Earnings Call Transcript - HIVE Q2 2022

Operator, Operator

Good morning, everyone. I would like to welcome you to today's webcast, reviewing HIVE Blockchain Technology's financial results for the three months ended September 30, 2021. On Slide number 2, except for the statements of historical facts, this presentation contains forward-looking information within the meaning of applicable Canadian Securities Legislation that is based on expectations, estimates and assumptions as of the date of this presentation and you can see the corresponding full disclosure up on the screen right now. On Slide 3, you will see one of our most popular visuals we included last time for the DNA of volatility. And we're always sure to include this table in our earnings presentation, especially following the disclosure, because it's a great reminder to investors and shareholders on how much various asset classes can move up or down over a one-day and ten-day timeframe. And as you can see here, the volatility of Bitcoin and Ethereum is much greater than the S&P or gold stocks. And then of course, if you look at HIVE, it's even more volatile and that's because we mine both Bitcoin and Ethereum. If we move on to slide number 4, I'm pleased to welcome the presenters for today's program. Frank Holmes, Executive Chairman, Darcy Daubaras, Chief Financial Officer, and Aydin Kilic, President and Chief Operating Officer. We have guests for today, which we are really excited about. Representatives from DeFi Technologies, which HIVE owns 4.9% of the Company, and then Network Media Group, which HIVE owns 3.4% of the Company. And then if you move to Slide number 6, representing DeFi Technologies for today's presentation is Russell Starr, Executive Chairman and CEO. And on the next slide representing Network Entertainment for today's presentation is Derick Murray, Producer, Director, CEO, and Tom Lombardi, Strategic Advisor for NFT, R&D research. On the next slide, I would like to hand it over to Frank Holmes, Executive Chairman for our corporate update.

Frank Holmes, Executive Chairman

Thank you, Holly. This is a recent magazine, Real Assets Adviser and it talks about real estate to goals, but the next big thing is Bitcoin and HIVE being where it is as a position in that space. So I thought this was fitting because it really is our big growth. If you take a look at it as I walk through the story today, it is Bitcoin. Next please. Bitcoin mined in HODL by HIVE continues momentum due to the BTC having fallen to 88 and then as we increased our footprint, our production, which I'm going into greater detail later in the presentation. You can see that our production has been increasing each quarter. This translates to revenue; not only is Ethereum the stealth part of our revenue model, but our revenue continues and we still are, as of the end of September, the highest revenue Company of all the crypto mining companies. And a big part of that is not only the huge growth in our Bitcoin production and footprint, but in the background of that is the steady Eddie revenue and high gross profit margin of mining Ethereum, particularly in Sweden and also in Iceland. Strong profit and earnings per share; income was up five-fold gross mining margin quarter over quarter. If you take a look at the data points, Darcy is going to go into much more explicit detail on this. But what's really important for investors is basic income per share. Ended September 30 was $0.16; the previous year was $0.03. I did compare the previous year to many of the peers in the crypto mining space; they were actually losing money. But we made money and then not only did we make money the previous year, we expanded dramatically with the rise of Ethereum and Bitcoin pricing, but in particular, because we've increased our footprint in mining Bitcoin. HIVE's strongest revenue growth for quarter ended September. As you can see, we're number one. Number two comes Marathon, and then Bitfarms and then Riot. What's most interesting is a big part of that revenue, steady growth in revenue, has been from Ethereum, but I'm going to repeat myself, the big growth has been Bitcoin. And that's what we did a funding for last week to maintain that momentum. And some of these companies have market caps that are billions of dollars greater, which scratches are ahead on that relative valuation metric, and so with us is just to recognize that we will focus on what we're doing in growing our revenue and having the highest returns on invested capital. Those cash-flow returns on invested capital for HIVE are the highest among its peers. Next please. As a quant analyst, Matt Kacur has a company called FSA Valuations Statistics. He talks about ranking all the Canadian companies based on our free cash flow return on invested capital, and cash flow return on invested capital and he picks the top tier stocks in each industry. As a group, he has been a regular on BNN in Canada, and you can click through to watch the video where he talks about his analysis, but he feels that back on October 19, HIVE was undervalued and it was worth at that time CAD 685. Next please. This gives an idea of the intrinsic value of this quant model, which is a very common type of discipline, particularly in America, of the quarter approach of looking at the stocks. Next please. Motley Fool’s recently said that if you put a $1000 investment in HIVE in January 2020, it's worth over $47,000 today. We have had nothing but what we say is wonderful stories, and especially companies like Motley Fool’s, which have a broad distribution in both Canada and in the U.S. and read for their analysis of the industry and they do take complexity and distill it down to simplicity for investors. Recent press release, November 9th last week, we went out and raised over a $100 million financing to expand our BTC production by an additional extra hash, which is worth six Bitcoins a day. Based on today's difficulty rates, it puts us in a very healthy position to maintain where we're going, and interesting for all your listeners, it was over 300% oversubscribed. And another interesting part is the Bank of Montreal, which is a major Canadian bank, for the first time has come in and participated in financing in blockchain mining. So we're thrilled to welcome the Bank of Montreal and also just thank Stifel for leading this and Canaccord for participating. Canaccord has done a great job and our ATM, which has now finished from last year. But this year allows us to fast-track the momentum for next year. Recent press release on October 27 was our investment; we made other strategic investments in other companies that are particularly using the Ethereum network, and we made this a critical investment in the NFT business via Network Media Group, which we'll be presenting today. It's a phenomenal microcap stock that had its challenges during COVID; that's all turned around. They produce high-quality content, which has sold to Netflix or prime time. It's Muhammad Ali, it's Bruce Lee. And you're seeing billions of dollars going into the NFT business and the digitization, not just of film, but also of music. Next please. We also mentioned that in October, we made a press release, Diana Biggs, who went to the University of McGill as an engineer that has an incredible resume and has been deeply involved in the crypto space from a very early period for the past ten years. So she brings tremendous knowledge; she was ahead of HSBC Innovation Labs and we're thrilled to have her here. She was very much involved with DeFi still with DeFi. She helped expand their footprint, especially their own ETFs in the Nordic countries, which has about $0.5 billion of Bitcoin in it. And it's a very profitable part of their business. She’s joined us for our Board of Directors in Switzerland, where the Company, basically is in Zug, Switzerland, which is like the Silicon Valley for all the foundations in the crypto industry. Next please. It's interesting in the ecosystem for Ethereum is the largest. And it's really important to recognize that this ecosystem includes thousands of altcoins, the apps, NFTs, stablecoins. And JPMorgan and Bank of America endorse Ethereum. But for us, what's interesting is the valuation metrics and where the big growth is Bitcoin. And that's where we're focused for future growth by maintaining our Ethereum footprint because of this big battle between proof of stake and proof of work, and you will no longer be able to mine. I've heard that for five years, and supposedly next year is going to eventually happen. But we'll see as we continue to mine, and we have strategies in the event that proof of stake does take over from proof of work; we're in a very advantageous position with all the investments we've made in this high-performance equipment. Next please. This is another visual to give you an idea of the depth and scope of the Ethereum ecosystem. Next please. One of the big challenges, and I will go into more detail on this, are the difficulties that continue to rise. It's interesting that it fell for Bitcoin. But it did highly come off for Ethereum, and Ethereum has gone to all-time highs. And the big reason for that is that there are so many individuals who have AMD 580 chips or NVIDIA chips for gaming, in particular, they turn their computers on to mine when they are sleeping; so you have a much more diversified ecosystem for mining Ethereum. And as one young designer told me last week that there's CAD-CAM city planning for San Antonio, and that he turns the machine on and it generates about $4,000 a year, which allows him to buy new equipment, new PCs, and any software he needs from mining Ethereum while he sleeps. Next please. Now I want to turn it over to Aydin. Aydin Kilic is our recent President and Chief Operating Officer. And he's doing a great job; he's going to give you a wonderful update on where we are. Aydin.

Aydin Kilic, President and COO

Thank you, Frank, for that introduction. It's been an outstanding quarter for HIVE. I want to share some operational numbers that illustrate how we achieved the highest revenue this quarter among our peers. Currently, we have 1.25 exahash of active Bitcoin mining, accounting for about 0.8% of the total network. Additionally, we are mining 4200 Gigahash of Ethereum. When you convert Ethereum mining into Bitcoin equivalent, 1,000 gigahash of Ethereum equals approximately 220 Petahash of Bitcoin mining. This brings our total to over 2 exahash of equivalent Bitcoin mining, which is important for investors to understand how HIVE reached such impressive revenue this quarter. We're also observing the difficulty rate, especially after the significant drop in mining difficulty in China earlier this year due to miners going offline. This highlights the significance of operating in a politically stable jurisdiction. HIVE benefits from green and clean energy sources, with all our power coming from hydro or geothermal. Our operations in Sweden, Iceland, and Quebec are in politically stable areas, which is often overlooked as attention tends to focus solely on megawatts or costs per kilowatt hour. It also illustrates how centralized Bitcoin mining used to be, with over 60% of the Bitcoin mining hash rate previously based in China. While cryptocurrencies are designed to be decentralized, Bitcoin mining has shown a tendency towards centralization. We've seen the hash rate drop dramatically from 180 million Terahash to around 80 million Terahash in July. It has now largely recovered to approximately 160 million Terahash, with much of that hashing power moving to the U.S. We anticipate continued growth in hash rates as many companies are raising capital to enter the Bitcoin mining sector. Next slide, please. Ethereum is significantly more decentralized compared to Bitcoin. The Ethereum network has consistently grown over the past few years, particularly in the last year, without experiencing a dramatic drop like Bitcoin mining did. As Frank mentioned earlier, Ethereum mining is much more globally decentralized, which has lessened its impact from China's crackdown on crypto mining compared to Bitcoin. Looking at the production data, in the second quarter, 8,688 Ethereum were mined, a decrease from 32,800 Ethereum the previous year. However, Ethereum's price has soared, reaching almost $5,000 per coin, compared to $400 or $500 a year earlier. Despite the reduction in coin production by a factor of four, the price surged tenfold, indicating strong fundamentals for Ethereum mining. HIVE's significant mining presence has also contributed to our impressive results this quarter. We discussed coin output and pricing, and this graph illustrates combined mining economics. It shows the revenue per terahash per day from Bitcoin mining, based on the Bitcoin price and the daily coin output during mining. Bitcoin has remained strong, hitting multiyear highs earlier this year during the bull market around February and March. Although there was some decline in the summer, when the hash rate fell, profitability increased due to a rise in the quantity of coins mined. Recently, Bitcoin's robust price has pushed the dollar per terahash per day back to spring levels, indicating strong economics for Bitcoin mining. The hash rate has significantly rebounded, and with Bitcoin priced around $65,000, the current dollar per terahash per day is approximately $0.40, while HIVE operates at 1.25 million terahash. Next slide, please. Now this is the same graph before Ethereum. This is dollars per mega hash per day for Ethereum. And so you take a step back and you say, hold on a second. This actually looks like it's been very consistent for the last year. And now, there are a couple of big spikes in May of 2021 and February, those were just transaction fee rallies. There were a few days where transaction fees in Ethereum Blockchain were very absorbed in. The London Hard Fork that came about in early August was designed to prevent these exorbitant transaction fees. Why? Because they wanted the network to be accessible; they wanted people to send and receive Ethereum or mint their NFTs or have various gaps and tokenized projects being able to efficiently operate on the Ethereum blockchain by preventing super high transaction fees on any given day. Now, in our last earnings, in some previous commentary, we pointed out in the 30 days following the London Hard Fork, compared to the 30 days leading it, mining economics are actually better. And if you look at August here, you can see that there was a rally in Ethereum mining profitability compared to the month of July. And that basically illustrates the point that we were making earlier; our technical team was running our own analytics. We were studying the rewards at the dollar per mega hash level exactly as presented here. So for you technical guys out here, it's always great to look at dollar per mega hash per day for Ethereum mining to understand the underlying economics, and of course, Ethereum has performed better than Bitcoin. Anyway, we've got a strong, consistent Ethereum mining business. And to our earlier slides, you've seen no difficulties continue to go up; stronger price action has made this a very lucrative business for us, which we're very happy to be a part of the ecosystem. Next slide, please. Some big accomplishments in this last quarter, we hit that magic exahash mark in August 2021. And at that point in time, we had our future equivalent of Bitcoin mining at 3 exahash, and we had announced 5,800 machines that were purchased in 45 days, so that was a big highlight; August was an electric month for HIVE. But what's happened since then? Next slide. We've actually increased our active Bitcoin hash rate by 35% in the last three months, or 1.26 hash right now. In addition to that, we're at 4200 Gigahash, so our Ethereum footprint has increased. This is remarkable because earlier I mentioned that each 1,000 Gigahash of Ethereum mining is about 220 Bitcoin Petahash. So HIVE's total global hash rate now on a Bitcoin equivalent is over 2.1 exahash, and that's important for the investment. Not the composite of these figures here. Remarkable growth this quarter. Next slide, please. An update on our data center New Brunswick construction is well underway. We're on track to have 50 megawatts online in December 2021. In Q1, so in a few months, we're going to have all 70 megawatts online hashing premium clean. This is a full-on infrastructure project you can see our secondary substation there, it looks like something out of a sci-fi movie, and then our hot island, that gorgeous silver wall with all those sensors running through. So very exciting; we have over 2 exahash of Bitcoin – sorry, almost 2 exahash of Bitcoin mining capacity at one site at our data center in New Brunswick. Beautiful, gorgeous passive design; you could see some of the architectural details there in the superstructure photos. Next slide, please. And so the future looks bright for HIVE. We are on track to bring us to over 6,000 Gigahash of Ethereum mining. Previously, we highlighted that we have 3 exahash of Bitcoin mining. This is very exciting. And again, if you take that 6,000 Gigahash for Ethereum mining, that's over an exahash of Bitcoin mining, that's over 1.2 exahash of Bitcoin mining. Again, on an equivalent basis, our current pipeline brings us to over 4.2 exahash of Bitcoin mining. Next slide please. If that wasn't exciting enough, on top of all of that, just the compounding growth that we're experiencing at HIVE, which again is always exciting with Frank’s leadership, we just announced another $100 million raise. Without further increases, that number that I just gave you would put HIVE's 2022 Bitcoin equivalent hash rate to about 5.3 exahash with our 4 exahash of Bitcoin mining capacity, and additionally the 6,000 Gigahash. So it's going to be a very exciting year ahead, and we've got a great team globally positioned as we develop infrastructure and deploy our chips. Next slide. And on that note, I'll turn it over to Mr. Darcy Daubaras.

Darcy Daubaras, CFO

Thank you, Aydin. And I'll continue on with the financial review of the Company for the second quarter ended September 30, 2021. Next slide, please. Turning to Slide 36, we generated revenue from digital currency mining in the second quarter of Fiscal 2022 of $52.6 million versus $13 million in the prior year second quarter. The increase in revenues versus the same quarter in fiscal 2021 was due to an increase in the production of Bitcoin mining, as you've seen, to 656 from 88 in the prior year, driven by the acquisition of the two Bitcoin mining data centers in Canada. This was bolstered by the revenues driven by the Ethereum mining that took place during the recent quarter, even though the number of coins mined fell from 32,800 in the prior year to 8,688 in the current year. This is the power of the close to ten times increase in the price of Ethereum compared to a year ago. Our gross mining margin, which equates to our revenues minus direct operating and maintenance costs, increased in absolute dollars to $45 million in the most recent quarter compared to $9.2 million in the prior-year comparative. Gross mining percentage also increased to 86% from 71%. Gross mining margin is also partially dependent on various external network factors, including mining difficulty, the amount of digital currency rewards miners received, and the market price of the digital currencies at the time of mining. Next slide, please. Turning to Slide 37, comparing our current Fiscal Q2 quarter to the previous Q1 quarter, we generated revenue from digital currency mining in the second quarter of Fiscal 2022 of $52.6 million versus $37.2 million in the previous quarter. The increase in revenues versus the prior quarter, again, was due to an increase in the production of Bitcoin mining. This was driven by the acquisition of the New Brunswick data campus and the ongoing delivery of ASIC miners to both of our Bitcoin mining data centers in Canada. Our gross mining margin increased in absolute dollars to $45 million in the most recent quarter compared to $31.0 million in the prior year comparative. The gross mining percentage also increased. Next slide, please. Our adjusted EBITDA increased in the second quarter of Fiscal 2022 to $52.3 million versus $10.6 million in the prior year comparative quarter. The Ethereum mining margins that we experienced during the quarter enabled us to continue the upgrade of our data center assets in Sweden and Iceland, and also diversify our business by starting to invest in HPC assets. We're proud to continue to record consecutive quarters of positive adjusted EBITDA and profitability, which is a reflection of our attention on reducing operational and overhead costs in the organization from top to bottom. I will highlight, as I always do, the gross mining margin and adjusted EBITDA are non-IFRS figures. Net income for the second quarter of Fiscal 2022 was $59.8 million compared to $9.2 million in the prior year comparative quarter. This increase was driven predominantly by unrealized gains recorded in investments, reevaluation gains on digital currencies, and realized gains on the sale of digital currencies in the current quarter. Next slide, please. Now comparing our adjusted EBITDA and net income to the prior quarter, June 30, 2021, our adjusted EBITDA increased in the second quarter of fiscal 2022 from $29.3 million to $52.3 million compared to the prior quarter. Again, I'll mention the gross mining margin and adjusted EBITDA are non-IFRS figures. Net income for the second quarter of fiscal 2022 was $59.8 million compared to $13.5 million in the prior comparative quarter, and again, the increase was driven by unrealized gains recorded in investments, reevaluation gains on digital currencies, and realized gains on the sale of digital currencies in the current quarter, where in the prior quarter we were comparing to the losses incurred. Next slide, please. As you can see here, when we're looking at HIVE's holding strategy, the comparison from the year-ago quarter to where we are now is astronomical. We have been using this very strong approach to hold all of our coins as much as we can. And at September 30, the end of this most recent quarter, we are sitting with $123.1 million in assets sitting on the balance sheet from the holding of Ethereum of over 25,000 coins and Bitcoin of over 1,100 coins. Next slide, please. This continues a very healthy balance sheet that we've been able to build here at HIVE. Cash-on-hand of $4.8 million amounts receivable and prepaids from the normal course of business $9.4 million, and as I had mentioned, $123.1 million in digital currencies, having a strong current asset of $151.8 million versus a total current liabilities of only $10.2 million. This continues to give us the ability to fund our operations through the holding; we've got solid financial positions, and this is something that we will continue to do moving forward. Next slide, please. Here you can see our capital structure. As of November 10, 2021, over 388 million shares issued and outstanding 7.8 million warrants. We've got our options there at around 15 million and RSUs at 1.3 million. We also show the investments that we hold in DeFi Technologies network and also in tokens.com. These are investments that we have made in the past and hold small positions in each of those. And now I'd like to turn it over to Holly to finish off our presentation. And thank you very much to our shareholders and investors for listening to us this morning. We're very excited about the future moving forward with HIVE.

Operator, Operator

Thank you so much, Darcy. And now we will see a presentation from Russell Starr, Executive Chairman and CEO from DeFi Technologies.

Russell Starr, CEO and Executive Chairman

Thank you everyone for joining. Thank you to HIVE and Frank Holmes for inviting us. I think this is going to be a very interesting and compelling presentation for anyone attending this HIVE update. HIVE and DeFi Technologies to the share swap many months ago; it has resulted in tremendous value creation for both companies. Obviously, their business lines outside of DeFi and HIVE are generating tremendous revenues for both companies. However, the synergies between the two in my opinion are geometric. So thank you very much for listening and attending. My name is Russell Starr; I'm the CEO and Executive Chairman of DeFi Technologies. What is DeFi? Simplified, it is the evolution in change of almost everything that you encounter in your financial world. It's bridging the gap between traditional capital markets and the new decentralized finance world. And DeFi Technologies is changing the way that people can invest in DeFi protocols themselves. What exactly do we do? It's very simple. We create equity wrappers, and we put them around DeFi protocols that trade on alternative exchanges and allow your average everyday investor to buy a DeFi protocol on a traditional listed regulated equity exchange. And this is a very powerful proposition because to date most of the world hasn't been able to benefit from truly one of the most innovative and compelling investment opportunities since the Internet revolution. Who are we and who is building this amazing company? As you know, I'm the CEO and Executive Chairman. My background is in traditional finance. I helped build and found a broker-dealer in Canada. I've built and sold several junior companies. Litter is one of the co-founders; he created a private company called SEC 5, he is our President. Diana Biggs is now our Chief Strategy Officer. She was recently the head of Global Innovation at HSBC. And two of our key and most influential executives are Johan Thornblad and Olivier Roussy. Johan created and founded XBT Provider, now known as CoinShares. And Olivier was the founder and one of the co-creators of HIVE itself. He and we have taken the same innovative thinking that created HIVE to DeFi, thereby allowing people access to the world of DeFi in traditional listed equities, similar to the way that HIVE was created to allow people to invest and get exposure to Ethereum and its many complexities and opportunities. Our capital structure is approximately 200 million, well actually 210 million shares. Currently about a $1 billion market cap. Our stock and our Company have grown substantially as our AUM has grown over the last several months. We have a very robust balance sheet as you can see, and we intend on growing our AUM and listing more and more ETPs, listed equity instruments that allow exposure to the growing and very intriguing DeFi ecosystem. Why DeFi? Well, a lot of people ask me this question and a lot of people are unaware of how incredibly fast this industry is growing. Between crypto and DeFi, this industry is growing two times faster than the Internet. And you get a lot of questions from people suggesting that this may be a flash in the pan, or that a key risk might be that Ethereum, Bitcoin, and other DeFi protocols could go to zero with impending regulation. I actually think the exact opposite. We believe that as the regulatory environment catches up to this incredibly exciting sector, it will only grow in popularity and in size. To date, the total value locked in DeFi is well over $100 billion. And as you can see, it started the year, just hovering close to $20 billion. Like I said, the opportunity to invest in the tech bubble in 1994 is almost analogous to what you're seeing today. And maybe I shouldn't even use the term bubble because I don't think this is a bubble in any way, shape, or form; this is an opportunity to realistically invest in the likes of Amazon, Apple, Microsoft, any of those major companies that you see today back in the single-digit figures and truly create wealth, generational wealth. Many companies are supporting DeFi, and HIVE is obviously benefiting as a result. The impressive funds and entities backing us enhance the credibility of the idea that this sector is growing twice as fast as the Internet, opening significant opportunities for investors engaged in this dynamic ecosystem. Our revenue model revolves around three business lines: DeFi Asset Management, where we have developed various ETPs including Bitcoin Zero, Ethereum Zero, Solana, Cardano, Polkadot, and the first-ever Uniswap ETP. Unlike many companies, we trade our own underlying assets, allowing us to execute trades and capture the spread. We do not charge management fees for our Bitcoin and Ethereum ETPs, and our fees for DeFi protocols are minimal. Where we generate the majority of our revenues is obviously on the management fees for the DeFi protocols, but mostly on staking the underlying. And staking in my opinion today with what the Fed has done to the treasury market and the fixed-income market is something that's going to revolutionize the world moving forward because you can actually generate positive yield versus all the negative yielding debt instruments that exist currently due to inflation and the continuous money printing in the U.S. We just today launched one of our first nodes in our DeFi infrastructure and governance business line, and then of course our third basket is DeFi venture, where we co-invest with the likes of Anthony Pompliano and Teeka Tiwari as well as other related parties through our vast network due to Yohan, Olivier, Diana, and Wooters relationships. We effectively get the opportunity to invest in very early seed opportunities in the DeFi universe and generate tremendous returns on that. We are guiding investors towards achieving approximately $400 million in assets under management from the Nordic growth market. We are currently listing our products in Germany, with several already available, and we are about to introduce many more on Euronext. We expect the growth we've experienced in the past nine months to continue, and potentially accelerate as we gain exposure to larger markets. Our infrastructure and governance model allows us to manage additional nodes, generating between $1 million and $2 million per node. With $1 billion in assets under management, we anticipate potential earnings of nearly $100 million, thanks to our efficient operations and low personnel costs. So the profit margins and the EBITDA margins on this business are staggering and quite frankly, near the 85% to 90% level. This market space, like I said, is growing in leaps and bounds. It's something that you can't even compare to anything other than, quite frankly, the evolution of the steam engine and the railroad back in the early centuries, the early 1800s and 1900s, and then of course, the most recent Internet revolution. And like I said, this is growing two times faster than even that was. This is, in my opinion, going to be the most dominant business opportunity, investment opportunity of the next decade. Lastly, here are the underlying AUM in our protocols that we currently manage. As I mentioned, we've gone from 0 to almost $400 million, $374 million U.S., and we anticipate that to double or triple in the near term over the next 6 to 12 months. And I look forward to any questions, concerns, comments. People can reach out to me. My email is [email protected]. Thank you very much for your time. Thank you again for HIVE allowing us to do this brief presentation. And thank you very much to Frank Holmes and teams for inviting us.

Operator, Operator

And now we will be hearing from Network Entertainment's representatives for today, which is Derick Murray, CEO, Executive Producer and Director, as well as Tom Lombardi, Strategic Advisor for NFT, R&D research.

Derick Murray, CEO and Executive Producer

I'd like to thank all of you for joining us today. And I want to thank Frank Holmes and HIVE for inviting us to this forum. My name is Derick Murray; I'm the CEO of Network Media Group. Today with Tom Lombardi, who many of you may have seen our press release, where Tom has recently joined the network team as our NFT strategic advisor. I'm going to hand the microphone over to Tom.

Tom Lombardi, Strategic Advisor for NFT, R&D Research

Thanks, Derick. It's a pleasure to be here. NFTs present an amazing opportunity to transform finance, media, and culture. And with $10.7 billion in platform revenue at the end of Q3 2021, this technology has gone mainstream and we certainly see that growth continuing into the future. And where we go from here and what we use these for, we're really only limited by our imagination.

Derick Murray, CEO and Executive Producer

Thanks, Tom. I really appreciate you mentioning the word imagination. That's something that really resonates with me. For many years, I had in my wallet a quote from Muhammad Ali, "a man who has no imagination, has no wings". And that inspired our Academy Awards shortlist film, Facing Ali, that our entire team at Network is very proud of. I'm going to show you just a short clip, just to give you a sense of this film and this great man, Muhammad Ali.

Movie Audio, Movie Audio

This is the motion picture event that will change the way you see Muhammad Ali forever. Boxing is a strange sport. You can overstay your welcome and you can get physically hurt. Brian is going to take so many shots to the head. You can lose your life giving the people what they want to see.

Derick Murray, CEO and Executive Producer

Facing Ali was foundational in positioning Network Entertainment to be a globally recognized premium content provider of documentary series and feature documentaries. Network celebrates the lives of the world's most iconic personalities and enduring legacies, and dives deep into fascinating and inspiring cultural topics from the worlds of music, film, comedy, fashion, sports, politics, and business. The Network premium brand of content delivers world-class casts combined with visually cinematic and richly crafted storytelling. As you know, the content universe demand for content has exploded over the last few years, and Network has been front and center in creating content for these media and tech companies who have launched these new streaming services. Our relationship with Ayla's talent in front of the camera, or his producing partners is unparalleled. A-list talent and industry leaders across the spectrum are equally enthused about the NFT platform and its endless opportunities. Embracing the new platform and aligning Network's NFT initiatives with top talent and IP owners is a natural fit for the Company. I often stated that our network or content is platform agnostic, simply put, we create content that is distributed and formatted for every possible media. We look at NFTs as a new and exciting digital content platform. Every day at Network, we create and work with illustrations, animation, graphics, film, music, video, or photography to tell stories and engage audiences worldwide. I think you could see why our entire team at Network is really excited about the apparent synergies between what we do every single day and what we will be doing in the future on this new and exciting NFT platform. And on that front, I am going to hand the mic over to Tom, to dig in a little further with you on NFTs.

Tom Lombardi, Strategic Advisor for NFT, R&D Research

Thanks, Derick. But let's talk about what NFTs are. NFTs are non-fungible tokens. The best way to understand non-fungible tokens is to talk about a fungible token. Everyone understands like Bitcoin and Ether; these are digital assets, these are fungible tokens, much like a commodity; one is like the other, and we can use the blockchain to validate that. A non-fungible token is something that is unique, and an NFT on a blockchain allows us to now associate digital property ownership to these objects such as photos, videos, music, and essentially anything that is digitally made. The value proposition is really this: this is digital uniqueness before this level of scarcity for digital content that we've never had before. How they are used today, NFTs are used in what we call the NFT Flex. We’re using them for profile pictures. It’s a place where we can show our friends and show the public that we own this individual image. Probably the most famous one is the Crypto-Funk. Some of them are selling for $7 million, but on average, they sell for $0.5 million. What really kicked off NFTs was the people sale. People as in the digital artist, People sold work of art at $69 million at an auction. I think once that happened, eyes opened, the media got involved. The other really good application is the project called NBA Top Shot. NBA Top Shot is a collection of essentially, if you think of collectible playing cards, these were collectible videos of dunks and moves by basketball players. There was $500 million of revenue in the first six months from close to 800,000 users. Not only do they have this cultural connection, but now there's an investment thesis behind the clubbers. The tech majors and large companies are certainly diving in head-first. We saw the big Facebook rebranding to Meta, short for the metaverse. Mark Zuckerberg said in his speech, 'We will be supporting crypto and NFT projects in the community.' And then there are countless other projects. Quentin Tarantino, EA Sports mentioning that NFTs are the future of gaming. McDonald's, Simpsons, Disney; there's a lot of adoption from global companies around the world. And we think that this unlocks so many opportunities within media, entertainment, and culture.

Derick Murray, CEO and Executive Producer

As a pioneer in the blockchain industry, HIVE is the ideal strategic partner for Network. HIVE support alongside our commitment to be a market leader in the rapidly evolving NFT ecosystem is foundational. It also allows us to expand our IP pipeline with additional NFT rights in collaborations on the horizon. When I think of our relationship with HIVE, I start to do the math. HIVE, plus Network, plus Aseerium, plus NFTs, equals a global NFT content strategy. There has been tremendous success already in this new NFT universe. We're really excited about the prospect of bringing together community; tie it into investment and packaging it with culture, pop culture. Network NFT studios, built on success, designed for now. Thank you everybody for joining us, and thank you, Frank Holmes and HIVE for having us here today. And there will be no presentation that will be complete without the pitch. Pretty simple pitch really. An investment in Network NTE.B provides access to the NFT revolution. Kind of sexy. That's it. That's all I got. Thanks so much everybody. Goodnight.

Operator, Operator

I want to bring everyone's attention to some of our new YouTube videos on the HIVE YouTube page, be sure to check those out as well as be sure to follow us across social media. We're quite active, not only on Twitter, but also on Instagram. And then as I mentioned, on YouTube as well. Be sure to subscribe for updates. And thank you, everyone. That will conclude HIVE Blockchain Technology's webcast for the three months ended September 30, 2021. And just as a reminder, you can read the full earnings press release on our website. And you can email any questions to [email protected]. Thank you.