Hut 8 Mining p(US:HUT)2022-11-10 17:30Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $31.7 million, a decrease of $18.6 million compared to Q3 2021's $50.3 million, primarily due to lower Bitcoin prices [11][20] - Digital asset mining revenue was $27.3 million, down from $47.9 million in the same quarter of 2021, with 982 Bitcoin mined compared to 905 Bitcoin in Q3 2021 [12][20] - Adjusted EBITDA for Q3 2022 was $2.1 million, a significant drop from $30.7 million in the prior year [21] - The company recorded a net loss of $23.8 million for the quarter, compared to a net income of $23.4 million in the prior year [20] Business Line Data and Key Metrics Changes - The high-performance computing (HPC) business generated $4.4 million in revenue, primarily from monthly recurring revenue [6][13] - The cost of revenue increased to $45.6 million from $21.2 million in the prior year, with depreciation rising significantly due to more miners and infrastructure [14][20] - Mining profit for the digital asset mining operation was $9.3 million, down from $33.5 million in the prior year [17] Market Data and Key Metrics Changes - The company has the largest self-mined, unencumbered Bitcoin reserves among publicly listed companies, totaling $223.4 million as of September 30, 2022, based on 8,388 Bitcoin held [24] - The average cost of mining Bitcoin fell by 29% compared to Q2 2022, attributed to favorable power rates and a more efficient mining fleet [12][20] Company Strategy and Development Direction - The company maintains a three-pillar strategy focusing on Bitcoin mining, maximizing Bitcoin reserves, and growing the HPC data center business [9] - The company is committed to a conservative approach to balance sheet management, especially in light of market volatility [23] - The company plans to explore opportunities for organic and inorganic growth but remains cautious due to the current market environment [28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macro environment, including fluctuating energy prices and increased global hash rates [5] - The company intends to keep its Bitcoin holdings in cold storage until there is more clarity on market conditions and counterparty risks [46][87] - Management expects consolidation in the industry over the next six to twelve months due to distress among some players [32] Other Important Information - The company delivered a notice of events of default to Validus Power Corp. due to failure to meet operational milestones [16] - The company has raised approximately C$2.6 million under an equity distribution agreement with a maximum proceeds target of C$270 million [22] Q&A Session Summary Question: Insights on plans for next year regarding hash rate or business diversification - Management reiterated a focus on being opportunistic for both organic and inorganic growth but did not provide specific guidance [28] Question: Industry evolution and potential for consolidation - Management expects to see consolidation in the industry due to distress among some companies, but the future behavior of the hash rate remains uncertain [32] Question: Update on Validus and potential vertical integration - Management stated that negotiations with Validus are ongoing and that they are exploring various strategic opportunities [39] Question: Implications of recent events in the Bitcoin mining space - Management expressed concern about potential contagion effects from recent industry events and emphasized a conservative approach [46] Question: Guidance on hash rate capacity and North Bay situation - Management indicated that guidance remains fluid due to the situation at North Bay, which is currently operational [47] Question: Details on cost per coin reduction - Management attributed the 30% reduction in cost per coin to a combination of factors, including normalization of power costs [54] Question: Progress on Zenlayer partnership and HPC capacity - Management provided updates on the Zenlayer partnership and indicated that hardware delivery is ongoing, with environments expected to be operational by the end of the year [75]