Hut 8 Mining (HUT) 17 Mar 222021 Q4 Earnings call transcript

Good morning and welcome to the Fourth Quarter HUT 8 2021 Earnings Call. My name is Brandon and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session [Operator Instructions]. Please note this conference is being recorded. it Shane turn now will over Downey. to I Shane you begin. may And

Bitcon Corp. and well two good through its call reserve the welcome to held Mining results. It to and morning over and Jamie was things X,XXX rate a and the HUT excess surpassing annual you XXXX. list year becoming some CEO gentlemen. Jaime for run of then joined Leverton, into by summary up NASDAQ language in morning, Q&A. X and the a earnings Thank will in and to of exahash disclaimer X. annual end the then on we'll ladies at And first common of jump turn miner it I'll this shares XXXX our of to HUT for hash transformative I'm I short business the Canadian open

business issued and current uncertainties meaning you risks MD&A, differ on to expectations. such find press otherwise, can call I Mining company's of of data with performance Bitcoin earlier to our expectations discussed form not the strong the factors in acquisition cause legislation of statements are annual investments pleased operating from the may with strategic Corp. all Unless XXXX. for the center you in are These to ended variety well-positioned noted of Hut subject could we shortly Overall, and for mining a and continued here and within include Canada. the as These made forward-looking amounts website on regarding include, miner SEDAR first annual from Along limited this to year tremendous to remains year actual addition and the the economics and statements capital during list TeraGo, current materially the are but but X blockchain TSX securities at on to the being both hutXmining.com. applicable asset growth. remind improvements to and capital first performance, the Canadian in the future that its risks are results denominated financial and Index S&P including release XXst, to added subsidiaries. a the in December dollars. information In be results NASDAQ comments digital in our XXXX, uncertainties the we today, like record-breaking markets Hut for are to, EDGAR statements, the that information also referred the X financial our company had and Canadian form

miners with rate We two exahash. also XX,XXX increasing purchase to of watts hash nearly strengthened our an relationship excess substantially the with of MicroBT our

Trinity limited also throughout equipment year CADXX driven revenue We increases with has to the we for was mining achieved year, with rate to pursue continue entering our flexibility increased activity, support each revenue We into a CADXXX.X financing capital record This demonstrated capital of valuable This quarter strategy. million provided the Bitcoin collateral non-dilutive sequential performance our structuring in strong year prior approach over the by Capital. with hash and as growth price. million quarter. in flexibility

CADXX,XXX Bitcoin CADXXX.X an than revenue was X,XXX average approximately mining million. at achieved with tripled new compares the CADXX,XXX Bitcoin year. Bitcoin. mined revenue in million of we We XXXX's X,XXX average per more as at an Our revenue prior CADXX.X of activities approximately This XXXX from of of

expense liability, of in estimated that and I electricity prior management increase X be poor the amounts while million. prior mining mining been period. mostly million fees fully in to relates have year. gross record of million, -- due not addition year, of accounting of insurance achieved costs prior CAD can is by absolute million, ultimately compared to site year income. specifically which new against with Cost XX continued CAD million that purchases. was the earned to initial have loss company's the million Bitcoin million over a additional by XX.X this from G&A Genesis Mode compared the digital year. when note depressed loss million our ran a earnings administrative of X.X revaluation as tax XXXX to compared loss IFRS expense tax tax million arrangements, various to as X% our of of prior-year performance, in and generate partially X.X our revenue a terms, as an XXXX of a the X.X a share-based arrangements The so million from business CAD practices, compared year corporate due depreciation to uncertainty. after offset lending to a our CAD initiatives, CADX.X by the recovery. new XXXX the XXXX, the XX.X deferred duties warrant to -- tax the Bitcoin associated miners XX four compared XXXX. expense. currently million are This launch on that hosting in the stems assets CAD CAD assess allow to year. XX.X loss CAD costs was building this commitment costs XX.X our increase mining in million classification late With generated which of year-end, to larger impairment in the classification We as as the CADX.X out company's onboarding one-time million and XXXX. new economics operating CAD ranging to for CAD currently useful are hurdle which respect XX.X supporting investment fleet CAD X.XX% non-operational issued past a year combination costs. of year. higher reported the of million, to liability, in XX deeper due and General warrant company CAD The profit cash to reversal earned life The to of net income These clear IAS as of well impacted to recorded the our by CAD be of liabilities the provided operating the million CAD Site of higher compared is expense. we addition was expense resulted is made from mining income of strategic depreciation with The million which best much net first years equipment customer year, reflected XX.X and and was We’ve of finance larger treatment unrealized HUT of sales reduce customer. the Our under were relations driven out XX.X Hosting in tax revised net infrastructure XX.X capital and prior in warrants pool were XXXX with Galaxy. definition XXXX operating XX Eco fleet. annual prior power in refunded warrants X's have a deferred CAD which from costs, gross million, equipment a January driven revenue in increased certain we were XXX.X sales investor from strategy. lending of XX.X income opposed expense in into net CAD income in tax executives to XX CAD over lending due meanwhile an team's million of CAD increase million financial excluding in at collection of determined to CAD X.X QX be to been well and arrangements revaluation line non-cash raised XX to return by transactions assets expense fee of and June of benefited quantum consumption. and the authorities professional expect costs to and million, X.X associated of sales CAD CAD transaction prior the in flow as managers, million and compensation in by markets of of to result months, expansion, non-operational XX. CAD second our We driven million this site was that issued increased P&L, Canadian the This million the operating of Hosting import XXXX Whereas, XX.X in a capital May the a Bitcoin to driven the for This

of section or these through P&L. fair the each offloading first present second, we As reporting section the a And these unrealized financial at loss balance rather liability warrants in equity than gain mark-to-market instruments the measure sheet. at value period, the liability, our

As at warrant the million. December was fair XXXX, value of XX, CAD liability XX the

company's We expense driven million was the in warrant excludes taxable million ultimately loss in loss by unrealized of impact also due which The was revaluation XXX.X the liability. higher recorded on price. income, net respect tax to revaluation warrant XXXX, X.X of cumulative which deferred share in a liability the increase of CAD of the of CAD

after of unrealized the assets, which over XX.X gain through the a the million on movement Bitcoin an given in we tax basis. digital recorded of year, price Finally, CAD OCI went all on

for year’s annual results, of Taken many quarterly additional million adjusted themes We they operating turn results to for achieved loss just negative XX.X commentary. how reflects on and XXXX. CAD million by CAD and together, to CAD quarter. performance, going the XX.X compared XXXX in adjusted CAD strong to touched CAD I this EBITDA other quarter for for I achievements achieve revenue X.X results of QX some will driven record million XX XX.X now our in prior comprehensive the also million the of Fourth million of provide performance. to compared EBITDA XXXX, XXXX of

revenue. Our resulted in asset increased BTC XX.X hash digital rate of mining million CAD and price

transaction to CAD the the We our share-based one-time in X.X versus associated electricity, XX.X in expense as prices period. QX with investor cost and CADX compared me, quarter. than X the the fourth of management year was approximately million consumption, of bring recorded expansion CAD building compared XX.X to driven average power fact compensation prior ASICs of difficulty are year well The by results, million CAD But mining million the expense rates, higher fees The revenue the discussed discussed was professional costs team General slight of fees prior and in offset investment After deployed, Our fourth same prior year's I versus CAD income power factors And million. maintenance the the mining of versus hosting fleet. XXX associated to reflect as loss a costs repair, a versus equipment increase XX,XXX well inclusive a that X.X the sales our monitoring, in point by and the our million, was revaluation loss the unrealized contributed -- CADXX.X increase and of CADXXX.X was year’s point Bitcoin net of cost CAD warrant function business figures million million. expense number entirely X.X tax million general with our net again increase be in million of CAD expense The quarter, and Bitcoin due quarter. CADX.X on our XXX.X as Cost result net of power higher X.X in as million the approximately for mine XX our to previously consistent practices. CAD XX,XXX administrative strong the primarily which best excuse depreciation loaded prior was of of network annual to were depreciation previously well as CAD CAD increased corporate out quarter want loss in relations of QX. XXXX, emphasis more excluding each of average for Alberta. as network million in operating of year. namely result with fully quarter for G&A T&D liability, excluding the personnel, costs non-cash quarter the CAD non-operational costs. expenses million one performance expense and as administrative reported prior -- for in million

million Our reflected in year's adjusted of versus our CADXX.X in quarter CADX.X fourth quarter. strong is performance operating EBITDA prior the million

acquisition growth Our Business. raised of mining through Bay, CADXXX mining Data TeraGo's equity issuances of balance well be million three across Center The Ontario, proceeds company the our of the and the as sheet will in in of as in the approximately acquisition issuances remains healthy. invested third from XXXX. equipment, continue We to were North site these development

We the financing securing non-dilutive including XXXX. Trinity evaluate also US$XX with end liquidity, enhance continue equipment arrangement of measures to a million to Capital at

value Our Galaxy. and December at X,XXX marked are X,XXX of with as lending consisted subject of held and Bitcoin holdings totaled million balance Bitcoin fair XX, in and held This Bitcoin CADXXX.X Genesis to custody XXXX. arrangements

emphasize move during there, that, any not more I Bitcoin Data Cloud we'll acquisition speak to long and TeraGo’s and recent Jaime, from quarter. over to to Center did sell continue And our Jaime? will We the With hurdle Q&A. term of will our in the turn call who detail to across strategy Business.

Directors importantly, of and vision good being hard I'm transforming diversifying team into mining their of innovation. on first and CADX in I'd do to everybody. CADXXX much, to Board from infrastructure and and proud recognize like began differently, listed to Shane, work fleet a and Hut billion Hut and the to million X and company we asset diversification Hut our see cap for digital are global beginning X asset today. so market morning, NASDAQ from XXXX, our to mine where Ethereum year XXXX was to entire our infrastructure a our In the to miner nascent X.X. Thank incredibly on of the by our leveraging team's infrastructure X tremendous center capable acquisition mining environments dedication strategy XX,XXX get embarked blockchain repair we as nearly crucial Web you leader becoming and support Index; the leadership the things and company the upgrading digital for to the Canadian being and for and data our innovation to of to growth, relentless that intersection the line working year top opportunity and to Web space. a forefront certified the X company ordering by TSX/S&P our miners Hut blockchain been first vision of from most growing and of ecosystem the named asset our at providing X.X seize a between It's building rapidly specialists innovate to the to digital infrastructure shaped will a MicroBT, upon be bring experience too, infrastructure and of

we execution, to as our on are scale growth. Now we're laser focused that not market leaders, realizing we've and X,XXX will blocks, laid just With miners. continue building strengthen position digital on hurdlers the over we crucial and Bitcoin continued miners. But our balance said, sheet, asset as we've

Through than and are Fourth and digital TeraGo’s innovation, for Centers We Industrial we Hut value, create platform a our the are technologists. to applications family. future the With to built X we the the business to imagination of of enterprise helping and shape customers power welcomed Data to helping the internet on Cloud acquisition revolution Business, building more Revolution. dedication, asset XXX

powered to This acquisition by assets first conventional the giving computing and white the hybrid data the capacity to space X.X cloud us We revolutionize and data of diverse energy both and space these emission-free traditional is that gaming also capitalize geo gained square feet digital blockchain XX,XXX asset center infrastructure creates performance nascent create industry’s. center web computing, industry's and provides the on model high sources.

division. in new with diverse locations map Kelowna of have is our located and Medicine mining X Our performance our Tier eight facilities way the in as key excited across centers high the geo Canada, Mississauga to and centers mining, for TeraGo our Drumheller Hat. we're so to sites in and acquisition two Hut computing Location now X asset all traditionally data used of now the digital Tier fleet data provides and X part

Q&A. third new technology rapidly up construction in and Our operator. Canada's turn in data it one open in of Bay, Ontario, that, will for And North Vaughan Vancouver, centers and with our to it growing Mississauga, two be we'll completing to we Kelowna, thrilled site companies. I the fastest And back are

Thank session. From you, we Joseph have Vafi. Please Genuity, Jamie. go [Operator We'll the now question-and-answer Instructions] ahead. Canaccord begin

Joe. morning, Good

the everyone. thanks on and taking Hi, Jamie. finish Congratulations for year for the a Thanks, for Shane Pallav strong Hi. Saini Joe. on and question.

rest can year first, is the us, can mining what offer you the additional on your any So business? production of the and you operational side the for plan color of remind

Yes.

that. happy I'm take to So

when which site first completing As have installed being we've in Xx power will then in We available online, Xx to as XX the which racking compute the hash we power that to the opportunities we over Bay. And a eight of incremental expect few we have communicated, work as just this we new come megawatts North continuing next will of balance the actually over our goal equipment facility. up location rapidly are within mining Bay look chain to that over year construction third North for be up it that at approximately, the what, weeks, on months will next the hash supply at week. towards four the bring And well.

for that. Thanks Great.

are What's Following as TeraGo your truly and M&A along lines? out up of a vision more to operating look years you now acquisition, those we piece one business two business we the to see expect that the for diversified here.

through will organic been we've drive transparent that and inorganic to Look, continue growth means.

our continue to opportunistic and and proven when comes to have us. be to that sheet deploying patient balance it We you'll ourselves see that's capital with from something

case-by-case that into at I again, do when And So we evaluate really sure assets right to deploy to we point the basis. we're capital, speak looking because it's in time. on can't right anything a make specific, the

the Right. for questions. Thanks

you. problem. Thank No

Hallum, go have Sutton. ahead. Craig Please from And George we

morning, George. Good

Adam actually for Jamie. George. it's [ph] on Oh, Hi,

Adam. morning Good

the about mining, capital DC thinking hosting allocation? business? the assets, an Could you give you've your Now acquired between and us specifically about datacenter update that

sure have bit enterprise is our Mining of it. a less in data those infrastructure say but in There's more the more style different capital I’m businesses power in better come acquisition a requirements through a are the as very it's way are fundamentally quite is, capital the not intensive. compute motion dedicated the mining space, different centers capital involved and that traditional facilities. to the is, required fundamentally power a whereas, far the data white different. lot the to centers, of business, obviously, TeraGo I’m the side different as obviously, The

on market we at as new to ecosystem we the where So based out see from the look some to capital continue from deploy customers in demand some our how the and new we will continue we build of coming -- product opportunity, thinking.

And that make hosting more updated thinking versus proprietary a Great. little any how simpler, mining? to look you on at

me is the probably We hosting mining the shifting in focus and are And center. services quote co-location as managed numbers. today really on -- really mining XX% cloud at the prop our TeraGo don't We're sites. data to

asset So TeraGo traditional centers focusing the be revenue the mining sites will focus prop mining. predominantly non-digital for and using will be that our data mining

Great. question a the And site lower power over one year? pickup expect coin if coming to costs. know third curious coin then with you there's insight in quarter-over-quarter, in have online material changes final per cost the with on modest for any per me, cost Do you next

the on models difficulty medium-term. global That think they part, their the and taking are months a and have the short and quickly challenging moved difficult the requires going and few everybody hashrate up and network impact own run difficulty predict last needs quite really on to that's Wow! hashrate the hashrate that's and primary that's over view where to in and difficulty overall

great. Thanks. Okay,

problem. No

go have from Brendler. Davidson, [Operator D.A. we Instructions] Please And ahead. Chris

Hi, guys. Chris. you are doing? How It's actually

Good morning, Chris.

a question. think and least on and coin, I previously impact obviously facility, last a that my Good Bay where the understanding thanks we the big could network taking your but hash want significant for do questions. improvement have per I North rate that that cost follow see I just potentially understand in cost. was, our morning, to at pretty

here network, once North Bay absent get could potentially sub we XX,XXX big in operational? is So a fully like change

everything the depends We to globally. how variables across different cost the it economics into and Bitcoin -- really potentially could. mining go But that those again, moves the

That's a very good answer.

for say sure. You definitely can't

see let's XX,XXX six? the still think, about the How the miner of coin. to other Okay, to get side we have I coming. deliveries

pricing So, you a gap. deliveries. there you better gotten for about But little heard as you strategy extra I've ramp still that need get Can talk to that hash? to to just your has close six new

Yes.

into that economics out months the far capital consistent we hash lead very we're deploy seeing sync of now from we pricing the And entrance space. manufacturing we moving IRR few the where new see as come of So, absolutely delivery we you're and an with how that right, as, last to look particularly terra perspective, into thought as as hardware. some were, had the down, been to we expected And better well. per to price are softening actually the starting we see ASIC times was,

price in better softening a delivery time. So, and

so we're evaluating constantly going marketplace opportunistic we'll continue and what's the accordingly. do So, and be in on to

Okay. given for They or of borrowing strategy higher, stock changes doesn't just appetite do markets improve expect than out it go it, and against lending to be miners lending pursuing as had is against than rather in price better the don't borrowing capital well, the Bitcoin things it? we've Bitcoin the out the predominant

start and then can I Shane chime have in. Well,

and balance. in Bitcoin in to order have markets the economics have borrowed our past, Bitcoin good currently capital our encumbered. past. don't have preserve weren't that mining used the against as But it to We in do capital, were we We when constrained Bitcoin access

on anything the if It's used in are based don't know against certainly market decision you what's the We a past. we're it. I we a again, we've have yield available to there. using that in relationships and make instead. Shane, add But the it's not tool

more with moment's almost borrowing day's less Yes, I it's like go could Bitcoin. ahead or notice lot execute not against a that we notice, and add. a a something on would even say or today certainly to

that the toolkit it's definitely to-date the we've in path. Jamie last like in very not intentionally year pursue anyway, intentionally yes, and said, So, something very

like like, good that Ethereum. a XX% if as happens still Ethereum actually is doing of most how recent guess Okay. change resist. mining, did the change we XX%, what I Bitcoin Last X.X? job But mine and could go one update Ease very much does in any that I your it's on contribute can't that

So, been our go that Ethereum our that for talked next move classic, and to most when for a remains don't a to would blockchain compute to GPUs about timeline the same. answer while. it's proof-of-stake, many mine is we move If profitable to really in have the We for -- obviously think that I and it but our happens, haven't Ethereum I using a currently checked years.

Okay, could wrap it up. Thank you.

Great.

No further Instructions] questions at [Operator the moment.

Thanks, Brandon.

And we David Please online. have Shapiro ahead. go

Yes, just extent you've to looked what Jamie. down drive your at costs? to immersion I curious was electricity cooling

of looked immersion, Jason we've and the interesting at Yes, pays some space tech as space something Head the there to. very attention in close Zaluski matures is it's our new happening Technology,

have Nature mining that equipment, the let cool climates OpEx North Bay, all significant the Medicine requiring sites. to cold incremental our of or means being Mother for Hat, in do free CapEx take we not We air Canada in of us. here up benefit Drumheller, advantage which and cooling, in we're

us So, it's and this and is for conversation and Nature it, doesn't close we for we at it attention are the charge we'll calculations a and that said That Mother different let when us, space again, maturing makes us, sense different. she look the run but work ROI it. we're a for paying do bit of

you. Thank

My pleasure.

questions And moment. like All right. at no the looks further

for and continued joining all we Then your Thank St. wish Day. support. you Okay. very everybody a Happy Patrick's

you And and joining. disconnect. Ladies now today's conference. for you may this gentlemen, you. Thank concludes Thank