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 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 unique in our ability to support clients that may have their own GPUs on hand, but need access to build out infrastructure on a very tight turnaround. We will continue to focus on capitalizing on these opportunities in HPC and cater to these growth areas in the coming quarters. Moving on to our treasury strategy. You are all very well acquainted with our commitment to HODLing our Bitcoin mined, and this year, while we worked to close the transaction with USBTC, we continued to maintain our stack above 9,000 Bitcoins, only selling production at opportune points throughout 2023 when we felt prices were particularly strong, such as in the last month. We have not dipped into anything mined or HODLed prior to 2023, which has been very intentional. We remain bullish on Bitcoin, are committed to our treasury strategy and know that it remains a powerful differentiator for us. With up to 10 spot Bitcoin ETFs awaiting SEC approval, we believe it’s a matter of time before we see an ETF approved. BlackRock is one of the institutions on that list and has a near-perfect ETF approval track record of 99.8%. We see institutions like BlackRock with approximately $9 trillion in assets under management as a meaningful bridge between traditional wealth and Bitcoin once ETFs are approved. For example, last month, we saw the price of Bitcoin rally 27% on optimism around ETFs and with these shares backed one-to-one with Bitcoin, we believe that we should not only see increased demand, but also see value heading up and to the right with these approvals. Tying this back to our stack, a lift in the value of our stack compared to the capital, time and effort it would take to mine the same amount from this point going forward, especially 160 days or so out from the halving is a very compelling scenario and reinforces our current treasury strategy. As we have said in the past, moving forward we hope to see positive momentum and will actively seek opportunities to responsibly work our stack to drive additional value. At the beginning of the month, we were very pleased to share that we have received court approval for our stalking horse bid for four natural gas power plants in Ontario, a 40-megawatt facility in Kapuskasing, a 110-megawatt facility in Kingston, a 120-megawatt facility in Iroquois Falls and a Bitcoin mine and power facility in North Bay, which has 40-megawatt of capacity. While the sale and investment solicitation process is underway, if our bid is ultimately declared successful, a new subsidiary of the company will become the owner of the assets of the four sites. Our partner, Macquarie, will receive a minority equity interest in the subsidiary of approximately 20% and a subsidiary of Hut 8 will be the majority owner with the remaining approximately 80%. We believe that the strategic addition of these assets would position Hut 8 as a vertically integrated mining operation, allow us to utilize idle infrastructure and machinery, provide access to energy pricing certainty and give us flexible energy capacity and properties for alternative uses such as traditional data center and/or AI hosting. Significantly, the facilities are expected to give us the optionality to pursue revenue-generating activity, including selling energy to the grid, mining Bitcoin, and powering high-demand HPC applications like artificial intelligence. This move is not only in keeping with our infrastructure-first strategy, but also affords us very compelling flexibility ahead of the halving. In addition, we made considerable progress as we work toward closing our transaction with USBTC, which has been our North Star since we first announced the merger. On September 13th, we announced that our shareholders overwhelmingly approved the transaction through a special vote, which is incredibly encouraging, because it reflects how engaged and supportive they are of our merger of equals. Five days later, we announced that we obtained a final order approving the plan of arrangement with USBTC from the Supreme Court of British Columbia. We also continued to file updated amendments to our S-4 with the SEC, and on November 9th, the SEC declared Hut 8 Corp.’s registration statement effective, which is a significant milestone that we have been collectively working towards. Now that we have the effectiveness declaration between the SEC, we are very pleased to share that we expect to close our transaction by November 30th, subject to USBTC obtaining its required stockholder approval and the satisfaction of other customary closing conditions. Before I turn it over to our CFO, Shenif Visram, I would like to thank our investors for their continued commitment to Hut 8 and their excitement for our merger, our team for their ongoing hard work and dedication across the business and our Board for their continued support and guidance. Thank you. And over to you, Shenif.

Thank you, Jaime, and good morning, everyone. In the third quarter, we continued to address the operational challenges at our Drumheller site and pursued the stalking horse bid to manage the suspension of mining activities at North Bay. These ongoing issues impacted our Q3 results. We reported revenue of $17 million for Q3 2023, a decline of $14.7 million compared to $31.7 million in the same quarter last year. This decrease was attributed to a lower amount of Bitcoin mined, although it was partially offset by an increase in Bitcoin prices. Revenue from digital asset mining was $12.5 million as we mined 330 new Bitcoin during the quarter, down from $27.3 million in Q3 2022 when we mined 982 Bitcoin. The reduction in Bitcoin mined stemmed from increased network difficulty, electrical issues at Drumheller leading to reduced mining activities, the halt of GPU Ethereum mining following the Ethereum networks' merge, and the suspension of activities at North Bay. The impact of reduced Bitcoin mining was partially countered by the higher price of Bitcoin, evident in the digital asset revenue per Bitcoin mined at $37,800 this quarter, compared to about $27,800 in the same quarter last year. Our high-performance computing business added $4.5 million in revenue in Q3 2023, slightly up from $4.4 million in the same quarter last year. Q3 2023 results included revenue from new sales, which were somewhat affected by client churn. We anticipate starting revenue from the Interior Health contract in Q4 2023. The cost of revenue for Q3 2023 was $21.4 million, reflecting a decrease of $24.2 million year-over-year, primarily made up of depreciation and site operating costs. Depreciation expenses fell to $10.2 million in Q3 2023 from $25.3 million during the same quarter in 2022, due to a lower net book value of digital asset mining assets following a non-tax impairment charge in Q4 2022. Site operating costs were at $11.2 million, down $9.1 million from last year. Within the digital assets mining operation, site operating costs decreased by $9.3 million, primarily due to lower power costs. The average mining cost per Bitcoin for Q3 2023 was approximately C$26,300, compared to about C$18,300 in the same quarter last year. This increase was a result of higher power consumption per Bitcoin mined and ongoing electrical issues at Drumheller, somewhat mitigated by the company's decision to reduce energy costs compared to last year. We incurred $2.5 million in operating costs related to the high-performance computing operation, a slight increase from $2.3 million in Q3 2022 due to higher repair and maintenance costs, partially offset by reduced software expenses. In terms of margins, our digital asset mining operations generated a mining profit of $3.8 million in Q3 2023, down from $9.3 million in the same quarter last year. This decline in mining profit resulted from the lower Bitcoin mined due to increased network difficulty, the suspension of activities at North Bay, and ongoing electrical issues in Drumheller, partly balanced by a lower average power price and a higher Bitcoin price compared to Q3 2022. General and administrative costs rose to $11.9 million for the quarter, compared to $11.2 million in the same quarter last year. The primary factor for this increase was $2.4 million in one-time transaction costs in Q3 2023 associated with the merger with USBTC and the stalking horse bid. Excluding these one-time costs, general and administrative expenses decreased by $1.7 million year-over-year, driven by lower sales tax expenses and other costs. We reported a net loss of $53.6 million for Q3 2023, compared to a net loss of $23.8 million in Q3 2022. In this quarter, we recognized a $20 million impairment loss on our deposit related to the power purchase agreement for North Bay owing to our power providers’ receivership. Additionally, we recorded a $10.1 million non-cash loss on the revaluation of our digital assets, as opposed to a $7.3 million non-cash gain in the same quarter last year, primarily due to fluctuations in Bitcoin prices during the respective periods. In Q3 2023, we saw an increase in net finance income expense by $0.6 million, largely due to higher interest expense from our loan with coin-based credit that was initiated in the second quarter of 2023. Q3 2022 also included a non-cash loss on the revaluation of warrant liability of $2.9 million. Reflecting the discussed operating results, Hut 8 recorded an adjusted EBITDA of negative $11.6 million in Q3 2023, contrasting with a positive adjusted EBITDA of $9.4 million in Q3 2022, primarily driven by a decrease in digital asset mining profit and non-cash revaluation loss on our digital assets. Our balance sheet remains robust, with manageable debt levels and a cash balance of $21.1 million as of September 30, 2023. As previously stated, the company secured a US$50 million credit facility with coin-based credit on June 26, 2023, which allows drawdowns in three tranches. By the end of Q3 2023, the company had C$47 million in loans outstanding, net of deferred financing costs associated with the facility. Our Bitcoin holdings, marked at fair value, amounted to $341.4 million as of September 30, 2023, based on 9,366 Bitcoin held in reserve, with 7,259 Bitcoin valued at $265 million remaining unencumbered. As announced, the company has continued to sell Bitcoin production to support operations while we finalize the merger with USBTC. In the current quarter, we mined 330 Bitcoin and sold 100, resulting in an increase of 230 Bitcoin held in reserves.

Thank you. Our first question comes from Mike Colonnese with H.C. Wainright. Please go ahead with your question.

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 in 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?

We are thrilled to have launched our on-demand cloud portal a few weeks ago, and we plan to keep investing in and expanding this area. This capability is essential for clients and customers who need to self-provision quickly. The initial feedback on the portal has been very positive. Currently, we have about a megawatt of available capacity and infrastructure in our data center fleet, and we’re seeing a significant number of data center leases being signed across North America this year. Over time, we believe capacity will become limited, given the long build-out times required for enterprise-grade data centers. We are optimistic about our assets, especially since our data centers in Ontario and BC are largely powered by zero-emission and renewable energy, which we see as a competitive advantage. Regarding pricing dynamics, while I can't provide specific details, it’s primarily a supply and demand issue. As the available supply for computing becomes limited, we anticipate upward pressure on pricing in the market.

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.

We have shared a lot of information about the deal in the past, and it remains available on our website. I encourage anyone interested in the details to review that material. A key milestone for us was receiving the effectiveness declaration from the SEC. Assuming we get a successful vote from USBTC stakeholders and complete other closing requirements, we anticipate finalizing the merger by the end of November. We are excited to get started. This is truly a merger of equals; our operations are entirely based in Canada, while USBTC focuses on assets in the U.S. Both of us have a diversified revenue strategy. We generate fee-based revenue from high-performance computing and, looking ahead, we'll be able to adapt our business lines to take advantage of market trends in both high-performance computing and Bitcoin mining, especially as we approach the halving. Additionally, we are enthusiastic about the potential of the power assets we are developing with Macquarie.

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

Of course. Thanks, Joe.

Could you provide us with some insight into what the potential deal regarding the power generation assets means for your operations and business expansion? I understand that you weren't previously utilizing all of that power, so any information you can share would be appreciated. Thank you.

We are very excited about this opportunity. The only facility related to the four assets in the stalking horse bid that we have had a prior association with is the North Bay facility. We had just under 40 megawatts operational at North Bay, and our goal is to bring that data center capacity online as quickly as possible. If we are successful with the stalking horse bid, we expect to close in the next two to three months. We plan to get the North Bay facility running again, but we have infrastructure work to complete and we need to bring the miners back on site, likely during the middle of winter in North Bay. This will take some time, but we are committed to getting that site operational. As for the other three sites, we have 40 megawatts at Kapuskasing, 110 megawatts in Kingston, and 120 megawatts in Iroquois Falls. It remains to be determined how we will manage those assets. However, it provides us with a lot of optionality, which is important because the cost of power is the largest operating expense for a Bitcoin miner. Controlling our power sources is very exciting, especially as we anticipate movement in energy prices and our ability to sell power into the market. Additionally, we can determine how to use that power when it's not needed by the grid, whether it be for Bitcoin mining or high-performance computing. We have a lot of flexible options, and we are eager to see how this develops 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 congratulations on completing the SEC process. I understand how difficult that can be. I'm interested in your thoughts on the USBTC side, as they have made significant strides, including the deal with Celsius Network. Can you explain what updates or changes they bring to the table that might enhance the value of this deal from your viewpoint?

We are extremely pleased with the progress made by the team regarding the Celsius transaction, although I won't go into specifics during this call. However, the current status of the Celsius transaction is publicly available. If we are able to successfully complete this deal, it will be a valuable addition to what we internally call the new Hut. I am also very encouraged by the diversified nature of the USBTC business, which has been growing its fee-based revenue streams since we first engaged with them nearly a year ago, particularly in the managed services segment and with the Celsius work. Overall, I am very satisfied with the team's progress and look forward to uniting everyone to continue our growth as one cohesive 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. It’s Daniel 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.