MARA Holdings, Inc. (formerly Marathon Digital Holdings, Inc.) — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 16, 2023. Unless noted, dollar amounts below are in millions. The filing includes unaudited fourth-quarter data. The company mines bitcoin and stated its strategy was to retain bitcoin produced, after paying cash operating costs, as a long-term investment.
Financial performance and position
| Metric | 2022 | 2021, restated |
|---|---|---|
| Revenue | $117.8 | $159.2 |
| Total cost of revenue | $151.4 | $42.4 |
| Total margin (revenue less cost of revenue) | $(33.7) | $116.8 |
| Net loss | $(686.7) | $(37.1) |
| Adjusted EBITDA (non-GAAP) | $(533.7) | $162.7 |
| Bitcoin produced | 4,144 BTC | 3,197 BTC |
| Cash used in operating activities | $(176.5) | $(19.0) |
| Cash used in investing activities | $(390.2) | $(891.1) |
| Cash provided by financing activities | $410.7 | $1,037.3 |
- Revenue fell 26% year over year: lower bitcoin prices reduced revenue by $77.3 million, partly offset by a $44.6 million production-related increase. Production rose about 30%, but facility delays and downtime weighed on output.
- Costs rose sharply, including energy, hosting and other costs of $72.7 million and depreciation and amortization of $78.7 million. Management cited higher unit costs and accelerated costs from the Hardin facility exit.
- Major 2022 charges included $332.9 million of impairment on mining equipment and vendor advances, $173.2 million of bitcoin impairment, $55.7 million of impairment tied to Compute North, and $85.0 million of realized and unrealized losses on bitcoin held in the investment fund. A $83.9 million gain on equipment sales partly offset these items.
- At year-end, cash and cash equivalents were $103.7 million, with $8.8 million of restricted cash. Current assets were $277.5 million and current liabilities were $26.1 million. Operating cash outflow increased substantially; vendor advances for mining equipment were a major investing use.
- Year-end debt included $747.5 million principal of 1% convertible notes due 2026 (reported net of discount at $732.3 million) and a $50.0 million term loan (reported net at $49.9 million). The company had no RLOC borrowings at year-end. It repaid the Silvergate term loan and terminated both Silvergate facilities on March 8, 2023.
- At December 31, the company reported 12,232 BTC with a carrying value of $190.7 million and fair value of about $202.4 million; 4,416 BTC were pledged as collateral. Cash, cash equivalents and restricted cash totaled $112.5 million on the cash flow statement.
Fourth-quarter snapshot and changes
Unaudited fourth-quarter 2022 revenue was $28.4 million and net loss was $392.7 million. The quarter included $332.9 million of mining-rig and vendor-advance impairment, $16.7 million of additional Compute North deposit impairment, and $26.4 million of bitcoin impairment. The filing attributes the severe annual deterioration to falling bitcoin prices, operating disruption and significant noncash impairments, in addition to lower mining margins.
Hashrate increased from 3.5 exahashes per second at the start of 2022 to 7.0 at year-end. The company exited its Hardin, Montana facility, redeployed rigs, and faced delays energizing McCamey, Texas. Compute North’s September 2022 bankruptcy disrupted hosting arrangements; US Bitcoin took over operations at McCamey, Granbury and Kearney in December.
Restatement, outlook, risks and contingencies
- Restatement and controls: The filing restated 2021 annual financial statements and interim periods in 2021 and 2022. Corrections addressed revenue presentation (principal versus agent), bitcoin impairment measurement, consolidation and presentation of the NYDIG fund, asset disposals, other items and related taxes. The 2022 annual statements were not identified as restated. Management found disclosure controls ineffective and material weaknesses in financial reporting; the auditor issued an adverse opinion on internal control over financial reporting, while giving an unqualified opinion on the financial statements. SEC staff comments remained unresolved.
- 2023 plans: Management targeted more than 23 EH/s of operational hashrate by the third quarter of 2023, versus 7.0 EH/s at year-end 2022, by energizing its planned fleet of nearly 200,000 rigs. The company also planned immersion-mining deployments and a 20% interest in an Abu Dhabi joint venture for two sites totaling 250 MW, with operations expected in the second half of 2023. These are forward-looking targets, not guarantees.
- Liquidity and banking: Management expected liquidity from cash, bitcoin sales and capital markets, including its at-the-market equity program. The company raised $361.5 million net through common-stock sales in 2022. It reported approximately $142 million of deposits at Signature Bridge Bank on March 12, 2023, after Signature Bank’s closure; normal banking activities resumed the following day.
- Compute North recovery: The company received an allowed unsecured claim of $40 million under the bankruptcy plan, but stated recovery amount and timing were uncertain; its preferred equity interests were expected to recover nothing.
- Other risks and contingencies: Key exposures include bitcoin-price volatility, network difficulty and the 2024 halving, electricity costs, reliance on third-party hosting and custody, regulatory uncertainty, banking and financing access, and potential dilution. Bitcoin impairment under the company’s accounting policy cannot be reversed if prices later recover. The filing also describes an ongoing SEC subpoena concerning the Hardin facility and a pending Michael Ho lawsuit; management said the lawsuit’s outcome could not be predicted.
Investor verification priorities
- Review the restatement disclosures and confirm how the corrected accounting affected reported trends; assess the unresolved SEC staff comments and the plan and progress for remediating material weaknesses.
- Track actual energization, hashrate, production, mining costs and capital required to meet the 2023 expansion targets.
- Verify liquidity after repayment of Silvergate debt, the status and availability of bank deposits, and dependence on bitcoin sales or further equity issuance.
- Assess the value and recoverability of vendor advances, the $40 million Compute North claim, and the scale of future impairment exposure.
- Review the convertible notes’ maturity and potential dilution, the terms and funding obligations of the Abu Dhabi joint venture, and updates on legal and regulatory matters.