Crypto Miner Hive Blockchain Shows Third Quarter Losses As Ethereum Merger Reduces Revenue And Mining Margin

Crypto mining company Hive Blockchain ( HIVE ) fell to a fiscal loss in the third quarter as the Ethereum blockchain’s transition to proof-of-stake validation reduced its revenue and gross margin by roughly 50%.

The Vancouver-based firm reported a net loss of $90 million, or $1.09 per share, for the quarter ended Dec. 31, compared with a profit of $51.2 million, or 66 cents per share, a year earlier, it says in a Tuesday. release. It had a loss of $37 million, or 45 cents per share, over the previous three months. The net was mainly attributed to write-downs of mining rigs and chips due to lower cryptocurrency prices, the statement said.

The last three months of 2022 were the first quarter Hive did not mine any ether following Ethereum’s Merge upgrade in September that ended the blockchain’s proof-of-work validation method.

Hive’s fiscal third-quarter revenue was $14.1 million, down about 52% from a year earlier, largely due to Ethereum’s merger, higher global hashrate growth and lower cryptocurrency prices, according to the statement. Meanwhile, gross margin was also affected by the falling crypto prices as it fell to $3.6 million or 25% of crypto mining revenue versus $15.9 million or 54% from the same period last year.

“HIVE has skillfully navigated the digital mining industry in a post-Ethereum merger, when many questioned how we could continue to generate profit from operations. This has been answered by our gross margins of $3.6 million this quarter, at a time when many other crypto miners are struggling for solvency,” Hive CEO Aydin Kilic, who took over on January 17, said in the statement.

Some of the ways Hive navigated the tough quarter is by using some of its graphics processing units (GPUs), which were previously used to mine ether, to mine other crypto tokens that it then converts into bitcoin. The Post-Merge strategy also includes launching the HIVE Performance Cloud, and redirecting the GPUs to support high-performance computing workloads outside of mining.

“This is a further development of our expertise as a technology company and sets the stage for a new era in HIVE’s technology services deployment,” said Kilic. The company also sold energy back to the grid and upgraded its mining machines for improved efficiency during the quarter, he added.

In today’s market conditions, the cloud segment is 25 times more profitable than mining when measured in dollars per megawatt hour, or power consumption, Hive said on Tuesday. Hive expects $1 million in annual revenue on an ongoing basis for this line of business.

Shares of the miner fell about 3.6% on Wednesday, in line with its mining peers, while bitcoin fell about 2.9% over the past 24 hours, according to TradingView data.

DIRECTION (February 21, 10:48 UTC): Corrects the second quarter’s result to a loss in the second term.

UPDATE (February 22, 18:52 UTC): Updates history throughout to add revenue, mining margin numbers, share performance and additional context.