Hut 8 Corp. (HUT) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the American Bitcoin launch conference call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sue Ennis, Head of Investor Relations. Please go ahead.

Good morning, everyone. Today marks the official launch of American Bitcoin, a company that we believe will set a new standard for the global Bitcoin mining industry. It also marks a defining milestone in Hut 8's continued evolution into an integrated energy infrastructure platform. During today's call, we'll discuss the strategic rationale behind the launch of this new entity, our vision and strategy for American Bitcoin, and how the carve-out of our mining business strengthens our broader platform. After the prepared remarks, we'll open the line for questions. Speaking from Hut 8 are CEO, Asher Genoot; CFO, Sean Glennan; and Chief Strategy Officer, Mike Ho. We're also pleased to welcome Eric Trump, our partner in this new venture, to the team and to today's call. I'll quickly cover the safe harbor statement before we get started. Some statements made during this call may be considered forward-looking statements within the meaning of applicable securities laws. Such statements reflect 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. Except as required by applicable law, Hut 8 undertakes no obligation to update or review any forward-looking statements. And with that, I'll turn it over to Asher.

Thanks, Sue. Today, we take a pivotal step forward in the evolution of our business by launching American Bitcoin, a new pure-play Bitcoin miner formed through the strategic carve-out of our mining business in partnership with Eric Trump and American Data Centers. In today's call, I'll discuss the strategic rationale behind the carve-out of our mining operations into a stand-alone business and explain the role of American Bitcoin in our power-first strategy. Mike, who will serve as Executive Chairman of American Bitcoin; and Eric, who will serve as Chief Strategy Officer, will then outline our vision and road map for the new company. Finally, Sean will summarize the transaction and review the key commercial agreements that link the 2 businesses. Going forward, all Bitcoin mining operations previously reported under Hut 8's Compute segment will operate through American Bitcoin, a majority-owned subsidiary of Hut 8. Initially, American Bitcoin's financials will remain consolidated under Hut 8's existing reporting structure as shown here. This carve-out reflects a structural shift in how Bitcoin mining fits within our platform. Hut 8 will no longer own ASIC servers. Instead, we will hone our focus on developing and monetizing data centers, not Bitcoin mining itself through colocation and managed services delivered under our Power and Digital Infrastructure segments. Moving forward, we expect substantially all of our Bitcoin mining business and our compute layer to be operated through American Bitcoin. As part of this model, Hut 8 will serve as American Bitcoin's exclusive infrastructure and operations partner. This relationship is governed by a series of long-term commercial agreements that transform the cyclical economics of our former Bitcoin mining segments into stable contracted revenue streams in our Power and Digital Infrastructure segments. Later, Sean will discuss the commercial framework we've implemented to enable this transition. We intend to further advance our broader platform strategy by having American Bitcoin become a publicly listed entity. While we plan to retain a meaningful equity stake and continue serving as American Bitcoin's exclusive infrastructure and operations partner over the long-term, our ultimate goal is to maintain indirect exposure to Bitcoin upside through our ownership position in an entity that independently funds exahash growth in Bitcoin production. The rationale behind this carve-out and its impact on our positioning are best understood in the context of our broader capital allocation framework. Historically, our platform model has required us to make capital allocation trade-offs across 3 businesses: power, digital infrastructure and compute, each with its own risk return profile and cost of capital. In practice, this often meant making trade-offs between power acquisition, digital infrastructure development and ASIC fleet expansion. We first addressed these constraints by launching our GPU-as-a-Service business through Highrise AI, a subsidiary brand in our compute layer, which scales via off-balance sheet financing. By now carving out substantially all of our ASICs into a stand-alone entity capable of raising its own capital, we extend that strategy and further align each segment of the business with its respective cost of capital investor base. This separation enhances our capital allocation framework, enabling Hut 8 to raise and deploy capital with greater precision and speed across our ecosystem. Equally important is that this carve-out also unlocks new synergies at the core of our power-first model. With American Bitcoin serving as a dedicated anchor tenant, Hut 8 can focus fully on scaling its power and digital infrastructure footprint, while continuing to leverage Bitcoin mining infrastructure development to drive rapid and capital-efficient monetization of power assets. As American Bitcoin scales its ASIC fleet, the resulting infrastructure demand will accelerate our development flywheel, compounding value for both companies. In short, this transaction creates 2 focused yet complementary businesses, each purpose-built for its respective mandate. It evolves Hut 8 toward more predictable, financeable, lower cost of capital segments and establishes American Bitcoin as a pure-play mining platform built for exahash growth, Bitcoin production and operating leverage. Now I'll turn it over to Mike to walk through our vision and strategy for American Bitcoin and what it means when we say we are setting a new standard in Bitcoin mining.

Thanks, Asher. Today marks the beginning of a focused effort to build a category-defining Bitcoin mining company that combines world-class infrastructure, institutional discipline and a long-term commitment to delivering substantial economic value to the United States. What I want to demonstrate today is that we have a defined near-term path to translate our vision to make American Bitcoin the world's largest, most efficient pure-play Bitcoin miner into reality. This page outlines the initial phases of our growth strategy, a road map designed to scale American Bitcoin to 50-plus exahash of installed capacity at an average efficiency of under 15 joules per terahash. In short order, these metrics, if realized, would position us among the top publicly traded miners in both scale and efficiency. Before discussing this road map in detail, I want to explain why we believe it is not only ambitious, but also achievable. Our ability to execute is underpinned by 2 core advantages: preferential access to leading-edge ASIC technology and direct access to best-in-class infrastructure. Together, these inputs enable us to deploy capital efficiently, scale with speed and operate at a caliber, we believe is unmatched in the market. I'll discuss each advantage in turn. First is preferential access to leading-edge ASIC technology. Over the past several years, Asher and I have built deep relationships across the mining ecosystem. These relationships have given us early and often preferential access to next-generation ASIC technology. A key example is our partnership with BITMAIN to develop and commercialize the U3S21EXPH, the first ASIC miner mass-commercialized by the manufacturer with direct-to-chip liquid cooling technology in a rack-based form factor. We believe our ability to deploy this machine at scale and more broadly, the deep miner manufacturer relationship that enables this partnership, reflect a key competitive advantage that will enable us to achieve our ambitious targets for American Bitcoin. Second is direct access to best-in-class infrastructure. Through our commercial partnership with Hut 8, American Bitcoin will have direct access to the robust pipeline of power assets and full stack greenfield development platform that have driven Hut 8's track record of rapid and cost-efficient expansion. We believe this will enable us to scale quickly, avoid greenfield development risk and deploy into infrastructure specifically optimized for high-density ASIC computes. And paired with access to leading-edge ASIC technology, we believe this positions us to scale at speeds, densities and efficiencies unmatched in the market. Let's now turn to how we will apply these advantages in our initial growth road map. Phase 1 is our starting point. At launch, American Bitcoin will have 10 exahash of installed capacity with an average efficiency of 21.2 joules per terahash, representing the contribution of substantially all of Hut 8's former ASIC miners. Our intent is to scale quickly beyond this phase. In Phase 2, Hut 8 expects to energize the Vega site, execute an existing purchase option for 15 exahash of U3S21EXPH units at the site and sell those ASICs to American Bitcoin. These machines running in Hut 8's proprietary liquid cooled architecture would bring our total capacity to approximately 25 exahash while driving fleet efficiency down to approximately 16.3 joules per terahash. Phase 3 builds on this momentum. We'll aim to acquire and energize a second site already under exclusivity within Hut 8's pipeline and deploy 10-plus additional exahash in U3S21EXPH miners. This would bring us to 35-plus exahash with a fleet efficiency of less than 16 joules per terahash. Finally, in Phase 4, our plan is to replicate this model once more at another site already under exclusivity within Hut 8's development pipeline, adding 15-plus more exahash of BITMAIN U3S21EXPH miners. This would take us to our target of 50-plus exahash at an average efficiency of less than 15 joules per terahash. Our initial road map for American Bitcoin reflects a repeatable, capital-efficient growth strategy. The inputs are proven. The execution is structured and the learning curve will compound with each deployment. In that sense, what we've outlined here isn't just a near-term plan, but the foundation of a scalable platform designed to set a new standard in Bitcoin mining. The structure and composition of our leadership team reflects the core premise of American Bitcoin, a business engineered for unmatched speed, scale and capital efficiency. The team we've assembled combines a proven track record, ecosystem connectivity and capital market fluency we believe is required to execute on our strategy and drive long-term shareholder value. While American Bitcoin is a stand-alone brand, its infrastructure and competitive advantages are rooted in the Hut 8 platform. As Executive Chairman, my role is to ensure a strategic alignment that unlocks the full value of this integration. My early work designing, building and selling turnkey mining facilities to operators who would go on to become some of the largest public miners in the world, laid the groundwork for industry-leading initiatives, like Hut 8's partnership with BITMAIN and the co-development of the U3S21EXPH. This legacy of innovation and access will give American Bitcoin a structural edge I intend to deepen over time. Matt Prusak, who previously served as Chief Commercial Officer of Hut 8, will return to our ecosystem as CEO of American Bitcoin. He is tasked with scaling the company into the world's leading institutional miner and creating outsized value through active reserve management. Matt's track record makes him uniquely suited to this challenge. At the intersection of institutional mining and financial markets, he played a pivotal role in scaling U.S. Bitcoin Corp. prior to its merger with Hut 8, where he led early fundraising rounds and served as the primary liaison to government, industry and regulatory bodies. This combination of business acumen and policy experience makes them the ideal leader at a critical juncture for the role of Bitcoin in the U.S. economy. Eric Trump, as Chief Strategy Officer, will drive and define American Bitcoin's long-term strategic direction. His responsibilities span capital formation, corporate development and market alignment. Eric will forge strategic partnerships across financial and operational domains to align our growth trajectory with evolving market and capital dynamics. With his expertise in infrastructure development, track record of scaling capital-intensive platforms and deep conviction in Bitcoin's strategic role in the U.S. economy, Eric will drive a strategy that is both disciplined in execution and aligned with long-term value creation. Supporting our leadership team is a Board built for scale and public market readiness. Joining Asher and myself are Justin Mateen and Michael Ibrahim, proven entrepreneurs and investors with experience scaling high-growth platforms while safeguarding shareholder interest. Both Justin and Michael bring direct access to institutional capital and the governance acumen required to guide a business of this scale. I'm proud to build American Bitcoin alongside a team of this caliber. It is not only built for execution, but also unified by a shared mission to advance the role of Bitcoin in America and unlock financial freedom for everyday Americans. Now, I'll turn it over to Sean to walk through the form of the transaction and commercial structure that defines how American Bitcoin and Hut 8 will together drive outsized value for their respective shareholders.

Thanks, Mike. I'll outline key terms of the transaction that established American Bitcoin as a majority-owned subsidiary of Hut 8 and provide an overview of the commercial agreements that link the 2 businesses. This page provides a simplified view of the transaction and resulting commercial structure. Under the terms of the transaction, Hut 8 contributed substantially all of its wholly-owned Bitcoin miners to American Data Centers in exchange for an 80% equity interest in the company. Following the transaction, American Data Centers was renamed and re-launched as American Bitcoin. Today, the entity is owned 80% by Hut 8 and 20% by Eric and the other legacy shareholders of American Data Centers. As Asher outlined earlier, Hut 8 will act as American Bitcoin's exclusive infrastructure and operations partner. From day 1, the 2 companies will be closely aligned through a series of long-term commercial agreements designed to generate stable fiat-based revenue for Hut 8's Power and Digital Infrastructure segments. Let's take a closer look at 3 key agreements between Hut 8 and American Bitcoin. First is the colocation agreement, which gives Hut 8 the exclusive right to host American Bitcoin's ASIC miners at its sites. This agreement generates recurring fiat-based revenue for Hut 8's Digital Infrastructure segment under our ASIC Colocation business line, while giving American Bitcoin turnkey access to high-density, cost-competitive infrastructure without CapEx and development risk. Second is the management services agreement under which Hut 8 will operate all of American Bitcoin's mining operations at colocation sites. This creates a second recurring fiat-based revenue stream within Hut 8's Power segment under managed services, while allowing American Bitcoin to leverage Hut 8's proven mining operations platform. And third is the shared services agreement through which Hut 8 will manage American Bitcoin's core business functions, including finance, HR and compliance. This agreement is designed to minimize the burden of building and maintaining business functions in-house, allowing American Bitcoin to scale with a lean, efficient cost structure. Together, these agreements enable American Bitcoin to achieve the cost structure of a vertically integrated miner without the balance sheet burden of owning infrastructure and building internal overhead. As a result, nearly all capital deployed by American Bitcoin can support exahash growth and Bitcoin accumulation. For Hut 8, these agreements deliver long-term fiat-based contracted cash flows and create a dedicated utility scale off-taker, accelerating our development flywheel and supporting capital-efficient platform expansion. With that, I'd like to introduce Eric Trump, Co-Founder and Chief Strategy Officer of American Bitcoin, who will walk through the vision of the company.

Well, thanks so much, Asher, Mike and Sean. I can't tell you how excited I am to be part of American Bitcoin. I've been in the world of hard assets in my entire life. We've built the best hotels, the best golf courses, the best real estate developments, commercial buildings, residential buildings. And it really wasn't until I lived a crazy political world that I truly realized the power of crypto to my eyes really open to cryptocurrencies and most specifically, Bitcoin, which has truly become a love of mine. I saw banks cancel people for no reason at all. I saw weaponization. I saw people wait 6 months to get a basic mortgage from a bank that they had done business with for 20 years. It didn't make sense. And I really realized that finance is antiquated. Modern finance is slow. It's expensive. And I also realize that, there's perfect complement, a complement to the hard assets that I live in every single day, and that's really digital gold. That is Bitcoin, something that's immediately liquid, something that's 24/7. Who thinks that modern banking should be Monday through Friday, 9:00 a.m. to 5:00 p.m. It doesn't make sense. I realize that, there's something that's so mobile, that's so global, that's so transparent. I realize that, there's nothing that's being done by the modern financial system that can't be done better, faster, cheaper, more efficiently using blockchain. And it's really that era that opened my eyes to exactly what we're creating today. There isn't a week that goes by that I'm not tracking a slow swift wire transfer on Friday afternoon, yet you can transfer millions of dollars of Bitcoin or cryptocurrency across the globe with seconds notice. So today, we closed the gap, and we do that by building what's going to be the largest and best Bitcoin mining company. And I've got to know Asher, I've got to know Mike, I've got to know the entire team, and they're incredible at what they do. It actually combines really 3 aspects of my life, high finance, obviously, cryptocurrency, which we've gone into a family more so than really anyone and they're doing incredible things in, but also physical assets, and that's exactly what data centers are. They're physical. You build them from the ground up. They consume energy. They're life, they're constructed. And so you take the physical platform and you combine that with this revolutionary world of cryptocurrencies and Bitcoin most specifically, which is absolutely leading the way, which truly is digital gold. And I think we truly have a recipe for success. You have an asset class that's appreciating at 60% a year over the last 10-year period of time. It's really transformational. Every company, every serious company that's really finding it, they're putting it on the balance sheet, and it's proving to be transformational to those organizations. It's also being transformational to investors who are looking to those organizations, realizing that they can truly see the future. Last but not least, we're doing in America with a government that's dedicated to low-cost energy, which just gives any American company, but most specifically a company that's reliant on the power grid, such an incredible competitive advantage. So today, I couldn't be more excited to join my friends. This is a mission that we're going to be at for a very, very long time. This is something that we're going to take incredibly seriously. I love the crypto world. I love the Bitcoin world. I love the tangible hard asset world. And when you take an unbelievable company like Hut 8, when you take American Bitcoin, which is going to be the best at what it does, when you take many people, but 3 specifically that have an unbelievable passion for this industry between myself and Asher and Mike, and you've joined those forces together, we're going to be unstoppable. There are so many great opportunities on the horizon. We're going to do unbelievable things together, and we're going to do it here in the United States, and that makes me incredibly proud. So to Asher, to Mike, to Sean, to the entire Hut 8 team and to the entire new team at American Bitcoin, I couldn't be more excited. I will put my heart and soul into this mission, and we look forward to doing many great things together. I know, there are a tremendous amount of analysts on this call right now who have questions for all the respective parties. I open it up to them right now.

[Operator Instructions] Our first question comes from the line of Patrick Moley with Piper Sandler.

Congrats on this new deal. I just had my first question for Eric. Eric, how important do you think it is from a national security standpoint for the U.S. government to prioritize U.S. Bitcoin miners and kind of ensure that this Bitcoin mining isn't moved offshore. We're seeing a lot of Bitcoin miners that are striking deals with some of these AI hyperscalers and there's fears that maybe that could result in some of the Bitcoin mining or more market share moving offshore. So just kind of wondering how you're thinking about that.

Yes, it's an awesome question. And I can tell you, there are governments throughout the world that are highly dedicated to this. One specifically that I mentioned, maybe I won't call them out by name, all the residual -- they're a very hot location in the summer, and they take all the residual energy for the country in the winter that they're not using to cool buildings and other things. And they use for one thing, right? They use it to monetize ultimately to mine Bitcoin. And so listen, there's 1.2 roughly million Bitcoin left to be printed and there's a race to the finish. And I think lever there first and whoever can do it best and most efficiently and most pragmatically in the cheapest energy environment is ultimately going to be the winner of that race. And it's something that everybody wants. It's something that so many countries are stockpiling right now. It's something that I truly believe will be truly generational wealth. But if you look at -- that's kind of the problem around the world. You look at -- trying to mine Bitcoin in the U.K. right now, you can never do it, right, because of energy costs. Trying to do it in so many different areas in Europe, you could do it because of energy costs. I mean, first of all, we've always had great energy costs because we're a country that has a tremendous amount of energy. But now all of a sudden, we have policies that are driving down the cost of energy, making America even more competitive. And so we've got the best mines in this country. We've got the best energy policy in this country. That policy is only getting better. And you have really an asset that everybody wants, which is Bitcoin and everybody is starting to believe it. And the best days of cryptocurrency are definitely ahead. I mean, the adoption of it right now is unbelievable. You're seeing it every single day. I mean, you're seeing banks start to custody. You're seeing banks start to spin off crypto arms to it. And so I think we're ahead of this curve. I think the Hut 8 guys are phenomenal. There are people that actually do it themselves, right? They can get projects done in half the time of other builders. It's one of the things that really attracted me to them, just their willingness to work 7 days a week and be pragmatic and get things done using their own hands. And we're going to beat everybody in this race. I'm really convinced of that. And I think we're going to do it in an environment that, again, has the most synergies and efficiencies, and that's the United States of America because of, again, our energy policy. So I hope that answers your question.

No, definitely. That's great color. And then just a follow-up for me. You say that you want to get to 50 exahash per second by Phase 4. Can you maybe just help us understand kind of the time line there? How long do you think it will take for you to get to that level?

Asher here. I'll jump in on that question. So today, as we've kind of shared with the market in the world already, we have about 10 exahash that have come online in Q1 through the fleet upgrade that we've announced. And in addition to that, we have roughly 15 exahash of the Vega project that's coming online in Q2. So that takes us to an incremental 25 exahash. So if you think about kind of the road map in the plan, you have 2 additional Vega's around similar size and scale, and that's how you get above the 50 exahash mark. We have not disclosed yet where those sites are, but we have disclosed in our most recent earnings, the size of our pipeline, the amount of gigawatts we have under exclusivity. And so we feel very excited and confident. And through American Bitcoin, we'll look at both private and obviously public financings in order to grow and build the business.

Our next question comes from the line of Brett Knoblauch with Cantor Fitzgerald.

Maybe to start, I guess you guys are kind of retaining an 80% stake in your subsidiary. What is American Data Centers contributing to the subsidiary that they are getting a 20% stake in?

Definitely. So when we started the conversation with Eric and we met him, we really bonded an ideology and philosophy regarding crypto, but Bitcoin specifically and what it could do for the financial sector and also within the U.S., right? If we think about Bitcoin and Bitcoin mining specifically, it really harnesses everything that makes the U.S. amazing, everything from the power availability that we have from fuel going into electricity, going to digital infrastructure and the data center capacity into the ASIC into compute, then securing the network. The philosophy around wanting Bitcoin to be able to be this -- this beacon and to be able to be this place that people can go and be able to kind of trust as this digital store of value. And so when we got aligned on kind of ideology around the ecosystem, we got to know our company better. We said, what is the best way we could potentially work together -- and he's like, look, I started this awesome company called American Data Centers, where a lot of really interesting things in the development pipeline that we've been working on. And I think we should look at bringing those together. And so we haven't shared kind of what other growth that we have as a part of kind of everything we have planned in the future, but really bringing together all the ideas and all the development that they had and what they were planning to launch into kind of the foundation of the business we've created. And we said, hey, let's just help you skip the first couple of years and get to a scale state because we think this can grow even faster, and we can really put fuel on the fire by growing and scaling and then adding in kind of all the development assets that you guys are kind of going to put into American Data to grow and to evolve. And so as we thought through kind of the merger and what the economic split was, we said, all right, why don't we -- instead of contributing cash, why don't we contribute miners into American data centers? In return, you guys will give us 80% stake of the business and we'll rename the company American Bitcoin. And so we contributed miners as a part of this merger into American Data centers. We received equity for that contribution and then we renamed the company all at the same time when we announced the deal yesterday.

Helpful. And then on just the Vega site, it seems like you guys are about to exercise the purchase option on the 15 exahash worth of new miners there. Where is that capital going to come from? Is that going to come strictly from the new subsidiary? And then the plans to create a strategic Bitcoin reserve within ADC, is any of that Bitcoin also going to be coming from Hut? Or is all the Bitcoin on Hut's balance sheet today staying on Hut balance sheet?

Thanks for the question. When you think about kind of the contract that we have with BITMAIN, the beauty around that contract is it 15 exahash, but we have an option to purchase those in full or in part at any point we want. And so as the site comes online, we'll work through all the kings of a new site coming online. Then, we'll be bringing on exahash as we look at hash price forward hash price and also the cost of buying the machines. And so we have kind of this option where the price is fixed, so hash price is looking really good, they can't increase the price of the machines on us. And then if the price goes down, we can kind of have a conversation with them, right? And so we have this really interesting kind of ability to purchase. And we can bring on exahash a day, if we wanted to. We can bring on 15 exahash overnight, if we wanted to. And that's really great from a financing perspective, because we don't have to take a lot of dilution to make this large order. We can look at stepping that up as we kind of grow and we grow into the 15 and then going forward into the 50. And so as we think about growth under the American Bitcoin brand, we said the ultimate goal is for this to also be a publicly listed entity. We're looking at a private financing in between that journey. And as we continue to grow, we believe in American Bitcoin's ability to raise capital and to be able to grow both in the private markets and also in the public markets. In regards to the Bitcoin, the really thesis behind this transaction, and we thought about this transaction for a long time and didn't really find the right opportunity until we met Eric and this kind of all came together and said, okay, this makes a lot of sense. But when we think about Hut 8, Hut 8 is now going to be a stable, call it, predictable cash flow business on power, on digital infrastructure, on colocation agreements -- and our proxy to the upside, but also the volatility of Bitcoin is going to be through American Bitcoin. And so over time, what you will all see is American Bitcoin scaling and growing exahash, scaling and growing the treasury under management that we have. And over time, Hut 8 as American Bitcoin grows that Bitcoin strategy in that treasury, Hut 8 will look at their HODL and over time, invest it into the infrastructure projects that drive high yields and high returns. And so this is going to be a transition. It won't happen overnight. The first step is American Bitcoin having all the miners. But over time, American Bitcoin will be the pure-play Bitcoin mined at a cheaper cost than you can buy from, will increase the strategic treasury in addition to that as well. And then it will be partnered with a sister company that is a low cost of capital infrastructure company focused on power, focused on digital infrastructure, so we can maximize kind of cost of capital bucket and drive the ultimate return and ultimate yields on these projects.

Our next question comes from the line of George Sutton with Craig-Hallum.

Congratulations, and I really appreciate Michael's 4-phase discussion on the growth. So with respect to that, you mentioned that American Data Centers has its own development pipeline. I'm curious how that fits into that 4-phase structure, would that be Phase 5 and beyond?

So I think when we think about kind of the assets that we've been talking about. So part of those are financing opportunities, right, as they've thought about the strategy and the financing and the people that have shown interest to get involved and kind of support the brand. So you'll see that, as fuel to pushing the phases that we brought up and talk through. The other thing is, obviously, as we continue to build and grow these assets, Hut 8 has a very deep development pipeline of near-term and long-term opportunities, and we can bring the development opportunities that they've seen into that fold. And so even if we use one of our sites, but that may be replaced with one of their development opportunities. So that's a broad theme. If you think about kind of interesting opportunities from a data center powered land perspective, financing opportunities, American Bitcoin is going to be raising capital to scale and to grow. And this is kind of the beauty behind the structure is Hut 8 can raise capital for infrastructure. American Bitcoin can raise capital for Bitcoin proxy, and it gives shareholders the maximum exposure in return on the asset class that they truly want to invest into.

Got you. My second question, probably best addressed by Eric. BITMAIN has had political challenges. They've had some ASICs held up in port. And then there are also tariff implications relative to this transaction. I'm wondering if we could just discuss those dynamics.

Yes. So as you've all known, we work with BITMAIN, MicroBT, Kanan, which are kind of the leading manufacturers within the sector. And then you have new entrants like Block, like Ariadne. And so we work with all of them, know them all really well, have everyone's miners tested in our R&D facilities is now fully deployed across the sites. As we've looked at manufacturers that are not in the U.S. and that are more global, they have manufacturing facilities, for example, the B machines that we have coming in, in Malaysia, in Thailand and other places around Southeast Asia. And so we've been very sensitive to what does that look like from an import regulatory perspective? What does that look like for these companies and their future ambitions to manufacture in the U.S. As you may know, MicroBT, which is also kind of similar structure as BITMAIN company in China. I think both of them are in Singapore now. They have manufacturing facilities in Southeast Asia, but MicroBT also started manufacturing machine in the U.S. as well. And I know BITMAIN is doing the same. And so look, we have active dialogues with them in regards to their supply chains in regards to as we think about kind of macro trade dynamics and how do we ensure that we have the ability to grow with not just one, but all the counterparties in a way that drives the most value to the shareholders of American Bitcoin and allows us to grow in the most risk-adjusted fashion.

Our next question comes from the line of Stephen Glagola with JonesTrading.

Thanks for the question, and congrats on the deal. Maybe for Sean, can you just detail the recurring annual fees Hut is receiving for the colocation agreement and the managed services agreement? And then given, you're fully consolidating American Bitcoin, will the colocation agreement bring incremental cost versus the cost of revenue of your mining business prior or currently?

I'll do a back top here a little bit and jump in for Sean. So we have not disclosed the interparty transactions, like cost of those. We will in future earnings and disclosures as we launch this brand. If you think about the business from day 1, it's going to be a consolidated financials due to our ownership stake into the entity, as you shared. And so you'll continue to see kind of the vertically integrated economics, right? When you look last year in the kind of earnings and quarter that we just released, I mean, our margins on mining in the last quarter were around 50%, and that was with an average fleet of 32 joules per terahash. If you look at the new fleet that's come in, in Q1, we've dropped that fleet to around 20 joules per terahash. So you're going to see a massive margin expansion there in regards to the cost to mine the Bitcoin because of the new machines that have arrived. So you'll see that all on a consolidated basis in our financials. You'll see kind of the MD&A section break out what those interparty agreements look like. And ultimately, I think what's really important to spend time thinking about and noting is as Hut 8 continues to drive down its cost of capital as it continues to build data centers and develop data centers, will look at a yield on cost model with American Bitcoin. So how they can focus on building power infrastructure, digital infrastructure and focus on getting infrastructure-like returns rather than having to compensate for the volatility of Bitcoin and trying to make super high returns because you have upside and downside risks, where on the American Bitcoin side now, you can invest purely in Bitcoin and ASICs and not have to invest in the infrastructure stack. So for every dollar you deploy, you get more leverage in actual Bitcoin mined and added to your treasury. But at the same time, the problem with companies that have tried to do this before and they do them through hosting agreements. And hosting agreements that most people know on this call don't work because you have disincentivized structures where the hosting provider basically locks you in on a hosting rate if it's on a profit share. They're floating on their energy costs. And so the decisions you make are not for the best interest of the final compute customer, where in this more colocation model where power is passed through, you have full control you get the ability to not invest in infrastructure on the American Bitcoin side, get all of the return and yield on the ASICs, meanwhile having more vertically integrated economics and control over the actual fleet. And so we think this is a really synergistic partnership, and we'll share a lot more into the actual structures. But the 3 commercial agreements between the entities are, one, a colocation agreement. So think about that as a real estate deal in regards to the rack space and the infrastructure that Hut 8 invests into. The second is a managed services agreement. American Bitcoin will also be super SG&A light. They'll be able to run really lean, be able to manage through volatility, meanwhile, be able to tap into the resources of a fully vertically integrated and large scope horizontally of skill sets, services like build-out, engineering, software, data science. I mean, you guys know about our reactor, our curtailment software, our operator. And so all of that will be fully at the disposal of American Bitcoin, meanwhile being able to run an SG&A light model. And then lastly, a shared services agreement, even back-office things like accounting and legal being able to support a lot of those functions, because I think what makes a great mining company is the ability to be the lowest cost operator and producer of Bitcoin, meanwhile having the balance sheet and the economic structures to manage through the volatility because as much as we all want Bitcoin to go down, we all know that in the short-term, there is volatility. It's your ability to weather those storms and become bigger and bigger. And as people know, the U.S. Bitcoin and Hut 8 journey, I mean, U.S. Bitcoin grew in 2021, 2022, everybody was blowing up around us, all the bankruptcies restructuring. And we said, you know what, let's build through this bear market, made it bigger than ever. We merged with Hut 8 and then we are today where we are launching this beautiful brand and excited for this next chapter of accelerated growth.

I appreciate that, Asher. And if I just can ask one more to you. It seems like the goal is to ultimately spin American Bitcoin into a separate public entity. What's your time line for this or expected time line for that?

So I'll -- so the word spin, I've learned is a very hot topic item when it comes to legal and taxes. So we're not spinning out the entity, right? We're carving out these assets. Today, if you think about American Bitcoin, and I love the slide that our team made when you look at the compute layer, we have Highrise who runs the GPU business. We have American Bitcoin on the ASICs. And so we have ownership stakes in these entities. The reality is those ownership stakes will dilute over time as we raise capital. And hopefully, even with that dilution, the value will only increase, because we're having a smaller piece of a much bigger pie. As we think about the growth in kind of the go-public transaction, I mean, we're very active in looking at taking American Bitcoin both public and then also private transactions in between. So we're actively in that. We look at that in kind of the short to medium-term, not long-term if the markets participate with us. And we see the structure holding and Hut 8 continuing to be an owner of this publicly listed entity as well.

Our next question comes from the line of Bill Papanastasiou with KBW.

Congratulations on the transaction, everyone. Eric, perhaps you can frame your priorities as the Chief Strategy Officer of American Bitcoin Corp. Is there anything outside of the announced scaling initiatives to that 50 exahash plan that we should be thinking about?

Listen, the priorities are simple. We're going to become the greatest Bitcoin mining company on earth, and we're going to do it here in America. I think the whole mission can be synthesized that succinctly. You've got the best crew in Hut 8. They know exactly what they're doing. Asher and Mike are incredibly impressive. You have the best asset class. You have an asset class that's upcoming. There's no question we're in the dial-up phase of that that asset class that's only going to continue to grow. And again, we're going to do it in an energy environment that's going to be unparalleled anywhere around the world, and that's really your combination for success. And so we're sprinting toward being #1. We're going to be #1. That's everybody's goal. And we're going to do it a hell of a lot faster than anybody can possibly imagine. And I think that's how we're defining success, and we're going to make it happen.

Appreciate the color there. And how should we think about the treasury strategy here for American Bitcoin? I assume all incremental Bitcoin from this point forward will reside with the new entity. And how are you thinking about tapping that treasury or using dilution for growth?

Yes, I can chime in here. So as you all know, Hut 8 has a large treasury. As we think about American Bitcoin growing, American Bitcoin will be mining Bitcoin if the opportunities arises, we will be purchasing Bitcoin opportunistic times as well. And so as American Bitcoin increases its Bitcoin treasury management and its Bitcoin stack organically, Hut 8 will use its Bitcoin to turn into fiat to invest into infrastructure projects. So long-term, Hut 8, all of the Bitcoin on Hut 8's balance sheet will be invested into high-returning infrastructure projects. Meanwhile, American Bitcoin will hold that. So it will be a natural transition as American Bitcoin both gets to and exceeds the current stack that Hut 8 has. And so I think, obviously, our financing structures as we look at American Bitcoin as a private entity are going to be different as a public entity and where we're focusing on the capital that's deployed will be different, and we'll be communicating with the shareholders of American Bitcoin as we move forward and as they invest into the company.

Our next question comes from the line of Chris Brendler with Rosenblatt Securities.

Congratulations on this exciting transaction. Asher, I wanted to ask sort of how much of this -- from a strategic perspective, does this transaction sort of indicate a willingness to go further into HPC as you move this the Bitcoin mining business to American Bitcoin, does that indicate and open up opportunities to expand and accelerate your HPC ambitions?

Yes. So I think what I tell everybody, look, our vision long-term is to be an energy infrastructure platform that sits at that intersection between power and technology. I feel like I'm -- Jeff Bezos was saying, we're going to sell more than books back in the day and people are laughing and saying, you're freaking crazy. That's not possible. And so when we think about what Hut 8 is aiming to become, it's truly to build an energy infrastructure platform that sits at that intersection, enables future technologies that are large consumers of power, whether that be data centers that support Bitcoin compute, data centers that support GPU and AI compute or CPU compute, whether that be other manufacturing facilities that are coming back into the U.S., like we want to build at that intersection and that -- at that intersection where we can build digital infrastructure. And so if you look at kind of this last year, as we've had amazing new investors join the cap table, there's been this constant battle between where do we deploy capital amongst our stack in the power layer and the digital infrastructure layer and in the compute layer. And the conversation that we've had time and time again is we don't see our business as Bitcoin versus AI. We see our business as power layer, digital infrastructure layer. We can build lower redundant data centers, higher redundant data centers. We'll have a different type of customer on the other end, a different type of pricing because it's a different type of upfront CapEx cost and then compute. And GPUs and ASICs have a similar return profile. You want a much faster payback on your investments, because the depreciation of the chips you have to account for and the volatility of the actual revenue streams. And so this is not a, hey, we are now not going to focus on Bitcoin or we're going to double in AI. This allows us to accelerate into both verticals of our business today that we deeply believe in and doing so in a way that doesn't have to compromise on the other. And so what this transaction allows for is full scale to be able to build out the Bitcoin mining business that we built so much expertise in, build the infrastructure on the Hut 8 side that we believe allows us to have a low-cost way to monetize power assets and to secure megawatts, and continuing to relentlessly focus on the transactions and the megawatts we have or commercializing them for large-scale HPC data centers and Tier 3 data centers. So we're extraordinarily excited and feel like this will unlock the handcuffs and allow us to sprint at all directions with the right teams focused on the right initiatives so we can relentlessly execute.

It makes a lot of sense. It's exciting stuff. Just to follow-up on that topic. As American Bitcoin scales and grows potentially as a public -- its own public company, do you expect the majority or 100% of their mining activities to take place at Hut sites? Or is it contemplated that they would potentially use other hosting providers? And how do you evaluate sort of the economics and the decision-making around allocating power to this new company that you own 80% and other opportunities? It will be straight financial or the other strategic implications of how you allocate your power going forward?

So I'll answer it from the American Bitcoin perspective in that Hut and then from the Hut 8 perspective as well. From the American Bitcoin perspective, we want to do what's best for the shareholders of that company. And what we believe is best for the shareholders of that company today is the sister company relationship and this exclusive relationship between Hut 8 and American Bitcoin. And the reason why is the business model is not, let's go buy ASICs and host it with third parties, because we've all seen what can go wrong in those scenarios, especially through the volatility of hash price and Bitcoin price. When the times are good, it's great. When the times are not, it's not. In order to build a world-class leading organization, you always have to underwrite the worst-case scenario to be able to manage through that. And so by having this relationship between American Bitcoin and Hut 8 and having this backbone, we're able to have vertically integrated economics in a pure-play asset-light model. And that's kind of the key. We spent a lot of time, I mean, well over a year thinking through the structure. And last year, we're thinking about doing something like this and ended up stopping at the 11th hour when Sean joined and he's like, hey, let's take a step back. I know we've spent a lot of money and a lot of time and really kind of calibrate and we believe this is the right time and the right moment with the right partners to do this. And so from American Bitcoin perspective, it's being able to give shareholders access, the knowledge, the skill set of a vertically integrated scaled company with low SG&A, asset-light being able to manage their volatility. So for the foreseeable future, we think that's what makes the most sense for the company, and we think the economics will speak for themselves there. In regards to Hut 8, the only reason we're able to say, "Hey, you know what, let's go do deals with American Bitcoin and continue to scale aggressively on the Bitcoin side of the business." And then when we look at the data center Tier 3 side, I think unlike some companies, our goal is not to maximize the last single dollar on any given site. Some sites we're looking at partners, we're doing it ourselves. Other sites we're looking at bringing on JV partners where we can build long strategic relations in the industry. And all of that is on the basis of having a deep and large development pipeline. If we want to build a truly generational business, it's not by showing the markets we can monetize 1, 2, 5 sites. It's by showing the market we have the conviction and the pipeline to create a flywheel where we can monetize sites for the next decade to come. And so we have a lot of confidence in our ability to procure power and our ability to build digital infrastructure, and we don't believe we're at a place today that we have to choose where we dedicate those assets to. We just have to put more pressure on our development team to go find more power so we can scale.

Thank you all for your participation on today's call. This concludes the conference. You may now disconnect.