Hut 8 Mining (HUT) 11 Aug 222022 Q2 Earnings call transcript

Welcome to Hut 8 Second Quarter Analyst and Investor Call.

In addition to the press release issued earlier today, you can find Hut 8’s financial statement and MD&A on SEDAR and shortly on both EDGAR and the hut8mining.com. Unless noted otherwise, all amounts referred during this call are denominated in Canadian dollars. Any comments made during this call may include forward-looking statements within the meaning of applicable securities legislation regarding the future performance of Hut 8 Mining Corp and its subsidiaries. The statements made reflect current expectations and as such are subject to the variety of risks and uncertainties that could cause actual results to differ materially from current expectations. well include, the not X for quarterly June XXXX uncertainties factors to, months the and MD&A XX, in company’s XX, discussed MD&A as year risks ended but information XXXX. limited are the ended and December These annual the form as for the law. company as forward-looking or intent obligation update any Any only date it any of forward-looking statement is disclaims which unless required by statement the speaks made and the to call over I Hut like would turn the now Jaime CEO, to Leverton. to X

ramp continue Thanks, us continued X.XX an in Michelle. installed recurring monthly our of we of hash full at QX financial up mining increased by the morning, for Good first our exahash everyone and increasing grew XX, we and June fee-based our quarter rate increased to results quarterly Bitcoin revenue activities capacity you continued that our new X,XXX strong thank by our nearly Bay, and holdings. North generated the three revenue mines. through miners across second We sites the than end joining since our generating strong X’s year. our to In of Notably, discuss X revenue also generate to the Hut quarter the of centers mining as X% all site to Ontario for while more company. support mining third and vitality data

pillar the financial stack opportunities balance growing arise. our on be encumbered yield our of that we of were soon of contagion X as to organically end, that very capacity it’s sheet stabilize, to generate key priority down always our in sold X,XXX options opportunities in a the and recalling very and anticipate to a end into markets industry across spread do our allow mid-May which hasn’t as approach. inorganic plan the We materialize. is and XXXX, programs possession balance the to responsible intentional our us sheet for in that one Bitcoin exahash explore miners commitment and a speaks compelling or resume of continue will value Hut that additional of Maximizing about that working we forward, much our Bitcoin acumen so. Bitcoin, the our ready had the the business. we first we anticipate to to that To asset digital our us income stack any might see opportunistic our to only is approximately being we as Looking in prudent mining to X.XX while manner will by have before as

in space. one weren’t that and opportunities strongly digital we We only ahead the on services be Web for also of miners while and and of believe that lie products business blockchain HPC eliminating returns HPC second industry. X.X spent rationalizing into for computing our the we diversified industry and quarter delivering to and us. that high-performance And We the nascent meaningful potential the much the Bitcoin, have are asset bullish infrastructure continue the

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long repressed our selling view and Bitcoin on Bitcoin our of peers. taking reserves. many current and obtained mining have successfully operations are We a believe unlike from intentionally our to prices We fund we business, are

is For sense far are cognizant additional Bitcoin the sell us, low mining only away. having fund at Bitcoin I repeating. bears but to that and we it too doesn’t mentioned before, not this it make to prices have

first been for half We the approximately market prudently anticipating saw the possible managed we We forward. swept and successfully approach am well market confident were balance the and last have to up in avoid by to fall thoughtfully preparing this XXXX conservative downturn winter year. volatility of maintaining and we and navigate continue we point that and I becoming a will for the back a run bull to operate into sheet have going

review for for is to their it To our will been CFO, investors, our you. support over to has their key business. We industry and guidance, the our know you. for execution much support Shane, leadership Hut X very their our Downey, the thank dynamic to time very and a I for across of it appreciated. I thank broader who team results, like team our and Before financial over would Shane turn board our executive your

Super Jaime thanks, morning good and everyone.

new a first $XX.X environment, Given mined QX solid was mining we by strong revenue driven digital XXXX activity mined asset computing for in earlier achieved over produced performance $XX.X of with revenue of million. business, year. XXXX. strong contribution we This the challenging same macro of we we in increase million solid the We full XX% million This operations with mining quarter, acquired of achieved this Bitcoin. as high-performance $XX.X digital year prior activities result from revenue XXX when quarter $XX.X Bitcoin. million a mining the for asset digital XXX compares quarter from a the quarter the from We asset which of

the operationally, increase entire the sorry, and our and came mined as substantial increase hash ASICs in rate difficulty. of efficiency Bitcoin expanded increase reflects network XX% and have we year-over-year Bitcoin upgraded significant this in fleet in – the despite Additionally,

$XX.X January the million depreciation $XX.X in the Cost to data prior was XXXX in compared past as QX costs operating contributed of Our acquired million $X.X quarter’s was million. business operating by approximately QX new an XXXX. as consists XXXX in expense of to by of center since $XX.X business mentioned million of depreciation. revenue mining XX approximately the million of revenue, of year the a $XX $XX.X million million over end full revenue for the newly assets worth fixed $X of million months additional million addition Site infrastructure acquired acquisition. reflecting the and from the well $XXX center and data of and equipment site of we at costs driven through $XX.X previously quarter Increased to increased

which combination stemmed increased costs in site incremental a the operation, asset higher Within the operation by electricity from driven prices million are increase and of $X.X power related to million mining a costs all of year-over-year. operating consumption. by modest $XX.X computing costs, digital which high-performance of operating

personnel. substantially and networking team have operations need data profitable center to and drive business. now onboarded We includes we sales, high-performance cloud growth in the our This computing

In with terms reflecting of pleased into generally our were and light quarter. lower generated combination costs. identified have certain Bitcoin a mining in the prices in and business, and mining the of as And of XX% were electricity in to performance the mentioned, margins, of prior increased continue margin approximately operation year the these digital and factors, services expect strong integration margins period, external of operating XX% completing the result. Margins in our we computing asset the versus we low these products as communicated. business we fall rationalized previously range XX% Jaime as our offerings high-performance to XX% to HPC In

high-performance related insurance SG&A business related operations. of position results, provided XXXX part want was but driven purchases our in a global General that compensation quarter increased to net exercise, tax period. that the growth quarter. of $X year. well expense, and to us for by with million and emphasize non-cash of profitable sales our revenue XXXX. reflects The QX to tight increased markets, the quarter. computing these prudent liability guidance This costs premiums realize $X.X loss Following high-performance imports net in net expansion recorded benefits combined by officer the substantially team. million. and we loss our expense revenue driven costs then Insurance compared equipment of as and insurance Sales the to we were the then revaluation increase related insurance administrative prior related were loss We salaries incremental during to an and million believe higher the to of of primarily share-based have primarily QX tax in $X.X were $XX.X ongoing withdrawn expense coverage was to $XX.X and by compared result million growth rationalizations director to and a the premiums the million prior year million computing expense, $X in during build-out losses expense the

million from model. in our recognized the asset non-cash of digital by other the revaluation digital ability as the maintain million recorded period. a $XX.X prior macro loss valuation an we then a And warrants despite in assets for address of offset the on Firstly, under adjusted million achieved than our liability our To a a on gain loss as end mining. balance revaluation of $XX.X $XXX.X stemming revaluation healthy of operations. remaining secondly, was QX a position, and for the Bitcoin during Black-Scholes was with revaluation the more to sheet balance comprehensive decline EBITDA of our cash against remains Bitcoin on environment quarter. of offset gain challenging of the of quarter. X XXXX, was non-cash expense compares Hut the profitability reflecting the recorded loss the million a at income The This $XXX.X the $X.X $XX.X incurred the holdings. with financial year million statement company total result price in $XXX.X accumulated million in loss million gain

and of year, combined from $XX asset company. management. announced, generally, in we approximately $XX previously balance program with quarter combined The million of raised the growth of environment the space, of and will during We February digital to As approximately committed first the end, program ongoing sheet the these volatility million. million into impacting we the X entered capital light months challenging approach the be is we to of our were million. at-the-market proceeds CADX markets to our invested – continue conservative or with remainder which issuances to In additional $X remain in raised the Subsequent completed a approximately XXXX. CADXX an offering the million

We our are non-recourse modest the that of fully remain level substantial equipment in place holdings financing digital pleased asset with unencumbered. and

are of reserve. on fair XX, June based totaled as and value $XXX.X holdings XXXX in Bitcoin million at X,XXX held Bitcoin Our marked

long-term Our conservative continue means to have our approach to balance strategy. HODL we sheet been management able

not turn to XXXX. With will Michelle, sold any have We operator, the since I call our Q&A. back for that, Bitcoin early analyst

Chris question [Operator D.A. from Instructions] first Please Davidson. Brendler comes Your Thank ahead. of go you.

cost the it – with in congrats Hi, thanks. and what just second I there. talk increase looks with perhaps sort you be how on your most guess give on power up? like operation the I going at start big us importantly, coin the this Can of And morning cost sort and will about part your North then terms forward along guideposts results. per the Good what quarter? did general quarter? the will of the just side in North that, as end then of Bay Bay so as some of And the ramps

want start? to You

Chris. Thanks,

the of expect this Phase Bay at be the X full North We end of XX-megawatt by to capacity quarter.

cycle. market. prices we From we increment be has a attention we place Meaning adjust always pay and power sites a close where reverse in take And to power in always been manage get on are, will that at high, a place watching your kind and that’s process in questions Alberta order. actively I’ll we’re to when power accordingly. a in of perspective, energy our XX-minute as continue operations the prices power So too

grid sites speculate connected PPAs that’s and grid, North grid is I from the to going, Medicine site have just then our connected. connected have our how as windows. a in know, separate those Hat to whereas prices the different the Bay grid, Medicine dynamically site And Alberta not that site So sites. XX-minute manage in as really the two is grid, where And broader – connected is place in Hat we increment can’t meter, the those are between energy behind and we Drumheller our reminder, Alberta directly on we you are but which it’s is in

that that much looking wasn’t months just where on think, And I are the this a site guess idea a cost. energy going, really Right. about, prices third forecast I better but I power talked for will like we’ve have for

quarter do. natural the costs prices what cost expecting even where We sort gas prices. costs should your became to just the think So of given this coin power power per problematic spike for fall in And folks, weren’t regardless were. energy start I of many

to but quarters, surprised the not see next operating start the couple ramps costs go So as that site of stabilize quarter, that this for see hoping up to up? North will Bay your that we

grid exactly. Yes, assuming on surprises more side. That we the don’t have

Got it.

And from you operations. Okay. mining It perspective just the looks a deposits. is – some in growth there additional like

So new to paid what coming what prices you mining equipment have come can – them you and have about new you maybe relative probably talk what past you paid in the and have for down? may rigs

month come year, in, incremental order from that a of The X,XXX that balance this made made perspective. incremental we a of we from XXXX, remaining the MicroBT, of orders we get the deliveries So haven’t an a equipment that prior beginning from we haven’t but through with units mining have we made order. year end they towards last order any and are

something that how Is part you to you be of in that expand are half? the will have capacity you much second Okay. the do think today? beyond plans where Like

today, that have we So built the as out we’ve we orders need it there to the the that sites. maximize stands power at placed

North when And get operation wise? the of how be there, of percentage much you the how just Okay. – roughly, will much Bay,

Yes.

and out XX of X XX megawatts. Drumheller megawatts is Phase Bay, Medicine at is So maxes North Hat XX megawatts.

some Is there phase a North second point? Bay for at

It is under contemplation.

allow would in the thanks, will ask I Jaime. get great. folks Okay, queue, back I questions. other

Thanks, worries. Okay, no Chris.

Thank you.

question Please ahead. next comes Canaccord. Thank go Joseph you. from Vafi The from

Good morning, Joe.

look kind the you? the compute approach, think, Nice is with, see morning. this to are kind how just kind is investment next at side if or deploy would point the I the where follow-up. starts I to then to kind a in you and this business How And year? of And invest kind you peers. into a costs of mining it. capital out growth Jaime, look I’ll investment at Good morning, look good have forward or do of returns you of emergence strategy, mode, way the Hi, one of the other? of more business the compute, guess, of guys. high-performance you into versus very three-pillar to high-performance to To relative Hi, business right start move want over why differentiated at

Yes.

Joe. question, great So

to when at be the over we XX months, As I opportunities. think past we we’ve proven like look opportunistic growth

projected going are models really approach to I returns. run we pillar. So difficult to unique opportunities think some to based which this on, for is opportunities what market of continued environment provide course, present themselves And that opportunistic in going But to say growth.

We both come continue they opportunities growth in and to as the look analyze at forward.

enough. Fair

high-performance at what’s guess and high a So dynamics in the – of fair us time you you based just and opportunities this work capacity evaluate of economics where I going on ramp How there? on environment rate, put on say business of cadence that give and mining of real do broader the capacity or to kind is the on I you all point, what tempo being give did the side side start to and in compute. even believe view guess? say the then to or growth see Could is it’s HPC demand performance kind the you

available. them And data capacity five you different market we segments so know, centers, and of and have have different addressed each have yes, as

as and data It’s space to the native unique looking in Web traditional provide a to X to very X coming determinations see that asset center invest, of positive based for be in grow at level, with allow of to that’s active all each our ecosystem. Tier us respect geographic infrastructure X digital our conversations really for and momentum Web stack position for that seeing and But two to the at the which really are data full we segment making out lot us market. demand we assets, this in in how we’re So on engaged infrastructure us a offerings. to high in on very them unique each that a want centers the them where way ecosystem of we’re company. want we a in have up mining We from

see grateful strength increasing we of continued and but customers ecosystem momentum also today enterprise the we in So are that for. existing growth of base that coming have from out incredibly

it other at be haven’t just the kind that And already or kind lot. great. That’s used flow order would able or begun? committed Okay. some in theoretically your then units on of part of on that that for hurdle, be Thanks which sheet balance cash amount is MicroBT cash, could a initiatives on least deployed nice a addition of to is of the

answer I’ll with one Shane that some let specificity.

Yes. Perfect.

paid certainly, the the the end as intention level of that is final up the million that quarter. at Yes, the towards start all us of through substantially MicroBT we the it balance appropriate of on and We’re $XX year balances cash gives looking flexibility along forward think order? XXXX. that, So an of

Thanks, Shane. Got job. Great it. everyone. Thanks

Joe. Thanks,

George of Thank comes The you. next Sutton Please go question from ahead. Craig-Hallum.

George. morning, Good

Good and the starting of strategy really to off the HODL see last pay days. very morning to nice is handful

first So presentation instead your listen to fortunate music elevator I was minutes. for to the several of

how this, I the of So relative mentioned talk rationalization the if think that square apologize. HPC you footage can you that you about about? talking the you I’m curious, quickly the to scope refill do can opportunity? But And you’re you just discussed

rationalization existed. to offerings more specific that The was lower-value product

were in specifically rationalization. we window of rationalized target not space our margin those so offerings to two product white that And opposed as

I understand.

been fact the I broader That’s from you’ve in playing Bitcoin bit prices do purchases you. machine have slow word going thank the things down. with strengthen? to here Where starting sit And you little that helpful. a think perspective the been given my coming Okay, know prices out a

mining of in available lot is that hardware a is North landed There America.

seen mining we have the haven’t of that need year. price ramping as the over we move for think we out But before, the I last equipment I’ve balance the weeks. on the built We much for that few have touched power the or

for point, mining equipment this looking at So not XXXX. I’m at really

Bitcoin If to areas we Understand. likely aggressively additional a year we more more are now, into areas? look expanded from or hear HPC you’ve out let’s say, mining

Yes.

are over you Rafi, right question, difficult It’s months. going I’ll me really to predict give to XX Joe, where to for arise for answer. similar and the similar just X So ask growth a a me the next opportunities

market incredibly opportunistic like you We’re in when we capital us to really deploy last year. we from And be conditions. as saw unique

the So or if it. one we’re then the not move forward present pillar in right opportunity doesn’t itself with going other, to

right pursuing it’s the for categories. to in me are are but So impossible the going where we over say to actively next evolve X opportunities to XX, both

Thank very much. Great. you

The go Kevin ahead. comes you. HCW. next Dede, Thank Please question from

Good Kevin. morning,

in Good the add power morning, felt and me. prices to that Alberta Jaime quarter? you Shane. heat all in Thanks at Jaime, And go down you ever enough at all? Or did by compelled high wind were machines there for struck

power ancillary power hotter do we program In case power did some active. some in down. We of the see site pricing, And during Drumheller, services, we peak and pricing when peak the that participate we have in days. remains We are power do prices when high. of don’t too our mind

monitor every XX we power Kevin, pricing react minutes and accordingly. yes, So

any thought to Yes, at why all quantify I’d ask. I for it. there right. made comment, That’s hadn’t that way us? Is I heard you realized that Yes,

have problem. us to I can that take team away have no for Jaime

to you It’s meantime, the centers they how me fully are, stacked investments you that a could give us have make with In the to little five are HPC insight utilized unclear Okay. the on equipment. running? fully how have they on you

new old of does an in? things, you equipment opportunity mean gives and with equipment Given you left sort reset that

Yes.

was So, available space low-margin a lines the a we specific we to few as have – product opposed can of couple And sites. rationally, comment to equipment. of white at the

space. or actively looking we that best do utilize And – we are white so at how utilize sell

our James Operations, are of So, led underway actively those SVP by Beer. activities

see So, how going that have spending do you space white in cash, in available? out the bring $XX how million you building

you the is when we where laid into gotten those but will down. everybody to growth specifics specifics on come, going let any haven’t I We know assure are

Okay.

you of you – Hut little out? how a and Just are you understand this another marketing the I the HPC And side, sort on effort? market? know help And talked taking sales X me building but the just that have to to – the how the bit, just are

Yes.

So, have who is we the that incredible the us an side go-to-market we this got Rayner, year. have earlier leader responsible HPC – for sales of for Josh business, joined

know, the when made As came supported full that a the from with team you acquisition we TeraGo, it. – it

group over to have more more sales great team resources. bring did Web some The specific is added ecosystem. hires Josh members into well. the skill set have And – aligned that we number new then So, as a of and to to to driving we X sales their been

sales in earlier to then XX we public who marketing [ph], about are we And also team. to total, affairs. up our this that year and are people So, joined add just Dermer that Aaron in team have lead

have three the that go-to-market strategy including in side marketing team, overall and X, we lead generation business. now so resources the marketing and Hut for the for are HPC the focused of work message on the that And

Okay. something came the that digital to didn’t other to And sort understand working able in of understand pass? you space, bit of how you really little companies with tie mining a about sort but I into could talk are how foundry,

Yes.

So, relationship that’s strategic a we Foundry. Foundry, really had with have long-standing –

know, on side. they mining partner Bitcoin you As the are mining our largest pool

as with well. we closely well. put we before a sister And them assets decision purchase their some [ph] to financing purchase center as the these our core done data Foundry have company, of infrastructure their made We data center with when Bitfinex and into worked facilities then

now have and are we client we a ours So, are a historically, there. of also as they client

up that you to able Understood. Okay. just or equipment, you servers new spool Was had? are

in it had they are moving was that our we existing infrastructure into data center. So, that – that

much. Appreciate Got it. Thank it. very you you Thank so Jaime. much

Please from The go Thank comes ahead. you. Papanastasiou Bill next of Stifel. question

question. for my Good taking Hi. Thanks morning.

Bill. morning Good problem. No

X you Yes. are HODL guys that is few Obviously, public the to miners this in have bear Hut strategy question the one sold of first market. that not My has. related

to So, you. hands off

guys at I your potentially are Just in again, conditions Bitcoin wondering to are that you Are guys know that lending liking? that have how market later of or the kind looking level this you May. program year? improved you out reentering kind concluded loaning not you a considering of

address did bit I we that more call So, work into have a I intend remarks, to strategy our and We my stack in bit will on revisit color as little a it. evolve the absolutely go and Shane it.

we I think But we side. are we a he color not quite that undue of reserves. will comfortable in because that can those with leading but market into absolutely variety again, something the it’s project without where expect over perspective, a move are everything we it to from to our opportunities to how sits and a is counterparty risk on work little the Shane stack turn sequent that around add taking I on best exploring

well. Bill, Jaime. it said Thanks Jaime think I I mean overall, Yes.

XXXX were as throughout that just that ongoing space. Genesis counterparties very really intentionally highly continue asset sort two engage discussions with being of selective, selective and being been the worked active have with, firms digital to and quite we participants in well-capitalized that we of Galaxy, part We reputable,

trading generating yield of from nothing that said, at to caution, sort back substantial range as in to holdings associated else maybe of with have would Bitcoin strategy specifically, cautious, our associated sort Yes, our from again, exploring look around intentionally employing for guess more in sort around of So, the small done suppose pause, course, counterparties. determination algorithmic of thinking that our explorations something from more of drive is our yield, perhaps. unencumbered an and the we being with some we past, explore then, yes, stack, we mean generating stack, portion So, we derivative to looking in against of of where similar I reengage sort direct of yield abundance have sort acceptable have a we that programs a to how May to made income And working what will with risk time very approach program. and sort yield the I can been perspective we of again, around and with,

So, broader And to will some stability continue that’s hopefully work as we relative digital the of a do look where towards to we asset we at that now. space. continue within that are

Great. and in to the next didn’t apologies, I wasn’t address the related this guess is I whole my the color you waiting Thank question, on I you and call. for period. as well was hopefully, in either, able to and get the X? had of there upgrade Bitcoin at mine if guess are potential this is about behind operations. company I proof-of-stake, guys equivalent, Ethereum the you from total how coming Wondering looking XX% Hut strategy

improved Yes. Obviously, hard about it’s Ethereum chain. and close a very work something work we now talk attention of to. is new There lot are paying right a

close we that are So, obviously paying attention to how see evolves.

really center the at at to to the a into Medicine whether in we other any time, new continuing chain, that over workloads us profitable types a ton look of compute we that mine site hard we will can center that’s next apply the allows One and which to work or Ethereum addition has data Hat. having other other the that of work to compute all move of proof-of-work environment. doing But the proof-of-work the of in that done is chains. our not put most in been environment Classic to things of available is enterprise-grade that at today on mining team workloads looking we chassis, at love if Ethereum compute some, then about fleet ultimately data And our GPU look in it mining our

Ethereum And few So, again, we – very, with I today. think our strategy will be very but the mining we economics – different are to into to a perform very areas. parse that compute well. happy continues

will on world strategy a the with stick more we clarity get have perspective. a merge And so we post until that chain proof-of-work from we

the much color. so you Thank Great. for helpful. That’s

much. you Great. Okay. Thank so

you. Thank

comes question Gusto last go Please Securities. ahead. Gala from of Our Truist

Good morning.

but there Thanks a like a there selling? said is, sold particularly holding, know Hey. on anything hold do holding ‘XX, been Gusto. would for total you and you one looking decisions core holding question. between But moving you have make my haven’t holding it is target? if are for in BDC Good that thing taking you I of just wondering early that the are – how Most or those And you morning. comfortable are are like is any I questions at? is is a say target – This we answered. Julian there

No. is target. no There

makes reinvest Our I – And going a Bitcoin at equipment just particularly period don’t the payback that’s to in commitment levels. these balance it to post sense hold on extends that sheet, and think is having. then Bitcoin to I have sell

And the suggest if would it going you you sell it’s so to later. Bitcoin now, cost to mine more math ultimately,

that’s really and evolve that adjust as and conditions Bitcoin thinking about thinking we how tested are will as as So well. market price change today be always and it

space. or have all and now going that ask management like you asset maybe hedging Got seems around Shane was it. just done of that And comments, the about already overlay exploring we seen on [indiscernible] past, are exposure are thinking from an strategy, in but seems question type the after or the it this, like it I maybe some non-correlated And you counterparties or that to particularly DFI. a have obviously, other about it

at So, would into you back to at you to about kind step or that? say that that is are when think looking that fair moment this of that,

with potential Shane settled at actively ongoing strategy It’s to But that are or active just an Shane strategy that. team his and on going on forward. haven’t this point. timing we touched investigation. work So yes, exploring

Thank taking you Alright. questions. Got Appreciate for it. the it.

any No questions? are problem. Michelle, there

continue There further are this questions Please no with remarks. time. at closing

day, a you your support Michelle yourself and and for your again thanks have thank Well, everyone for and joining the call help. wonderful Okay. for

for and your for you please Ladies this our call We and you. conclude that disconnect thank Thank gentlemen, you conference lines. today. does your participation ask