Hut 8 Corp. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Amounts below are in U.S. dollars; financial statement figures are in millions unless noted. The Business Combination closed November 30, 2023, so the Q1 2023 comparison is USBTC’s historical results, not the combined company’s, and is not fully comparable.
Business context
Hut 8 operates Bitcoin mining, managed infrastructure services, high-performance computing (HPC) colocation and cloud services, and other businesses including hosting and power generation. At quarter-end, it reported 884 MW of energy capacity under management, approximately 54,500 owned miners totaling 5.5 EH/s, and four Ontario natural-gas power plants with 310 MW of capacity. The company also holds an interest in the King Mountain mining joint venture.
Key financial metrics
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $51.7 | $15.6 |
| Operating income (loss) | $266.9 | $(1.8) |
| Income from continuing operations | $258.3 | $17.3 |
| Net income, including discontinued operations | $250.7 | $17.3 |
| Operating cash flow | $(26.3) | $1.5 |
| Investing cash flow | $23.3 | $6.2 |
| Financing cash flow | $(14.6) | $(5.7) |
- Revenue mix: Digital assets mining $30.4; managed services $9.2; HPC colocation and cloud $3.3; and other $8.8.
- Profit and margin context: Revenue less cost of revenue, before depreciation and amortization, was $23.6 (about 45.6% of revenue). This is not a GAAP operating margin. The reported $274.6 digital-asset fair-value gain drove most of the quarter’s operating income and net income; it is not operating cash flow.
- Mining economics: Reported weighted-average cost to mine a Bitcoin was $24,594 versus $12,348 in Q1 2023; weighted-average revenue per Bitcoin mined was $51,769 versus $23,106. The filing reports a 52.5% gross margin per Bitcoin versus 46.6%. These figures include the company’s net share of King Mountain JV and are affected by changing Bitcoin prices and network conditions.
- Liquidity: Cash and cash equivalents were $11.5 at March 31, down from $30.5 at year-end; restricted cash was $0.6. Current assets were $33.5 versus current liabilities of $108.0. Operating cash flow was negative despite reported net income, reflecting noncash valuation gains and working-capital movements.
- Debt and leases: Loans payable totaled $177.6, including $67.0 current and $110.6 long-term; lease liabilities totaled $41.0. The Coinbase facility carried a $65.0 balance at a 10.50% rate and matures June 2024. The TZRC secured note had a 15.25% rate and approximately $75.1 of principal and PIK interest before a stated discount; it is secured by the company’s TZRC interest and has no recourse to the company. The third-party note was repaid in January.
- Bitcoin holdings: The company held 9,102 Bitcoin valued at $648.9 at quarter-end, including 1,872 Bitcoin pledged as collateral. The filing also reports a $348.5 cost basis for Bitcoin held.
- Adjusted EBITDA: Management reported $297.0 versus $11.1 a year earlier. This non-GAAP measure includes significant adjustments and the quarter’s digital-asset gain; it should not be read as cash generated from operations.
Material changes and unusual items
- Revenue increased 231% year over year, with the comparison affected by the Business Combination and the addition of businesses and sites. Mining revenue rose with a higher average Bitcoin price and added operations; HPC contributed revenue for the first time in the comparison shown.
- Bitcoin was remeasured at fair value under the newly adopted accounting standard. Its reported price rose from $42,288 at December 31, 2023 to $71,289 at March 31, producing the $274.6 fair-value gain.
- Following the April 19, 2024 Bitcoin halving, the block reward fell from 6.25 to 3.125 Bitcoin. Network difficulty averaged 77.4T in Q1 versus 40.1T a year earlier; management notes that higher difficulty and the halving can pressure mining output and economics.
- After an equipment efficiency review following the halving, Hut 8 shortened the estimated remaining useful life of certain MicroBT M31S/M31S+ and Canaan Avalon miners to five months as of January 1, 2024. This change increased Q1 depreciation expense by $2.7.
- Hut 8 closed its Drumheller, Alberta site in March and recorded a $7.6 discontinued-operations loss, including $6.1 of impairment. Management also reported $2.9 of restructuring costs in G&A.
- The February Far North acquisition added an 80.01% interest in four Ontario power plants; preliminary purchase accounting reported $46.0 of consideration. A sale-leaseback arrangement resulted in finance leases. Hut 8 also invested $6.4 in Ionic shares.
Outlook, risks and contingencies
The filing provides no quantified financial guidance. Management said it expects operating cash flows to meet anticipated short-term cash requirements, while longer-term funding needs may rely on capital markets or a revolving credit facility. It intends to sell newly mined Bitcoin to fund operating costs while retaining existing holdings for potential appreciation. This outlook is subject to substantial uncertainty.
Key risks include Bitcoin price volatility, rising network difficulty and the halving’s impact on mining rewards, energy and hosting costs, liquidity and collateral requirements, integration and execution risks following the Business Combination, and the ability to finance growth. The Coinbase facility is Bitcoin-collateralized and includes a provision that may require partial prepayment if Bitcoin falls below specified thresholds. In April 2024, Hut 8 entered four covered-call trades involving 2,125 Bitcoin pledged as collateral with NYDIG.
Two purported securities class actions and related shareholder derivative suits were filed in 2024. The company disputes the claims; the proceedings were preliminary and the potential impact could not be estimated. The filing also notes a roughly $40.0 AI-equipment purchase order, subject to limited cancellation rights, with financing alternatives under evaluation. Management reported effective disclosure controls as of March 31, 2024 and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- How much of reported earnings and Adjusted EBITDA reflects Bitcoin fair-value appreciation rather than recurring operations or cash generation.
- Post-halving mining performance, including Bitcoin mined, network difficulty, fleet efficiency, and cost per Bitcoin—especially after Hut 8 stopped self-mining at the Charlie and Delta sites in April.
- Near-term liquidity and debt repayment capacity, including the Coinbase facility maturity, Bitcoin collateral terms, and the company’s negative Q1 operating cash flow.
- The final Far North acquisition accounting, the economics and financing of the AI-equipment purchase, and the returns expected from expansion and new business lines.
- The status and potential costs of the securities and derivative litigation, and the risks associated with the April covered-call transactions.