Hut 8 endures Q2 challenges, but ‘bullish on a diversified strategy’

Hut 8’s year-over-year revenue and bitcoin production plummeted during Q2 2023. Various challenges ahead of its merger with US Bitcoin Corp appear to have influenced the decline.

The Canadian-based company’s revenue was $19.1 million CAD ($14.2 million USD) during the second quarter, company executives said Monday — essentially flat from the first quarter and down from $43.8 million CAD ($32.5 million USD) in the second quarter of 2022. 

The number of bitcoin Hut 8 mined last quarter was also down significantly year over year, decreasing by 58% to 399 BTC. The company had mined 475 BTC during the first three months of 2023.

Electrical problems at its Drumheller facility contributed to the decrease, with the site currently operating at only 20% of its installed hash rate.

“The electrical issues at the Drumheller site have been compounded by high energy rates, which further increased curtailment at the site,” Hut 8 CEO Jaime Leverton said during the company’s earnings call Monday. 

Hut 8 is working on repairs, including by implementing firmware across all miner models designed to lower the power supply’s maximum output voltage, executives noted.

The company’s stock price was down about 7% on the day, as of 11 am ET.

Diversification key ahead of halving 

Hut 8’s installed hash rate stayed flat quarter over quarter at 2.6 exahash per second (EH/s), as of June 30. The company expects its self-mining capacity to hit 7.5 EH/s after the close of its merger with US Bitcoin Corp — a deal first revealed in February.

The transaction is expected to close by Sept. 30. 

But Leverton said in a statement that Hut 8 is “not here to simply chase exahash.” She added during the Monday earnings call that the company continues to diversify its business — a strategy she said is especially important before the next bitcoin halving slated for April. 

The CEO noted, for example, the company’s foray into the high-performance computing (HPC) space by buying wireless connectivity company TerraGo in January 2022. US Bitcoin Corp. offers fiat-based revenue streams like hosting and managed infrastructure operations, Leverton added.

“We’re very much bullish on a diversified strategy, but I think across our space you’re going to just continue to see miners evolve their businesses in different ways,” she said. 

Read more: Bitcoin miners seek revenue with AI, high-performance computing 

Hut 8’s HPC operations generated $4.2 million CAD ($3.1 million USD) of revenue during the second quarter — down from $4.5 million ($3.3 million USD) in the first quarter and from $4.7 million ($3.5 million USD) during the year-ago quarter.

The slight decline in revenue from this segment reflected the discontinuation of certain low-margin products, as well as “customer churn.” 

Revenue from Hut 8’s five-year agreement with Interior Health — signed in June — will start being seen in the fourth quarter, executives said. 

The company has roughly one megawatt of data center capacity and existing infrastructure available to meet customers’ artificial intelligence and other high-performance computing needs, according to Chief Financial Shenif Visram.  

Hut 8 still looking to HODL

While Hut 8 mined 399 BTC during the quarter, it sold 396 bitcoins. Its stack, thus, increased — albeit slightly — from 9,133 BTC to 9,136 BTC. 

Leverton noted that the company has not sold any BTC it mined before 2023. 

“This approach was very intentional,” she said on the call. We remain very bullish on bitcoin, are committed to our treasury strategy and continue to believe that this is a powerful differentiator for us.”   

Hut 8 secured a $50 million credit facility with lender Coinbase Credit in June — a deal designed to help it keep as much bitcoin ahead of the next halving.

“We have one of the largest self-mined bitcoin stacks of any publicly traded company, and this credit facility allows us to maintain our HODL strategy while giving us financial flexibility,” a Hut 8 spokesperson told Blockworks at the time.

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