HIVE Blockchain Reports Second Quarter Financial Results

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ZUG, Switzerland and VANCOUVER , Dec. 2, 2019 /CNW/ - HIVE Blockchain Technologies Ltd . (TSX.V:HIVE) (OTCQX:HVBTF) (the "Company" or "HIVE") announces its results for the second quarter ended September 30, 2019 (all amounts in US dollars, unless otherwise indicated).
"I am pleased to report a healthy second fiscal quarter of positive free cash flow contributing to an already strong balance sheet and continued progress in restructuring our operations to ensure sustainable future profitability," said Frank Holmes
, Interim Executive Chairman of HIVE. "Since we assumed control in the latter part of 2018, the current management team's focus has been on ensuring transparency and accountability and assuming direct control of our operations to improve operational efficiency. We have changed service providers, assumed direct control of our supply chain in Sweden , and initiated reviews of the profitability of our various business units.
"I am particularly pleased with the improvements we have seen in our GPU Ethereum mining operational efficiency. During the second fiscal quarter, we unwound our previous service provider agreement in Sweden and assumed full control of our supply chain in that jurisdiction. This transition, which was completed in November, is anticipated to result in an approximately 25% reduction in our operating and maintenance costs, notably through direct relationships with local energy suppliers.
"We are now focused on achieving a similar result for our smaller Ethereum mining facility in Iceland , either by improving profitability or relocating equipment there to a lower cost jurisdiction as Iceland has become less price competitive.
"During the quarter, our cloud mining operations for Bitcoin benefited from a healthy coin price in the summer months but market conditions worsened significantly into the fall. The price of Bitcoin declined while the difficulty in mining Bitcoin increased dramatically reaching a record high. As these operations operate on a fixed cost basis, we have prudently decided to suspend 200 Petahashes of our cloud mining capacity as the current quarter has become unprofitable for mining. We are currently reviewing various factors including market conditions and the anticipated impact on legacy ASIC miners from the halving of Bitcoin rewards expected to occur in May 2020 , to determine our best path forward for this equipment.
"We currently have a healthy net cash balance and significant digital assets portfolio. We are evaluating a pipeline of potential investments including M&A to determine the best opportunities to generate shareholder returns. Subsequent to quarter end, we continued to build our brain trust through the appointment of Dave Perrill
, the CEO of rapidly growing data center company Compute North, to our board of directors. Dave will help us execute this next stage of our growth strategy. "The cryptocurrency market has continued to remain volatile, and the share prices of digital currency miners in general has underperformed the actual coins," Mr. Holmes
concluded. "We have not been immune to this as our share price, which previously was highly correlated to the performance of cryptocurrencies, has decoupled from them for the past six months as large, early investors in HIVE have pared down positions. While we cannot control such external impacts, we continue to remain focused on improving the profitability of our operations and are hopeful that our share price will ultimately reflect improving fundamentals." Q2 F2020 Highlights
Generated record income from digital currency mining of $12.0 million Generated gross mining margin of $(0.6) million from mining of digital currencies, or approximately $5.5 million , excluding certain non-recurring charges including a value added tax provision in Switzerland related to historical periods, upfront energy costs paid during the quarter in Sweden for which the Company anticipates receiving energy rebates in the future, as well as some overlapping service provider costs the Company paid related to its transition to its new service provider, Blockbase, from its original provider Genesis Increased mining output of newly minted digital currencies: 586 Bitcoin 20,649 Ethereum 32,692 Ethereum Classic Incurred a net loss of $11.5 million for the period, reflecting the non-recurring charges impacting gross mining margin as well as $6.1 million in non-cash expenses, $2.1 million in recorded foreign exchange loss, and $1.4 million recorded loss on sale of digital currencies and investments reflecting a decline in certain coin pricing Generated $0.3 million in cash flow from operations Increased net cash less loans payables to $5.3 million , with digital currencies assets at $7.2 million , as at September 30, 2019
Financial Review
For the quarter ended September 30, 2019 , income was $12.0 million , an increase of approximately 84% from the same period in the prior year. Second quarter income from digital currency mining was pr...