Hut 8 Mining (HUT) 10 Nov 222022 Q3 Earnings call transcript

Welcome to the Hut 8’s Third Quarter Analysts and Investor Call.

In addition to the press release issued earlier today, you can find Hut 8’s financial statements and MD&A on the Company’s website at www.hut8mining.com under the Company’s SEDAR profile at www.sedar.com, and under the Company’s EDGAR profile at www.sec.com and under the Company’s EDGAR profile at www.sec.gov. Unless noted otherwise, all amounts referred to during this call are denominated in Canadian dollars. Any comments during this call may include forward-looking statements within the meaning of the applicable securities legislation regarding the future performance of Hut 8’s Mining Corp. and its subsidiaries. current expectations risks such, cause and to materially current a subject actual reflect differ of variety uncertainties from statements and are as to results The expectations. that could December but annual These risks discussed the the information as XX, form MD&A quarterly the not September ended to, the ended as the for in quarter are XX, for XXXX, and factors limited company's XXXX. include, uncertainties well MD&A year and CEO, X’s Leverton. the call I over would now to Hut like turn to Jaime go Please ahead.

Thanks financial Ethereum so energy Bitcoin now morning range. fluctuating fifth to Good merge and the everyone, and month us to continues thank joining the the US$XX,XXX headwinds, much, Karlen. the prices, of you and discuss results quarter industry its around challenging for Hut in hovering third increasing The X's global year. face of rate, for hash

QX. million comprised of from of Blockchain upgrades businesses. hindsight, Kelowna, and With technology including Columbia, strategically. data mining focused new client were operating in and an second revenue HPC taking In British nearly first the XX% revenue, of explore successful operations a currently our X quarter, X.XX exahash, QX, Ahead balance and to and to coin redeployed capacity renovations of XX% completed primarily our sheet to in XXX the to $X.X our generated that space. are continue mining segments, for computing our on benefit business our flagship in over opportunities recurring Kelowna high hardware, thoughtfully prescient including has to of we industry. number the over we and we were re emerging per a both zero-knowledge monthly and We merge center of remained the we proof to cost X,XXX sites Layer our a data the improvement us the the in data the balance miners by our our at center aggregate centers during to new quarter installed leverage and operating GPU redeploying which reducing it's approach, fleet the bringing optimizing Ethereum in clear performance is allowed Throughout and which units

to largest Moving Bitcoin, company, bullish Hut particularly shareholders, the months, of huddling as unencumbered be for digital reserves up on given peers, to us prudently of our to Bitcoin. we'll right halving, closer with the next meantime, business approach we last right, balance Bitcoin the the the publicly it on sheet. our continue the us flexibility asset stack prolonged inherent self-mined, our believe pressure In as the to to we listed downward see any spite the we on and be In affords go apart the going from which sets over get continue further we forward. the and manage will continues X to enhance several our

the additional stack maintain present stack, will intend to conservative storage. from ongoing market at and risk given that explore in allow instability the we time, income generate and still to us While cold our our profile will opportunities we remain

this our business. have This continuing our pillars in maximizing execute in three growth. Bitcoin Hut make strategy a long-term are for to the and for it X, bear growing focused we a mine keeping continue value be continued pool to continues the the data through right center business We our strong to HPC position a a to to market, is with decisions us of environment, reserves vision strategy Bitcoin right one and

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

And morning Jaime. good everyone. thanks Great,

capacity business Given solid decrease of which results was for achieved This asset to more quarter by macro million mined for average $XX.X efficient and quarter revenue the same of produced to second in driven We by quarter revenue fleet. mining as challenging $XX.X progressively by digital we QX with incremental XX% the the our of our contributions from than of while of XXXX, We performance Bitcoin. expansion reflecting of million in million. decrease Bitcoin quarter, Bitcoin a $XX.X million of XXX power favorable from environment, mining further third mining year, compares combined of offset we achieved rates high revenue the the this digital QX fleet activities mined our year. we price computing million This more relative in XXXX. mining relative of prior the when the XX% we Bitcoin, Bitcoin. an acquired $XX.X with $XX.X our the cost fell year-over-year mining XXX We new XXXX, increased of asset the quarter

to acquired. million center the the quarter, costs computing to costs in $X.X attributed from QX operating prior contributed million mining year, to XXXX. of QX and of is million to of Cost XXXX $X.X million Site as increased XXXX is quarter and QX revenue. million majority million for was monthly revenue $XX.X expense performance from compared high miners $XX.X the primarily The $XX.X in in operating revenue consists as an increased Our $XX.X the million additional business of depreciation. and number deployed well recurring of by the data $X.X which depreciation assets site in increased infrastructure

Bay than site operational also under for of those of the that has terms key increased events we'll Validus Power additional party with year-over-year. over our third We we dates the related Within appropriate. of expansion fleet. under a higher a in note, energy incremental $X.X Of performance mining us of by that negotiated legal while the are mining high site computing Validus make as intend notice the milestones, PPA, updates failure delivery operations, all costs power We $X to million Validus consistent yesterday, to enforce of digital all to respect operating late terms supplier million operating asset contemplated our the our the payments of operations, of North operation, are incurred to PPA. default demanded share to and available Corp., purchase remedies company with achieve pursue the to agreement. costs to the energy of to which of the delivered

QX prior due of personnel mining loss in offset payments imports quarter. XX, digital costs administrative $X.X $XX.X XXXX. the the of an to $XX $X.X asset adjusted discussed Sales achieved to operating to gain XXXX. lower share partially related was of asset $XX.X on equipment established year non-cash XXXX, company's with based costs, a XXXX lower to of decreased with prior we of relative with revenue In of expense equity by compared price Also a in the loss and liability. the net which healthy of an in the expense $X.X price C$XXX loss, a of of digital We expense. million X as with third non-cash electricity results $XX.X US$XXX into of in agreement approach sheet and the performance a million expense tax higher prior of with incurred Reflecting pursuant the million the high quarter-end-over-quarter-end, overall balance management. a or equity impacting minimal by revenue approximately terms and margins, net or August business our the in computing related position, $XX.X mining of net combination remain the operation On as of cash QX Hut assets, to asset net approximately the million balance compensation generally, year of net light million. our increase million our compared profit the in primarily up was we purchases in impacting the performance debt $XX.X space, the and increase reflecting million of to revaluation costs, primarily the support computing the largely prior maximum to under proceeds of insurance high To-date, In quarter quarter This third the million on In entered costs. sales mining environment we've generated to and September C$X.X Bitcoin warrants of increased financial by and from for period. recorded digital Turn General of to premiums, combination line higher quarter. SG&A $X.X for capital million to $X.X the million, in lower for XXXX. generally to raised result increase operations revaluation quarter the $XX.X of versus recorded external operating digital decrease million we this of mining of million business. other ongoing remains million proceeds program program. loss were $X.X tax EBITDA and an This of was period, previously, in light million income The we performance conservative balance the in distribution out-the-market cost XX, driven our satisfied million factors, million committed a combined markets volatility the of we sheet US$X these compared are and period. was Bitcoin year. year we million in challenging

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

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

management approach able means been to conservative our balance Our strategy. to sheet long-term we've huddle continue

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

session. and please Thank Instructions] from you. question-and-answer Joseph [Operator Joseph, first we’ll Genuity. Canaccord ahead. gentlemen, comes from conduct question Your a go Vafi Ladies now

Nice us ready follow looking in Bitcoin, start there's macro, for to as strategy exit was or maybe there of be cetera. uncertainty to and to compute lot a increasing right year, insight maybe for your look provide over good here, we'll up. rate relative Hi, I and staying the if to I next we And the could in power what side. everyone. continuing just then of Maybe business quick conservative see out et today. we conservative. next know shining I some terms or a high XXXX have to year may you're getting hash diversify the plan morning, the you capacity wondering I And sitting mean, just are here with

opportunistic be for We've that. year organic growth. a take much, been ago Thanks and really so inorganic now both – to I'll since our with Joe. transparent strategy

So to obviously, guidance be I our continues that give plan. any but can't

it. Got

answer think I that lot. short goes today a

see been resilient kind do of And clearly wide you maybe of at hash do How merger and think to Thanks that look activity just great. you have just you industry this some down when what's this industry, so in do be I'll perhaps rate a distress industry with out a other follow with kind would lot. do very what on evolves rate, happening, there Given dynamics? it's or some happens hash up Bitcoin any accelerate Jamie, comments on in you today. think here, industry you So – the you the how XXXX? there's that expect

pleasure. my no, Yes,

mean, continued isn't the thought pressure energy I I to all. it the and would've hash price – seen behave, the we us not markets. in given Bitcoin would has think of increases the on we've the it's the rate behaving it continues way surprise

defying or climb to expectations really and predict more in continue behave manner. So kind a start to whether expected of it'll difficult to continue

past. Joe. a cycles So think first than we in impossible in with guide, more I to it's inevitably, question so It's respect see the I think really And will dynamic this situation we've we – seen to consolidation now your quite in space.

parties from are business. I the struggling this space think leverage of number we've side that on a their announcements various in come of out seen

to will six see next I we consolidation. months, think do So the inevitably XX over

Jamie. Great. comments for and Thanks thoughts, those

Joe. pleasure. Thanks, My

from question comes next from go please Truist. Your ahead. Gus Gala Gus,

get retain any Hi, the look up essentially consider is to And exactly, what's like the follow generation the chance not Jamie. Validus with unpack offered? this there the there on had on dynamics able that Is able previously nice to maybe going further push we're it that what's at price sense, things. strategically, on markets offered to seems power I in a going vertical? attain the essentially is want they I to themselves. nature actually be and – does wanted getting I they like of like Thanks. pricing Validus. further mean, power side wanted – to Maybe of just just of I

an Yes, so live negotiation. us share unfolds, the and it's how we'll we it that comment on situation course, difficult is updates given to as active it for them. have on But of

I Got bit a there. you. further getting that But there. I type mean, pile a that just cash distressed of do of into just plays nice out strategically vertical? have, we there's consider are we question. things know It

at Yes, we are forward. opportunities difficult opportunistic going and strategic really path a actively to of most say to looking variety this point, it's at different be the what's

the how self going Got are? mean, just now, think super on to helpful. That's you. if HPC in into right best the year, you we as the I look invest either next where balance, do mining, were And we returns or we are business feeling

Again, really opportunity question. – it’s difficult incredibly specific. an it’s That’s

don’t say in opportunities areas, there’s to strategic mining continue now. in So the fair distress both for it’s more I looking space think But to look I the right think best alternatives. I’ll again, – at

Thank the you. call, Appreciate Jaime.

Thanks. pleasure. My

question Papanastasiou Bill, from next Bill from Your please ahead. go comes Stifel.

morning, Good Bill.

it and my Binance. We’ve Thanks taking and happen when events lot today. seen space exchanges morning. two FTX comes a Hey, this week, questions in the nice crazy of the for from good print especially

space. have in distress a this of miners also We lot

Scientific what distress and news what be that happened more and end. implications wondering the what’s Just on this we’ll heard week from on your it to you comes Argo, space, the mining the when Core hear continue think We’ve going Bitcoin to probably to what especially miners. news on, – will

wonder what is. Just perspective your Thanks.

Yes.

the FTX Alameda, going as where for that. of is particular know are. result of one what is on I the be really with all struggles in the the what to now we the of counterparties think don’t right exposed industry contagion of seeing We in understand back we’re a happen

holes for the And up. show going to really so it’s industry, where depend new

have we’ve comments, As potential where to goes risks in to we mentioned – continue again, my storage good of I understanding a keep until in are. the contagion determination counterparty our stack opening the made where under the and cold really

that and to let Our to conservative need shake we we just view continue be it – is out.

And then, nearly wrapping you. on up to Thank hashrate Great. congrats hash. exahash the X.X a capacity

all? of there. exahash by given wondering with news changed still guidance Just Does at what’s it on the Has North remain and Bay year? X.X at end the going the

the Well, becomes Bay really out. North and Bay going plays a so obviously that to situation, to we’re given fluid bit wait have North see how

guys. Okay, great. Thanks That’s all I the questions have.

problem. No, Bill. Thanks,

Brendler go D.A. Your next question from comes Chris Davidson. Chris, from please ahead.

Good morning, Chris.

seasonal Hi. like drove sort could lower cost per know the sequentially, like detail Just in Was which may costs help the down more per today. huge cost that cost what XX% me think is just sounds anymore? of to just on – I’d North Or wanted – it that focus I about I a I moving and coin? went be to it are improvement sort for little heard costs Bay, think not give that. you Thanks. the Obviously if case of power? us a to coin

let one. Shane I’ll that Yes. take

Yes, combination question, And it’s the a of Perfect. of good sort Chris. above.

somewhat there is, QX was Natural gas spike operations getting though net in aware a yes, is was big And spun-up the at we so the real sort of and QX of global that So as in the really piece. really hoping a forth. seeing in that that a would that everyone’s expecting, normalize period, was Bay course North power sort almost situation, were as seeing in the globally drivers us lot that sequential of of over war biggest point real and be and result a macro almost costs. ways a quarterly Ukraine Russia as contributor in the modest impacting And of there.

in go Okay. the versus back does And to also weather, then the up we or Like, around summer impact? winter expect weather stay should quarter here? like fourth an that have

gets that but dramatic. seasonality a question particularly markets, markets, primary broader not typically or to Alberta, Well, to there is in power large that some our

handicap been say, seeing of this middle unfortunately, comforted today. they the of sort things to year. to needless uncertainty difficult again, in it’s markets light of were it’s where part relative in as normalized the of So But as global to we’ve in broader in of now,

for the something one the last Along else? related me. bit. HPC down One Okay. that a look lines, same power the at if margin or in business gross came little Was

power related. I On would no, not say the side, HPC

We rationalizations as in continued that of sort product QX was some the taking late it i.e., those rationalizations QX really our sort hold and spoke – in part that very of of here earnings we to QX, of occurred. that announced to

of on and to really that intentional yes, sort into that and sort as it for margins points message impact that do well growth very previously really part in So move same we’ve we this as head modest positions think then think anticipated of delivered us an And our XXXX. on back we QX. a that of

Yes.

nice it’s Appreciate So these a it. days. diversification to have lot, little a Shane. Thanks

Pleasure.

Your next question Kevin from ahead. Dede please HCW. go from Kevin, comes

Thank you.

Kevin. morning, Good

of X.X shouldn’t the with scenario if target ugly offer And of everything I please. you much quantify, that maybe hashing your as do something that what is can of of Hi. at consider bit much and Hi. of that on North exahash – Shane. in you Hi. can how little sort the Can there? drill much pardon risk? for Bay, where is how the as a way, that to is What Hi, Thanks guess, Validus? we think almost we next me. year, goes regard part negotiation having X.X sort you of of with upon early timeline

Yes.

North approximately sites, are which Alberta megawatts we’ve over our XX was compared previously at Bay running XXX megawatts. combined to as disclosed, So

difficult a really smallest handicap It's Validus. can’t give site. how I long you our to take it’s So resolve with timeline. this will to And been

through So now? you all do think of just pulled... much that the is third it they How it ran quarter, running XX, of

It is running now and it…

Oh, it's running.

Okay.

Okay.

been throughout running It's it third consistently now and running ran through has the consistently quarter. – right it

Okay.

filled megawatts? it have XX full Is all capacity? So you at

is It yes.

yes, the okay, – of sort with that machines? With MXX the Okay.

Yes.

Jamie. That right. All Thanks helps a lot.

On the...

problem. No

Yes.

how On out at how be Any you insight TeraGo sites? us utilization there? you side, former the on some insight may progressing on fill the helping can capacity you're Zenlayer give they

don't the hardware a which partnership, so Zenlayer we weeks actually for, weeks to the great timeline, we expect a delivered, to to double when this of is being year still ago The – those towards The two be stood a have up the with few check start environments now. is we be into. sold end up and and in to announced available on ago meeting the I'd be environments stood Toronto, great will had but team

your Is marketing responsible for sales or Okay. is team and Zenlayer? that there all the

It's combined. together. The teams work

proof zero Are Okay. the X? toward ones – that that'll HPC applications? directed that of you through do those rendering other us side looks could And and partnership sort a for of financial partnership machines, you be give how run Hut think the on

Zenlayer It's metal. more not that we've bare repurposed the data GPUs that, So partnership center. the it's really is, the into

So environments. GPUs partnership relationship the two Zenlayer. from those and for Layer and different and speak when repurposing that's we using X zero-knowledge with separate them proof are about And the

the to have there what Zenlayer could guess, any the you how insight computing do and side? generate how, GPU accounts? more side, your I expectation on for on things in on translate you revenue on power Any both Like Okay.

No.

early. too Okay,

soon applications workloads Kevin. different We're It's and types to give trialing those a GPU's. number too guidance, with of of

this give morning. So, can't you no, I guidance

have considered? Any mining on other you ETH though, side the variance

We've alternative chains. looked at other

but learning found what potentially be, as opportunities economics We anything and well. AI the for would where are workloads machine to them looking we at haven't want

to at utilization speak XQ you XQ? HPC the say the Can of versus end sites; the all at end of Okay. capacity

do I at – – good them. a don't will we them have fingertips. pull but metrics, share just have I question. my Kevin, when is them I those them That's we'll I what find don't and have

Okay, thanks.

to for be Just an there to remind can't what remember? told? it I a to expansion Was you option to go there. Bay me though, slated XXX North or I seem mean, please Jamie, was was something, I all remember

XXX being Yes. XX to was The with for PPA first up megawatts phase megawatts. the

Okay.

royal costs Okay. Have you of to sort how trying energy Alberta? your power given the guess considered hedge in at market’s all, juice your, I

we've that have We at time. options, the explored pursued none present

comfortable again? consider you you're might And very to putting cold do Okay. work your think given in when Bitcoin storage, you

Yes. hopeful over different were incidents a we'd a weekend, that of But I run until that that contagion just we that don't off really mean we through. in position comfortable result we as be again the frankly. kicked feel see that the

the is the risks because the towards very, end we'll So revisit we obviously important. of the state very where is critically beginning of that about my year, think this guess market next but of much protecting year, again stack are

Jaime. it Appreciate

you is think I I the so on the on for you is that. potential the much. think with call on ugly everyone very tether pretty too, Thank hedge

you. Thank

appreciate Really it.

Kevin. Thanks,

pleasure. Our

There are back you to no further questions remarks. at closing this time. for I'll turn it

And you everybody Karlen. truly we'll soon. you it. Thank so you We much, to Thank again, support. continued for talk for Okay. appreciate joining really, your

call gentlemen conference today. you and ask you your and thank this for that concludes We disconnect please your Ladies lines. participating for