Canadian Crypto Mining Company Hut 8 Posts $136 Million in Loses During 2018 After $49.4M
Canadian cryptocurrency mining giant Hut 8 recorded $136 million in losses in 2018, according to its annual earnings report published Monday.
Hut 8 Mining Corp (TSXV:HUT) is one of the world’s largest publicly traded crypto mining companies by operating capacity and market capitalization. Earlier this week, the company published the financial results for the period ending December 31, 2018.
A conference call to discuss the financial results took place on Tuesday, hosted by Hut 8 CEO Andrew Kiguel and CFO Jimmy Vaiopoulos. The financial report indicates that Hut 8 lost a significant amount of money despite also earning “record” revenue.
In 2018, Hut 8 earned $49.4 million CAD from mining 5,592 bitcoins. The company’s adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) equalled $19.3 million, with net income losses and comprehensive income losses totaling $136,765,537.
A significant amount of Hut 8’s losses were caused by depreciation: the company earned $49,439,100 in revenue but recorded $47,018,781 in depreciation for gross losses of $22,453,209 and a gross profit margin of -45%.
The remaining losses were attributed to write-downs ($85 million), foreign exchange losses, and other expenses.
Hut 8 had previously recorded net income of $94,512 in 2017 with mining profit margins of 88%. In 2018, mining profit margins dropped to 50%.
Hut 8 Expanded Massively in 2018
Despite losing more than $136 million in 2018, Hut 8 is bullish on the future of bitcoin:
“Hut 8 management believes that bitcoin is the future of global digital money” said Andrew Kiguel, Chief Executive Officer of Hut 8. “Our conviction in the use of bitcoin as a digital store of value and international payment settlement system remains stronger now than ever.”
With that positive outlook in mind, Hut 8 expanded its mining operations in 2018, going from 7 BlockBox data centers to 85 BlockBox data centers. The significant expansion in mining capacity, combined with crypto’s ongoing bear market, were huge contributors to Hut 8’s losses.
Going forward, Hut 8 is optimistic future mining operations will be more profitable.
The company has entered into a definitive agreement with the city of Medicine Hat, Alerta for the supply of 42 MW and 21 MW of additional off-grid energy. Hut 8 has also completed its flagship bitcoin mining site in Medicine Hat, representing an increase of 63 MW of operating capacity for an aggregate of 95.2 MW at year end.
Conviction in Bitcoin “Remains Stronger Now Than Ever”
Hut 8’s financial statement adds that the company has several reasons to be optimistic for bitcoin to continue growing in 2019:
“Bitcoin is having a positive start in 2019. The cryptocurrency has appreciated approximately 40% since the beginning of the year, outperforming the NASDAQ, the S&P 500, as well as most commodities including gold and oil.”
Hut 8 also highlighted “several factors occurring in 2019” that give the company reason for optimism, including regulatory clarity for bitcoin that “sets it apart from other cryptocurrencies” and “institutional custodial solutions” being released by Fidelity and Goldman Sachs.
Hut 8 also cited increased institutional awareness, inflationary pressure on global fiat currencies, and new smartphones (like the Samsung Galaxy S10) being built with built-in cryptocurrency wallets.
For all of these reasons and more, Hut 8 is optimistic that its brightest days lie ahead.
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