Welcome to Hut 8’s Third Quarter 2023 Financial Results Analyst and Investor Call. In addition to the media release issued earlier today, you can find Hut 8’s financial statement and MD&A on the company’s website at www.hut8.io under the company’s SEDAR+ profile at www.sedarplus.ca 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 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 a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. These risks and uncertainties include, but are not limited to, the factors discussed in Hut 8’s Annual Information Form for the year ended December 31, 2022, and the company’s other continuous disclosure documents. Except as required by applicable law, Hut 8 undertakes no obligation to publicly update or review any forward-looking statement. During the call, management may also make reference to certain non-IFRS measures that are not separately defined under IFRS such as adjusted EBITDA, mining profit, digital asset revenue per Bitcoin mined and mining cost per Bitcoin. Management believes that non-IFRS in financial information taken in conjunction with IFRS in financial measures provide useful information for both management and investors. Reconciliations between IFRS and non-IFRS results are presented in the tables accompanying our press release, which can be viewed in our website. I would now like to turn the call over to Hut 8’s CEO, Jaime Leverton.

Thank you, Carmen. Good morning, everyone. Welcome today -- to today’s call where we will discuss Hut 8’s results for the third quarter of 2023. Throughout the third quarter, we continued to mine despite headwinds from seasonal energy spikes, which drove some curtailments and increased network difficulties. We continued to work to mitigate the issues we are seeing in Drumheller, and the team made good progress in repairs but continued to see challenges upon re-energization. Still, we made some progress finishing the quarter with a 7% improvement in operating capacity over the end of the second quarter. At Medicine Hat, the team utilized mutually beneficial terms in the electricity supply agreement covering the site, which provides the opportunity for both parties to continue benefiting from high prices in the Alberta power market. In our HPC business, we created some momentum in Q3 with new customer additions and growth among existing customers. Last week, we launched our on-demand cloud service for customers seeking HPC services from our GPUs with Kubernetes-based applications that can support artificial intelligence, machine learning, visual effects and rendering workloads. This service puts control in our client’s hands while reducing provisioning time from days to minutes, which is particularly compelling for those seeking shorter term HPC projects. This offering is currently available for our Mississauga data center and we look forward to expanding this service to new regions and adding more services in the weeks and months to come. We also have data center capacity in both Central and Western Canada that we can quickly allocate with minimal investment to accommodate clients that have up to an equivalent of 85 HGX class server chassis with GPU cards. We continue to see constrained infrastructure supply, especially for high performance computing capacity required for intensive workloads like AI and are…

Thanks, Jaime, and good morning, everyone. During Q3, we continued to remedy the operational challenges at our Drumheller site and pursue the stalking horse bid to address our suspension of mining activities at North Bay. As both matters remain ongoing, they affected our Q3 results. We achieved revenue of $17 million for Q3 2023, a $14.7 million decrease relative to the same quarter prior year of $31.7 million. This year-over-year decrease was driven by a lower quantity of Bitcoin mined, partially offset by an increase in the price of Bitcoin. Revenue from digital asset mining activities was $12.5 million as we mined 330 new Bitcoin in the quarter. This compares with $27.3 million of digital asset mining revenue in Q3 2022 when we mined 982 Bitcoin. The year-over-year reduction in new Bitcoin mined was driven by a combination of an increase in network difficulty, impacts of electrical issues at the Drumheller site resulting in less mining activities, the halt of GPU Ethereum mining, which we were doing in Q3 2022 until the Ethereum networks merged and the suspension of mining activities at North Bay. The impact of revenue of less Bitcoin mined was partially offset by the higher price of Bitcoin reflected by the digital asset revenue per Bitcoin mined of $37,800 in the current quarter, compared to approximately $27,800 in the prior year quarter. Our high performance computing business contributed an additional $4.5 million of revenue in Q3 2023, compared to $4.4 million in Q3 2022. Q3 2023 results included revenue from new sales, which were partially impacted by client churn. Revenue from the Interior Health contract is expected to start in Q4 2023. Cost of revenue for Q3 2023 was $21.4 million lower than prior year by $24.2 million and consists of depreciation and site operating costs. Depreciation…

Thank you. [Operator Instructions] And our first question comes from the line of Mike Colonnese with H.C. Wainright. Please proceed with your question.

Good morning, Mike.

Hi. Good morning, Jaime and team, and congrats on all the progress you have made on the merger, really exciting to see there. First one for me, we are seeing a growing number of Bitcoin miners announced plans to enter the high performance computing space in recent months and I know you and your team, Jaime, have really been in this space for much longer. So I was hoping to get your views on this recent trend, really what differentiates Hut’s approach to HPC offerings versus its peers?

Yeah. Thanks, Mike. Great question. As you alluded to, we have been at this for a very long time, kicked off with the closing of our TeraGo data center acquisition almost two years ago. And really we spent the last number of months updating the facilities, updating the product stack and really getting ready for what we anticipated to see as an increase in market demand, particularly as it relates to artificial intelligence and that’s something that has certainly borne out over the past number of months. And I think, really what differentiates how Hut is looking at the business, we purchased a business that was fully built out. So if you recall, we have five data centers across Canada and two in the Greater Toronto area, two in Downtown Vancouver and one in Kelowna, and with a number of enterprise customers on both the co-location, cloud and managed services space. We have got a very, very robust infrastructure and staff that supports these clients and these product offerings. Much of my leadership team, including myself, comes from the traditional high-performance computing and data center space. So it’s a business that we know well, understand well and the ecosystem that plays in that space is also very well understood by myself and the management team. So we really have seen this trend coming and believe it’s important to tackle as a robust enterprise-grade solution. It is very, very different compute from a Bitcoin mining, data center, both and how it’s operated, how it needs to be managed, how customers expect it should be serviced. It’s really a different business model altogether and we think we are incredibly well poised to be at this intersection between these two types of high performance computing.

That’s great. I appreciate that. And definitely I had to pack on this one. So it’s good to see. And just as a quick follow-up, if I may. So if you could just speak to the market rates and pricing dynamics you are seeing out there right now for co-location services and cloud or GPU-as-a-Service type offerings and really how your product stack is positioned against that sort of market backdrop?

Yeah. I mean, I touched on it in my comments earlier. We were really excited to launch our on-demand cloud portal, which kicked off a few weeks ago and that will continue to be an area that we continue to invest in and expand, because that type of on demand capability, I think, is really important for clients and for customers looking at these types of workloads, just the ability to be able to self-provision within seconds, we think is critically important and are super excited from the early feedback that we are getting on the launch of that portal. As I touched on, we do have about a megawatt of readily available capacity and infrastructure across our data center fleet and we continue to see data center leases totaling tens of gigawatts be signed across North America so far this year and we believe that we are going to -- over time, we are going to see capacity start to come at a premium, because it does take a long time, as you know, to build out these types of our enterprise-grade data centers. So we are very bullish on the assets that we have. We love that our data centers in Ontario and in BC are almost entirely zero emission and renewable energy powered, which we think will continue to be an advantage in this space as well. With respect to pricing dynamics, I can’t get into specifics of that, but what I will say is, it’s very much a supply and demand conversation, and as available supply for compute starts to become constrained, we expect that to see -- to put upward pressure on pricing in the market as well.

Got it. Thank you for taking my questions.

Of course. Thanks, Mike.

Thank you. One moment for our next question please. It comes from the line of Joseph Vafi with Canaccord. Please proceed with your question.

Hey, guys. Good morning. Nice to see progress here on the USBTC merger, really great news. Maybe you could kind of outline for us the playbook there. I mean, it’s been a while, I am sure you have got some good plans in place. Do you have an outline or a playbook that you could share with us over the next few months as that merger closes and I would imagine you start to ramp some of that exahash capacity at the USBTC facilities? And then I have a quick follow-up. Thanks.

Yeah. I mean, we have got quite a bit of information about the deal, which we have shared in the past and it continues to be available on our website. So I encourage those of you that want to refamiliarize yourselves with the details of the deal to refresh that deal deck. And as we touched on, so a very, very critical milestone for us was achieving the effectiveness declaration from the SEC, and as I also mentioned earlier, assuming successful USBTC stakeholder vote and other closing items we expect it to close by the end of November. So really looking forward to getting things underway. And as we have touched on, it’s very much a merger of equals. Our facility is, obviously, entirely Canadian based between the mining sites and the data centers. USBTC team focused on assets in the U.S. and both of us with a diversified strategy when it comes to revenue. So a mix of fee-based revenue streams for us in -- with respect to high-performance computing and then as we think about the stack down the road, as I have touched on earlier as well. And then USBTC mix of South mining of Bitcoin denominated revenue streams, as well as their managed services business or managed infrastructure operations as they have historically referred to it, which is a fee-based revenue stream as well as their hosting business. So really excited in a pro forma where we continue to have the ability to kind of flex between our different lines of business and really take advantage of the different momentum and swings we see in the market across high performance computing and Bitcoin mining going into the halving. And then, of course, very excited about the potential here with the power assets that we are working on in conjunction with Macquarie.

Great. Thanks, Jaime. And yeah, following up on…

Of course. Thanks, Joe.

Yeah. Following up on that -- on the power generation assets and that stalking horse bid. Again, could you perhaps provide us a little bit of a playbook if that deal -- if and when that deal gets done, what does it mean for your operations, what does it mean for expansion of the business, because I don’t believe you were using all of that power previously. So any color there would be helpful, too. Thanks a lot.

Yeah. No. No. My pleasure. It is something we are very excited about. So the only facility within the four assets that are covered within that stalking horse bid that we had prior association with is the North Bay facility. So if you recall, we had just under 40 megawatts stood up at North Bay and so we would be looking to bring that data center capacity online as quickly as possible. And we believe that, if we are successful with the stalking horse bid and we would be able to close that sometime in the next two to three months. And so we would be looking to bring the North Bay facility back up as quickly as we could, obviously, infrastructure work needs to be completed. We need to bring the miners back to site. We will be dealing with the dead of winter in North Bay at that time, most likely as well. So it will take some time to get us back up and running, but our intention is certainly to bring that site back online. And then the other three sites we mentioned, 40 megawatts at Kapuskasing, 110 megawatts in Kingston and 120-megawatt facility in Iroquois Falls. It remains to be seen what -- how we would provision in and work with those assets. But as I touched on in my earlier commentary, it gives us a lot of optionality, which we love to have control directly over the largest operating expense for a Bitcoin miner, I think, as everybody knows, is the cost of power. So having better control over power inputs with respect to these plants is very exciting. I think there’s a lot of upside as we look to the future with respect to how we see energy prices continuing to move in the market and our ability to have power assets that we can sell into the energy market. And then also be in control of our own destiny with respect to how we want to use that power when it’s not being utilized or needed by the grid, whether it’s for Bitcoin mining, high performance computing and we have got a lot of optionality there and excited for how this may progress for us.

Great. Thanks for that color, Jaime. Much appreciated. Congrats on progress this quarter.

Thanks so much, Joe.

Thank you. One moment for our next question please. It comes from the line of George Sutton with Craig-Hallum. Please proceed with your question.

Thank you. And my congrats on getting through the SEC process. I know how challenging that’s been. So, I am curious from the USBTC side, they have made a lot of progress, including the Celsius network deal. Can you just walk through sort of what’s your -- what they are bringing to the table that may have changed since the announcement and how that improves the value of the deal from your perspective?

Yeah. We are certainly very, very excited with the progress that the team has made with the Celsius transaction and I am not going to get into details on this call. But it is publicly available information where things stand with respect to the Celsius transaction. Certainly that -- if that is ultimately successful and close it out will be a nice addition to the new Hut, as we lovingly refer to it internally, and, again, as I touched on earlier, really like the diversified nature of the USBTC business and they have certainly been growing their fee-based revenue lines since we first started talking to them almost a year ago with the managed services business, as I referenced, and then the work that’s being done on Celsius. So, certainly, very, very pleased with the progress that the team has made over there and really looking forward to just bringing a whole team together and continuing the growth that we have been pursuing independently together as one team.

Jaime, I am wondering, you mentioned in your prepared comments that you are looking for opportunities to work your stack. Have you contemplated synthetic swaps as an alternative to bringing the Bitcoin on your balance sheet? In other words, taking 15% of the value, buying a swap, and taking the other 85% to redeploy?

I don’t think there’s anything Shenif and his team haven’t looked at with respect to our options long-term around the stack. But let me turn it over to Shenif if you want to speak in more specifics about the swap rate in particular.

Yeah. Thanks for the question, George. I mean, obviously, we have looked at a lot of options with the rise in Bitcoin price covered calls have obviously been something we have looked at very diligently. Once we close the transaction with USBTC, we will be in a better position to kind of move forward with some plans we want to do. But, certainly, it’s on our list of items we want to work on, on leveraging our stack and creating more value for our shareholders from leveraging the stack in a different way than we have done historically at the company. So actively in pursuit of these items, and hopefully, once we get the deals over the line, we could spend a bit more time and then share with all of you what our plans are around that.

Understand. Thank you, guys.

Sure.

Thank you. One moment for our next question please. It comes from the line of Bill Papanastasiou with Stifel. Please proceed.

Good morning, Bill.

Hi. Good morning. Hi. Good morning. It’s Daniel [ph] on for Bill today. My first question here is on your USBTC treasury strategy. Are there any plans to change strategy if we see an approval of a spot Bitcoin ETF?

So, Shenif, just talked about some of the research and exploration that his team is doing around options to work the stack. I am not sure that we have any more color to add there and with respect to the treasury management and our historic and ongoing commitment to holding Bitcoin on balance sheet, I don’t have any additional color to add versus what I touched on in my opening remarks.

Got it. Switching gears quickly here. Now we have seen an improvement in mining economics recently, can you speak to how it has or may potentially impact capital allocation decisions going forward?

Well, that’s one of the things I love about having a diversified business model. We get to make those choices based on the active developments that we see in all of our businesses, whether it’s Bitcoin or high performance computing. So I can’t answer that question specifically, but that’s one of the reasons we have optionality. So really our focus is, first and foremost, on getting our transaction into USBTC closed off, so that as a combined team we can look at what makes the most sense with respect to our next move from an organic and/or inorganic growth perspective.

Thanks. That’s helpful. I will pass the line.

Thanks so much.

Thank you. I am not showing any further questions in the queue. So with that, I will conclude the call. A transcript of this call will be available on the Hut 8 website in the Investors section. Thank you for joining us at the Hut 8’s third quarter 2023 financial results analyst and investor call. You may disconnect.

Thanks, Carmen. Thank you, everybody.