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    HIVE Digital (HIVE) Q2 2027 Earnings Call Transcript

    The Motley Fool·11/10/2026 22:20:23
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    DATE

    Tuesday, Nov. 10, 2026

    CALL PARTICIPANTS

    • Director of Marketing and Branding - Nathan Fast
    • Executive Chairman - Frank Holmes
    • President and Chief Executive Officer - Aydin Kilic
    • Chief Financial Officer - Darcy Dubaras
    • President and Chief Operating Officer of BUZZ - Craig Tavares

    TAKEAWAYS

    • Total Revenue -- $84.9 million, representing a 7.3% sequential increase driven by growth in both digital currency mining and high-performance computing services.
    • Digital Currency Revenue -- $76 million, reflecting a 5.5% sequential increase supported by higher Bitcoin production as average network difficulty declined.
    • HPC and AI Revenue -- $8.8 million, growing 70.7% year over year due to the deployment of NVIDIA B200 GPU clusters and strong pricing across GPU marketplaces.
    • Adjusted EBITDA -- $24.8 million, representing an 85% sequential increase from $13.4 million in the first quarter of fiscal 2027.
    • GAAP Net Loss -- $78.7 million, including $54.9 million in depreciation and a $31.2 million non-cash impairment of mining equipment.
    • Equipment Impairment -- $31.2 million, resulting from a recoverability assessment driven by lower mining revenue per unit of computing power and reduced market values for ASIC equipment.
    • Bitcoin Rewards -- 1,070 Bitcoin received during the quarter, an increase from 1,004 Bitcoin in the preceding quarter.
    • Operating Hashrate -- 23.8 exahash on average for the quarter, with the company utilizing firmware down-clocking to optimize fleet efficiency.
    • Live HPC ARR -- $40 million as of the call date, generating approximately $110,000 in daily revenue.
    • Contracted GPU Cloud ARR -- $185 million, supported by a $225 million agreement with Bell AI Fabric and a $350 million agreement with an investment-grade enterprise customer.
    • Global Power Footprint -- 860 megawatts of secured power capacity, with 440 megawatts currently active for Bitcoin mining operations.
    • Cash Balance -- $139 million as of Sept. 30, 2026, compared to $208 million at the end of the prior quarter.
    • Digital Currency Holdings -- $22.6 million, consisting of 269 Bitcoin held in treasury at the end of the second quarter.
    • GPU Financing -- $129 million, secured through a loan with a 9% interest rate and a three-year term to fund the purchase of GPUs for the Cohere agreement.
    • ATM Equity Program -- $43.2 million in gross proceeds raised during the quarter through the issuance of 13.7 million common shares at an average price of $3.15 per share.
    • Paraguay Expansion -- 100 megawatts of additional power capacity at Yguazu planned for energization by the end of calendar 2026.
    • Toronto Airport Site Budget -- $40 million, allocated for a 5-megawatt IT load data center targeted for completion in 2027.
    • Regulatory Provision -- $84.5 million, maintained for regulatory liabilities related to a previously disclosed value-added tax matter in Sweden.
    • HPC Gross Margin -- 51%, with management targeting a run rate of 80% as new GPU clusters enter service.
    • Combined ARR Target -- $500 million, projected for early calendar 2027 based on the deployment of contracted GPU cloud capacity and current mining economics.

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    RISKS

    • Dubaras stated, "The impairment deserves some explanation... Under U.S. GAAP, we assess our Bitcoin mining equipment following lower mining revenue per unit of computing power and reduced market values for ASIC equipment," describing the $31.2 million non-cash charge.
    • Holmes stated, "HIVE itself, its volatility has expanded along with -- you can see with CoreWeave and the 10-day it gets exasperated even more so because of Bitcoin and the movements in Bitcoin," noting the impact of external market events.
    • The company maintains an $84.5 million provision for regulatory liabilities regarding a value-added tax dispute in Sweden.

    SUMMARY

    HIVE Digital Technologies Ltd. (NASDAQ:HIVE) reported a transition toward high-performance computing (HPC) while maintaining its core Bitcoin mining operations through a dual-engine infrastructure strategy. Management stated the company is converting hydroelectric power into global compute power, with significant expansions underway in Canada, Sweden, and Paraguay. The company reported a substantial non-cash impairment of its mining equipment during the quarter, reflecting changing economics in the digital currency network. Management indicated a strategic focus on sovereign AI infrastructure to serve demand for localized data control and enterprise security.

    • The company is developing a 320-megawatt Gigafactory in the Greater Toronto Area, which management described as the crown jewel of its development pipeline.
    • CEO Kilic stated that the company is "land banking by substations" in Ontario, New Brunswick, and Paraguay to secure long-term power access for future Tier III data centers.
    • The province of Ontario's new data center playbook provides a tailwind for the company's Canadian projects through expedited approvals for liquid-cooled facilities.
    • The Cohere agreement involves 2,304 NVIDIA GB200 GPUs, with delivery expected to begin before the end of calendar 2026.
    • Executive Chairman Holmes noted that the Central Bank of Paraguay now recognizes Bitcoin as an export, which he indicated is an important development for the country's GDP reporting.
    • The company is shifting toward liquid-cooled, closed-loop cooling systems to meet sustainability requirements and NVIDIA reference designs for AI data centers.

    INDUSTRY GLOSSARY

    • ARR: Annualized run rate revenue, a projection of future annual revenue based on current shorter-term performance.
    • ASIC: Application-Specific Integrated Circuit, specialized hardware used for mining digital currencies like Bitcoin.
    • Exahash: A measure of total computational power being used by a network to process transactions.
    • GPU Cloud: High-performance computing services providing access to Graphics Processing Units for AI and machine learning tasks.
    • HPC: High-performance computing, the use of supercomputers and parallel processing for complex modeling and data analysis.
    • Tier I Data Center: Infrastructure used for energy-intensive tasks like Bitcoin mining that do not require high levels of redundancy.
    • Tier III Data Center: A data center with redundant components and multiple distribution paths, suitable for high-availability enterprise AI workloads.
    • VAT: Value-added tax, a type of consumption tax placed on a product whenever value is added at each stage of the supply chain.

    Full Conference Call Transcript

    Nathan Fast: Hello, and welcome to HIVE Digital Technologies Earnings Webcast for the Second Quarter of fiscal 2027. I'm Nathan Fast, Director of Marketing and Branding at HIVE, and I'll be moderating today's call. Before we begin, please turn to Slide 2 for our disclosures. Today's presentation contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, forward-looking information under applicable Canadian securities laws. Any statement that is not a statement of historical fact is forward-looking. Words such as expects, believes, anticipates and similar expressions identify these statements. These statements speak only as of today's date. Actual results may differ materially, and we undertake no obligation to update them, except as required by law.

    For a full discussion of risk factors, please refer to our most recent filings at sec.gov and on SEDAR+-- we will also reference certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income and free cash flow. Management uses these measures to evaluate operating performance and believes they give investors additional insight. They are supplemental only. They should not be considered in isolation from or as a substitute for GAAP results. Reconciliations to the most directly comparable GAAP measures are included in the appendix to this presentation and in our earnings press release furnished to the SEC on Form 8-K.

    On the next slide, it's my pleasure to introduce today's presenters: Frank Holmes, Executive Chairman; Aydin Kilic, President and CEO; and Darcy Dubaras, Chief Financial Officer. With that, I'll turn the call over to Frank for a macro recap of the quarter.

    Frank Holmes: Thank you, Nathan. As usual, I try to give my Chief Investment Officer as Executive Chairman of HIVE, a macro recap and interject some of my macro commentaries as a money manager in what I have seen for the company and how it fits into the global scene. So before we do this, I always like to talk about VNA volatility. And it's so important for investors to recognize that different factors that over time changes with the volatility, but the S&P daily volatility is plus or minus 1% and the 10-day is 2%. And it's interesting because gold used to be same as the S&P 500 and now it's much greater.

    And NVIDIA is also greater than what the S&P 500. And Bitcoin, as you can see, is 3x the volatility of daily of what the S&P 500 is and almost 2.5x -- sorry, 3.5x what the daily volatility is for the S&P. Strategy, Michael Saylor incredible company. It even has a greater volatility. And CoreWeave, because of its extremely leveraged balance sheet, it seems to get more volatility as the poster child AI business to use to say it's got all kinds of financial problems.

    But at this stage, I think so much is greatly exaggerated, but it still is pretty strong, the negative narrative on both Tier 1 to Tier 3 data centers, and I'll give you more commentary on that. But HIVE itself, its volatility has expanded along with -- you can see with CoreWeave and the 10-day it gets exasperated even more so because of Bitcoin and the movements in Bitcoin. But I will walk you through some of the numbers so you can get better understanding about the great value proposition. Next, please. But before we get into that, I want to thank the investors.

    I want to thank for being loyal with this volatility with Invesco, Citadel Advisors, Millennium Management, Situational Awareness and Baird advisory for believing in our vision and recognizing the great value we provide to this industry. The team -- most important is the quality and the depth and breadth of the team. As you can see, Aydin Kilic and Craig Tavares, Aydin is the CEO for HIVE, and Craig is the President and Chief Operating Officer of BUZZ, which is our HPC AI factory strategy, in particular, sovereign data centers. And Craig is doing a phenomenal job in Canada and also going back and forth to visit team now Johanna Thornblad in Sweden to expand that footprint.

    And Darcy Daubaras is the longest-standing CFO. Gabriel Lamas is our President, Electrical Engineer that's in Paraguay and Gabriel Ibghy, as you can see here is General Counsel, and he goes between Germany and Canada. So we do function over many time zones and provide interesting skill set. The world's first publicly listed digital asset miner on the TSC 2017. And you can see last year with the big growth was our exahash and Bitcoin. We're so happy we put that on the balance sheet and the income statement because it's given us economies of scale as Bitcoin went through a big correction this year. And I'll give you more color on that in a minute.

    It's important to recognize that HIVE functions over 9 time zones, 5 languages, 3 continents. As you can see from Sweden to Vancouver to Montreal and Bermuda is in there right in the middle and Texas, the head office is here where I am. We continue to be very efficient and as miners for Tier 1 data centers or bare metal AI business model. So HIVE is turning hydroelectric power into computing power. And we've been doing this when we started in Iceland and Sweden. The dam -- the hydro dam is very close to our facility in both in Sweden and the same thing in Canada and in Paraguay.

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

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

    So that is why -- one of the big reason why we're in Bermuda. And when the company first started, we started in Switzerland. Why Switzerland in 2017? Because it had the most advanced regulatory model and structure. And we and me as being co-founder and putting up capital and reputation, I want to make sure we're in the most regulated world who had some guardrails up early and Switzerland was much further ahead than other jurisdictions. And then in 2018, Bermuda came out with regulatory arms and basically a whole digital crypto set of rules.

    And from an accounting point of view, it made it much easier to go from Switzerland into Bermuda to be the controller, not in Zug, Switzerland, and that's where we've been for many years now. And so it's a very important global design to be tax effective for investors and also for ourselves, and we end up paying a lot of taxes. We have paid a lot of taxes in Sweden, a lot in Paraguay and a lot in Canada. What it does do is it allows us to be in a regulated world. And now the U.S. is set up with a regulatory regime for the crypto industry.

    And I think that the GENIUS Act is a very important step stone for America now. So HIVE is only green energy, low electricity cost, low temperature, except for when we go to Paraguay, it's much hotter. So we have a different type of chip in our Tier 1 data center there. HIVE stock rises above the 50-day falls below it, now it's below it, and a lot has to do with the summer with the Japanese yen was going through -- we saw earlier this year in June, going into June, what they call the carry trade and it first impacted Korean semiconductor massive sell-off that impacted U.S. stocks and impacted HIVE.

    And you can see these external events such as Bitcoin pricing or the unwinding of Japan has had this incredible multiplying effect and amplification of volatility. But all through all this noise, we just continue to plot along and make sure that we're doing the most effective mining or bare metal expansion program. So what's important for investors is that the Central Bank of Paraguay now recognizes Bitcoin as an export. As I mentioned at the beginning, they export a lot of food for the world. And now we're showing up as exporting compute power is very important for the country.

    And we're talking about more than a couple of hundred million dollars of value that goes through the Central Bank now. So you can see on the map, this visual just helps you to -- I mentioned earlier, the map was showing you how the compute power goes from Sweden and from Paraguay and from Canada to Bermuda. All of this is really, I think, that we're going to see going forward where more central banks are going to start adding that as an important component of GDP. So HIVE is the first to build Tier 1 data centers in Paraguay, and this long-term Tier 3 AI factories. And the rally – this rally is a massive event.

    It's like Formula 1 in Texas and Mexico and Miami and Las Vegas and all over Europe. In Paraguay, it's just car racing, and it's a big event. But us being the first to build these unique data center construction. So HIVE has led the way. Now Stargate is heading to Paraguay. We're in the Crusoe that is opening -- Crusoe is partnered with locals to do 100 megawatt going up to higher for a long-term energy contract and HIVE has also been going through the formula process for our data center for HPC for the 100 megawatts.

    But we've been going through this sort of dramas that happened just recently in Paraguay, which everyone knows, regarding conflicts of interest, but trail by the President of the country is now in jail. But the country shows that it has great -- it's important for investors, great stability because it has the checks and balances of power and accountability. The institutions there have been able to create this stability, and I'm so impressed with it. But in addition to characters that would happen and the sort of disconnect the short term with Paraguay, which will resolve it, we come back -- it doesn't matter.

    There's always these bad characters, bad characters, and it's how fast can you deal with it. Precious metals in China, 83 metric tons of gold plated copper bars for collateral. It just doesn't matter where you go, there's just bad characters and there's got to be checks out there to try to unravel this. And then Binance, again, last year, they blame an algo. This year, they -- interesting enough, just before the American elections, Binance gets hacked and Bitcoin falls 10% immediately. The real concern is it's not Bitcoin. Bitcoin as itself has not been hacked.

    It's the on-ramp and off-ramps -- and as more policies come embraced in America and other jurisdictions around the world, then I think things like this hacking into finance by supposedly one of their engineers left is computer open. But does it really matter? This is just bad actors no matter where you go in any industry, and it's how quickly can you cut those losses, correct the problem, learn from the lesson and push forward in life. So recently, we all went to the All-In, that is Aydin and Craig and myself went to Los Angeles to the All-In Summit. And I think it's the #1 podcast in the world.

    It comes out on Fridays, and it's a great analysis of technology, and it gives you lots of different opinions. And so if you're not listening to it, I highly recommend it, and they bring on usually CEOs of companies, and they have different perspectives of what happened in the sweep just recently in this election cycle in America. And what does it mean to AI and data centers? Well, the blue midterm sweep puts sovereign data centers like buzz in focus.

    I think this is extremely valuable because there's something that's happened in America with lots of FUD and deep concern that the Blue swing across America and one of the big concerns besides the Iran war lasting too long and Americans being really ticked off about it because every week, they're spending $100 to $200 more at the gas pump because of this war in Iran. And that was a big swing, especially by the Libertarian votes and people that are swing voters between the Democrats and Republicans. They all swung from being Republican, that swing boat in the Democratic Party.

    And with that, there are some higher percentage of states like Texas, which is 28% of all the data centers being built and has the biggest infrastructure electricity that there is a concern in this state. And I think that it lends itself that if anything, it's just going to delay data centers. This makes China very, very happy in the AI boom. And I don't think it stops it, but it will delay the process of building out. But what this allows is countries like Canada and Paraguay and Sweden is to be able, as they say, in Canada and Sweden, skate faster. They have an AI minister. They have policies in place for AI and for data centers.

    So this, I think, is really a great way of looking at HIVE is the strongest position in these other jurisdictions with sovereign data centers. So HIVE's BUZZ HPC partners with ProCogia to deliver end-to-end sovereign AI across Canada, U.S. and Europe. Next, please. And we know that recently the Canadian Business Development and Sweden have had meetings and our country President, John Thornblad, has been back and forth in visiting Sweden, where they're truly working together for cross-border. This is very different with Trump and his fight with tariffs is basically seeing a realignment of interest between Europe and Canada and sovereign data centers.

    So I think this is a really interesting time for the value of these assets we have. But what's really important is the sheer size of BUZZ Gigafactory of 320 megawatts of electricity, sponsorship that support by the federal government and the provincial government. And it's going through its normal process right now, some additional clearance to make sure that it's not going to harm the community, but really, it's a beautiful location, and it only enhances Canada's ability. And I think what we're going to see more and more in Canada, where Canada can't be exporting oil and gas to the U.S. a degree or electricity, it will be exporting to the U.S. compute power.

    What we've been demonstrating, we've been successfully doing from Canada, from Sweden and from Paraguay. And at one time when we started in Iceland. This is a rendering of what the potential is for a 320-megawatt GTA gigafactory smack in the middle between University of Toronto and Canada is what they like to call Waterloo University, which is Canada's MIT. So we have the intellectual capital in the largest city in the country, but it's also a city that's been well known if you look at history for R&D and for innovation. And I often think it's because of the long cold winters get dark at 4:00 and the sun doesn't get come up the next morning.

    So people are really quite advanced in doing research in the winter. And so this is a rendering, which we feel is a huge expansion opportunity over the next 12 months. HIVE and BUZZ HPC's partnerships with NVIDIA, with Simon Fraser University, as you can see here, with Dell Canada, with Dell, Canada, NVIDIA, Tigo in Paraguay. So we do have top of the food chain, Intellectual and Vector Institute where Nobel Prize winners come out of. We are connected at the very top end of the intellectual food chain and business development in the ecosystem of AI, Tier 3 data centers. Expanding our industry reach. Well, we've been very, very busy this quarter. Conferences attended, 16 of them.

    I just had an incredible event in Berlin with NVIDIA and Diplomats and heads of the whole AI build-out in data centers attended our event, and that was just super charged with this, I think, just great, great people. And then interviews, doing 2 to a day appear, sometimes we do 3 in a day. So building lasting relationships in the quarter. We can see here that the President of Taiwan met with the President of Paraguay, Gabriel Lamas in Taipei and then Evan Solomon is the Minister of Artificial Intelligence and Digital Innovation under Prime Minister Carney. And there's myself at Michael Dell is a second meeting we've had on brainstorming of how we build our companies.

    And it's just an honor for me to be with Michael Dell that has given just billions of dollars for American kids for education. The thoughtfulness and the stewardship of he and his wife are over the top. So I just applaud for his leadership. And then I really think you got to think of Prime Minister Carney has reversed a lot of Justin Trudeau's policies, which were really anti-growth, anti-capital investing. A lot of global macro economists look at GDP per capita, and they look at GDP, what percentage of money of the economy went into infrastructure and innovation and R&D.

    And under Justin Trudeau, it fell way, way behind, and that impacted the relative GDP per capita of the U.S. to Canada, which were always in the same trending line. It also impacted Europe. What's really important for investors is that Prime Minister Carney has showed tremendous leadership of reversing a lot of these the same political party recognizing with this experience from Goldman Sachs partner to the Head of Bank of Canada and Head of Bank of England and Chairman of Brookfield, what creates wealth. And it's about capital investing long term that unlocks job sustainability and growth. So building industry partnerships, as you can see, many pictures of the team traveling the world.

    So land and power, that's building the pipeline, 320 megawatts Gigafactory in the Toronto region, 32 megawatts in Boden, 100 megawatts in Paraguay and Pecos County working on 500 megawatts. And next, please. So I'd like to try to relate to some of the things as a macro investors -- for investors to understand that there's some macro events taking place, and they're still not over under the Trump era, and that is the Monroe Doctrine of looking at the Western Hemisphere. And there's many reasons for opening up, and you've seen a huge swing in South America going to the middle on the election process from the far left. And what are some of these reasons?

    Well, a lot of the strategic minerals, which China is cutting America off and Japan, they're in Latin America. And when we look at population of consumers, we're talking about 1 billion. So the idea of not being pulled into wars in Europe or into Asia of really North-South traffic. And I know from other products I have, the north southbound traffic for the airlines industry known as digital Nomads is huge. It's absolutely huge in the winter season of people flying from Canada and the U.S. that fly south to Mexico to Argentina, wherever there's strong internet, they got to go to Colombia, they go to Medellin. And they learn in the local cultures and they really use Airbnb.

    And it's really quite fascinating to see that it's opening up and focus. So rather than going across the Pacific, the North-South traffic is going to only increase. Next, please. And the reasons for that is this was called the Ring of Fire. And what we see here is Bolivia with all of its lithium in Chile, also with lithium in Argentina, which is known as the big lithium triangle. And we need that. We need the lithium batteries, the backup for HPC data centers and for Tesla vehicles or EV vehicles, you need lithium.

    So this is another big factor of North-South in addition to oil in Venezuela, which is turning around their GDP dramatically since Maduro's has been taken out of this corruption and dictatorship in that country. So AI data centers are driving demand for lithium and other critical minerals. Next, please. And we can see this with copper prices, we're hitting all-time highs because of the build-out in electrical grid. So it's not just -- and copper from what they call the Ring of Fire is very important. It comes from Peru and Chile, the big copper porphyry deposits, and they also come from in the U.S. and up into Canada into the Rockies.

    So with that, we try to break down here for you, land is $1 for every $100 spent of AI CapEx. And this is a breakout of what does it cost by Louis Gardner. And I think it's just helpful to recognize that the CapEx cost for a megawatt for HPC data center used to be 33x what a Tier 1 data center is for Bitcoin mining, and now it's pushing more than 40x. And that most of that is really the new power structure and the cost of the NVIDIA chips has gone up dramatically. But what I want to highlight to investors is that I'm going to turn it over here to Aydin.

    But for the financials is to recognize that our revenue was up about 3%, even though Bitcoin was off 27%. So that means in the past year, we built economies of scale, and our margins are still very healthy and robust. And I think the other part is in GAAP and mark-to-market, during this quarter, we started buying some better -- more energy-efficient ASIC chips and mark-to-market says, well, if Bitcoin is down, then the value of those ASIC chips is down. And before the next halving, they're down. So we still say, well, there are great prices to lower or become more efficient. And with that, we bought some more of these chips.

    Well, that just says your depreciation, even though we have an accelerated depreciation for our chips has not as been as great, and that's how inexpensive these chips have fallen. So we thought it was very prudent to go and start buying these chips on a weekly basis to upgrade our data centers. And what does that do? It creates on a mark-to-market rulemaking a noncash charge of $31 million.

    So it's recognizing following GAAP that you really have to drill through and take a look at what was the revenue and then what was our adjusted EBITDA or operating income from that -- and you can see that it's very, very healthy, especially when you compare to our peers and we compare to ourselves quarter-over-quarter, year-over-year. So Darcy has covered this, and Aydin is going to probably give you some more interesting granularity with it.

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

    Now -- along the bottom, if you look at the adjusted EBITDA of $24.8 million, that stands alongside a net loss of $78.7 million, of which is measured against $102 million of depreciation and noncash impairment and other noncash charges. By the way, of that $102 million, about $86 million is really just depreciation and a noncash impairment relating to ASICs and hash price, which applies to any miners following U.S. GAAP operating ASICs. Let's double-click on those operating margins. So again, we have the 2 engines, Bitcoin mining and HPC Cloud.

    So the total revenue of $85 million, a 36% gross operating margin was really made up of $76 million of Bitcoin mining revenue, where gross mining margin was 34% for the quarter. And the HPC AI revenue of $8.8 million actually did a very nice 51% gross HPC margin, resulting in a $4.5 million gross HPC margin. Now a couple of things to point out. One, we realized our $35 million HPC annualized recurring revenue target. So that's great. And also, it's worth pointing out that we are still scaling this business. So as we bring online new GPU clusters, our margins will continue to climb on the HPC business.

    Obviously, as you're scaling the business, bring on more resources, you are having additional overhead with that growth. Our newer deals are targeting about 80% EBITDA on GPU cloud, but we'll get into that shortly. Let's go to the next slide. Going into the winter season here, as of September 30, $139 million of cash on the balance sheet and $22.6 million of Bitcoin on the balance sheet as well for a combined $160 million of liquid assets, cash and cash equivalent on the balance sheet. So with the volatility in the market lately, it is good to have that strong balance sheet, which we are protecting. Our mandate this quarter is to protect our balance sheet.

    We have navigated 2 Bitcoin halving's and Ethereum merge, and this is the AI bear market that we've seen with all the recent pullbacks in the cloud, almost $4 trillion in market value wiped out in the last couple of weeks. Again, this is not our first rodeo. HIVE has been a publicly traded company. In fact, the longest standing of our peer group of HPC and AI infrastructure builders that have pivot from Bitcoin mining. So keeping a strong balance sheet, conservative G&A, although we are growing the business is our solution to scaling and, of course, growing cash flow and realizing return on invested capital. Let's go to the next slide.

    So if you look at our operating margins today, it's really great news. Not only do we reach that $35 million ARR for the quarter, -- but as of to date, we're actually at $40 million of annual recurring revenue for HPC. What that means is that we're doing over $110,000 daily revenue, which is fantastic. And if you apply those same HPC margins of 50% approximately from the quarter to our current $40 million, it's about a $20 million annualized gross HPC margin today. And on the Bitcoin side of the business, it was $300 million ARR for the quarter.

    But even if you look at mine economics and production since the period end to today, it works out to a very similar figure. So find that same 34% gross mining margin, it's about another $100 million of annualized mining margin. So I just want to give the Street and all the investors out there a snapshot of where we stand today, November 9 since the quarter end. And again, really exciting that our HPC revenues continue to climb due to strong demand, of course, GPU hourly prices. Let's go to the next slide. Global power footprint, 860 megawatts. Now we've updated this slide to include all the sites. And there's really 2 categories.

    There's Bitcoin mining sites and there's Bitcoin mining sites that are being converted to Tier 3. And so we've highlighted them in green and orange. And so you can sum up that across all the sites that have been identified for conversion to Tier 3, we have a 530-megawatt Tier 3 conversion pipeline globally, which is very exciting. Of course, Big Boden, the Gigafactory site in the Greater Toronto area, their new Brunswick site are big contributors to that pipeline. And of course, 440 megawatts is active currently mining Bitcoin. So we're really excited about the growth that we have ahead.

    It's just a good global snapshot because land and power is the input to the system, whether you're selling rack space or standing up GPU cloud and selling tokens, really, the input to the system is having powered land. We've got a lot of it. As I've said in the past on earnings calls, we have been land banking by substations. And this, of course, is the fruit of that labor. Let's go to the next slide.

    Some great news out of Ontario actually on the home front in Canada, we saw that blue wave sweep the U.S. midterms, and there was massive headwinds and negative sentiment surrounding AI, and we saw collectively $4 trillion of market cap from American tech stocks really get wiped out over the last couple of weeks. And so there's a massive breadth of fresh air. And candidly, what we think is an extremely strong tailwind for HIVE and BUZZ as our data center pipeline across Canada totals 400 megawatts of utility load, but most notably, our Gigafactory site and our Toronto Airport site sit proudly in Ontario.

    And so Premier Doug Ford announced a playbook in August, where he said that they're really choosing to build the economy of the future that will generate billions of economic growth. They want increase tax revenues and create thousands of new jobs. So we think Premier Ford, he gets it, we salute you Premier Ford. And his Minister of Economic Development, Vick Fedelli, said the province will make certain to give priority to data centers use a closed-loop system, which I do note. All of our data center designs for our sites, notably, the Gigafactory, Toronto and even Grand Falls have always been based on a liquid-cooled closed-loop system. We've talked about this before.

    So it's very comforting to see the strong support from the office of the Premier. And moreover, they doubled down on this because the data center playbook came out in August, just a few days ago. In fact, Ford's office stated that they will be approving the first swath of new AI data centers " sooner rather than later. So again, a breath of fresh air amidst a lot of global turmoil, at least in the U.S. markets. So we're very excited about the outlook in Canada. Let's go to the next slide. So this is a recap of all the sites that we have underway, their status.

    Again, starting with the Big Boden site, that one is the most near term. We've got that LOI executed. We'll be providing the Street's update as we get closer to that definitive agreement. And really, it's an exercise, not in Russian, but getting the right deal done for our shareholders. And so it is an IG offtaker. And so one must contemplate how much deposit you're getting on signing, what parental guarantees look like and all of the things that will affect your cost of capital when you're going to finance it. We're very much aware of the headwinds in the industry right now.

    So we are being cautious and protecting our balance sheet while also seeking the lowest cost of capital by strongly negotiating terms that behoove our shareholders and our stakeholders. So that's the quick update on Big Boden. And then, of course, the rest of the sites, but it is more of a handy reference slide. We can actually flip through one by one. Let's go to the next slide. So here's a beautiful visual of the Toronto Airport site. This is not a Bitcoin mine. It's a proper data center that we acquired in September of last year. Again, we've talked about this site being very attractive for military applications. We've had some reverse increase from Canadian government.

    And budget for this will be about $40 million, which we're funded for, thanks to the financings we've done earlier this year. And at 5 megawatts of IT load, this would do $8 million annual recurring revenue as colo or as GPU cloud, about 2,000 GB300s, which at today's prices would easily throw off $80 million ARR. So the operative word is optionality. It's a bite-sized site. It will be a showcase marquee, and we welcome to have visitors as the site progresses and we want to showcase the progress. Stay tuned for updates. Let's go to the next slide.

    The Gigafactory, of course, a crown jewel, again, how could we not mention the site, especially with the recent positive words from Premier Ford in the province of Ontario? Again, as we said, our design has always been a closed-loop cooling zero water usage design using liquid cooling, you have loops where whether it's glycol fluid, you've effectively got a system whereby thermal energy is transferred through closed-loop piping to chillers that sit outside of the building. And so thermal energy gets expelled that way. And so no water is actually consumed despite all the FUD, it seems that a lot of the protesters -- it's ideology driven.

    I don't know anybody that actually builds data centers but it's in the industry that's protesting them because they know that these things don't drain energy. And when you're consuming electricity, you are an industrial client of utility companies. So do we shut down aluminum smelters? Do we shut down every other industry all across North America that uses megawatts of power? No, because these drive revenue and taxes for the utility companies, no one's putting a gun to the head of the utility company. So I think that there's a lot of misunderstanding. It's really as a Bitcoin mining company, we understand FUD, fear uncertainty and doubt.

    So it was just to remind folks that this is a project that we engage with the region as well as the municipality on sustainable planning design as well as engineering infrastructure upgrades. That means widening roadways, improving civil infrastructure for the 25-acre parcel where we assembled land for this future site. And again, closed-loop cooling, zero water design, as is called for an NVIDIA reference design. So NVIDIA doesn't make an open-loop system that just continuously drains water. So again, I just think there's a lot of misunderstanding. We just want to educate the public. Let's go to the next slide. New Brunswick campus, of course. So the update here is we've now expanded the site.

    We've closed as recently as September, all the parcels of land to the east and to the south. This is now a 64-acre campus. We're very excited 15 megawatts of IT load and stay tuned for updates. But again, this forms part of our Canadian sovereign compute thesis. So our dual engine strategy approximately $300 million ARR, whether you look at the fiscal Q2 or really production economics since Q2 sits squarely at $300. It's actually slightly above since the quarter, notwithstanding the recent downturn in Bitcoin price over the last few days, we actually saw really strong hash price in the month of October.

    And then in the HPC GPU cloud, we are now at $40 million ARR, again, about $110,000 a day, in fact, a bit north of that on Sunday. So very exciting on a combined basis, our dual engine is about $340 million ARR. And this is just a recap, a handy recap, especially for the analysts out there, we signed 3 GPU cloud deals this year totaling $600 million of total contract value. So that $40 million ARR that we're at today is the bar chart at the bottom. The Cohere deal gets us $115 million by adding $70 million ARR. Again, that's -- sorry, $75 million ARR, and that's a 3-year deal.

    And then the IG 5-year deal for $350 million add $70 million ARR, that gets the contracted total GPU cloud revenue to $185 million. Again, just hand you recap deal terms, hardware, et cetera. And if you zoom out and just look at our HPC revenue road map, well on track to hit that $200 million ARR target, expect an update on the 504 B300 GPU deal. I will tell you that we have demand through this and beyond on the GPU cloud side. We're going to talk more about that shortly. So stay tuned and expect us to provide updates on more GPU deals. And of course, as I mentioned earlier, we're advancing the big Boden working.

    We actually had a site tour with a potential lender last week in Boden. And so again, focusing on getting the best cost of capital advancing that process, making sure we're looking out for our shareholders and negotiating deal terms that really this will be a long-term deal. And so we want to make sure that we're doing the right thing today and securing strong cash flows. So stay tuned for updates on Big Boden. But again, on a combined basis, if you looked at all the sites on the right, it's HPC/colo, 325 megawatts by IT load would be $500 million ARR. And if you look at GPU cloud on the left, that would be $200 million ARR.

    Both would target about 80% EBITDA, $700 million ARR combined over $500 million of projected EBITDA based on our HPC revenue road map. On that note, once we hit our $200 million GPU cloud target targeted for end of this year, going into 2027, with that $200 million GPU cloud annual recurring revenue plus the Bitcoin mining revenue, which is really exciting, actually puts us at a $500 million combined ARR target for early calendar 2027.

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

    And you would see that the HPC/colo target still is about $495 million on the right. So it actually increases the combined HPC GPU cloud target is $780 million. Again, there's a lot of volatility. We've seen commentary on GPU financing and credit market crunch, et cetera. We are protecting our balance sheet. Our goal is to navigate the headwinds. Stability is key, maintaining positive cash flow. This really just shows what we've got demand for near term, and we will provide the Street more updates. Really, our focus is to build up the Toronto Airport site for 2027 and have that go live before the end of the year.

    But again, just so you can understand the metric of if you took colo, a colo site and moved it to GPU cloud, the rule of thumb is every 5 megawatts of IT load is 2,000 GPUs and 2,000 GPUs at current prices is about $80 million ARR. So current prices, we're seeing GPUs are pricing in the $4.50 range and even higher. So again, this is just an indicative slide for people to plot the economics. Again, optionality is a keyword. We've talked about annual recurring revenue.

    But on an EBITDA basis, if you look at the margins of I should say, the higher margins from the new GPU cloud deals, it would put collectively our EBITDA at a potential target of $350 million with the load-and-lease HPC colo deal being executed with the GPU cloud deal growing at $280 million ARR. So a strong outlook for us to grow into as we navigate these market cycles. Again, we're not necessarily in a rush to sprint, but rather protect the balance sheet and only do what we think are the best deals for our shareholders. Let's go to the next slide. Speaking of funding, again, just a quick recap.

    We did the $245 million of 0 interest coupon convertible notes this year. After capped calls, net proceeds were $200 million. And in addition to that, we recently announced a $120 million GPU loan and the funds are with an escrow agent from the lender. And so there's a committed GPU loan. Again, deal terms, 80% loan to cost, 3-year term, 9% interest, those funds get released to the OEM, the GPU OEM milestones because this is the anatomy of the GPU deal. So these proceeds were to fund the Cohere deal, which again was a 3-year $225 million total contract value deal. The hardware, the CapEx was $165 million.

    And nowadays, GPU clusters of this size, 2,000 GPU cluster of GB300 are close to $200 million plus. So again, we locked this in much earlier in the year. And so $129 million of financing on the $165 million of GPU cluster. And so -- this is a straight line. We will own the GPUs outright. The loan balance is $0 after the 36 months. It's co-termed with the offtake agreement of 3 years, which is Bell Canada. Again, if you don't know about Cohere, right now, they're doing a $35 billion Series E backed by the Government of Canada, Bell and NVIDIA.

    And again, we own the GPUs outright at 136 and the retail value is actually upside to this SPV level debt. And so when you look at on an annualized basis, $75 million of revenue is about $49 million of debt service. It's a very, I would say, well structured financing for our first large cluster deal. And again, we want it to cash flow, want to make sense. Yes, revenue is important. EBITDA important and cash flow is very important as well. So we're happy to announce this, and we will continue to navigate the market and scale our business very intentionally by sourcing what we think is the lowest cost of capital.

    Just to recap, the last 12 months of revenue of approximately $329 million for HIVE, which is more than a lot of our peers. So again, our dual engine strategy continues to generate revenue and cash flow, very healthy 860 megawatts of secured power. You see some of our peers between 800 to over 2 gigawatts of power and our 2-year forward HPC ARR stands very respectable $700 million in our base case. So really, we think we've got very strong optionality as we continue to execute on leases for HPC colo and GPU cloud and of course, growing at re-rating and valuation alongside our peers. Let's go to the next slide.

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

    And the macro zoom out, if you look at all of our sort of growth road map, the $500 million target for HPC colo over the 325 megawatts by IT load and then $200 million on the GPU cloud, using peer multiples, again, even though markets pulled back, there are more conservative multiples, puts us at a $3.9 billion implied valuation to grow into as we build out our sites over the next 2 years. So on that note, I'm going to turn it over to Mr. Darcy Daubaras, long-standing CFO in the industry. Next slide.

    Darcy Daubaras: Thank you, Aydin. So for our investors, I'll walk through HIVE's second quarter financial results for fiscal 2027 that is ended September 30, 2026. This quarter presents 2 important stories. Operationally, we delivered higher sequential revenue, increased gross operating margin dollars and significantly improved adjusted EBITDA. At the same time, our reported GAAP results reflect the challenging economics of Bitcoin mining and a significant noncash impairment of equipment. I'll explain both because understanding that distinction is important to assessing our performance. Before reviewing the quarter, I'll briefly touch on our capital structure. At September 30, HIVE had approximately 276 million common shares outstanding, 3 million warrants, 2.6 million options and 15.6 million restricted share units.

    Our shares trade on the Toronto Stock Exchange and NASDAQ under HIVE and on the Colombian Exchange under HIVECo. Turning to our financial highlights. Total revenue was $84.9 million, including $76 million from Bitcoin mining and $8.9 million from HPC and AI services. Gross operating margin was $30.2 million and adjusted EBITDA was positive $24.8 million. These represent meaningful improvements from the prior quarter. On a U.S. GAAP basis, however, EBITDA was negative $22.1 million and the net loss was $78.7 million. The net loss includes a $31.2 million non-cash impairment of equipment as well as $54.9 million of depreciation, $8.6 million of share-based compensation and a $7.3 million loss from changes in the fair value of derivatives.

    The impairment deserves some explanation. Under U.S. GAAP, we assess our Bitcoin mining equipment following lower mining revenue per unit of computing power and reduced market values for ASIC equipment. These factors lowered expected recoverable cash flows and residual values. Our assessment determined that the asset group's carrying value exceeded its recoverable value requiring this $31.2 million noncash impairment. As I mentioned, this is a noncash charge, but is a real adjustment to the carrying value of our assets. We finished the quarter with 269 Bitcoin in treasury. Three measures summarize the operating quarter.

    Revenue was $84.9 million, adjusted EBITDA was $24.8 million, and we produced approximately 1,070 Bitcoin equivalent during the period, keeping that side of the operations extremely strong. Together, these metrics show the operating contribution of our expanded platform, while our GAAP statements also recognize the depreciation and non-cash impairment associated with the capital-intensive nature of Bitcoin mining. Looking now at our balance sheet. We ended September with $139 million in cash, $22.6 million in digital currencies, $18.6 million of receivables and prepaid and $11 million of investments. Current assets totaled $213.4 million versus current liabilities of $137.8 million, leaving working capital of approximately $75.6 million.

    That liability balance includes an $84.5 million provision for regulatory liabilities related to the previously disclosed VAT matter that occurred in the prior quarter. Cash declined from approximately $208 million at June 30 as we continued investing in our infrastructure and growth plans. We report a $12.2 million of operating cash flow for the first 6 months of the fiscal year, alongside substantial investing activity. We remain focused on maintaining financial flexibility and allocating capital carefully across Bitcoin mining and HPC and AI infrastructure. Turning back to operations. Gross operating margin was positive $30.2 million compared with $42.4 million a year ago, a decrease of approximately 29%.

    Basic loss per share was $0.29 compared with a loss of $0.07 last year. The larger reported loss reflects both operating economics and those significant noncash charges, including the equipment impairment recognized this quarter. Gross operating margin excludes depreciation, so it offers a different view of performance from GAAP earnings. Looking at that, the year-over-year comparison highlights the pressure on mining economics. Revenue was $84.9 million compared with $87.3 million in the prior year quarter, a decline of about 3%. Gross operating margin declined from $42.4 million to $30.2 million, and the margin percentage decreased from approximately 49% to 36%.

    The 10-Q identifies lower mining revenue per unit of computing power as one of the factors affecting our mining equipment recoverability assessment. This is an important reminder that revenue scale alone does not determine profitability in a changing Bitcoin network environment. Sequentially, we made meaningful progress. Revenue increased from $79.1 million in Q1 to $84.9 million in Q2 or approximately 7% increase. Gross operating margin increased from $24.2 million to $30.2 million or approximately 25%. That represents an improvement in gross operating margin dollars despite the challenging industry backdrop. Based on the reported amounts, gross operating margin was approximately 31% of revenue in Q1 and 36% in Q2.

    The improved operating contribution helps explain the increase in adjusted EBITDA, even though it does not eliminate the effect of noncash expenses on U.S. GAAP results. From an earnings perspective, I want to distinguish our operating performance from the accounting charges affecting the reported result. Adjusted EBITDA was $24.8 million compared with $31.5 million in Q2 last year. Our GAAP net loss was $78.7 million compared with $15.8 million in the prior year quarter. The most significant new item this quarter was the $31.2 million non-cash equipment impairment. Under U.S. GAAP, we evaluate long-lived assets for recoverability when circumstances indicate their carrying amounts may not be recoverable. Lower expecting mining economics and ASIC resale values triggered that review.

    In addition, depreciation totaled $54.9 million compared with $38.3 million a year earlier, reflecting the expense associated with our asset base. Share-based compensation was $8.6 million and the derivative fair value loss was $7.3 million. These items are reflected in GAAP earnings, while adjusted EBITDA provides a supplemental view using the reconciliation in our reported results. I would emphasize that the impairment is not a cash outflow this quarter, but should not be dismissed. It reflects a reassessment of the recoverability of our mining assets. Finally, the sequential earnings comparison shows the improvement in operating contribution.

    Adjusted EBITDA increased from $13.4 million in Q1 to $24.8 million in Q2, an increase of $11.4 million or approximately 85% -- at the same time, our GAAP net loss narrowed from $142.9 million in Q1 to $78.7 million in Q2. It is important not to treat that reduction in net loss as a like-for-like improvement in operations. Q1 included the substantial noncash Swedish regulatory provision, whereas Q2 includes a $31.2 million noncash impairment of equipment. In fact, the 10-Q in our reporting results reflects a small $0.2 million reversal of regulatory provision expense in Q2 due to foreign exchange movement. Taken together, the quarter demonstrates better sequential revenue, higher gross operating margin dollars and stronger adjusted EBITDA.

    It also demonstrates the need for disciplined investment decisions and careful assessment of asset values as mining economics evolve. As always, we will continue to focus on operating efficiency in our Bitcoin mining and disciplined development of our HPC and AI infrastructure business. With that, I'll turn it over to Nathan Fast.

    Nathan Fast: Thank you, Darcy. That concludes the presentation for today. And with that, we will now begin the question-and-answer portion of our call. [Operator Instructions] Our first question comes from the line of Bill Papanastasiou.

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

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

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

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

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

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

    So I think that stands in stark contrast to a lot of the rhetoric coming out of different states in the U.S. But by the way, I really empathize with the rest of the industry. I think that all of us winning is good. And it obviously provides a unique value proposition for HIVE shareholders and investors at this point. And so we do -- we're grateful that the wins that are back in that regard. But I do hope that broadly, cooler heads prevail and people realize that AI is really going to unlock an immense amount of value. And I think just kind of on a tangent.

    The concept of Jevons Paradox is just because the cost of a commodity goes down, it doesn't mean that you use less of it. you expend the same cost and you consume more. So we'll have more economic output. It's -- I think that's the way it's an abundance, not a scarcity mindset. But anyway, we're really bullish on Canada right now, obviously. Of course, Sweden having this LOI signed is very optimistic. And as Frank addressed, there have been some political sea changes in Paraguay, but we've been operating there for a long time. Operationally, it hasn't affected us. And as a new administration comes into place, really, we think that, as Frank mentioned, there's calamity that happen everywhere.

    It's how well are the institutions set up to course correct. And so we believe that Paraguay is a very stable jurisdiction with good governance. And so -- we're also bullish on Paraguay as well. I mean it's still rich in natural resources, very smart cabinet administers that are very much pro data center and Pro AI. And so I think that consensus still remains strongly rooted. And we'll see how things unfold, but we're very confident that Paraguay is still going to be a fantastic horizon for data center building for AI.

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

    Nathan Fast: For our next analyst question, we'll go to the line of Chris Brendler from Rosenblatt.

    Christopher Brendler: On all the progress. I just wanted to ask on the Bitcoin mining side. Even though it's been a little bit of a rough run, you have seen improvement recently in hash price and your results also suggest sort of really strong cost controls. I just wanted to ask from a macro sort of top-down perspective, given what's going on, on the HPC side these days, are you sort of interested in potentially expanding more on the Bitcoin mining side? Or are we still prioritizing capital for the HPC side? And then also, what's the latest on your plans in Paraguay?

    I know you just talked about it, but I was wondering, I think last quarter, it was potential for high-performance compute data centers in Paraguay. Right now, it's -- I think it's just Bitcoin mining. And so is the plan sort of related to my first question, still to try to switch? Or is there any interest in expanding Bitcoin mining at this point?

    Aydin Kilic: Yes. And I tried to address this in my section as well. Right now, it's protect the balance sheet and navigate the market that we see ahead. So I think different people on the street have different opinions. This pullback, is it short term? Is it medium term? But cash is king. And so we'll be deploying cash for assets that will generate near-term revenue and cash flow.

    And I think the other point that we also try to address in the press release was that ending the quarter with $139 million of cash on the balance sheet, while also successfully meeting the capital commitments for the first large GPU cluster deal that we announced with Cohere, meaning that we secured $129 million of debt. So really, instead of talking about how much money we can spend and how much we can grow, we're trying to show what we are -- we've got contracted, how we're financing it and that we've got a steady hand to get through any market uncertainty and deploy the GPUs for the commitments.

    So as for your question on Bitcoin mining, it's really function of ROI. You can go back years and years and years. Frank, Darcy and I always talk about return on invested capital. So if the price of an ASIC is attractive enough where you're going to realize a net ROI after electrical costs of 12 months. And of course, not in a bull market, like you've got to measure that in a mid or even bear market, then that's a buy. But right now, our capacity is full globally.

    And so we've got 25 exahash, which I think we operated an average of 23.8 exahash this quarter with firmware down clocking, et cetera, to increase ASIC efficiency, optimize the joules per terahash fleet efficiency. So we wouldn't really be expanding per se. Opportunistically, as Frank noted, from time to time, if there are small orders that are very attractively priced, I mean we're talking $3 a terahash, then doing a small order to replace some older machines in existing infrastructure, but that's just more being opportunistic and not like we're talking maybe $100,000 spend. So nothing significant. So I hope that answers your question, Chris. Anything else you'd like to cover?

    Christopher Brendler: Absolute. Yes, that makes a ton of sense, thanks for that detailed answer. Yes, I guess the other question I had was on the HPC cloud business, nice to see the sequential increase in revenue there. Also saw a sequential increase in the gross margin. And I just want to just remind us right now, we're at sort of low 50s level. What's the sort of targeted run rate gross margin in that business?

    Aydin Kilic: 80%. So the new GPU cluster deals that we're bringing online, the GB300s, the GB200s, those are targeted at approximately 80% EBITDA. And that's within -- operating within a colo facility with Bell Canada. I hope that's helpful. Yes. So we have quite progress this quarter. But I guess, as the top line and more machines come online, the 300s come online, then you'll see closer to 80%. Yes, because right now, the 51% that you see not only represents -- is measured on the $35 million, which was booked for the quarter. So as that $35 million grows to $20 million ARR. So all that incremental revenues at 80% EBITDA gets you very much closer.

    But moreover, as I alluded to in my section, as we're scaling the business and having costs and resources in place to allow us to scale, that also addresses part of the margin. So once we're kind of a critical mass, that also supports the margin improving.

    Nathan Fast: One final question this morning from the line of Fedor from B. Riley.

    Fedor Shabalin: I have a couple of short questions on funding. First of all, mining cash flow, you used it to fund HPC build-out, but hash rate is quite low, although some price is quite low, although some improvement. If Bitcoin stays around $70,000 to $80,000 per coin, how much HPC CapEx can mining actually fund? And with current environment, with current stock price, at what share price would you stop using the ATM to finance the equity portion of HPC build-out?

    Aydin Kilic: Yes. Well, we did the converts, as you know, earlier this year. And so we've got a strong cash position, the $139 million. By the way, on top of that, 22.6 million Bitcoin. So just over $160 million of liquid assets, capital commitments for the GB200 order satisfied the GB300 order we announced earlier in August on the 5-year deal with an IG offtaker. We have put deposits in place for that as well. And so we'll spell out further details when the financing on that is announced. But what I'm giving you guidance on, Fedor, you always ask very nuanced detailed questions. I appreciate it, is that our significant capital commitments have been satisfied for the most part.

    And we've also included a budget to complete the Toronto 1 data center for USD 40 million to bring on that 5 megawatts of critical IT load. So really, our focus is to deploy the clusters that are currently contracted, if you refer to the HPC revenue road map slide, the money shot slide, and then build out the Toronto 1 data center. And separately from that, in addition to that, we're looking to undertake a financing process for the Boden site with -- of course, with a signed lease. We'll use that likely to secure corporate bonds. And so not to dip into the balance sheet to finance Boden. So I think -- I hope that's helpful.

    And we don't -- we've always been very conservative and judicious on the use of the ATM. We've never sold on a down day. And so with where the stock now is for us and really the whole industry, yes, it's not conducive, we think, to use the ATM when the stock is at these levels. And so fortunately, we've got the balance sheet and cash flow that allows us to get our contracted revenue online.

    And notwithstanding where the Street is, we always believe fundamentals once the revenue is live and the cash flow is live and we're at that $200 million target for the end of the year, which, by the way, we'll be providing updates in very due course. That last tranche, we're $185 million active in contracted revenue as of today. And so that last remaining tranche of $20 million ARR, that cluster of B300, 504 GPUs that's on that revenue growth slide. We'll be providing an update on that very soon as well, and that will get us squarely at the $200 million target. So really, it's getting that cash flow online.

    And with the margins once we're at that $200 million, the company will have more cash flow. But again, we want to focus on protecting the balance sheet and seeing how the market recovers before committing further capital expenditures. Cash is king right now. I hope that helps.

    Fedor Shabalin: That's super helpful. And just a follow-up regarding the GB200 facility, I think it's a good template asset level and size the contract. Can you finance the colocation site the same way before tenant sign? Or does New Brunswick or Toronto financing depend on lending a lease first?

    Aydin Kilic: So -- we don't have to finance -- the nice thing about the colo sites, it's a bit of an easy button because we don't have to finance them. They're built by Bell AI Fabric, and we're a tenant. And the nominal deposits a couple of million bucks. But other than that, we're just -- it's CapEx -- very CapEx-light and quick time to market. And that was our strategy to get to our $200 million targeted ARR on the GPU cloud business. Toronto is a nice bite-size, Toronto Airport site, nice bite-sized 5-megawatt IT load, $40 million CapEx is very digestible for us off balance sheet.

    And then as mentioned, for Boden, it would be corporate bonds as we've seen our peers in the sector, the Cipher and Hut 8s of the world financing with corporate bonds and HPC offtake. And so that's what we've provided guidance on, and we'll update the Street accordingly on New Brunswick. We have a lot of interest. There's a lot of interest for New Brunswick. I mean it's kind of a good question that you're asking because it spurs me to comment, both GPU cloud and HPC colo. And I try to thread in the operative word of optionality into my presentation. And we know that sentiment varies on the street.

    Some investors are very bullish on just locking in long-term investment-grade HPC colo. Others believe the higher reward of GPU cloud, albeit being more CapEx intensive, long term is more beneficial. Of course, that sentiment changes with risk on, risk off. So stay tuned for updates on New Brunswick, but we've got a ton of demand on that site. And as I did address, we expanded that campus to 64 contiguous acres. And so that was -- you might have heard me refer to land banking by substations. So we've done that in Paraguay, and we've done that in Ontario, and we've done that in New Brunswick.

    So building out the site footprint while going through design development optimization, permitting, et cetera, and of course, working with the utility companies, making sure that there's buying -- they're very excited, of course, to have an AI data center conversion from a Bitcoin mine. Myself and Craig Tavares, we flew out to Fredericton in August of this year, actually for meeting with the office of Premier and NB Power, and they were very excited about it to be the largest AI data center in the maritimes.

    So yes, stay tuned, but those are kind of the functional updates on it, and we'll provide guidance on the type of offtake we decide for New Brunswick and correspondingly, the financing structure to support that growth.

    Nathan Fast: Thank you, Fedor. With that, we will conclude our Q&A session and our Q2 fiscal 2027 earnings call. Thank you to Frank Holmes, Aydin Kilic and Darcy Daubaras for sharing their insight this morning. Thank you to our attendees and our analysts for joining, and we look forward to speaking to you again soon.

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