Mr. Andrew Kiguel reports
HUT 8 REPORTS 2019 YEAR-END FINANCIAL RESULTS
Hut 8 Mining Corp. has released its financial results for the year ended Dec. 31, 2019.
A conference call has been scheduled to discuss the company's year-end financial results, hosted by chief executive officer Andrew Kiguel and chief financial officer Jimmy Vaiopoulos, starting at 10 a.m. ET on Monday, April 6, 2020.
Date: Monday, April 6, 2020
Time: 10 a.m. ET
Dial-in: 1-888-465-5079 (Canada) or 1-888-424-8151 (United States)
Passcode: 7760 654, followed by the number sign
- Annual revenue of $82-million from mining 8,618 bitcoin;
- Mining profit margin of 45 per cent;
- Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $33-5 million, with an adjusted EBITDA margin of 41 per cent;
- Increased petahash capacity by 19.6 per cent;
- Repaid $5.3-million of outstanding debt;
- Refinanced a $15-million (U.S.) debt facility to lower the coupon rate;
- Graduation to the Toronto Stock Exchange through TSX Sandbox;
- Achieved bottom line profit with net income of $2.1-million.
Despite volatile price swings for bitcoin in 2019, Hut 8 achieved revenue of $82-million, compared with $49.4-million in the prior year, a 66-per-cent increase. The reason for the increase was primarily due to Hut 8's flagship facility in Medicine Hat coming on line halfway through 2018 and the purchase of 12 additional BlockBoxes that became operational at the beginning of 2019. The resulting mining profit margin for 2019 was 45 per cent, compared with 50 per cent in 2018.
Expenses for the 2019 year were $6.1-million, of which there were non-cash share-based payments of $2.9-million. This was compared with the prior year with expenses of $8.8-million of which there were non-cash share-based compensation of $3.5-million. The company's focus is to be one of the lowest cost miners in the market to grow bottom line profit and best position itself for the next bitcoin pricing cycle.
Hut 8 recognized $33.5-million in adjusted EBITDA, an increase from the prior year of $19.3-million, an increase of 73 per cent. Hut 8 realized 41 per cent of adjusted EBITDA margin in 2019, compared with the prior year of 39 per cent. The increased adjusted EBITDA margin allowed the company to self finance growth of hash rate, while paying down its debt balance from cash flow generated from operations.
For 2019, Hut 8 had a revaluation gain of $4.3-million (2018 -- loss of $17.9-million) from adjusting the value of the digital assets held in inventory to the market value on the reporting date. This gain is from the increase in bitcoin price from $3,743 (U.S.) on Dec. 31, 2018, to the Dec. 31, 2019, price of $7,194 (U.S.). The upward trend of bitcoin price in 2019 also meant that the company was able to sell bitcoin at a higher market price than its adjusted cost base, resulting in a realized gain on use of $4.1-million for the year ended Dec. 31, 2019.
"Two thousand nineteen was a milestone year for Hut 8 as we achieved bottom line profitability which allowed for growth in operating capacity and paying down debt," said Jimmy Vaiopoulos, chief financial officer of Hut 8. "We are proud to have had a successful first full year as a public company while also graduating to the TSX via the TSX Sandbox."
The upcoming bitcoin halving is a major event for the industry this year and is also on management's radar. The halving, set to occur in mid-May, 2020, will have the impact of cutting miner's bitcoin compensation per block reward in half. The company expects that will cause many less efficient miners to shut off their miners unless the price of bitcoin significantly appreciates before then. The impact on Hut 8 is difficult to assess. Certainly, without a corresponding increase in the price of bitcoin, Hut 8's revenue will be impacted negatively. If the price of bitcoin and the network hash rate remain flat, Hut 8's corresponding revenue would be cut in half subsequent to the halving. Management's expectation is that there will be a drop in hash rate as less efficient miners shut down, consequently reducing competition. It also anticipates that the price of bitcoin will appreciate post the halving as it has in the past two halving events. However, how these two factors play out is difficult to forecast. Management is actively seeking ways to mitigate these industry specific factors.
Management also continues to monitor the possible impact of the coronavirus (COVID-19) on operations. Management has taken steps to mitigate the impact, including setting up remote monitoring of the sites if required. Hut 8 takes COVID-19 seriously and is working with its site operators to keep the sites clean and employees safe.
This release should be read in conjunction with the company's audited consolidated financial statements and corresponding management's discussion and analysis for the year ended Dec. 31, 2019, filed on SEDAR and posted on the company's website.
About Hut 8 Mining Corp.
Hut 8 is a bitcoin mining company with industrial-scale operations in Canada. In total, Hut 8 owns and operates two sites in Alberta, Canada, including 94 BlockBox AC data centres with current maximum operating capacity of 107 megawatts and 952 petahash per second.
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