Marathon Digital Holdings, Inc.
(NASDAQ: MARA)
("Marathon" or "Company"), a leader in supporting and
securing the Bitcoin ecosystem, reported its financial and
operational results for the first quarter ended March 31, 2023.
First Quarter 2023 Financial
ResultsThe Company recorded a net loss of $(7.2) million,
or $(0.05) per share, during the fiscal quarter ended March 31,
2023, compared to a net loss of $(12.9) million, or $(0.12) per
share, in the prior-year period ended March 31, 2022.
Revenues were $51.1 million for the quarter,
slightly below prior year revenues of $51.7 million, as a 74%
increase in bitcoin production was more than offset by lower
bitcoin prices in the current year period.
The company recorded gains on the sale of
bitcoin of $17.6 million in the quarter as a result of its
previously reported program of selling bitcoin to fund operating
costs. In addition, the Company experienced lower impairments in
the carrying value of its digital assets of $11.5 million, as
bitcoin prices were generally rising during the current-year
period. In addition, the Company benefitted from the absence of a
$5.3 million unrealized loss on digital assets it held in an
investment fund in the prior year. Partially offsetting these
favorable earnings variances was lower total margin of $25.3
million, primarily resulting from lower bitcoin prices, and
increased tax expense of $4.3 million due to the establishment of a
valuation allowance at year-end 2022.
Adjusted EBITDA was $18.6 million in the current
year period compared with $9.8 million in the prior year period, as
the aforementioned gain on the sale of bitcoin, the lower
impairment charges, and absence of the unrealized loss were
partially offset by lower margin excluding depreciation and
amortization of $21.5 million.
First Quarter 2023 Production Highlights
|
Year-Over-Year Comparison |
|
Prior Quarter Comparison |
Metric |
Q1-23 |
Q1-22 |
% Δ |
|
Q1-23 |
Q4-22 |
% Δ |
BTC Produced |
2,195 |
1,259 |
74% |
|
2,195 |
1,562 |
41% |
Avg. BTC Produced per Day |
24.4 |
14.0 |
74% |
|
24.4 |
17.0 |
44% |
Operational/Energized Hash Rate
(EH/s)1 |
11.5 |
3.9 |
195% |
|
11.5 |
7.0 |
64% |
Installed Hash Rate (EH/s)1 |
15.4 |
NA |
NA |
|
15.4 |
9.1 |
69% |
|
|
|
|
|
|
|
|
Management Commentary“After
weathering a tumultuous 2022 that tested the resilience of our
entire industry, this year is off to a strong start as we grew our
hash rate, reduced our cost to mine, and improved our balance sheet
during the first quarter,” said Fred Thiel, Marathon’s chairman and
CEO. “In Q1, we grew our energized hash rate 64% from 7.0 exahashes
to 11.5 exahashes. By growing our hash rate faster than the rest of
the network and improving our uptime, we also increased our bitcoin
production. We produced a record 2,195 bitcoin during the first
three months of this year, which is a 74% increase from the prior
year.
“In addition to our energized progress, we also
improved our financial position during the quarter. We increased
our cash position by $12 million, reduced our debt by $50 million,
and increased our unrestricted bitcoin holdings by 3,132 bitcoin
after we prepaid our term loan and terminated our credit facilities
with Silvergate Bank. We exited the quarter with approximately
$124.9 million in unrestricted cash and cash equivalents and 11,466
bitcoin, the market value of which was approximately $326.5 million
on March 31.
“With more hash rate coming online in the months
ahead, Marathon remains on track to reach our 23 exahash goal near
the middle of this year. We remain optimistic that we can achieve
our primary growth targets and establish Marathon as one of the
largest, most energy efficient, and most technologically advanced
Bitcoin mining operations globally.”
Q1 2023 Earnings Webcast and Conference
CallMarathon Digital Holdings will hold a webcast and
conference call tomorrow, May 11, at 8:30 a.m. Eastern time to
discuss its financial results for the quarter ended March 31,
2023.
To register to participate in the conference
call, or to listen to the live audio webcast, please use this link.
The webcast will also be broadcast live and available for replay
via the investor relations section of the Company’s website.
Date: Thursday, May 11, 2023Time: 8:30 a.m.
Eastern time (5:30 a.m. Pacific time)Registration link: LINK
If you have any difficulty connecting with the
conference call, please contact Marathon’s investor relations team
at ir@mara.com.
Investor Notice Investing
in our securities involves a high degree of risk. Before making an
investment decision, you should carefully consider the risks,
uncertainties and forward-looking statements described under "Risk
Factors" in Item 1A of our most recent Annual Report on Form 10-K
for the fiscal year ended December 31, 2022, filed with the SEC on
March 16, 2023. If any of these risks were to occur, our business,
financial condition or results of operations would likely suffer.
In that event, the value of our securities could decline, and you
could lose part or all of your investment. The risks and
uncertainties we describe are not the only ones facing us.
Additional risks not presently known to us or that we currently
deem immaterial may also impair our business operations. In
addition, our past financial performance may not be a reliable
indicator of future performance, and historical trends should not
be used to anticipate results in the future. Future changes in the
network-wide mining difficulty rate or Bitcoin hash rate may also
materially affect the future performance of Marathon's production
of bitcoin. Additionally, all discussions of financial metrics
assume mining difficulty rates as of May 2023. See "Forward-Looking
Statements" below.
Forward-Looking
Statements Statements made in this press release
include forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934. Forward-looking statements can
be identified by the use of words such as “may,” “will,” “plan,”
“should,” “expect,” “anticipate,” “estimate,” “continue,” or
comparable terminology. Such forward-looking statements are
inherently subject to certain risks, trends and uncertainties, many
of which the Company cannot predict with accuracy and some of which
the Company might not even anticipate and involve factors that may
cause actual results to differ materially from those projected or
suggested. Readers are cautioned not to place undue reliance on
these forward-looking statements and are advised to consider the
factors listed above together with the additional factors under the
heading “Risk Factors” in the Company's Annual Reports on Form
10-K, as may be supplemented or amended by the Company's Quarterly
Reports on Form 10-Q. The Company assumes no obligation to update
or supplement forward-looking statements that become untrue because
of subsequent events, new information or otherwise.
About Marathon Digital
Holdings Marathon is a digital asset technology
company that focuses on supporting and securing the Bitcoin
ecosystem. The Company is currently in the process of becoming one
of the largest and most sustainably powered Bitcoin mining
operations in North America.
Marathon Digital
Holdings Company Contact: Telephone:
800-804-1690Email: ir@mara.com
Marathon Digital Holdings Media
Contact:Email: marathon@wachsman.com
|
|
|
|
MARATHON DIGITAL HOLDINGS,
INC.CONSOLIDATED CONDENSED STATEMENTS OF
OPERATIONS (unaudited)(In thousands, except share
and per share amounts) |
|
|
|
|
|
|
Three months ended March 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
Total
revenues |
$ |
51,132 |
|
|
$ |
51,723 |
|
Costs and
expenses |
|
|
|
|
Cost of
revenues |
|
|
|
|
Cost of revenues - Energy, hosting and other |
|
(33,377 |
) |
|
|
(12,522 |
) |
|
Cost of revenues - Depreciation and amortization |
|
(17,733 |
) |
|
|
(13,877 |
) |
|
Total cost of revenues |
|
(51,110 |
) |
|
|
(26,399 |
) |
|
Operating
expenses |
|
|
|
|
General and administrative
expenses |
|
(15,344 |
) |
|
|
(15,515 |
) |
|
Impairment of digital
assets |
|
(6,151 |
) |
|
|
(17,647 |
) |
|
Impairment of patents |
|
- |
|
|
|
(919 |
) |
|
Realized gains on digital
assets sold and unrealized losses on digital assets loan
receivable |
|
17,615 |
|
|
|
(461 |
) |
|
Realized and unrealized gains
(losses) on digital assets held within investment fund |
|
- |
|
|
|
(5,328 |
) |
|
Total operating expenses |
|
(3,880 |
) |
|
|
(39,870 |
) |
Operating
loss |
|
(3,858 |
) |
|
|
(14,546 |
) |
Other
non-operating income |
|
791 |
|
|
|
247 |
|
Loss on
extinguishment of debt |
|
(333 |
) |
|
|
- |
|
Interest
expense |
|
(3,760 |
) |
|
|
(2,814 |
) |
Loss before income
taxes |
|
(7,160 |
) |
|
|
(17,113 |
) |
Income tax benefit
(expense) |
|
(75 |
) |
|
|
4,262 |
|
Net loss |
$ |
(7,235 |
) |
|
$ |
(12,851 |
) |
|
|
|
|
|
Net loss per
share, basic and diluted: |
$ |
(0.05 |
) |
|
$ |
(0.12 |
) |
Weighted average
shares outstanding, diluted: |
|
159,186,506 |
|
|
|
103,102,596 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental Information: |
Three months ended March 31, |
(in
thousands unless otherwise indicated) |
|
2023 |
|
|
|
2022 |
|
Operating
Metrics: |
|
|
|
Bitcoin production during the period (in bitcoin) |
|
2,195 |
|
|
|
1,259 |
|
Average bitcoin production per day |
|
24.4 |
|
|
|
14.0 |
|
Total margin (revenues less total costs of revenues) |
$ |
22 |
|
|
$ |
25,324 |
|
Total margin excluding depreciation and amortization |
$ |
17,755 |
|
|
$ |
39,201 |
|
General and administrative expenses excluding stock-based
compensation |
$ |
(11,399 |
) |
|
$ |
(6,240 |
) |
Installed Hash Rate (EH/s) at end of period (1) |
|
15.4 |
|
|
|
3.9 |
|
Energized Hash Rate (EH/s) at end of period (1) |
|
11.5 |
|
|
|
3.9 |
|
|
|
|
|
|
Adjusted
EBITDA (2) |
|
|
|
Net loss |
$ |
(7,235 |
) |
|
$ |
(12,851 |
) |
|
Exclude: Interest expense |
|
3,760 |
|
|
|
2,814 |
|
|
Exclude: Income tax expense
(benefit) |
|
75 |
|
|
|
(4,262 |
) |
EBIT |
|
(3,400 |
) |
|
|
(14,299 |
) |
|
Exclude: Depreciation and
Amortization |
|
17,733 |
|
|
|
13,877 |
|
EBITDA |
|
14,333 |
|
|
|
(422 |
) |
Adjustments for
non-cash and non-recurring items: |
|
|
|
|
Stock compensation
expense |
|
3,945 |
|
|
|
9,275 |
|
|
Loss from extinguishment of
debt |
|
333 |
|
|
|
- |
|
|
Impairment of patents |
|
- |
|
|
|
919 |
|
Adjusted
EBITDA |
$ |
18,611 |
|
|
$ |
9,772 |
|
(1) The Company defines Energized Hash Rate as
the total hash rate that could theoretically be generated if all
mining rigs that have been operational / energized are currently in
operation and running at 100% of the manufacturers’ specifications
(includes mining servers that are offline for maintenance or
similar reasons). The Company uses this metric as an indicator of
progress in bringing rigs on-line. The Company defines Installed
Hash Rate as the sum of Energized Hash Rate and hash rate that has
been installed but is not yet operational (e.g. mining rigs that
have been installed, but are not yet energized and in operation).
The Company uses this metric as an indicator of progress in
deploying mining rigs at its production sites. Hash rates are
estimates based on the manufacturers’ specifications. All figures
are rounded.
The Company believes that these metrics are
useful as an indicator of potential bitcoin production. However,
these metrics cannot be tied directly to any production level
expected to be actually achieved as (a) there may be delays in the
energization of Installed Hash Rate (b) the Company cannot predict
when installed and energized rigs may be offline for any reason,
including curtailment or machine failure and (c) the Company cannot
predict Global Hash Rate (and therefore the Company’s share of the
Global Hash Rate), which has significant impact on the Company’s
ability to generate bitcoin in any given period.
(2) Non-GAAP Financial
Measures
We provide investors with a reconciliation from
GAAP net income to the non-GAAP measure known as Adjusted EBITDA as
a component of this earnings release. For each period disclosed, we
define “Adjusted EBITDA” as (a) GAAP net income (or loss) plus (b)
adjustments to add back the impacts of (1) depreciation and
amortization, (2) interest expense, (3) income tax expense and (4)
adjustments for non-cash and non-recurring items, which currently
include: (i) stock compensation expense, net of withholding taxes
(ii) impairment of patents and (iii) impairment of assets due to a
vendor bankruptcy filing. Adjusted EBITDA is not a measurement of
financial performance under GAAP and, as a result, this measure may
not be comparable to similarly titled measures of other companies.
Non-GAAP financial measures are subject to material limitations as
they are not in accordance with, or a substitute for, measurements
prepared in accordance with GAAP. Adjusted EBITDA is not meant to
be considered in isolation and should be read only in conjunction
with our Quarterly Reports on Form 10-Q and our Annual Reports on
Form 10-K as filed with the Securities and Exchange Commission.
Management uses both Adjusted EBITDA and the supplemental
information provided herein as a means of understanding, managing
and evaluating business performance and to help inform operating
decision making. We rely primarily on our Consolidated Condensed
Financial Statements to understand, manage, and evaluate our
financial performance and use the non-GAAP financial measures only
supplementally.
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