HIVE Digital Technologies Ltd (HIVE) 2021 Q3 法說會逐字稿

Good morning, everyone. I would like to welcome you to today's webcast reviewing HIVE Blockchain Technologies' results for the third quarter ended December 31, 2020. My name is Holly Schoenfeldt.

On Slide #2. Except for the statements of historical fact, this presentation contains forward-looking information within the meaning of the applicable Canadian securities legislation that is based on expectations estimates and assumptions as of the date of this presentation. Please see the corresponding Slide #2 on your screen for full disclosures.

I'm pleased to welcome the presenters for today's program. Frank Holmes, Interim CEO and Executive Chairman; Darcy Daubaras, Chief Financial Officer; and Tobias Ebel, Director.

Slide #4. I would like to run through a brief overview of the company. HIVE is the first publicly listed blockchain infrastructure company listed on the TSX Venture Exchange since September of 2017, raising $200 million. HIVE provides shareholders with exposure to digital currency mining as well as a portfolio of crypto points. Low-working capital requirements does not require immediate sale of mined points. And lastly, HIVE has operations situated and hold jurisdictions with access to low-cost green and renewable energy.

On Slide #5. I think we all know that Bitcoin has topped $57,000. And on the next slide, we can see that Ethereum grows above $1,900. If we go to the next slide, I would like to hand the presentation over to Frank Holmes to start us off. Frank?

Thank you, Holly. And those gorgeous hats there, we'll have them soon for the shareholders that are showing so much enthusiasm. It's a record over 1,500 people listening to this webcast. And I have never received so many e-mails asking questions. I'm going to try to -- Darcy and I and Toby, weave in and out of the storytelling on these slides to give you the information. Hopefully, we answer the most dominant questions. But I'm talking about this morning over 100 e-mails of questions. So I do not think we'll have time to answer everything, but I hope that we can push them through this presentation.

Next, please. So one of the big parts, what I've noticed is that there's really not in North America on the sell-side brokerage analysts that really understand crypto, the crypto mining, when I talk to them and understanding that it's all of revenue growth both current and future revenue growth. So this is a simple visual to try to understand the volatility on a daily basis is that crypto is -- the coins of Bitcoin and Ethereum are substantially more volatile than the S&P or gold.

And when you add that volatility to what your current hashing power that is, how much you're mining today versus the equipment you've announced that you're going to buy in the future, your future potential hashing power is what drives these stock prices. But the biggest factor just like gold stocks is what is a daily action of gold, for silver stocks, what is the daily price action of silver, dictates the various price actions of the underlying stocks. And what we see is what's your potential is for revenue and cash flow.

Next, please. So I've asked a lot, which better to buy Ethereum or Bitcoin or buy stock? And this is just a classic example. I've seen this before in the gold and silver space where the stocks can far outperform when they have big leverage. And they can hold inventory, which we do. So last year, HIVE far outperformed the spectacular move in Ethereum, inching enough by Ethereum outperform Bitcoin and for far outperformed gold.

Next, please. So this is comparing to other companies that gain lots of attention in the capital markets: Riot; Grayscale Bitcoin Trust; HUT 8; and Bitfarms in Canada. Riot was (inaudible) break behind us in the U.S. in going public. But last year, we far outperformed, as you can see. And I think there's a big reason for it is that the 3 of us that are speaking today have been on a regular basis, even during crypto winter, to communicate how we were surviving and still waiting to turn the corner. And that created a very strong loyal shareholder base. I have never also received so many e-mails on shareholders that bought more after corrected that didn't sell and capitulate and are happy where we are because HIVE has made all-time highs. And anyone that's weathered through the storm from beginning of 3 years ago, definitely were able to come out a whole.

Next please, and most of them make substantial buckets of capital. So there's a HIVE Blockchain versus the Bloomberg Galaxy Crypto Index versus the S&P/TSX Composite Index and NASDAQ Composite Index. As you can see, we've done a spectacular result in that relative performance.

Next, please. But what's so important for all investors and traders is to recognize what the DNA of daily volatility is. And this basically says that approximately 70% of the time is a nonevent for the S&P to go up or down 1% in over 10 days, plus or minus 5%. And bullion to go plus or minus 1% in 1 day, and over 10 days, plus or minus 3%. That's the normal breathing capacity.

Bitcoin is 4x what the 1-day volatility is of the S&P 500, and 4x what gold is. Ethereum is 6x the volatility of gold in the S&P 500. And when we look over 10 trading days, it is 17% and 13% for Bitcoin and Ethereum. So the volatility is much greater and anyone coming in this space must really respect that volatility or they'll complain. They bought it a high day or its best I found is they buy -- after it's down 2 standard deviations at a day, it's usually a safer entry into this market.

But what's most interesting to me is Tesla. Tesla has incredible DNA like Ethereum. DNA volatility over 10 days is even greater. And over 1 day, it's greater than Ethereum. And gold stocks actually are a lot less volatile, which is a big surprise when you look at capital markets. The volatility is an important risk measurement that all investors should be cognizant and respect.

Next, please. So HIVE ranks higher than our competitors, which is interesting for us. We're ranked #1 in Canada when it came to overall trading liquidity. And we ranked #4 in the U.S. as OTC. And one of the #1 questions we keep getting asked is getting listed in the U.S. It's a process. It's a 2-step process. And first, you must go and do a registration filing for a 20-F. And after that or simultaneously, you can go and apply to be listed on either the New York Stock Exchange or NASDAQ. I have lots of experience in both exchanges. And all I can share with you is that we have started the process of the 20-F application, which is a complete registration document that will go to the SEC. This is key and most important, and that's in full throttle. But I can never promise where we're going to get listed and when we're going to get listed, even though this is the most dominant question. But it is in motion.

And next, please.

And just quickly on there, Frank, just to re -- I guess, hit a hammer on that one is it is a process, and there's a lot of hurdles that we need to go through regulatory reviews and everything. So even though we started the process, as we know, within this market, it's very volatile. And the regulators can throw a wrench to any kind of approach that we have. Nothing's guaranteed, as we know, in this industry.

So HIVE was, as I said earlier, was the most liquid stock in 2020. And I'm a big believer the reason for that is because didn't matter if markets were up or down. We were always consistent in explaining where we are and what we're doing and how we're surviving and how we're thriving.

Next, please. So this is more visual to help you understand that the volumes that we traded. It is a huge expansion from 2019. 2019 was known as crypto winter. It's when Bitcoin had fallen from basically sort of the bottom phase of it, the beginning of the bull market, but it really took off in 2020. And how we grew from trading 0.5 billion shares, as you can see, to trading in Canada, 1.8 billion; trading in the U.S., almost 0.5 billion; and then in Germany, 20 million shares.

Next, please. And so we've been doing this continuous updating on (inaudible) Kitco's known as the most sought-after sites for information on gold and silver. They've also been covering crypto where HIVE was the first company that in that space. And we were -- and U.S. global and myself got involved with high for a big reason is because we're mining coins that the initial -- the Genesis coin, they call it because it's the first coin or the virgin coin. And there's no AML, anti-money laundering, risks or issues with that or KYC which has been a big hurdle until recently that ETFs in Canada have been launched, allowing Bitcoin to go into them. Still, there's nothing has happened in the U.S. So we couldn't launch the ETF. So we wouldn't put our energy, our capital, our reputation behind the launching of HIVE Blockchain at the very beginning. And the first institutional money that (inaudible) at HIVE.

But during this whole process, we've had a lot of gold investors that were frightened of buying crypto, either Bitcoin or Ethereum, on one of these exchanges and all the negative stories of being [acting], so they have used HIVE as a proxy. And because we own coins at the same time as we're mining, we have tens of thousands of shareholders in over 80 countries around the world that own HIVE and it's their proxy. And so we've been able to deliver that recently at Stansberry Research, we also have been covering, with that capital markets is, and how they're sponsoring companies with HIVE. And Daniela was the first ever cover when she was at Kitco and now with Stansberry Research. And she's done a great job articulating the growth and the risks.

Next, please. So this strong media presence is very important. And what's interesting to us is that the crypto world of millennials, there's many more pages. In fact, they rank the top 100 reporters around the world. You do not get this in gold. You do not get this in the S&P or technology stocks who are the best sellers. But you do get it in crypto. And I've mentioned before in presentations that these crypto conferences before COVID came along, were very expensive to attend. They were sold out. And it's a complete different ecosystem.

Next, please. So what we've -- and I've written about this because our JETS ETF has experienced explosive growth of millennials coming in and then institutionals coming in. And millennials has been an exponential growth in using the Internet and using YouTube, in particular, and podcasts to capture information. And these are just some of the analysts that cover HIVE. They both say they're long. They're taking profits, they jump back and forth. And I think what's interesting is that Blonity, Lukas has done a phenomenal job of really capturing what those factors are. That is the momentum you have in growth in revenue and EBITDA and then what is your potential 12 months out for an expansion in your revenue and EBITDA so that if Bitcoin does go to $100,000 and if it does go to $10,000 on the ratio of 10:1, who would be the most profitable, who would have the biggest delta for growth in revenue. And so Blonity, I'm going to show you some of the visuals. I highly recommend you subscribe to him and just get a flavor for how to take a look and analyze.

And these other analysts that are covering us, please, you could see some have 13,000 subscribers or others have 700,000 subscribers. And I learned this in the Jets in launching JETS ETF, that there are some people out there that just amazed me a year ago that there was 2.5 million subscribers that covered the airlines. So clearly, YouTube is the best way to capture information. Thank you.

Next. So Blonity. Lukas Schübert, who's based in Germany. He's an energy analyst, does a great job of capturing the flow and rotates his portfolio every week. It's very aggressive how he rotates his holdings. But to me, it's most interesting as a way that he does capture the direction that drives investors in all these crypto stocks.

Next, please. But he always says, at the beginning of his presentations, be aware of the crowded market and scammers. And there are -- there's new companies coming out that we hear about. And they, too, are the next best thing ever. But it's very difficult. It's very difficult. It's actually much, much more difficult to become a crypto miner today than it was when we launched HIVE. And why is that? Because there's a big GPU shortage in chips. Chips, you need to make a graphics processing cards for making ASIC chips. There is a global shortage. And it is impacting the car industry, and it is impacting gaming, it is impacting everywhere. So a lot of the 2 major suppliers in the capital markets of equipment are sold out for this year. Fortunately, we have been able to navigate and go to boutique designers that make and sell equipment.

And in addition to companies like Canaan, who this morning I had an early morning call at 6 am with the CEO. And I think it's being a first mover of being able to capture that equipment. We've also noticed that what you would pay for the power, that is, what would you pay for a petahash and that was trading $20. And now they're trading $60, $70, $80, $90. We have not spent that and we have not reported in detail who we're buying our equipment from because we see people getting cheap capital and trying to front run us and offer more. So we've had to not be as transparent as we would like to be because of the sort of this front-running that we're experiencing in this thirst and hunger to get equipment.

Next, please. So this is what Blonity does. And he's pointing out here, his moving averages is across mining margins of periods. He has his own sort of algorithm that this is more looking at the current production profile, not the future production profile. And HIVE always gets a healthy ranking. And I think we showed it today in our earnings release, which Toby and Darcy is going to give you more detail on.

Next, please. So you can see here, it's another visual that it prints on a regular basis, and it gives us a little algorithm of operating margin and looks at 10, 30 and 90 days. And HIVE clearly, at this stage, has the most equipment now. We're also the only Ethereum miner. And Ethereum, we've stayed with it, and I think it's been really critical for us as being able to show the capacity to generate profits.

Next, please. So this is looking in the future. For all the announcements of mining equipment. This comes from a U.K. company, Ellwood Asset Management who yet said that it's your -- it's the arbitrage between what you have today versus what your ability is in the future. And what has happened here is that HIVE used to be on the far right side. And now we've shifted up that with all these wonderful news releases of getting through 2,000 petahash to 2,400 that we are now ranking much higher in that -- we're rank basically #3 and our future capacity for Bitcoin. This excludes Ethereum because we are the only Ethereum miners.

Next, please. So I really want to point out to investors is to recognize the average cryptocurrency mining equipment delivery lead times. And Bitmain has been probably the most challenging in getting things delivered on time for people. We ourselves have experience delays last year of equipment when it was supposed to come. And it seems that they just kicked the ball down the next month and next month until you get your equipment. So I really hope in this year that the Antminer 19 that have been ordered do get delivered for -- on a timely basis. Otherwise, it can impact our competition. It can impact -- because once you start having that impact, it impacts the whole ecosystem and everyone starts doubting. And so we've taken the direction also of going to other providers that are able to give us delivery of the equipment.

Next, please. So we purchased earlier Antminer T17, so this is when we gave more disclosure, et cetera, of where we were able to get equipment. And we played a very, a very favorable rate of everything we've been able to do, touch wood, has been below what the current market costs are. And that is something that I've got to that Toby for. He's done a phenomenal job in the relationships. He was also that -- the Co-Founding Director of this company of HIVE, and he's been very helpful at introductions. And now the new group that we have that GPU.One, which we'll talk a little later, they've been very, very helpful in sourcing equipment for us, for the Bitcoin mining production.

Next. Subscribe to HIVE on YouTube, please do, if you're not. I hope you like the 5 reasons to consider Ethereum. And this also relates to HIVE. And then quite often, we're asked the difference between Bitcoin and Ethereum. These are very brief and short. They're only 1-minute or 2-minutes information for you.

Next, please. Now I'm going to turn it over to hard-working, Darcy, our CFO, that's been plugging away, too, late at night and early this morning on the financials.

Great. Thanks, Frank, and welcome to everybody that's joined. We've got record numbers listening in. So this is perfect. We can flip to the next one, please.

Great. Yes. So I guess when we -- as a management group, we're putting together sort of our goals for the year. And as you've seen, if you've been watching us, we set out and said, okay, let's have a goal of getting 1,000 petahash because there was so much tightness in the market not much supply of equipment, and we thought it was going to be very difficult. And if we gone the normal route, we think it would have been because, as everyone has seen, there's been some major purchases made by some of our competition.

Since then, we've be able to go to some of the smaller suppliers, not ordering large amounts, but ordering staggered. So we're getting them monthly. And the latest one we've been able to announce earlier this week was the 10,500 in total to push us up over our 2,000 petahash. And right now, our future is to be at 2.4 by the end of calendar 2021. So we're really excited about that. It does come down to what Frank had mentioned. We're hoping that we're going to be able to get stuff delivered on time. But we think that being able to use numerous different suppliers is going to derisk the delivery risks that we might have if we had put all of our eggs in one basket.

Next, please. So just take a look at Ethereum. And as Frank had mentioned and everybody on the call understands, it's challenging, I think, for us to be compared to some of our competitors because they're all pure Bitcoin miners. Our bread and butter since we started in 2017 has been Ethereum, and we're proud of that to give out that diversification. Here, what you can see is we did have a reduction in the number of coins year-over-year that were mined down to 2,100. A lot of that had to do with the DAG file that we experienced. The DAG file has to do with the size of the chip that is in there. We had mostly 4-gigabyte cards, GPU cards, in our Sweden and Iceland facilities. We've gone through a major retrofit and gone out and purchased new 8-gigabyte cards, but that has to do with some downtime. There's going to be some downtime there. So we haven't been as efficient as we could have been if we had it up and running. So there was a little bit of a drawback.

But the great thing is we've been able to supply -- get suppliers. We've been able to get this program going. We had first thought it was going to be finished by the end of January because of the delays of COVID and everything else. We've been out -- have been -- had to push it down a little bit further. But we've got almost all of our cards on order. It's just working through those delivery problems that we thought, and we've got them well in hand and are getting deliveries weekly into our facilities in Sweden to put those better chips into place and to set us up for the future.

Next, please. And this is another thing that's -- we're showing is the Ethereum difficulty rate is doubling. We see what it's done in the last year, moving from just over 2P to up over 5. Now this is the function of the block-finding time. Because we've got so much energy and resources focused on this, we've been able to weather the storm, so to speak. And one of the things that Frank and I have focused on since we both joined, I guess myself, back in 2018, is trying to be the lowest cost provider. So we can weather these kind of storms. And when the Ethereum comes up, we're not jumping back and forth. We're focusing on that, and it's really helped us drive forward.

Next, please. Okay. So this is just -- it was an incredible quarter for us, even though we did have a little bit of a pullback on the number of coins. You can see that the income from digital currency mining year-over-year, $13.7 million versus $5 million in Q3 of fiscal 2020. The biggest thing that we see is the gross mining profit margin at $10.6 million in the quarter that was just finished versus $3.8 million. That is a huge, I guess, badge or pat on the back for our team in terms of taking control of our operations when we move from our former service provider, taking control of Sweden and Iceland and being able to drive down costs. We've now got that transparency. We've been able to find out where we can get the best efficiencies and that drives down our operating cost, which goes directly to this gross mining profit margin that you see in front of us.

Next, please. This is taking a look at the Ethereum mining increases quarter-over-quarter. So we're comparing it to the December 31st quarter they just finished versus the September 30. And you can see we're up on the income from digital currency mining, even though we had a little bit of a pullback as you saw on the Ethereum production. And also our gross mining -- gross profit mining margin is continuing to increase. So this is a grade in terms of the way that we're driving for it.

The adjusted EBITDA, now this is one of these accounting things that you want to try to pull out a lot of those things that aren't really controllable, $13.7 million for the quarter, which is compared to $4.9 million to (inaudible) -- and $17.2 million in net income. So we're continuing to have very successful quarters, and we see that continuing moving forward.

Next, please. The Ethereum mining margins is something that has continued to drive our growth quarter-over-quarter. You can see the adjusted EBITDA here at $13.7 million versus the $10.6 million in the prior quarter. Net income is up also and the gross profit margin. So we're continuing to see that graph. If you're looking at the bars, moving up, it's not a hockey stick, which is fine. Strong and steady is winning the race, and that's what we're continuing to do.

Next, please. A lot of things. Our income per share, it's continuing to go up. For the 3 months, we had a $0.05 income per share. For the 9 months, it was $0.08. We're continuing to have this positive quarter-over-quarter growth, which is very exciting. It's something that we're very proud of. And it's continuing to give us that support that we need that we're going in the right direction and continuing to focus on costs.

When we're in these kind of bull markets, it would be very easy to just spend money like we're crazy and drunken sailors. But this is the time that we have to continue to be resilient, look at cost reductions because a crypto winter will take place, and we got to make sure that we've got the stability to stand up to that.

Next, please. Healthy balance sheet is something that we continue to have, and we're very proud of. You can see the cash on hand was about $1 million at the end of December that -- a lot of that had to do with the spending that we were doing coming into the end of the year on the upgrade of the GPU chips. We've got a larger amounts receivable. And digital currencies' at $15 million at the end of the year.

As we've talked about, we have had a $15 million injection as part of a corporate debenture that was put in in early January. So that came in. And we've also had an at-the-market program where we're able to sell shares with a broker's assistance, and we've been raising money through that. So we're continuing to build up our cash, continuing to not have to sell our coins. So we're building up those inventories. And continuing to have a very strong balance sheet moving forward.

Next, please. Bitcoin mined. As you can see, if we go back a year, we weren't mining any Bitcoin ourselves. We had moved away from the cloud mining contracts that we had. They weren't very profitable for us. A lot of costs, not a lot of benefit. We've got our Québec facility up and running in April of 2020. And you can see this great growth. The 153 when we start had a lot of miners running. We did some upgrades, dropped down a little bit to 88. And 165 is where we've gone now, and we purchased some additional equipment in Q3. 1,240 machines that are being hosted right now in British Columbia. We're hoping to have those moved eventually into our own facilities. What we've seen is growth moving forward, and as I mentioned, being able to hold our coins in inventory is something that we think is very important, as a miner, is to have some coin inventory there.

And I'd just like to add, Darcy.

Yes.

During 153 to 88 is when the halving took place. So unless you have the new machines -- and so we got the new machines installed in the last quarter, and you can see our production expand back up in the Bitcoin. But that's a classic of showing 153 to 88 the impact of the halving.

Yes. No, great point, Frank. It seems like it was decades ago, but it was only less than a year ago. So that's a great point, Frank, I had forgotten about that. And that was the great thing and great timing in terms of us acquiring our first facility in Québec. A lot of people thought that we were crazy doing it just before the happening. But it's worked out extremely well, and we've got a great team that are working with us.

You can see here the Ethereum by quarter in terms of what's mined. What we've seen, and you guys can see is we run about 20,000 Ethereum coins per month. When you see those large jumps like we had in September 2020, a lot of that has to do with the DeFi in transaction fees. So it sort of seems like our norm is around 20,000. And anything above that, it has to do with, what we call internally, those bonus payments that are there. And we expect that in the last quarter of fiscal 2021, that's our quarter that'll be ending -- sorry, March 31, 2021 is going to be good also because we've seen a lot of those bonus payments accounting through the Ethereum network.

Next, please. Great. So I guess we'll move on to the corporate update. And Frank, are you going to run with it?

Sure. I'll (inaudible) for this.

Sure.

So we've made a press and in our previous press releases our should shareholders know that our liquidity is phenomenal. And how we've been able to have a substantially less dilution than any of our peers. If you take a look at the number of shares outstanding for Marathon from, I think, in the past year from 10 to 80 -- 10 million to 80 million, and Riot from 25 million to 75 million. So they've experienced that -- they had the ability to raise hundreds of millions dollars of capital to buy equipment, but it's been at the cost of having massive dilution. We've hardly had on a relative basis dilution. We've been very frugal. And only recently did the ATM machine kicked in, where we're able to raise capital without putting a half a warrant in the capital markets or putting a big cap on it. And it's been -- it had been a great mechanism so that we are able to announce that we're mining and we're saving all the coins. We're not selling any coins at this stage. We're rebuilding all our reserves.

So our HODL strategy is to build as much as possible a Bitcoin in our balance sheet and Ethereum. And so today, when you take a look at those assets, I think we announced the other day that something like USD 30-some-odd million in cash on hand. I think the total number, where it got to about $65 million in the most recent press release we put out into that number. So from year-end, U.S. global have committed to $50 million investment so they can fast-track the acquisition of equipment at year-end. And that didn't close just because of the ongoing process, regulatory. But we had committed to capital incentive and set it aside for them to grow with. And now it's growing even more as we bought more equipment. And so we are only coins, and that's very important in our strategy to always have coins on our balance sheet.

Next, please. So this is some of the older miners looking at Iceland. And it's much -- a nice looking, when you look at today, of the facilities, but that picture is me 2.5 years ago in Iceland, mining Ethereum. And the big part, as Darcy mentioned, has been the incredible rush to upgrade from 4-gigabyte to 8-gigabyte memory cards. And I think we're about 60% -- more than 60% through that pace. And hopefully, by the end of March, we'll be completed that's our goal. But there's been ongoing delays and disappointments in shipping around the world. I know from our mutual funds, our global funds, shipping costs, container costs have gone from 10,000 to 7,000. If you want to rent a container space for a month, it's gone from -- it's up twelvefold. So the delays of shipping globally by airplane or by boat or even by train is experiencing tremendous delays. And so it's just something -- it's one of those risks, but we are on it every day. We huddle every morning to know where we are around the world and getting our equipment and as soon as it's landed, how fast we upload it.

Next, please. So this is just announcing the private placement, the convertible debentures that we put in at year-end. And we gave an opportunity for HIVE to deploy capital to additional miners. And since then, the stock has doubled.

Next, please. So HIVE is purchasing 100% of the shares of GPU Atlantic. Now the order of 50-megawatt center in Grand Falls, New Brunswick. It's less than $0.05 cost. Purchase price is approximately CAD 25 million. We can go up to 60 megawatts, I believe, in that facility. And we're also bringing in some great young guys that have a lot of experience, both technical from CTO to database management, to network management, to relationships and acquiring equipments. And so we're thrilled. And this is what HIVE needs to jettison to the next level of a global player in this space is the brain trust. And they've come along with the GPU.One group that (inaudible) has been able to put together. So we're thrilled about this opportunity.

Next, please. Now these are the words for everyone just to get it, an idea that is an exahash. So if you have 1,000 petahash, you have an exahash. And an exahash is 1 quintillion. These are big, mega numbers. And the next level is going to be, as you can see, as zettahash, an exahash and then which is a sextillion. And these are just a lot of numbers. And it just really is impress you where we are. And in a very short period of time, in the past 2 months, we have added our capacity by basically 2 exahash because we had about 400 petahash. And now we're at 2.4 exahash. So that's 2.4 quintillion. I like that big number, quintillion.

Next, please. Now we're going to turn it over to Toby. In addition to being a violinist, a tax lawyer. He's a serial entrepreneur. And he has been so critical for us in managing the relationships even during COVID, going back and forth between Munich and Sweden and Stockholm and Boden. And so Toby just recently spoken on a webcast on ESG, and he is going to give you some really unique perspective because I would share with you that I believe we have the strongest ESG footprint of all the other miners.

Yes. Thank you so much, Frank. It's a pleasure to talk to you, stakeholders and to give you a bit of an insight what we are doing. So the great news and the great message is our frequency balancing system, where we worked hard the last -- the full last year is now fully operational. And what does that mean frequency balancing system? You can even understand it as, let's say, electricity demand balancing system.

So we are working together with the electricity supplier in the -- not only the communities in the whole region, which is Vattenfall. And so the electricity supplier is balancing all the time, 24/7, the supply of electricity and the demand, of course. So and it might be that the forecast of the electricity supply that is going out of the normal range. And for that, they need to ramp up quickly electricity production. However, the hydropower stations, the hydropower turbines, they have a lead time of something like 15 minutes to ramp up electricity production. And so here, what we are doing is we are stepping in as a buffer because computers can switch down in a second.

And so we are -- what we did, we installed a system and we worked together with Vattenfall and with some joint venture companies to have this technically running. We are getting signals, okay, please switch down some computers, switch down some electricity capacity to balance our electricity grid. And so we can do it within seconds and we get then the vice versa signals at the latest 15 minutes later and can ramp up our computers again.

And for this ability, so that we are selling to the market our ability to be flexible. For this, we are getting compensated. And I think the compensation in January, it was something like $140,000. So it's quite a substantial amount. So it's even economically, it's very great for the whole company, but we are doing what we are doing. We are doing something very great to the market because we are not only using green energy only. We are selling our flexibility back to the market. We are making with a multiplier of 15 or so a higher base supply of green energy possible because we have adjust the buffer of something like 5% in that market. And so we are making possible a higher based supply of green energy, green power in the whole region. In the range of our facility, it has something like 20 megawatts. We are expanding it to 25 or even 28 megawatts, what we want to do. And so we are making possible a higher base supply of something like 150 or 200 or more or even 300 megawatts in the market. And so we are believed with that -- what we are doing, we are really -- we are really by far the most sustainable data center company in the world.

And also on top of that, we are getting quite interesting fees for that. And the downtimes we are taking into account for that flexibility is just a loss of production of some minutes, and that happens during the year, maybe 15x or 20x. So we have some hours over the year of downtime. But we are earning -- so it is hard to say about something like 1 million or even 1.2 million for that. So that is very great, what we are doing.

And our next step is then also, as you see on this slide here, we are working together with the community of Boden with the Boden Business Agency. We are working on a smart city project because our next step is we want to sell to the market also our excess heat. So in this arctic circle, you can imagine the weather conditions during the year are quite cold. And with transport and selling our excess heat, we can even also support projects like greenhouses, so growing tomatoes and vegetables. And so in that region, don't get me wrong, we don't want to enter the business of gardening. But we want to expand our footprint in sustainability and even getting compensated for that.

And so in the end, what we are doing is a win-win-win for everybody. It's a win for us; for you, stakeholders; it's a win for the electricity company for the community and even the whole region and also for the climate. And that's great. Thank you.

Thank you, Toby. And Toby just gave a presentation to 1,000 institutional people with Vattenfall last week on ESG and our participation.

Yes. Yes.

So there is a big interest. And for shareholders listening to the call, you've got to think of what Toby has explained to you, the red shock, the big shock you saw earlier in the visuals, that's actually Facebook's data center. The Internet capacity and the infrastructure in Sweden is extraordinary relative to other countries in the world, in addition to hydroelectricity. And that's another big part of being located there. And Toby has done a great job of us getting involved with helping kids get into -- see all the hockey games if they can't afford it because it's a big sport. In addition to that, that's part of that community giving back and being involved with continuous education because there's a big push by the community for education for gaming and university program.

But Boden used to be a military center, which is so interesting in the history of it. But I'd like to just go forward and to explain to people that we have basically 10,000 hair dryers. Think of that. You know how loud they are, one of them? 10,000 of them. And those 10,000 are using, say, 1,400 watts of electricity, which you're using for your hair dryer. And if you don't keep it cool, it will basically shut off. So we need coolants. We need cold air. We need fans. And then we want to take those 10,000 fans or those hair drivers that are blowing that heat out that's going to go into a facility that would be able to grow carrots and tomatoes and cabbage, et cetera, rather than shipping from Spain or Italy, which would have a big carbon footprint. It would basically make it neutral.

So coming back on this and Toby has been so involved and this is sort of the future of where we're going. Next, please.

Yes. And to give you a number of this, so what we are producing 58 cubic meters hot air per second. So 58 cubic meters hot air means with a delta temperature of 30-degree centigrade. And we can deploy to greenhouses on hectares.

And the business Boden in energy, that whole business development team, they've been great partners in helping us. And I want to make sure we thank all of our partners that have helped us during this period, taking control of our destiny, driving down our costs everywhere at the same time. Now we'll be able to expand.

But during this process of us expanding and controlling our costs, what you're seeing in the ecosystem is Bitcoin addresses where balances are growing. And if you go to some of these sites, such like Robinhood, they can give you fractals of a share. You can buy a fractal Amazon or Berkshire Hathaway or Bitcoin, so you don't have to go and write a check for 1 coin, 1 share and spend $50,000. You can get a fractal of it. And so you're seeing that grow and that interest through the Robinhood and the other brokerage firms like Schwab, allow them to serve fractal investing. At the same time, you're seeing Bitcoin addresses growing. And this is part of a very important rule called Metcalfe's Law, that is that if you have the supply, the daily supply, and you turn around and get more and more people opening up wallets, it will -- the price will project much, much higher. So Metcalfe's Law is what people are using to forecast Bitcoin at 100,000, some are 400,000. And so what we want to make sure is that we're positioned to participate in that higher price action.

Next, please. So lots of news. Everyone's aware that Tesla about $1.5 billion worth of Bitcoin in early February. Elon Musk has been a huge fan of cryptocurrencies and Tesla intends to start using Bitcoin as a form of payment. Big step forward in mainstream adoption. But I think one of the key parts this past year was PayPal.

So if you have a PayPal account, you can buy Bitcoin, you can buy a fraction. So the fact that you can do that is a game changer.

Next, please. JPMorgan, remember, was always trash talking the industry until February of 2019 when they launched their own stablecoin, which for us is really important because the backbone to the stablecoins by the banks use Ethereum. And so more banks coming out with stablecoins, the more Ethereum demand picks up. Along with DeFi, decentralized finance. And now you have proof of stake taking place and something like $5 billion of coins went into learning and income that left the supply. So we're seeing a shrinking supply, and I thought it was well covered by Christine Kim and Bill Foxley at CoinDesk in December that Ethereum mining will continue to be very, very profitable for the next 3 years based on that. And having JPMorgan and now allocating a 1% to Bitcoin as a hedge as an alternative asset.

Next, please. So Google Search is an important part of the sentiment and sentiment quant funds that we noticed that HIVE for the past 6 months is traded by the hour with Ethereum, Bitcoin, particularly Ethereum price action. Ethereum is up in the next hour, then all of a sudden, our price starts rising. It falls, all of a sudden, HIVE starts to decline. So it's truly becoming a proxy and a lot of the quant funds who have used it, they use sentiment analysis. And this is showing you, and basically you know this well from the world of gold, that if more people just look at the price, then the probability next week of it being higher is much greater. And it's regarding the interest of just looking at the price, is a predictor of a short-term trend. And as you can see here, it's been a huge surge, much greater than even 2019 with Bitcoin at 19,000 out of the curiosity of what's going on in looking at Bitcoin price.

Next. This is Ether triples because -- excuse me futures has announced. Most of these hedge funds last year that announced they were buying Bitcoin, they actually didn't buy the coins themselves directly. They used the futures market. Even though there's no leverage allowed for crypto at this stage, but they went in and they bought their position because of liquidity and easier for accounting. And so the announcement on February 8 of Ether coming out, is that basically there's been a huge interest in the futures market by the Chicago mercantile. So this is extremely positive, I can call the wind hitting our sail for Ethereum.

Next, please. This is another sort of double of crypto index puts stocks in the shade. You can see that there's more interest in treating these, both going long, short, hedging. And all that does is add to the ecosystem liquidity, you need minerals and you need whales. You have to have a complete ecosystem, and there's going to be sharks in there. There's going to be tunas and groupers and, et cetera. But I think what you're seeing is that the ecosystem for the crypto world has expanded substantially into the futures and securities market.

Please? Questions. So we have about 10 minutes, 9 minutes left for questions. We'd like to wrap this up in an hour. I really want to point out the number 1 question, and I'm going to repeat it for those that came late on the call this morning is being listed in the U.S. It's a 2-step process. We are in that process now of lawyers working on a registration statement. A 20-F to go to the SEC and that application will go to an exchange. And it just will go through its normal process and it's in motion. That's what we're happy about.

Next big question is, do we keep the coins?

Yes, we do. We've always, always had an inventory of coins. And now because of our cash position or where we are, we are mining all those coins we can because we had to use a lot of coins in the last quarter of 2020 to upgrade our Ethereum production in Sweden and Iceland. And now, we're in a very strong positive cash flow that to be able to continue to grow and just build our inventory, replace all the coins we own in Ethereum and expand our footprint and owning Bitcoin.

Thanks, Frank. A few other questions that came in. This one says, in what ways does HIVE benefit from DeFi? I understand that the Ethereum mined by HIVE will be used to process the DeFi transactions. But will HIVE be able to provide DeFi services in a way to directly profit off of a DeFi boom? For example, gas fees, blockchain as a service fees, et cetera?

No. We're not going to be directly into that, but we are working on some strategic investments with -- that I think are very exciting regarding DeFi. And that we are going to sponsor DeFi companies and make investments in them going forward. Darcy, do you have any comments on that?

No. No, I think this is a type of thing where we'd like to -- I don't know what the right word is, but sort of being an incubator and help out other companies. We felt we'll be focusing on our expertise right now, which is running the facilities that led low cost so that we can get high margins. But also realize that we got to be part of the ecosystem, and we can't offer it just in a vacuum. And there are some great DeFi opportunities out there where we can make strategic investments and help our shareholders. And sort of like how HIVE is used as a proxy for Ethereum and Bitcoin as it moves. This will help the shareholders also if we have some strategic investments instead of them having to go out and invest in a whole bunch of companies. If we can get this stuff going, invest in HIVE and you've got exposure outside of Bitcoin and Ethereum but exposure to some other DeFi opportunities.

If we have made one little investment, but it would never move the dial at this stage, but it's appreciated like eightfold in that DeFi space. And I was just -- the start-up of a company and how fast is tracked. And I think there's -- in that video which I point out at the beginning, I highly recommend the 5 drivers for higher Ethereum price and one of them is explained in that short video, DeFi and stablecoins are really critical for that. Next, please, Holly?

Another question says, how do you see HIVE bidding into the proof of stake environment?

Well, proof of stake is where you basically put up your coin, your inventory and they give you an income. And I think, as my opinion, is that for the next 3 years, the demand for Ethereum from proof of stake, from DeFi and from stablecoins being launched is only to put upward pressure. And we'll make more money mining Ethereum than we would for the staking at this stage. But we want to have at that pivot point, a huge inventory so that when we stake, we'll have that recurring income.

Okay. Another one says, given the volatility of Bitcoin, along with more and more companies putting it on their balance sheets, where do you see HIVE in the next year?

Growth. As you can see, when we've made these announcements in the past couple of days, it shocked a lot of people how fast we -- are basically cranked up our Bitcoin production profile and facilities. So we definitely want to be owning more facilities and we want to be increasing our Ethereum footprint, which we're working on now in Sweden and planning for that and Iceland, at the same time, our Bitcoin footprint.

Is there any news on an expansion in Texas at all?

There's no news at this stage to share with the public.

Okay. Do you see regulatory issues in the future, for example, with central banks? And if so, how is HIVE getting ahead of these issues?

Well, the biggest part is that we mine coins that have no AML concern. And I think that, that's -- the biggest part is that where our business model is. But with the banks, with how they function and the regulatory regime by central bankers around the world, there's just so much noise. There really is a tremendous amount of noise but has died down a lot compared to 2018 because every time there's a meeting with Congress, or a meeting with the Senate, or a meeting with the Federal Reserve or the SEC, the crypto space would, during that crypto winter, get knocked down. That's not taking place today.

And the head of the SEC was teaching at MIT crypto and blockchain. So I think that, that's an important dynamic in the capital markets. But we do know that the SEC has pursued any pump and dumpers that are -- in particular, there was a pump and dump in ICOs, initial coin offerings, that really were egregious. And the SEC was great of cleaning up like the Wild West. So I don't think they're going to become lax there, but the standards of care is much better for the overall eco world.

All right. And with the last minute here, maybe Darcy and Frank can chime in. What is your vision for what the company will look like in 3 to 5 years?

Toby, what do you think? In 3 to 5 years?

Yes. Of course, yes, we are the largest provider.

So -- but where do you think we'll be with that? Darcy, do you have any -- where do you think we'll be?

Yes. No, I think that it's going to be transformational. I think that, especially on our GPU side, is -- the Bitcoin -- there's going to be new ASICs coming out, and you're going to go with that. I can see us continuing to look at what can be done on the GPU side in terms of AI, the larger data centers providing that back end to support other projects, whether it's video rendering or medical support sort of that back-end stuff. And that's where I think there's going to be some exponential growth possibilities for HIVE because we've already got our foot in that GPU side. Not in just the one limited box at Bitcoin mining.

Thanks. Well, I'll answer the end where I see -- I see in 3 to 5 years HIVE to be a $10 billion company. That's the vision that I have. And that will take from a combination of putting data centers on our balance sheet and becoming a serious global data center provider and unique incubating investing will help drive that. But most important is to be a leader in driving revenue from mining Ethereum and from mining Bitcoin. And I think that will jettison us up to a much more serious player on a global scene of other data centers.

Perfect. All right. Well, this concludes our presentation for HIVE Blockchain Technologies results for the third quarter. Thank you, everyone.