Ms. Jaime Leverton reports

HUT 8 REPORTS OPERATING AND FINANCIAL RESULTS FOR Q1 2023

Hut 8 Mining Corp. has released its financial results for the quarter ended March 31, 2023. All dollar figures are in Canadian dollars, unless otherwise stated.

"In early 2023, we experienced a confluence of events: electrical issues at our Drumheller site caused equipment failures, while fluctuating energy prices and increased network difficulty affected our mining operations," said Jaime Leverton, chief executive officer of Hut 8. "We also reached an all-time operational high of 1.72 exahashes/second at our Medicine Hat facility and announced a merger of equals with USBTC, and since then have made progress on key regulatory files required to complete the transaction."

"We continued to strategically manage our finances in Q1 while addressing challenges at the Drumheller site," said Shenif Visram, chief financial officer. "Although we continue to see good client demand in our high-performance computing business, the issues on the mining side of the business reflect a decrease in revenue and bitcoin mined, which the entire leadership and operations team is pro-actively working to resolve."

"Leading up to the halving, we will continue to focus on strategically increasing our stack of bitcoin and growing our HPC business, including exploring opportunities in the growing artificial intelligence market," said Ms. Leverton. "We expect that our proposed business combination with USBTC will increase our installed self-mining hashrate to 7.02 EH/s, enhance our geographic reach into new energy markets and further diversify our lines of business with capex-light, scalable, fiat-based revenue streams, positively distinguishing us from pure-play digital asset miners, who, posthalving, are likely to have more exposure to diminishing returns driven by an increasing global hashrate and additional competition from sovereign nations and well-funded new entrants."

Q1 2023 highlights:

• Revenue decreased by $34.3-million to $19-million during the quarter ended March 31, 2023, compared with $53.3-million during the quarter ended March 31, 2022.
• The company mined 475 bitcoin in the quarter ended March 31, 2023, an approximately 50-per-cent decrease compared with the quarter ended March 31, 2022, primarily due to an increase in average bitcoin network difficulty resulting in a decrease in bitcoin mined, and continuing electrical issues at the company's Drumheller facility which continued from the fourth quarter of 2022.
• As previously reported, the company encountered issues at the Drumheller site, primarily stemming from high energy input levels that have been causing miners to fail. This has materially reduced operations, which are currently at approximately 15 per cent of the company's installed hashrate at the site. Remediation began in March and gained momentum in April as the team implemented new custom firmware across all miner models designed to lower the power supply's maximum output voltage, ensuring Hut 8's equipment operates within safe limits. The company is actively increasing repair staff, adding an additional repair centre shift, and has procured new hardware to expedite repairs and accelerate the speed at which it brings miners back on-line, and expects to have complete restoration in 10 to 12 weeks. The electrical issues at the Drumheller site have been compounded by high energy rates which further increased curtailment at the site.
• Hut 8's high-performance computing (HPC) operations generated $4.5-million of primarily monthly recurring revenue in Q1 2023 compared with $3.3-million in Q1 2022 when the company acquired the HPC operations on Jan. 31, 2022.
• The company's installed hashrate was 2.6 EH/s (excluding the company's North Bay facility) as of March 31, 2023, compared with 2.5 EH/s as of Dec. 31, 2022. A total of 988 miners previously located at the company's North Bay facility were energized at its Medicine Hat facility in the last two weeks of the quarter ended March 31, 2023.

Bitcoin inventory and value

As at March 31, 2023, the company had a total self-mined, unencumbered and custodied bitcoin balance of 9,133 with a market value of $352-million. During the first quarter of 2023, 475 bitcoin were mined and 428 bitcoin were sold, for which the company received proceeds of $14.5-million.

• Revenue decreased by $34.3-million to $19-million for the quarter ended March 31, 2023, compared with $53.3-million for the quarter ended March 31, 2022. The company's digital asset mining operations mined 475 bitcoin and generated $14.5-million of revenue, versus 942 bitcoin mined and $49.3-million of revenue in the prior-year period. The decrease in revenue from digital asset mining operations was due to the 41-per-cent decrease in the daily average closing bitcoin price (approximately $30,600 for the current-year quarter compared with approximately $52,300 in the prior-year period), a halt in the company's graphic processing units (GPU) mining activities due to the ethereum network's change in consensus mechanism from proof-of-work to proof-of-stake during the third quarter of 2022 and an increase in bitcoin average network difficulty of approximately 50 per cent compared with the prior-year quarter. Additionally, the company mined a lower quantity of bitcoin due to the continuing electrical issues and increased energy rates at the company's Drumheller facility. The company's high-performance computing operations generated $4.5-million of primarily recurring revenue in the quarter compared with $3.3-million in the comparative quarter, which reflects two months of operations from the high-performance computing, as the acquisition of the high-performance computing operations closed on Jan. 31, 2022.
• Cost of revenue consists of site operating costs and depreciation and was $25.2-million for the first quarter of 2023 compared with $36.9-million in the first quarter of 2022. Site operating costs for the quarter ended March 31, 2023, were $14.4-million, of which $12-million was attributable to Hut 8's mining operations and $2.4-million was attributable to its high-performance computing operations. The average cost of mining each bitcoin for the first quarter of 2023 was approximately $25,100, compared with approximately $18,000 per bitcoin in the prior year for the same quarter. The increase was due to higher power consumption per bitcoin mined, increased energy prices and continuing electrical issues at the Drumheller facility, which were partially offset by the company's decision to curtail and increased efficiencies in the miners deployed compared with prior year same quarter. Depreciation expense decreased to $10.9-million during the first quarter of 2023 compared with $18.4-million in the same quarter of 2022, primarily driven by the lower net book value of digital asset mining assets after the recognition of non-cash impairment charge during the fourth quarter of 2022 as part of annual impairment testing.
• Net income was $108.5-million and net income per share was 49 cents for the three months ended March 31, 2023, compared with net income of $55.7-million and net income per share of 33 cents for the same period in 2022. The change was primarily driven by the $134.8-million non-cash revaluation gain on digital assets, $5-million gain on disposition of digital assets, partially offset by lower digital asset mining revenue, a non-cash revaluation loss on warrant liability and a greater weighted average number of shares outstanding for earnings per share purposes under international accounting standards (IAS) 33.
• Mining profit was $2.6-million in Q1 2023, compared with $32.9-million in Q1 2022. The change is mainly due to a lower average bitcoin price, higher bitcoin network difficulty, fewer bitcoin mined and lower digital asset mining revenue from the continuing electrical issues noted at the Drumheller facility.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was negative $3.7-million in Q1 2023, compared with $27.1-million in Q1 2022. Contributions from HPC operations were offset by lower margins in digital asset mining operations.

For more information, please refer to the company's management's discussion and analysis (MD&A) and the company's unaudited condensed consolidated interim financial statements for the three months ended March 31, 2023, and 2022. These documents are available on the company's website, under the company's SEDAR profile and under the company's EDGAR profile.

Corporate updates

Hut 8 and U.S. Data Mining Group Inc., doing business as U.S. Bitcoin Corp (USBTC), continue to make progress on the proposed business combination pursuant to which the two companies will combine in all-stock merger of equals. The combined company will be named Hut 8 Corp. (New Hut) and will be a United States-domiciled entity. The transaction is expected to establish New Hut as a large-scale, publicly traded bitcoin miner focused on economical mining, highly diversified revenue streams, and industry-leading environmental, social and governance (ESG) practices.

On March 10, 2023, the company announced that it received a no-action letter from the Canadian Commissioner of Competition, which confirmed that the Commissioner of Competition does not intend to challenge the transaction before the Competition Tribunal.

On March 13, 2023, the company announced that the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to the business combination had expired, which satisfied one of the conditions of the closing of the transaction.

On April 27, 2023, the company announced through press release that New Hut had filed an amendment to its Form S-4 registration statement with the U.S. Securities and Exchange Commission (the SEC).

As disclosed in the amended registration statement:

• New Hut's expected installed self-mining capacity has increased from the previously disclosed 5.6 EH/s to 7.02 EH/s at mining facilities in Medicine Hat and Drumheller, Alta.; Niagara Falls, N.Y.; Kearney, Neb.; and Granbury and King Mountain, Tex., upon the close of the transaction. The improvement is due to the energization of additional miners at USBTC's sites.
• The 1.7 EH/s installed self-mining capacity at the King Mountain, Tex., site is owned by the King Mountain joint venture in which USBTC has a 50-per-cent membership interest alongside a leading energy partner.
• On April 7, 2023, USBTC entered into a settlement with the City of Niagara Falls which concluded all claims related to the continuing litigation with the city and terminated the temporary restraining order against USBTC. USBTC was required to pay the City of Niagara Falls a $100,000 compliance fee and contribute $180,000 to the city's attorney's fees. USBTC is currently working with city officials to confirm safety procedures prior to resuming mining activity.

With the next halving event less than a year away, the business combination of Hut 8 and USBTC is particularly strategic as it will establish New Hut with geographic diversity across its self-mining business, which will include differentiated energy sources in a variety of markets, and improve efficiencies at the miner level by using proprietary, purpose-built software that can identify and mitigate machine and energy price issues in real time. Notably, it will further diversify fiat revenue lines of business by adding USBTC's 220-megawatt hosting and 680 MW managed infrastructure operations businesses to Hut 8's existing HPC and repair centre operations. Completion of the transaction is subject to obtaining the remaining regulatory approvals, shareholder approval, court approval and other customary closing conditions. Hut 8 expects the transaction to close in late second quarter, or early third quarter, of 2023.

Conference call

Hut 8 Mining Q1 2023 conference call will commence at 10 a.m. ET, today, May 11, 2023:

• To join the conference call without operator assistance, you may register and enter your phone number to receive an instant, automated call back that will place you in the conference.
• Those joining through the operator should dial in five to 10 minutes early to 1-888-664-6392 (toll-free, North America) and use access code 51509137 followed by the pound key.

About Hut 8 Mining Corp.

Hut 8 is one of North America's largest innovation-focused digital asset miners, led by a team of business-building technologists, bullish on bitcoin, blockchain, Web 3.0, and bridging the nascent and traditional high-performance computing worlds. With two operational digital asset mining sites located in Southern Alberta, Hut 8 has one of the highest capacity rates in the industry and one of the highest inventories of self-mined bitcoin of any digital asset miner or publicly traded company globally. With over 36,000 square feet of geo-diverse data centre space and cloud capacity connected to electrical grids powered by significant renewables and predominantly emission-free sources, Hut 8 is revolutionizing conventional assets to create the first hybrid data centre model that serves both the traditional high-performance compute (Web 2.0) and nascent digital asset computing sectors, blockchain gaming, and Web 3.0. Hut 8 was the first Canadian digital asset miner to list on the Nasdaq Global Select Market. Through innovation, imagination and passion, Hut 8 is helping to define the digital asset revolution to create value and positive impacts for its shareholders and generations to come.

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