Summary HIVE's Enterprise Value to Revenues at 1.2x and Enterprise Value to adjusted EBITDA at 2.6x are fundamentally low and attractive compared to peers. HIVE has firm expansion plans to reach 13.5 EH/s Bitcoin hashrate through a 100MW hydropowered facility in Paraguay. HIVE is a preferred NVIDIA Cloud Partner in AI, with executable plan to increase HPC/AI power capacity to 20MW and reach $100 M in annual run rate. HIVE's has $1.44 per share in net cash, including over 2,500 Bitcoins. Persisting 2022 Narrative Now Provides Value Opportunity In September of 2022 the Ethereum ( ETH-USD ) protocol ended the use of computational computer equipment to secure its network in a transition called The Merge. Under the new system, a simplified process trusts computer nodes which are holding relatively large amounts of ETH to validate and secure the network. This transition fundamentally changed HIVE Digital Technologies' (HIVE) business, as their GPU mining equipment had provided a sizeable, three-quarters of a percent of the total Ethereum hashrate during the final year under the old system. At the time of The Merge, HIVE's Ethereum mining business represented a third of its total revenues, and importantly, the segment generally provided high gross margins relative to other segments. Of the major, exchange listed miners, HIVE was set to see the largest hit to its valuation metrics, especially enterprise value relative to revenues and enterprise value relative to adjusted EBITDA. For comparison, the next largest Ethereum miner among HIVE's close competitors was Hut 8 (HUT), where about 10% of its revenue was Ethereum based. Indeed, in the fall of 2022 HIVE was overpriced on an enterprise value relative to forward revenues when compared to other similarly situated Bitcoin only miners. And these EV/Production type metrics are a key, first-line tool in evaluating the digital asset mining space. Though costs structure does play an important role in earnings, and meaningfully drives P/E type comparisons between the miners, market cap and enterprise value relative to production capacity is the primary differentiator. This negative narrative surrounding HIVE as an Ethereum producer, and one that is overpriced relative to its Bitcoin production capacity post The Merge, has to some degree persisted. Also the notion remains that management was not, at the time, attacking the sea changes coming to the Ethereum network head-on. Consider CEO Kilic's comments from August of this year: ...we always contended with the FUD, fear, uncertainly, a doubt that the merge was coming. Aydin Kilic, President and CEO - August 13, 2024 - Q1 2025 Earnings Call Transcript But this persistent narrative now presents an opportunity and value play as HIVE's EV to Sales and EV to adjusted EBITDA are currently industry low. Beyond the central value metrics discussion, the article below also covers: HIVE uses 100% green energy with firm expansion plans to reach 13.5 EH/s through a 100MW hydropowered facility in Paraguay. HIVE is a leader in uptime and has a high-efficiency fleet moving toward an energy consumption rating of 16.9 J/TH. HIVE has industry low general and administrative costs relative to production capacity. HIVE is a preferred NVIDIA Cloud Partner in AI, utilizing 2.3MW and an executable plan to increase HPC/AI capacity to 20MW. HIVE's has $1.44 per share in net cash, including over 2,500 Bitcoins. Hive Digital: Attractive Multiples HIVE generated revenues of $30.2 million during CY Q2'24 (F Q1'25). The decrease in revenues from Q1'24 was primarily related to the Bitcoin halving in April. The Bitcoin halving is an event taking place about every four years that reduces the block reward to miners by 50%. And block rewards are the large majority of the total value received, as transaction fees generally only represent a single digit percent of the total. However, the block reward-driven decrease was substantially offset by the increase in the price of Bitcoin; over the past 52 weeks price has moved from a $30,000 base to the current $60,000 range. hivedigitaltechnologies.com/investors/presentation/ Source: F Q1'25 Earnings Results , August 13, 2024, Investors :: HIVE Digital Technologies But how do HIVE's revenues compare from a value perspective? Note in the chart below the annualized current revenues relative to the respected enterprise values of the major western mining companies. Enterprise value is used rather than market capitalization as it more fairly captures debt, cash and the value of digital assets held in the comparison to the stock prices. At just 1.2x annualized revenues, HIVE compares favorably to its closest competitors. www.hivedigitaltechnologies.com/investors/presentation/ Source: HIVE Digital Investor Presentation , September 2024, Investors :: HIVE Digital Technologies (link above) ¹ Market cap and enterprise value as of 8/9/24, adjusted for peer debt and cash balances as of latest SEC filings for the period ended 6/30/24 and FV of Bitcoin HODL as of 7/31/24 from July production updates. HIVE also stands out in an EV relative to adjusted EBITDA comparison to its peers, with an even more favorable multiple than seen with revenues above. With about $60 million in annualized adjusted EBITDA on a $154 million EV, HIVE is fundamentally underpriced. But further, the company is significantly discounted relative to the other exchange listed miners. Using the Q2 data, HIVE's EV/(adj)EBITDA is 2.6x, compared to other similarly situated miners with 14x-17x multiples [see Bitfarms (BITF) and CleanSpark (CLSK)]. www.hivedigitaltechnologies.com/investors/presentation/ Source: HIVE Digital Investor Presentation , September 2024, Investors :: HIVE Digital Technologies (link above) - ¹(See note above) Adjusted EBITDA: Gross Margins In Flux Coupled with Stable and Low G&A Costs Bitcoin Dynamics Drive Gross Margins: Rewards, Difficulty & Price Every two weeks, the Bitcoin protocol adjusts the difficulty of its computational process depending on the amount of hash power miners are pointing at it. Generally the difficulty increases, as more and more resources are directed at the network. In the chart below, difficulty is the black line that is read on the right axis; for clarity note that often the difficulty is discussed in terms of total network hashrate and currently those numbers are in the 650-700 EH/s range. Also in the chart below observe that the difficulty's general rise flattened in April as the Bitcoin halving forced low efficiency equipment offline (this can happen during drastic pullbacks in the price per coin as well). www.hivedigitaltechnologies.com/investors/presentation/ Source: F Q1'25 Earnings Results , August 13, 2024, Investors :: HIVE Digital Technologies (link above) HIVE's monthly production following the halving was down about 47%, as seen in orange above. But as discussed in the first section, this system-wide decline in production has been substantially offset by the rise in the price per coin over the past year. This offsetting of the effects of the halving on revenues, and gross mining margins, can be seen in the graphic just below. Compare fiscal Q2'24 and Q3'24 with the most recent, post halving Q1'25. Revenues and gross mining margin dollars remain strong despite the Bitcoin halving because of the recent rise in the Bitcoin price. For reference, gross mining costs are primarily made up of the electricity costs but also includes maintenance costs. www.hivedigitaltechnologies.com/investors/presentation/ Source: F Q1'25 Earnings Results , August 13, 2024, Investors :: HIVE Digital Technologies (link above) Industry Leader in Low G&A Costs Per Bitcoin HIVE's other cash costs, besides those rolled into gross mining costs, are general and administrative expenses. The costs include management, investor relations, legal, and insurance costs. For HIVE these costs have consistently been near $3 million per quarter and are lowest in the industry, even when accounting for the company's relatively small size. www.hivedigitaltechnologies.com/investors/presentation/ Source: F Q1'25 Earnings Results , August 13, 2024, Investors :: HIVE Digital Technologies (link above) This control of corporate expense has allowed for positive corporate profit during the previous downturn in the per coin price of Bitcoin. The prior bear period squeezed gross margins distressing the industry and was a large factor in both the Core Scientific bankruptcy as well as Marathon Holdings' (NASDAQ: MARA ) partner Compute North's bankruptcy. CEO Kilic highlighted this fact during the most recent conference call: "I'm not aware of any other public crypto mine that's mined profitably over the last three years." Aydin Kilic, President and CEO - August 13, 2024 - Q1 2025 Earnings Call Transcript (link above) There is additional costs information in the following section that covers HIVE's growth plans for a 100 MW expansion in Paraguay. It will touch on HIVE's relatively low gross margin percentage seen in the Power Mining Analysis graphic just below. However first, as a close to the discussion of costs, consider the non-cash stock compensation comparison between the different miners in the Power Mining Analysis graphic. While the dilution related to the stock compensation is already captured through the EV side of the value metrics covered above, it is worth noting HIVE's history of also controlling this portion of management costs relative to its peers. Power Mining Analysis - Anthony Powers - EV/Revenue (CYQ2'24) www.hivedigitaltechnologies.com/investors/presentation/ Source: HIVE Digital Investor Presentation , September 2024, Investors :: HIVE Digital Technologies (link above) Quality Growth: 100MW Paraguay Expansion Plus Existing Fleet Upgrades Simply increasing the scale of HIVE's relatively small 5.5 EH/s Bitcoin mining operation should improve the stock price narrative. But also, the 6.6 EH/s Paraguay expansion is a game changer in terms of gross mining margins. The site will be equipped with high efficiency Bitmain S21 Pro miners operated on low-cost hydropower. For comparison, at current difficulty levels the cost per Bitcoin produced at the expansion is estimated to be $22,000 versus $41,900 for the existing fleet. Beyond the ongoing costs, the capital expense will be relatively cheap on a dollar per megawatt to buildout, especially in comparison to other green options like solar power. One point of risk is the addition of Paraguay to the portfolio of locations. This will add a fifth language of operation for HIVE as well as governance risks. Paraguay is in the 36th percentile in World Bank Governance Indicators ranking with weak rule of law and high corruption. These factors are a medium risk to pricing and curtailment contracts. Other major, western miners are also expanding in Paraguay, and Bitfarms in particular has a long-standing team in South America. www.hivedigitaltechnologies.com/investors/presentation/ Source: HIVE Digital Investor Presentation , September 2024, Investors :: HIVE Digital Technologies (link above) Additionally, HIVE is upgrading its current fleet, which will both increase its total hashrate and reduce its joules per terahash efficiency metric. For clarity across producers, joules per terahash is basically the same metric as those providing watts per terahash, as one watt is equal to one joule per second. HIVE's upgrades from 30 J/TH equipment to Bitmain S21 and S21 Pro miners will take fleet efficiency from 24.5 J/TH to about 18.7 J/TH. This will also add 1.4 EH/s to total capacity. The upshot, electrical costs per Bitcoin, the primary driver of gross mining margin, should be reduced by about 25%. For reference, existing average cost of power is $0.048 per kilowatt hour. www.hivedigitaltechnologies.com/investors/presentation/ Source: HIVE Digital Investor Presentation , September 2024, Investors :: HIVE Digital Technologies (link above) HPC/AI Growth: Annual Run Rate of $100 million in Revenues By December 2025. In June, HIVE had a $10 million annualized run rate for their HPC/AI segment. Plans for the coming year are to expand from about 2MW to about 20MW in New Brunswick, Canada and Boden, Sweden. Both projects are a retrofit with reduced costs over new construction. The facilities capital expense per megawatt is in the $5-$8 million range, which importantly does not include the GPUs. The projected annual run rate by December 2025 is estimated to be $100 million. HIVE has two advantages as they build out their HPC/AI capabilities. They were first with an AI strategy for repurposing GPU chips and have a strong history of the necessary uptime to provide a Tier 3 facility. This experience is valuable in a customer/user environment that is fundamentally different than digital asset mining. Understanding the economics of the HPC/AI segment are new and different and introduce risk for HIVE. There are dissimilar life cycles and margins for the generations of GPU architectures when compared to the ASIC miners. Capital expense to populate the retrofitted facilitates is also prohibitive. For example, using the NVIDIA H100 GPUs introduced in 2023 will cost about $30 million per megawatt of capacity. Because of the intense capital expense to populate the facilitates, HIVE plans to use a hybrid/mixed, colocation strategy. This creates counterparty risks not seen in the Bitcoin segment. And revenues generated on the leased portion of the facilities could be in the 10%-20% range versus those from their self-owned GPUs. Systemic Risk: Bitcoin and Broad Market Volatility HIVE has a history of management expertise to mitigate the risks associated with both their Paraguay expansion and build out of their HPC/AI facilities. They also have a record of weathering past periods of Bitcoin volatility. However Bitcoin price per coin and broader equity market volatility remain the primary risk for HIVE. Since 2019 Bitcoin pricing has shown periods of meaningful correlation to the equity markets, especially during periods of volatility. However, I am constructive on the Bitcoin price in 2025 as we are in the rising phase of the four-year global liquidity cycle that is timed with the Bitcoin price cycle. My general macro outlook is that both the Federal Funds rate as well as the European Central Bank rates will be lowered despite some readings of reemerging inflation. www.theblock.co/data/crypto-markets/prices Source: BTC Pearson Correlation, theblock.co/data Takeaway and Valuation HIVE is a small but industry-leading Bitcoin miner. Highlights include 100% green energy usage and a growing footprint with plans to expand to 13.5 EH/s by Q3 2025. Operationally HIVE leads in uptime, has a high-efficiency fleet moving towards 16.9 J/TH in 2025 and industry low general and administrative costs. The company is a preferred NVIDIA Cloud Partner in AI, currently utilizing 2.3MW and an executable plan to increase HPC/AI power capacity to 20MW in the coming year. HIVE's balance sheet contains about a $1.44 per share in net cash, including over 2500 Bitcoins. Recall from the first section above, HIVE is trading at attractive multiples compared to its peers for both EV/Revenue and EV/adj EBITDA. The negative narrative of HIVE as an Ethereum producer that is overpriced relative to its Bitcoin production capacity persists despite these now attractive multiples. And similarly situated peers are demanding EV multiples ranging from 14x-17x adj. EBITDA. In the estimate below a conservative 10x multiple is applied. Market Cap Estimation at 10x Adjusted Earnings Market Cap Enterprise Value Q2'24 Adj. EBITDA EV/Annual Adj. EBITDA $743 M $596 M $14.9 M (actual) 10x With approximately 117 million shares outstanding, the $743 million market cap estimate above would yield a $6.35 per share price. HIVE Digital presents a value trading near $3.30. In the short run, the market is a voting machine but in the long run, it is a weighing machine. ― Benjamin Graham Editor's Note: This article was submitted as part of Seeking Alpha's Best Value Idea investment competition , which runs through October 25. 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