections, Binance gets hacked and Bitcoin falls 10% immediately. The real concern is not Bitcoin—Bitcoin itself has not been hacked. It’s the on‑ramps and off‑ramps. As more policies come, embraced in America and other jurisdictions around the world, then I think things like this hacking into Binance—by supposedly one of their engineers left his computer open—but does it really matter?

There are just bad actors no matter where you go in any industry, and it’s how quickly can you cut those losses, correct the problem, learn from the lesson, and push forward in life. Recently we all went to the All‑In Summit. Aydin and Craig and myself went to Los Angeles to the All‑In Summit. I think it’s the number one podcast in the world. It comes out on Fridays and it’s a great analysis of technology and it gives you lots of different opinions. If you’re not listening to it, I highly recommend it. They bring on usually CEOs of companies and they have different perspectives of what happened in the sweep just recently in this election cycle in America, and what it means to AI and data centers.

But the blue midterm sweep puts sovereign data centers like BUZZ in focus. I think this is extremely valuable because there’s something that’s happened in America with lots of FUD and deep concern that the blue swing across America—and one of the big concerns, besides the Iran war lasting too long and Americans being really ticked off about it because every week they’re spending $100 to $200 more at the gas pump because of this war in Iran—and that was a big swing, especially by the Libertarian votes and people that are the swing voters between the Democrats and Republicans.

They all swung from being Republican, that swing vote, into the Democratic Party. With that, there are some higher percentages in states like Texas, which is 28% of all the data centers being built and has the biggest infrastructure electricity. There is a concern in this state, and I think that it lends itself that if anything it’s just going to delay data centers. This makes China very, very happy in the AI boom. I don’t think it stops it, but it will delay the process of building out.

What this allows is countries like Canada and Paraguay and Sweden to be able, as they say in Canada and Sweden, to skate faster. They have an AI minister; they have policies in place for AI and for data centers. So this, I think, is a really great way of looking at HIVE Digital Technologies as the strongest position in these other jurisdictions with sovereign data centers. HIVE’s BUZZ HPC partners with Progia to deliver end‑to‑end sovereign AI across Canada, US, and Europe. Next, please. We know that recently the Canadian Business Development and Sweden have had meetings, and our country president Johanna Thornblad has been back and forth visiting Sweden where they’re truly working together for cross‑border. This is very different with Trump and his fight with tariffs—basically seeing a realignment of interest between Europe and Canada and sovereign data centers.

I think this is a really interesting time for the value of these assets we have. What’s really important is the sheer size of BUZZ Gigafactory of 320 megawatts of electricity—sponsorship and support by the federal government and the provincial government. It’s going through its normal process right now—some additional clearance to make sure that it’s not going to harm the community—but really it’s a beautiful location and it only enhances Canada’s ability.

I think we’re going to see more and more in Canada, where Canada can’t be exporting oil and gas to the US to a degree or electricity, it’ll be exporting to the US compute power—what we’ve been demonstrating we’ve been successfully doing from Canada, from Sweden, and from Paraguay, and at one time when we started in Iceland. This is a rendering of what the potential is for a 320‑megawatt GTA Gigafactory, smack in the middle between the University of Toronto and what they like to call Waterloo University, which is Canada’s MIT.

We have the intellectual capital in the largest city in the country, but it’s also a city that’s been well known, if you look at history, for R&D and for innovation. I often think it’s because of the long cold winters—gets dark at 4 o’clock and the sun doesn’t come up till 9 the next morning—so people are really quite advanced at doing research in the winter. This is a rendering which we feel is a huge expansion opportunity over the next 12 months.

HIVE and BUZZ HPC’s partnerships with Nvidia, with Simon Fraser University, with Bell Canada, with Dell Canada, Nvidia, Tigo in Paraguay—so we do have top of the food chain intellectual capital—and Vector Institute, where Nobel Prize winners come out of. We are connected at the very top end of the intellectual food chain and business development in the ecosystem of AI Tier 3 data centers, expanding our industry reach. We’ve been very, very busy this quarter.

Conferences attended: 16 of them. We just had an incredible event in Berlin with Nvidia and diplomats and the head of the whole AI buildup and data centers attended our event. That was supercharged with, I think, just great, great people. Then interviews—doing two a day; it appears sometimes we do three in a day. Building lasting relationships in the quarter. We can see here that the President of Taiwan met with the President of Paraguay, Gabriel Lamas, in Taipei.

And then Evan Solomon is a Minister of Artificial Intelligence and Digital Innovation under Prime Minister Carney. There’s myself with Michael Dell—it’s the second meeting we’ve had on brainstorming of how we build our companies. It’s just an honor for me to be with Michael Dell, who’s given just billions of dollars for American kids for education. The thoughtfulness and the stewardship of he and his wife are over the top. I applaud his leadership.

I really think you got to think of Prime Minister Carney has reversed a lot of Justin Trudeau’s policies which were really anti‑growth, anti‑capital investing. A lot of global macroeconomists look at GDP per capita, and they look at what percentage of the economy went into infrastructure and innovation and R&D. Under Justin Trudeau it fell way, way behind. That impacted the relative GDP per capita of the US to Canada, which are always in the same trending line.

It also impacted Europe. What’s really important for investors is that Prime Minister Carney has shown tremendous leadership of reversing a lot of these—same political party—recognizing with his experience from Goldman Sachs partner to the head of Bank of Canada and head of Bank of England and chairman of Brookfield what creates wealth, and it’s about capital investing long term that unlocks job sustainability and growth. Building industry partnerships. As you can see, many pictures of the team traveling the world. Land and power: that’s building the pipeline—320 megawatts Gigafactory in the Toronto region, 32 megawatts in Boden, 100 megawatts in Paraguay, and Picos County working on 500 megawatts. Next please.

I’d like to try to relate to some other things as a macro investor for investors to understand that there are some macro events taking place and they’re still not over under the Trump era, and that is the Monroe Doctrine of looking at the Western Hemisphere. There are many reasons for opening up. You’ve seen a huge swing in South America going to the middle on the election process from the far left. What are some of these reasons? A lot of the strategic minerals which China is cutting America off—and Japan—they’re in Latin America.

When we look at population of consumers, we’re talking about 1 billion. So the idea of not being pulled into wars in Europe or into Asia, and really north‑south traffic. I know from other products I have, the north‑southbound traffic for the airlines industry—known as digital nomads—is huge. It’s absolutely huge. In the winter season, people flying from Canada and the US fly south to Mexico, to Argentina—wherever there’s strong internet—they like to go to Colombia, they go to Medellín, and they learn the local cultures, and they really use Airbnb.

It’s really quite fascinating to see that it’s opening up and focus. Rather than going across the Pacific, the north‑south traffic is going to only increase. Next please. The reasons for that is this—what’s called the Ring of Fire. What we see here is Bolivia with lithium; Chile also with lithium; and Argentina was known as the big lithium triangle. We need that. We need the lithium batteries—the backup for HPC data centers—and for Tesla vehicles or EV vehicles, you need lithium. So this is another big factor of north‑south in addition to oil in Venezuela, which is turning around their GDP dramatically since Maduro has been taken out of this corruption and dictatorship in that country.

AI data centers are driving demand for lithium and other critical minerals. Next please. We can see this with copper prices—we’re hitting all‑time highs because of the build‑out in the electrical grid. Copper from this Ring of Fire is very important. It comes from Peru and Chile—the big copper porphyry deposits—and they also come from the US and up into Canada into the Rockies. With that, we try to break down here for you: land is a dollar for every $100 spent of AI capex, and this is a breakout of what it costs by Lewis Gardner. I think it’s helpful to recognize that the capex cost for a megawatt for an HPC data center used to be 33 times what a Tier 1 data center is for Bitcoin mining, and now it’s pushing more than 40 times. Most of that is really the new power structure and the cost of the Nvidia chips, which has gone up dramatically.

What I want to highlight to investors—I’m going to turn over here to Aydin for the financials—is to recognize that revenue was up about 3% even though Bitcoin was off 27%. That means in the past year we built economies of scale and our margins are still very healthy and robust. The other part is, in GAAP and mark‑to‑market, during this quarter we started buying some better, more energy‑efficient ASIC chips, and mark‑to‑market as well. If Bitcoin is down, then the value of those ASIC chips is down, and before the next halving they’re down. We still said, well, they’re great prices to lower or become more efficient, and with that we bought some more of these chips. That just says your depreciation—even though we have an accelerated depreciation for our chips—has not been as great, and that’s how inexpensive these chips have fallen. We thought it was very prudent to go and start buying these chips on a weekly basis to upgrade our data centers.

What does that do? It creates a mark‑to‑market rule making a non‑cash charge of $31 million. So, following GAAP, you really have to drill through and take a look at what was the revenue and then what was our adjusted EBITDA or operating income from that. You can see that it’s very, very healthy, especially when you compare to our peers and we compare to ourselves quarter over quarter and year over year. So Darcy’s covered this, and Aydin is going to probably give you some more interesting granularity with it.

Aydin Kilic (President and CEO)

And thank you, Frank, for that excellent macro strategic overview of the industry. Now let’s get into some highlights from the quarter and an executive summary. So it was a strong quarter for us. Approximately $85 million of total revenue, of which we had about $30 million of gross operating margin. Now netting off our $10.7 million of G&A, earnings from operations in the business came out to $19.5 million. So what I like to think of as corporate margin on a cash basis—what did the business produce?

Now along the bottom, if you look at the adjusted EBITDA of $24.8 million, that stands alongside a net loss of $78.7 million, which is measured against $102 million of depreciation, non-cash impairment, and other non-cash charges. By the way, of that $102 million, about $86 million is really just depreciation and a non-cash impairment relating to ASICs and hash price, which applies to any miners following us. GAAP operating ASICs. Let’s double click on those operating margins. So again, we have the two engines, Bitcoin mining and HPC cloud. So the total revenue, $85 million to 36% gross operating margin, was really made up of $76 million of Bitcoin mining revenue, where gross mining margin was 34% for the quarter. And the HPC AI revenue of $8.8 million actually did a very nice 51% gross HPC margin, resulting in a $4.5 million gross HPC margin. Now a couple things to point out.

One, we realized our $35 million HPC annualized recurring revenue target, so that’s great. And also it’s worth pointing out that we are still scaling this business. So as we bring online new GPU clusters, our margins will continue to climb on HPC business. Obviously, as you’re scaling the business bringing on more resources, you are having additional overhead with that growth. Our newer deals are targeting about 80% EBITDA on GPU cloud. But we’ll get into that shortly.

Let’s go to the next slide. Going into the winter season here, as of September 30, $139 million of cash on the balance sheet and $22.6 million of Bitcoin on the balance sheet as well for a combined $160 million of liquid assets, cash and cash equivalent on the balance sheet. So with the volatility in the market lately, it is good to have that strong balance sheet which we are protecting. Our mandate this quarter is to protect our balance sheet. We have navigated two Bitcoin halvings and the Ethereum merge, and this is the AI bear market that we’ve seen with all the recent pullbacks and the calamity, almost $4 trillion in market value wiped out in the last couple weeks.

Again, this is not our first rodeo. HIVE Digital Technologies has been a publicly traded company—in fact, the longest standing of our peer group of HPC and AI infrastructure builders have pivoted from Bitcoin mining software. So keeping a strong balance sheet, conservative G&A, although we are growing the business, is our solution to scaling and of course growing cash flow and realizing return on invested capital. Let’s go to the next slide. So if you look at our operating margins today, some really great news. Not only did we reach that $35 million ARR for the quarter, but as of today we’re actually at $40 million of annual recurring revenue for HPC. What that means is we’re doing over $110,000 daily revenue, which is fantastic. And if you apply those same HPC margins of approximately 50% from the quarter to our current $40 million, it’s about a $20 million annualized gross HPC margin today.

And on the Bitcoin side of the business it was $300 million ARR for the quarter. But even if you look at mine economics and production since the period and to today, it works out to a very similar figure. So applying that same 34% gross mining margin, it’s about another $100 million of annualized mining margin. So I just want to give the Street and all the investors out there a snapshot of where we stand today, November 9th, since the quarter end.

And again, really exciting that our HPC revenues continue to climb due to strong demand, of course GPU hourly prices. Let’s go to the next slide. Global power footprint, 816 megawatts. Now we’ve updated this slide to include all the sites and there’s really two categories. There’s Bitcoin mining sites and there’s Bitcoin mining sites that are being converted to Tier 3. And so we’ve highlighted them in green and orange. And so you can sum up that across all the sites that have been identified for conversion to Tier 3, we have a 530 megawatt Tier 3 conversion pipeline globally, which is very exciting.

Of course Big Bowden, the gigafactory site in the Greater Toronto Area, and our New Brunswick site are big contributors to that pipeline. And of course 440 megawatts is active currently mining Bitcoin. So we’re really excited about the growth that we have ahead. That’s just a good global snapshot because land and power is the input to this system. Whether you’re selling rack space or standing up GPU cloud and selling tokens, really the input to the system is having power landed.

We’ve got a lot of it. As I’ve said in the past on earnings calls, we had been land banking by substations and this of course is the fruit of that labor. Let’s go to the next slide. Some great news out of Ontario. Actually on the home front in Canada, we saw that blue wave sweep the US midterms and there were massive headwinds and negative sentiment surrounding AI, and we saw collectively $4 trillion of market cap from American tech stocks really get wiped out over the last couple weeks. And so there’s a massive breath of fresh air and candidly, what we think is an extremely strong tailwind for HIVE and Buzz as our data center pipeline across Canada totals 400 megawatts of utility load.

But most notably our Gigafactory site and our Toronto Airport site sit proudly in Ontario. And so Premier Doug Ford announced a playbook in August where he said that they’re really choosing to build the economy of the future. They’ll generate billions of economic growth. They want increased tax revenues and create thousands of new jobs. So we think Premier Ford, he gets it. We salute you, Premier Ford. And his Minister of Economic Development, Vic Fedeli, said the province will make certain to give priority to data centers that use a closed-loop system, which I do note.

All of our data center designs for our sites, notably the Gigafactory, Toronto, and even Grand Falls, have always been based on a liquid-cooled closed-loop system. We’ve talked about this before, so it’s very comforting to see the strong support from the Office of the Premier. And moreover, they doubled down on this because the data center playbook came out in August; just a few days ago, in fact, Ford’s office stated that they will be approving the first swath of new AI data centers, quote, sooner rather than later.

So again, a breath of fresh air amidst a lot of global turmoil, at least in the US markets. So we’re very excited about the outlook in Canada. Let’s go to the next slide. So this is a recap of all the sites that we have underway, their status. Again, starting with the Big Bowden site, that one’s the most near term. We’ve got the LOI executed. We’ll be providing the Street’s update as we get closer to that definitive agreement. And really it’s an exercise, not in rushing, but getting the right deal done for our shareholders. And so it is an IG offtaker. And so one must contemplate how much deposit you’re getting on signing, what parental guarantees look like, and all of the things that will affect your cost of capital when you’re going to finance it.

We’re very much aware of the headwinds in the industry right now. So we are being cautious in protecting our balance sheet while also seeking the lowest cost of capital by strongly negotiating terms that behoove our shareholders and our stakeholders. So that’s the quick update on Big Bowden, and then of course the rest of the sites. But this is more of a handy reference slide; we can actually flip through one by one. Let’s go to the next slide. So here’s a beautiful visual of the Toronto Airport site. This is not a Bitcoin mine. It’s a proper data center that we acquired in September of last year. Again, we’ve talked about this site being very attractive for military applications. We’ve had some reverse inquiries from Canadian government, and budget for this will be about $40 million, which we’re funded for thanks to the financings we’ve done earlier this year. And at 5 megawatts of IT load, this would do $8 million annual recurring revenue as colo, or as GPU cloud, you’d fit about 2,000 GB300s, which at today’s prices would easily throw off $80 million ARR.

So the operative word is optionality. It’s a bite-sized site. It would be a showcase marquee and we welcome to have visitors as the site progresses, and we want to showcase the progress. Stay tuned for updates. Let’s go to the next slide. The Gigafactory, of course our crown jewel. Again, how could we not mention this site, especially with the recent positive words from Premier Ford in the province of Ontario. Again, as we said, our design has always been a closed-loop cooling, zero-water-usage design using liquid cooling. You have loops where, whether it’s glycol fluid, you’ve effectively got a system whereby thermal energy is transferred through closed-loop piping to chillers that sit outside of the building, and so thermal energy gets expelled that way and no water is actually consumed.

Despite all the FUD, it seems that a lot of the protesters—it’s ideology driven. I don’t know anybody that actually builds data centers, whether it’s in the industry that’s protesting them, because they know that these things don’t drain energy. And when you’re consuming electricity, you are an industrial client of utility companies. So do we shut down aluminum smelters? Do we shut down every other industry all across North America that uses megawatts of power?

No, because these drive revenue and taxes for the utility companies. No one’s putting a gun to the head of the utility companies. So I think that there’s a lot of misunderstanding—it’s really FUD. As a Bitcoin mining company we understand FUD—fear, uncertainty, and doubt. So anyways, just to remind folks that this is a project that we engage with the region as well as the municipality on sustainable planning, design, as well as engineering infrastructure upgrades.

That means widening roadways, improving civil infrastructure for the 25-acre parcel where we assembled land for this future site. And again, closed-loop cooling, zero-water design, as is called for in an NVIDIA reference design. So NVIDIA doesn’t make an open-loop system that just continuously drains water. So again, I just think there’s a lot of misunderstanding. We just want to educate the public. Let’s go to the next slide. New Brunswick campus, of course. So the update here is we’ve now expanded the site. We’ve closed as recently as September all the parcels of land to the east and to the south. This is now a 64-acre campus. We’re very excited. Fifteen megawatts of IT load, and stay tuned for updates. But again, this forms part of our Canadian sovereign compute thesis.

So our dual engine strategy, approximately $300 million ARR. Whether you look at the fiscal Q2 or really production economics, since Q2 sits squarely at $300 million, actually slightly above since the quarter, notwithstanding the recent downtrend in Bitcoin price over the last few days, we actually saw really strong hash price in the month of October. And then in the HPC GPU cloud we are now at $40 million ARR—again, about $110,000 a day, in fact a bit north of that on some days.

So very exciting. Now on a combined basis, our dual engine is about $340 million ARR. And this is just a recap, a handy recap especially for the analysts out there. We signed three GPU cloud deals this year totaling $600 million of total contract value. So that $40 million ARR that we’re at today—if you look at the bar chart at the bottom, the Cohere deal gets us to $115 million by adding $70 million ARR. Again, that’s—sorry—$75 million ARR. And that’s a three-year deal. And then the IG five-year deal for $350 million adds $70 million ARR. That gets the contracted total GPU cloud revenue to $185 million—just again, just a handy recap of deal terms, hardware, etc. And if you zoom out and just look at our HPC revenue roadmap, we’re well on track to hit that $200 million ARR target. Expect an update on the 500 for B300 GPU deal. I will tell you that we have demand through this and beyond on the GPU cloud side.

We’re going to talk more about that shortly, so stay tuned and expect us to provide updates on more GPU deals. And of course, as I mentioned earlier, we’re advancing the Big Bowden working. We actually had a site tour with a potential lender last week in Bowden and so again focusing on getting the best cost of capital, advancing that process, making sure we’re looking out for our shareholders and negotiating deal terms that—really this will be a long-term deal—and so we want to make sure that we’re doing the right thing today and securing strong cash flows.

So stay tuned for updates on Big Bowden. But again, on a combined basis, if you looked at all the sites on the right as HPC colo, 325 megawatts of IT load would be $500 million ARR, and if you look at a GPU cloud on the left that’d be $200 million ARR. Both would target about 80% EBITDA—$700 million ARR combined, or $500 million of projected EBITDA based on our HPC revenue roadmap. On that note, once we hit our $200 million GPU cloud target targeted for end of this year going into 2027, with that $200 million GPU cloud annual recurring revenue plus the Bitcoin mining revenue—what’s really exciting actually puts us at a $500 million combined ARR target for early calendar 2027.

Now of course Bitcoin mining revenues vary with hash price, but still, with what we’ve seen recently and the growth and deployment of our GPU cloud clusters over the coming months, we’re really excited to see that growth because this also means more EBITDA and more cash flow for the business. As I mentioned, we have outsized demand beyond what we projected. So this is an illustrative slide to show the Street: if, for example, we took the Toronto Airport site and allocated as GPU cloud, that would have our total GPU target revenue to $285 million.

And again, we have demand. This is an illustrative slide, and you would see that the HPC colo target still is about $495 million on the right, so it actually increases the combined HPC and GPU cloud target to $780 million. Again, there’s a lot of volatility. We’ve seen commentary on GPU financing and credit market crunch, etc. We are protecting our balance sheet. Our goal is to navigate the headwinds. Stability is key, maintaining positive cash flow.

This really just shows what we’ve got demand for near term, and we will provide the Street more updates. Really our focus is to build up the Toronto Airport site for 2027 and have that go live before the end of the year. But again, just so you can understand the metric of if you took a colo site and moved it to GPU cloud, the rule of thumb is every 5 megawatts of IT load is 2,000 GPUs, and 2,000 GPUs at current prices is about $80 million ARR. So current prices—you know, we’re seeing GPUs are pricing in the 4.50 range and even higher.

So again, this is just an indicative slide for people to plot the economics. Again, optionality is a key word. We’ve talked about annual recurring revenue, but on an EBITDA basis, if you look at the margins of the—I should say the higher margins from the new GPU cloud deals—it would put collectively our EBITDA at a potential target of $350 million with the load-and-lease HPC colo deal being executed with the GPU cloud deal according to $280 million ARR. So strong outlook for us to grow into as we navigate these market cycles. Again, we’re not necessarily in a rush to sprint but rather protect the balance sheet and only do what we think are the best deals for our shareholders.

Let’s go to the next slide. Speaking of funding—again, just a quick recap. We did the $245 million of zero-interest coupon convertible notes this year. After capped calls, net proceeds were $200 million. And in addition to that we recently announced a $120 million GPU loan, and funds are with an escrow agent from the lender. And so this is a committed GPU loan. Again, deal terms: 80% loan-to-cost, 3-year term, 9% interest, and those funds get released to the GPU OEM at milestones because this is the anatomy of the GPU deal.

So these proceeds were to fund the Cohere deal, which again was a three-year, $225 million total contract value deal. The hardware, the capex, was $165 million, and nowadays two GPU clusters of this size—2,000 GPU cluster of GB300s—are close to $200 million plus. So again, we locked this in much earlier in the year, and so $129 million of financing on the $165 million of GPU cluster. And so this is straight line. We will own the GPUs outright. The loan balance is $0 after the 36 months; it’s co-term with the offtake agreement of 3 years, which is Bell Canada. Again, if you don’t know about Cohere, right now they’re doing a $35 billion Series E backed by the Government of Canada, Bell, and even NVIDIA. And again, we own the GPUs outright at month 36, and the resale value is actually upside. This is SPV-level debt. And so when you look at, on an annualized basis, $75 million of revenue with about $49 million of debt service, it’s very, I would say, well-structured financing for our first large cluster deal.

And again, we wanted the cash flow; we want it to make sense. Yes, revenue is important, EBITDA is important, and cash flow is very important as well. So we were happy to announce this, and we will continue to navigate the market and scale our business very intentionally by sourcing what we think is the lowest cost of capital. Just a recap, the last 12 months of revenue—approximately $329 million for HIVE Digital Technologies—which is more than a lot of our peers. So again, our dual engine strategy continues to generate revenue and cash flow. Very healthy. Eight hundred sixty megawatts of secured power. You see some of our peers between 800 to over 2 gigawatts of power, and our two-year forward HPC ARR stands for a respectable $700 million in our base case. So really we think we’ve got very strong optionality as we continue to execute on leases for HPC colo, GPU cloud, and of course growing at re-rating and valuation alongside our peers.

Let’s go to the next slide. On a near-term basis, with the GPU cloud deals that are contracting—$185 million including our active $40 million revenue—and the HPC deal at Bowden, $45 million ARR, using current multiples, even though markets pulled back, using current multiples it would put us at about a $1.4 billion valuation. So we think that notwithstanding the headwinds in the industry, we’re continuing to execute. And so we think that there’s a lot of upside here, especially if you look at where our peers are trading.

And the macro zoom-out—if you look at all of our sort of growth roadmap, the $500 million target for HPC colo with a 325 megawatts IT load, and then $200 million on the GPU cloud, using peer multiples—again, even though markets pulled back and there are more conservative multiples—puts us at a $3.9 billion implied valuation to grow into as we build out our sites over the next two years. So on that note, I’m going to turn it over to Mr. Darcy Daubaras, long-standing CFO in the industry.

Next slide.

Darcy Daubaras (Chief Financial Officer)

Thank you, Aydin. So for our investors, I’ll walk through HIVE’s second quarter financial results for fiscal 2027 that ended September 30, 2026. This quarter presents two important stories. Operationally, we delivered higher sequential revenue, increased gross operating margin dollars, and significantly improved adjusted EBITDA. At the same time, our reported GAAP results reflect the challenging economics of Bitcoin mining and the significant non-cash impairment of equipment.

I’ll explain both because understanding that distinction is important to assessing our performance. Before reviewing the quarter, I’ll briefly touch on our capital structure. At September 30, HIVE Digital Technologies had approximately 276 million common shares outstanding, 3 million warrants, 2.6 million options, and 15.6 million restricted share units. Our shares trade on the Toronto Stock Exchange and NASDAQ under HIVE and on the Colombian exchange under HiveCo.

Turning to our financial highlights, total revenue was 84.9 million, including 76 million from Bitcoin mining and 8.9 million from HPC and AI services. Gross operating margin was 30.2 million and adjusted EBITDA was positive 24.8 million. These represent meaningful improvements from the prior quarter on a US GAAP basis. However, EBITDA was negative 22.1 million and the net loss was 78.7 million. The net loss includes a 31.2 million non-cash impairment of equipment as well as 54.9 million of depreciation, 8.6 million of share-based compensation and a 7.3 million loss from changes in the fair value of derivatives.

The impairment deserves some explanation. Under US GAAP, we assessed our Bitcoin mining equipment following lower mining revenue per unit of computing power and reduced market values for ASIC equipment. These factors lowered expected recoverable cash flows and residual values. Our assessment determined that the asset group’s carrying value exceeded its recoverable value, requiring this 31.2 million non-cash impairment. As I mentioned, this is a non-cash charge but is a real adjustment to the carrying value of our assets.

We finished the quarter with 269 Bitcoin in treasury. Three measures summarize the operating quarter. Revenue was 84.9 million, adjusted EBITDA was 24.8 million and we produced approximately 1,070 Bitcoin equivalent during the period, keeping that side of the operations extremely strong. Together these metrics show the operating contribution of our expanded platform, while our GAAP statements also recognize the depreciation and non-cash impairment associated with the capital intensive nature of Bitcoin mining.

Looking now at our balance sheet, we ended September with 139 million in cash, 22.6 million in digital currencies, 18.6 million of receivables and prepaids and 11 million of investments. Current assets totaled 213.4 million versus current liabilities of 137.8 million, leaving working capital of approximately 75.6 million. That liability balance includes an 84.5 million provision for regulatory liabilities related to the previously disclosed VAT matter that occurred in the prior quarter.

Cash declined from approximately 208 million at June 30th. As we continued investing in our infrastructure and growth plans, we report 12.2 million of operating cash flow for the first six months of the fiscal year. Alongside substantial investing activity, we remain focused on maintaining financial flexibility and allocating capital carefully across Bitcoin mining and HPC and AI infrastructure. Turning back to operations, gross operating margin was positive 30.2 million compared with 42.4 million a year ago, a decrease of approximately 29%. Basic loss per share was $0.29 compared with a loss of $0.07 last year. The larger reported loss reflects both operating economics and those significant non-cash charges including the equipment impairment recognized this quarter. Gross operating margin excludes depreciation, so it offers a different view of performance from GAAP earnings.

Looking at that, the year-over-year comparison highlights the pressure on mining economics. Revenue was 84.9 million compared with 87.3 million in the prior year quarter, a decline of about 3%. Gross operating margin declined from 42.4 million to 30.2 million and the margin percentage decreased from approximately 49% to 36%. The 10-Q identifies lower mining revenue per unit of computing power as one of the factors affecting our mining equipment recoverability assessment.

This is an important reminder that revenue scale alone does not determine profitability in a changing Bitcoin network environment. Sequentially we made meaningful progress. Revenue increased from 79.1 million in Q1 to 84.9 million in Q2, or approximately a 7% increase. Gross operating margin increased from 24.2 million to 30.2 million, or approximately 25%. That represents an improvement in gross operating margin dollars despite the challenging industry backdrop. Based on the reported amounts, gross operating margin was approximately 31% of revenue in Q1 and 36% in Q2. The improved operating contribution helps explain the increase in adjusted EBITDA even though it does not eliminate the effect of non-cash expenses on US GAAP results.

From an earnings perspective, I want to distinguish our operating performance from the accounting charges affecting the reported result. Adjusted EBITDA was 24.8 million compared with 31.5 million in Q2 last year. Our GAAP net loss was 78.7 million compared with 15.8 million in the prior year quarter. The most significant new item this quarter was the 31.2 million non-cash equipment impairment under US GAAP. We evaluate long-lived assets for recoverability when circumstances indicate their carrying amounts may not be recoverable.

Lower expected mining economics and ASIC resale values triggered that review. In addition, depreciation totaled 54.9 million compared with 38.3 million a year earlier, reflecting the expense associated with our asset base. Share-based compensation was 8.6 million and the derivative fair value loss was 7.3 million. These items are reflected in GAAP earnings while adjusted EBITDA provides a supplemental view. Using the reconciliation in our reported results, I would emphasize that the impairment is not a cash outflow this quarter, but it should not be dismissed.

It reflects a reassessment of the recoverability of our mining assets. Finally, the sequential earnings comparison shows the improvement in operating contribution. Adjusted EBITDA increased from 13.4 million in Q1 to 24.8 million in Q2, an increase of 11.4 million or approximately 85%. At the same time, our GAAP net loss narrowed from 142.9 million in Q1 to 78.7 million in Q2. It is important not to treat that reduction in net loss as a like-for-like improvement in operations. Q1 included the substantial non-cash Swedish regulatory provision whereas Q2 includes the 31.2 million non-cash impairment of equipment.

In fact, the 10-Q in our reported results reflects a small 0.2 million reversal of regulatory provision expense in Q2 due to foreign exchange movement. Taken together, the quarter demonstrates better sequential revenue, higher gross operating margin dollars and stronger adjusted EBITDA. It also demonstrates the need for disciplined investment decisions and careful assessment of asset values as mining economics evolve. As always, we will continue to focus on operating efficiency in our Bitcoin mining and disciplined development of our HPC and AI infrastructure business. With that, I’ll turn it over to Nathan Fast.

Nathan Fast (Director of Marketing and Branding)

Thank you, Darcy. That concludes the presentation for today. And with that we will now begin the question and answer portion of our call. Analysts on the line, if you could please click raise hand. When you’re ready with your questions, we will begin to choose and ask you to unmute. Our first question comes from the line of Bill Papa Nostasio. You can go ahead and unmute and proceed with your question.

Bill Papa Nostasio (Analyst)

Yeah, thank you. Good morning, gentlemen. Congrats on all the progress with the HPC business. For my first question I’d like to touch on the letter of intent for the long-term colocation contract at the 32 megawatt Bowden site in Sweden. Can you just provide a high-level update in terms of how far you are in discussions? What’s remaining to get that over the finish line and just an overview of what the customer profile looks like. Thank you.

Aydin Kilic (President and CEO)

Hi Bill. Yeah, this is Aydin. Thanks for the question. So I tried to address this in my section of the presentation whereby I was referring to negotiating the terms of the final agreement that really looking out for our shareholders. So there are terms that, when you’re finalizing an offtake agreement for a colo deal, termination rights, deposits, all of these different key factors that the street looks at, that you would look at to evaluate the risk profile of the deal and, moreover, the lenders.

So we could have signed the deal weeks and weeks ago, but really as we’re working on structuring the finance for that deal, this is where we’ve been very involved and even had a consultant for the lender come out and do a site visit last week. I mentioned that in my section as well. So lots of progress, lots of work happening behind the scenes. So it’s advancing very well and it is an investment-grade offtaker that we’ve alluded to. We’ll provide more details, of course, on term of the agreement as well as the profile of the offtaker.

But really it’s an exercise in getting the best terms that allow us to see lowest cost of capital and financing, which we think right now, especially in markets where we’ve seen the headwinds and the pullback, cost of capital is important. And so we don’t want to rush into a deal just for the sake of reporting new top-line revenue. We want to make sure that along with that we’ve got good cash flow and a good financing structure to support the growth.

Bill Papa Nostasio (Analyst)

Appreciate that. And as a follow up, I know this is still very fresh, but just curious how the team’s expansion strategy is evolving. I recall the United States was a potential geography for expansion in the past. Have you guys parked that idea following the recent midterm results and if you could rank which regions are most attractive today, that would be helpful. Thanks.

Aydin Kilic (President and CEO)

Certainly we’ve always had an eye on the U.S. We’re always looking at sites throughout the U.S. It’s got to be the right opportunity, of course. So that’s what I’ll say there. I think that the political headwinds in certain states obviously are signals that must be read, and plans must be made accordingly. I would say, to rank, really, Canada right now is standing in the lead. I addressed the playbook issued by the province of Ontario and the administration of Premier Doug Ford, and really his office doubling down just a few days ago, releasing a statement that they’re going to be approving the first swath of new data centers sooner rather than later. So I think that stands in stark contrast to a lot of the rhetoric coming out of different states in the U.S. But, by the way, I really empathize with the rest of the industry.

I think that all of us winning is good and obviously provides a unique value proposition for HIVE Digital Technologies shareholders and investors at this point. And so we do—we’re grateful that the winds are at our back in that regard. But I do hope that, broadly, you know, cooler heads prevail and people realize that AI is really going to unlock an immense amount of value. And I think, just kind of on a tangent, you know, the concept of Jevons Paradox is just because the cost of a commodity goes down, it doesn’t mean that you use less of it. You expend the same costs and you consume more, so we’ll have more economic output. I think that’s the way. It’s an abundance, not a scarcity mindset. But at any rate, we’re really bullish on Canada right now. Obviously, of course, Sweden having this LOI signed is very optimistic.

And as Frank addressed, there have been some political sea changes in Paraguay. But, you know, we’ve been operating there for a long time. Operationally it hasn’t affected us. And as a new administration comes into place, really we think that, as Frank mentioned, there’s calamity that happens everywhere. It’s how well are the institutions set up to course-correct. And so we believe that Paraguay is a very stable jurisdiction with good governance.

And so, you know, we’re also bullish on Paraguay as well. I mean, it’s so rich in natural resources, very smart cabinet of ministers that are very much pro data center and pro AI. And so I think that consensus still remains strongly rooted. And, you know, we’ll see how things unfold, but we’re very confident that Paraguay is still going to be a fantastic horizon for data center building for AI.

Bill Papa Nostasio (Analyst)

Great to hear that color on Paraguay. You answered my final question. Looking forward to all the progress in the current quarter. And I’ll go back in the queue. Thank you for answering questions.

Nathan Fast (Director of Marketing and Branding)

Thank you, Bill. For our next analyst question, we’ll go to the line of Chris Brendler from Rosenblatt. Chris, please unmute yourself and proceed with your question.

Chris Brendler (Analyst at Rosenblatt)

Hey, thanks, Nathan. Thanks for taking my questions. Congrats on all the progress. I just wanted to ask on the Bitcoin mining side—you know, even though it’s been a little bit of a rough run, I have seen improvement recently in hash price. And your results also suggest really strong cost controls. I just wanted to ask, from a macro to a top-down perspective, given what’s going on on the HPC side these days, are you sort of interested in potentially expanding more on the Bitcoin mining side, or are we still prioritizing capital for the HPC side?

And also, what’s the latest on your plans in Paraguay? I know that you just talked about it, but I was wondering—you know, I think last quarter it was potential for high-performance compute data centers in Paraguay. Right now I think it’s just Bitcoin mining. And so is the plan, related to my first question, still to try to switch, or is there any interest in expanding Bitcoin mining at this point? Thanks.

Aydin Kilic (President and CEO)

Yeah, and I tried to address this in my section as well. Right now it’s protect the balance sheet and navigate the market that we see ahead. So I think different people on the street have different opinions—this pullback, is it short term, is it medium term? But, you know, cash is king. And so we’ll be deploying cash for assets that will generate near-term revenue and cash flow. And I think the other point that we also tried to address in the press release was that, ending the quarter with $139 million of cash on the balance sheet while also successfully meeting the capital commitments for the first large GPU cluster deal that we announced with Cohere, meaning that we’d secured the $129 million of debt. So really, instead of talking about how much money we can spend and how much we can grow, we’re trying to show what we’ve got contracted, how we’re financing it, and that we’ve got a s