Welcome to the Hut 8 Q1 2022 earnings call. My name is James, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the Q&A session, if you have a question, please press zero one on your phone. As a reminder, this conference is being recorded. I'd now like to turn the call over to Jaime Leverton. Jaime, you may begin. Thank you so much, James. I do apologize. We've actually just done this entire earnings call, but apparently our audience could not hear. We are about to do it for a second time, and I do so appreciate the patience of everybody on the line, given the technical difficulties that our partner company here has had this morning. With that, thank you for joining us to discuss Hut 8's financial results for the first quarter of the year. We had a very strong quarter, outperforming our results for the same period in the year prior by a considerable margin with respect to revenue, net income, mining profit, and adjusted EBITDA. Our Bitcoin holdings also increased, and as of the end of March, we had 6,460 in reserve. Notably, we advanced our corporate strategy with the strategic acquisition of TeraGo's 5 data centers at the end of January. We are currently blessed with 400 cloud services and co-location clients across a number of sectors, and have moved further into the high-performance computing industry, where we are looking forward to offering companies in the blockchain and Web 3.0 space with rendering artificial intelligence and VFX support that they uniquely need. We are the only digital asset miner that has diversified in this way, and while we continue to be bullish on Bitcoin, we also believe in the promise of the high performance. And with that, Shane, back over to you. Thanks, Jaime, and good morning, everyone. I assure you when I did this last time it was epic, and I'll try to follow suit this time. I will run through some short disclaimer language and then jump into a summary of our company results. In addition to the press release issued earlier today, you can find our financial statement and MD&A on SEDAR, and shortly on both EDGAR and our website at hut8mining.com. Unless noted otherwise, all amounts referred to are denominated in Canadian dollars. I'd like to remind you that 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 securities. These statements are 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 the quarterly MD&A for the three months ended March 31st, 2022, as well as the company's MD&A and annual information form for the year ended December 31st, 2021. Overall, we were pleased with the strong operating results for Q1 2022. With our expanded and efficient Bitcoin mining fleet driving a profitable quarterly performance in our core digital asset mining operation, combined with the initial results from our recently acquired high-performance computing business, Hut 8 remains well positioned for continued growth in the dynamic and challenging market environment. Revenue. We achieved solid revenue of $53.3 million for the quarter, a 67% increase over the prior year quarter of $32 million. This performance was driven by strong digital asset mining activity and increased hash rate from under 900 petahash in Q1 2021 to approximately 2.2 exahash in Q1 of 2022. We achieved revenue of $49.3 million from digital asset mining activities that we mined 942 new Bitcoin at an average price of approximately $52,300 per Bitcoin. This compares with 539 Bitcoin at an average of approximately $56,700 in the prior year period. Our hosting and mining business generated $0.8 million of revenue compared to $1.4 million in the prior year period. The decrease in hosting revenue is due to a reduced number of hosting customers with the company acquired equipment from one of its two hosting customers in December of 2021. We've since exited the digital asset mining hosting business with our April 2022 acquisition of equipment from our remaining hosting customer. Our newly acquired data center business contributed an additional CAD 2.3 million of revenue in line with management's expectation for two months of operations given the January 31st acquisition date. Reflecting early and ongoing efforts on our sales team, we expect to deliver recurring revenue growth for the high-performance computing business in the 15%-18% range over the course of 2022. Onto operating costs. Cost of revenue for the quarter was CAD 36.9 million compared to CAD 19.8 million in the prior year. The increase is the result of higher depreciation expense and site operating costs, mostly electricity. The increased depreciation expense from $5.8 million to $18.4 million was driven by the addition of approximately $130 million in new mining equipment and infrastructure assets over the past 12 months, as well as approximately $25 million of data center fixed assets through the previously mentioned acquisition. Site operating costs increased due to Hut 8's continued expansion, specifically the addition of incremental miners to our fleet, which drove an absolute increase in operating costs, albeit on much improved margins as I will discuss in a moment. The Data Center business incurred $1.6 million in operating costs, reflecting two months' operation. In terms of margins, our core digital asset mining operations generated mining margins of approximately 67% versus 57% in the prior year period, reflecting our substantially more efficient fleet. This is given average quarterly Bitcoin price was actually down slightly, period-over-period. Our preliminary view is that the high-performance computing business will generate gross margins from the 35%-40% range. We're continuing to dive deeply into our business integration exercise, which includes formulating granular bottom-up views on profitability across the five businesses. We've also begun to identify and implement opportunities to further optimize high-performance computing margins going forward, including, for example, streamlining the product stack. These initiatives are in the early stages and will progress over Q2 and Q3. General and administrative costs were $11.5 million compared to $6.5 million in the prior year. The increase was primarily driven by sales tax expense, higher professional fees to support the company's growth, as well as higher insurance expense. Insurance expense reflects increased premiums driven by global insurance markets, combined with expansion of D&O and liability insurance and incremental coverage related to high-performance computing operations. Sales tax expense increased by CAD 2.5 million, mainly driven by capital investments, tracking sales, taxes, and duties, and overall increase in the company's purchases. The data center business contributed to $ 0.07 million dollars of selling, general, and admin expenses, and we are continuing to refine our expectations for the HPC going forward. We reported net income of CAD 55.7 million for the quarter, compared to net income of CAD 19.1 million in the prior year period. This net income was impacted by the company's strong operating performance, as well as a CAD 54.1 million non-cash gain on the revaluation of the company's loans liability. Given movement in the price of Bitcoin, we recorded a CAD 4.9 million unrealized loss in digital assets, all of which went through OCI on an after-tax basis. Taken together, this results in other comprehensive income of CAD 50.8 million for the quarter. Driven by the strong operating performance, Hut 8 achieved adjusted EBITDA of CAD 27.1 million for Q1 2022, compared to CAD 16.2 million in the prior year quarter. That will complete my remarks with respect to financial position. Simply put, our balance sheet remains healthy. We entered into a $65 million at-the-market offering program in February 2022, and raised net proceeds of $32.5 million during the first quarter. The proceeds from the issuance were used and will continue to be invested in the growth of the company. We continue to evaluate non-dilutive alternatives to optimize our capital structure as well. Our Bitcoin holdings are marked at fair value and totaled $3,367.6 million as of March 31st, 2022, based on 6,460 Bitcoin held in reserve. We continue to emphasize our long-term HODL strategy and did not sell any Bitcoin during the quarter. The acquisition of TeraGo data center business added approximately $30 million of assets to our balance sheet, and we will finalize the purchase price allocation here over the balance of 2022. With that, I will turn the call back to our operator for questions. Thank you. We can begin our Q&A session now. If you have a question, please press zero one on your touchtone phone. If you wish to be removed from the question queue, you may press zero two. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press zero one on your phone. Our first question is from George Sutton of Craig-Hallum. Thank you. That was a fun start to the call. Morning, George. Actually, Stu, you had the best possible mic drop in the world for a conference call. It's just saying, "This is Stu from Hut 8," and then you just end the call, but maybe next quarter. Looking at the MRR of CAD 1.6 million in your HPC area, can you just give us a sense of, like, where capacity utilization is today? How significant could it be with the existing assets? Yeah. I mean, Shane alluded to the deep dive that we're doing into the business, and we'll continue to update as we roll forward here. We definitely have available incremental sellable capacity in the assets today, if that's your question, George. We'll get more clarity on that is the point once this deep dive is complete. Yeah, exactly. Exactly. Okay. Just one other question. The difficulty rates went up during the quarter. You actually had, in my opinion, a very good cost per Bitcoin mined. Can you just give us a sense of where that credit is due? Is it the MicroBT machines that have come in? Are there other components that we should be aware of? Yeah. I mean, certainly the increased efficiency of our hardware stack is the biggest contributor to that, George. Gotcha. Thank you. Anytime. Our next question comes from Christopher Brendler of D.A. Davidson. Good morning, Chris. Yeah. Good to talk to you again. Yeah, again on the cost per coin, really impressive. I just wanted to drill down a little bit more. You know, is there anything other than the machines that's happening there? Because it seems like, you know, we're still waiting for, I guess, the third facility to open, and I think it's gonna be even lower cost per coin. We just talk about how the outlook for cost per coin as that new facility comes on given the progress this quarter. Yeah. We were really excited with the progress that we're making in North Bay, and we expect to turn up the first phase, which will initially be 15 MWs, later this month, in the month of May. The balance, which will be just over 30 MWs in total in North Bay, we expect that to be stood up by the end of June. Yes, as you referenced, that will be our lowest cost site from a power perspective. Of course, we can't project where the difficulty rate will move over the course of the quarter. Absolutely, our average utility costs will go down as that facility comes online. Great. Can you just remind us where you stand from a cost of electricity standpoint? I think you had a five-year PPA that you know, were smart enough to pay for, I think, last year. Is there any exposure in 2022 to the rise in natural gas prices? The North Bay PPA is at a fixed rate of sub-3 cents, just under 3 cents CAD. Our other sites that are in Alberta do have some exposure to natural gas pricing because they're grid connected, whereas the North Bay facility is behind the meter. Definitely, a significant advantage to having this new site come online in North Bay. Okay. Maybe is it possible that the North Bay will help offset some of the increases you see in the other two sites? I guess, why didn't we see that? Yeah. I guess can you benchmark where we're running today just given what's happening in the world? Well, that's difficult to say to benchmark because it does move quite a bit and we don't have a consistent price across the two assets in Alberta. It's a range and I can't give you a specific number, and I can't project what the number will be where there is variability and volatility in natural gas pricing and our exposure to that in Alberta. Although, as you can see, even though there was incremental volatility in Q1 as well around the energy markets, our margins were incredibly healthy. I don't- Totally. Expect the volatility to get outside of that band. Don't forget, we also mine a portion of the Bitcoin by mining Ethereum using GPUs, which has a significantly lower cost per Bitcoin to mine. That all blends into the overall cost per Bitcoin as well. Great. I'm gonna ask one more then. I want to let folks ask questions. On your equipment orders, things have changed quite a bit in the rig market recently. I'm hearing, you know, prices coming down even further. Yes. Just want to know, you know, from your standpoint, you know, do you lean into that opportunity? Do you feel good from an equipment perspective and with the remaining payments that you need to make, because I see these large deposits on your balance sheet. So you got some equipment on the way, and you do have some payments at the end. Is that something you've already funded? Yeah. The remaining orders that we have coming in is with MicroBT. We get approximately 1,000 units monthly, and that runs through the balance of 2022. Those machines continue to come in and they're actually coming in consistently on schedule, which is great. We have the funding required for the balance of those payments. As you know, we haven't deployed incremental capital into ASICs because we did believe that pricing was going to come down. I actually don't think that we are at the bottom of the market from an ASIC pricing perspective yet. We will continue to be patient and watch as the market dynamics evolve. Yeah, very smart move. Thanks, Jaime. Appreciate it. Thank you. My pleasure. Our next question from Kevin Dede. As a reminder, if you have questions, press zero one. Good morning, Kevin. Hi, Jaime. Thanks for having me. How are you? Of course. I'm good. I'm good. Great to talk to you. Thanks. The MicroBT machines, can you just give us an idea on how much you've completed the transition to the BH at Drumheller and Medicine Hat versus machines at Alberta North Bay? Yeah. Currently all of the BHs are offline. We were continuing to hold them in inventory, but they're not operating. The fleet is almost entirely MicroBT that we're running right now, and it is MicroBT that will be turning up in the initial 50 MWs at North Bay. We have some Claymores that are still operational, but no BHs. Okay. What's the intention with the plants? Are you gonna continue to run them? Are you happy with the efficiency that you're getting? Yeah, we're happy with the efficiencies that we're getting. Obviously, they are through their depreciation schedule as well. As you know, we use an aggressive two-year depreciation schedule. They are profitable and in the money, as it were. Okay. The BH that you decommissioned, what's your intent there? To sell? To sold them? I don't know yet, Kevin. Still contemplating. Okay, fair enough. Still contemplating. You do have open sockets. Yeah, you have open sockets at TeraGo, right? But. Oh, we wouldn't put ASICs in enterprise data centers. Fair enough. It's a completely different type of compute. It doesn't play nicely in an enterprise data center environment. No. Okay. The holding strategy, have you reviewed that in light of capital requirements and the market environment? Yeah. We've actively been reviewing the strategy and are very committed to it. I think holding Bitcoin is the right move. We have our capital requirements funded, and our Bitcoin's currently unencumbered, so there always is an option if we wanted to raise capital by using a portion of the Bitcoin as leverage. That's always an option for us to do so. No, selling Bitcoin in this environment to ultimately buy machines would yield less Bitcoin in the long term than the value of just holding onto the Bitcoin that we have today. Okay. The loans that you have, the Bitcoin loans that you have, what's your intent there, given your Bitcoin balance? Do you consider expanding them or how are you reviewing that? You're talking about their, our yield program? Our, the yield accounts that we have with Galaxy and Genesis? Exactly, yes. Yeah. Just looking for your thinking on that now. Our thinking hasn't changed, although it is something that we're consistently evaluating. Yields are around the 2% range right now. We continue to have 1,000 Bitcoin with each of Galaxy and Genesis, but again, it's something we're constantly evaluating. Plans for the balance, what is it? The 4,400+. Uh, that are- Yeah. Are you looking to? Putting in. Do anything with that asset in any way that might generate yield? Not at present, although we are going through an exercise to really look at our entire treasury management program. At present, we don't have any plans to do anything differently with those Bitcoin that are held in custody. Okay. Last question for me, Jaime, please. Have you kicked around using machines outside of MicroBT? We always kick around everything, Kevin. You know me. We like to make sure that we're in all of the right conversations. We test a ton of different types of equipment. There are some new entrants coming, as you know, and we're excited to see what may come out of those providers as well. Great. Thank you for entertaining my questions as always, Jaime. Look forward to talking to you. Anytime. Thanks, Kevin. We have no more questions. Okay. Thank you all for your time and again for your patience this morning. Definitely, never a dull moment in our world. Again, thank you so much. Have a great day, everybody. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.