Hut 8 Q3 2024: Pivot Sparks Revenue Growth, But Escalating Costs Loom
Hut 8 Corp. (TSX: HUT) reported its third-quarter earnings on Wednesday with revenue of $43.7 million, outperforming analyst estimates of $35.1 million. The company’s revenue nearly doubled from the same period last year, when it reported $21.7 million.
This substantial growth was driven by the strength in Hut 8’s managed services, which brought in $20.8 million this quarter compared to $4.8 million last year, highlighting a shift towards diversification. The high-performance computing segment, which did not contribute to revenue a year ago, added $3.4 million in the third quarter, reflecting Hut 8’s expansion beyond Bitcoin mining.
However, the firm’s core digital asset mining business generated only $11.6 million this quarter, down from $15.6 million in Q3 2023. This represents a significant 26% decline, underscoring the challenges of operating in a volatile crypto market with increasing mining costs.
The decline is also apparent in the total number of Bitcoin mined, with Hut 8 reporting 234 BTC mined this quarter, down substantially from 675 BTC in the same period last year, a staggering 65% decrease. The cost to mine one Bitcoin soared to $31,482 this quarter, more than doubling from $15,020 a year ago and rising significantly from the prior quarter’s costs, driven by higher operational and electricity expenses.
In terms of cost structure, Hut 8 reported that its energy costs per megawatt-hour (MWh) decreased to $28.83 from $42.73 a year earlier, a 33% reduction. Total cost of revenue exclusive of depreciation and amortization rose to $17.6 million this quarter from $13.5 million in Q3 2023, reflecting the additional costs incurred to scale its managed services and high-performance computing segments. Depreciation and amortization also jumped significantly to $10.5 million this quarter, up from $4.5 million last year, largely due to Hut 8’s recent expansion and the integration of assets from its merger with US Bitcoin Corp.
On the bottom line, Hut 8 reported a net income of $0.9 million, reversing a net loss of $4.4 million in Q3 2023. Adjusted EBITDA fell by 51% to $5.6 million, down from $11.4 million in the prior year’s quarter, suggesting that while Hut 8 has made strides in revenue growth, profitability is not keeping pace, likely due to the high costs associated with its diversification efforts.
Hut 8’s balance sheet reflects significant holdings in Bitcoin, with 9,106 BTC held in reserve, valued at approximately $576.5 million as of September 30, 2024. In addition, Hut 8 holds $72.9 million in cash, which provides some liquidity but may be insufficient to sustain its high cash burn rate if operational costs continue to escalate.
The company’s recent partnership with Bitmain to deploy 15 exahashes per second (EH/s) of the U3S21EXPH ASIC miners at its Vega site meanwhile represents a major capital commitment. This partnership, expected to be fully operational by mid-2025, has the potential to generate $135 million annually in colocation revenue. Hut 8 also announced an upgrade to its ASIC fleet with Antminer S21+ units, which is projected to raise its self-mining hash rate by 66% to reach 9.3 EH/s by early 2025.
Hut 8 Corp last traded at $27.57 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
