MARA Holdings, Inc. quarterly report, Q2 FY2024

Business Context and Reporting Period

Company: Marathon Digital Holdings, Inc. (MARA)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Quarter and six months ended June 30, 2024
Business Overview: MARA is a global leader in digital asset compute, primarily focused on Bitcoin mining and holding digital assets as a long-term treasury investment. As of June 30, 2024, the company operated approximately 250,000 mining rigs with 31.5 exahashes per second (EH/s) of installed hash rate. The company recently adopted a "HODL" strategy, retaining all mined Bitcoin and making strategic open market purchases.

Key Financial Metrics

Metric (in thousands, except per share) Q2 2024 Q2 2023 6M 2024 6M 2023
Total Revenues $145,139 $81,759 $310,337 $132,891
Net Income (Loss) $(199,659) $(8,962) $137,514 $109,737
Diluted EPS $(0.72) $(0.07) $0.50 $0.66
Adjusted EBITDA $(85,140) $35,807 $443,662 $180,352
Cash and Cash Equivalents $256,027 $112,505 (Beg) $256,027 $112,505 (Beg)
Digital Assets (Fair Value) $1,175,732 $639,660 $1,175,732 $639,660
Notes Payable (Long-term) $326,513 $325,654 $326,513 $325,654

Note: Q2 2024 Net Loss was significantly impacted by a $148.0 million unrealized loss on digital assets. Six-month Net Income included a $340.8 million unrealized gain on digital assets.

Material Changes vs. Prior Period

  • Revenue Growth: Q2 2024 revenue increased 78% year-over-year to $145.1 million, driven by a 136% increase in the average Bitcoin price, partially offset by a 29% decrease in Bitcoin production due to the April 2024 halving event and equipment failures.
  • Acquisitions: The company completed two major acquisitions in 2024:
    • GC Data Center Equity Holdings (Jan 2024): Acquired for $189.6 million, adding 390 MW of capacity. The company is transitioning these sites from hosting services to self-mining.
    • APLD - Rattlesnake Den I (Apr 2024): Acquired for $96.8 million, adding 200 MW of nameplate capacity in Garden City, Texas.
  • Bitcoin Holdings: Bitcoin holdings increased to 18,488 BTC (fair value ~$1.16 billion) as of June 30, 2024, a 47% increase from the prior year period.
  • Cost Structure: Cost of revenues increased significantly due to higher hash rates and depreciation from new acquisitions. Depreciation and amortization expenses rose 136% in Q2 2024 compared to Q2 2023.
  • Stock-Based Compensation: Increased to $28.3 million in Q2 2024 from $4.5 million in Q2 2023, driven by new performance-based awards and headcount growth.

Guidance, Outlook, and Risks

  • Treasury Strategy: On July 25, 2024, MARA announced a full "HODL" strategy, retaining all mined Bitcoin and purchasing an additional $100 million in Bitcoin. The company intends to fund operations through cash reserves and equity issuances rather than selling mined assets.
  • Operational Outlook: The company expects to expand the Garden City site to 200 MW in 2024. It is also scaling Kaspa mining operations to diversify revenue.
  • Liquidity: As of June 30, 2024, the company held $256.0 million in cash and $1.18 billion in digital assets. It maintains an At-The-Market (ATM) offering program with $1.15 billion remaining capacity.
  • Legal Proceedings:
    • Ho v. Marathon: A jury returned a verdict of $138.8 million against the company on July 18, 2024, regarding a breach of a non-disclosure agreement. The company intends to appeal and challenge the award amount.
    • Class Action/Derivative Suits: Multiple shareholder derivative and class action complaints remain pending regarding prior accounting restatements.
  • Internal Controls: Management disclosed a material weakness in internal control over financial reporting related to revenue recognition controls, which remains open as of June 30, 2024.

Investor Verification Checklist

  • Bitcoin Price Sensitivity: Verify the impact of Bitcoin price volatility on the company's reported Net Income and Adjusted EBITDA, given the significant unrealized gains/losses recognized under ASU 2023-08.
  • Legal Exposure: Monitor the status of the $138.8 million jury verdict in Ho v. Marathon and potential settlement or appeal outcomes.
  • Capital Allocation: Assess the sustainability of the "HODL" strategy and the company's reliance on equity dilution (ATM offerings) to fund operations and growth.
  • Operational Efficiency: Track the "Cost per Petahash per day" metric ($41.0 in Q2 2024) to ensure cost improvements offset the reduced block rewards from the Bitcoin halving.
  • Internal Controls: Review progress on remediation of the material weakness in revenue recognition controls to ensure future financial reporting reliability.