Hut 8 Corp. Q3 FY2024 earnings call

• Revenue grew 102% YOY to $43.7 million for Q3 2024. - Executed three major strategic initiatives: partnership with BITMAIN for a 15 exahash co-location deployment, launch of GPU-as-a-Service business Highrise AI, and conversion of the Anchorage loan to equity. - Vega project on track to energize in Q2 2025 with ~$135 million annualized revenue. - Applied a power first approach, expanding development pipeline by over 2 gigawatts of assets under diligence and 500 megawatts in assets under exclusivity. - Developed a new Tier I data center form factor at Vega, narrowing the gap between Tier I and Tier III infrastructure. - Announced purchase of over 31,000 BITMAIN S-21 Antminer units to upgrade 111 megawatts of self-mining capacity, expected to increase hash rate and improve fleet efficiency.

Digital asset mining: Revenue declined year-over-year to $11.6 million, with segment gross margins expanding by 7 percentage points from 30% to 37%. Managed services: Revenue increased more than four-fold to $20.8 million YOY, with a 16 percentage point expansion in gross margin from 70% to 86%. High performance computing, colocation and cloud: Q3 2024 segment revenue was $3.4 million, with segment gross margins decreasing slightly from 26% to 24%. Other segment revenue grew more than five-fold YOY to $7.9 million, driven largely by power revenues from natural gas power plants in Ontario.

• Anticipate continued top line growth driven by 15 exahash co-location agreement and GPU-as-a-Service business. - Vega expected to energize in Q2 2025 with ~$135 million annualized revenue. - ASIC fleet upgrade expected to increase self-mining hash rate by 66% and improve fleet efficiency by 37%, driving up to 18 percentage points of gross margin expansion. - If fully exercising the purchase option for 15 exahash of hosted miners at Vega, could drive up to seven additional percentage points of gross margin expansion.

• Volatility in hash price and Bitcoin price affecting the self-mining segment. - Uncertainties in the commercialization timelines of AI data center projects. - Risks associated with financing options for large-scale data center development, including potential dilution from equity issuance. - Challenges in managing balance sheet exposure and optimizing capital allocation across different segments.

Q: About current status of discussions with AI hyperscalers and nature of those discussions?

A: Have sites isolated and marketed for AI projects, in different stages of commercialization; will explain deals when materialize.

Q: Thoughts on potential for equity issuance vs sale of Bitcoin for financing Bitcoin mining growth?

A: Weigh investment returns of projects and cost of capital; will choose most accretive option at the moment.

Q: How to get 430 megawatts of capacity powered by end of 2025; brownfield sites or others?

A: Commercialization depends on customer and bills; have solutions with different build times, some realizing power next year, others a bit later but still ahead of many.

Q: Is Bitcoin price the major factor in exercising purchase option of BITMAIN miners?

A: Hash price is key, run sensitivity scenarios; locked in price to purchase machines, will analyze hash price and return profile closer to energization.

Q: How should investors think about power prices going forward?

A: Focus on controlling energy costs for profitability; optimize for return on investments, not just maximizing Bitcoin mined or lowest energy cost.

Q: How to think about using natural gas power plants in Ontario; sale or other use cases?

A: Core strength is consuming power for next gen tech; evaluating strategic alternatives to maximize value, including a five-year capacity auction coming up.

Q: Timeframe for 430MW capacity and economic differences between customers?

A: Tier III data centers have cost range; aggressively pursuing AI opportunities, will share more as material and definitive.

Q: Put CapEx dollars towards AI before leases signed?

A: Make modest investments to secure project value; some projects in Tier II markets allow initial modest payments, balancing risk and value.