MARA Holdings, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing also provides unaudited quarterly results, including Q4. The company was named Marathon Digital Holdings, Inc. in the filing.
Business context and operating performance
MARA primarily mines and holds bitcoin. It mined 12,852 bitcoin in 2023, up 210.1% from 4,144 in 2022. At year-end, it operated approximately 210,000 rigs, with 24.7 exahashes per second of energized hash rate; 55% of fleet power usage came from sustainable energy sources. The company is shifting from a predominantly third-party-hosted model toward a mix of hosted and self-owned sites.
Financial results and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $387.5 million | $117.8 million |
| Total cost of revenue | $402.9 million | $151.4 million |
| Total margin | $(15.3) million | $(33.7) million |
| Total margin excluding depreciation and amortization (non-GAAP) | $164.2 million | $45.0 million |
| Operating income (loss) | $220.9 million | $(673.5) million |
| Net income (loss) | $261.2 million | $(694.0) million |
| Adjusted EBITDA (non-GAAP) | $419.9 million | $(543.4) million |
| Net cash used in operating activities | $(315.7) million | $(176.5) million |
Revenue rose 229%, primarily from higher bitcoin production and, to a lesser extent, higher average bitcoin prices. Despite positive total margin excluding depreciation, GAAP total margin remained negative. FY2023 net income included a $331.5 million digital-asset gain under the newly adopted fair-value accounting model and an $82.3 million gain from extinguishing debt; these materially affected reported earnings.
At December 31, 2023, cash and cash equivalents were $357.3 million and bitcoin holdings were 15,126 bitcoin, valued at $639.7 million; together they totaled approximately $997.0 million. The company reported $325.7 million of net convertible notes, bearing 1% interest and due December 2026, and no term-loan balance. Financing cash flow was $555.9 million, primarily from equity issuance; investing cash flow was $4.6 million, including $264.9 million of bitcoin-sale proceeds and $158.9 million of advances to vendors.
Q4 2023 revenue was $156.8 million, total margin was $10.7 million, operating income was $185.1 million, and net income was $151.8 million. In Q4 2022, revenue was $28.4 million, total margin was $(15.1) million, operating loss was $(410.9) million, and net loss was $(391.6) million. Quarterly figures are unaudited.
Material changes and significant items
- Hash rate grew substantially: energized capacity increased from 7.0 exahashes per second at year-end 2022 to 24.7 at year-end 2023.
- The company early adopted ASU 2023-08, measuring qualifying crypto assets at fair value through earnings, and changed its bitcoin cost-flow method from LIFO to FIFO. The fair-value adoption produced an $11.5 million opening-equity adjustment and contributed to FY2023’s $331.5 million digital-asset gain.
- In September 2023, MARA exchanged $416.8 million principal amount of convertible notes for 31.7 million common shares, recognizing an $82.6 million gain. Common shares outstanding increased from 145.6 million at year-end 2022 to 242.8 million at year-end 2023.
- Bitcoin sales generated $264.9 million in proceeds in 2023; MARA sold 9,482 bitcoin to help fund operating costs. It reported no comparable sales in 2022.
- The company recorded no 2023 impairment charges comparable to 2022’s $332.9 million mining-equipment and vendor-advance impairment or $182.9 million digital-asset impairment. Prior-year results also included $55.7 million of Compute North-related impairments and $26.1 million of legal reserves.
Outlook, risks and contingencies
- Management targets operational hash rate of approximately 35–37 exahashes per second in 2024 and 50 by year-end 2025. These are targets, not guarantees; results depend on deployment, uptime, network difficulty, energy costs and bitcoin economics.
- The next bitcoin halving was anticipated around April 2024, reducing the block reward from 6.25 to 3.125 bitcoin. Management warned this could pressure mining revenue, particularly if bitcoin prices or transaction fees do not offset the lower reward.
- On January 12, 2024, MARA completed the acquisition of two mining sites with 390 megawatts of capacity for $179.0 million cash, subject to working-capital adjustments. A Paraguay joint venture is expected to bring approximately 1.1 exahashes online during the quarter ending June 30, 2024.
- MARA said it had sold shares under its $750 million 2023 at-the-market (ATM) program up to approximately the program limit after year-end. It also intended to launch a new ATM program of up to $1.5 billion. Further issuance could dilute shareholders. As of February 21, 2024, 267.6 million common shares were outstanding.
- Hosting commitments have estimated minimum payments of $920.8 million for 2024–2026 and $139.0 million for 2027–2028, excluding certain variable power and service fees. This is a material future cash obligation.
- Risks include bitcoin-price volatility, rising network difficulty, power costs and availability, reliance on third-party hosts, cybersecurity and custody risks, evolving regulation, and possible dilution or limited access to capital markets. The $40 million unsecured claim against bankrupt Compute North has uncertain recovery and timing. Securities-related class and derivative actions and an SEC subpoena/inquiry are also disclosed; outcomes are uncertain. MARA is cooperating with the SEC.
- The financial-statement auditor gave an unqualified opinion on the financial statements but an adverse opinion on internal control over financial reporting. MARA disclosed a material weakness involving revenue-related IT controls or an alternative manual control, and stated disclosure controls were not effective at year-end. SEC staff comments remain unresolved and could lead to further changes or restatements.
Important facts for investors to verify
- Whether FY2023 earnings and reported margins are sustainable apart from bitcoin fair-value gains and the debt-extinguishment gain.
- Actual post-halving production, realized bitcoin prices, transaction-fee contribution, energy costs and operating hash rate relative to targets.
- Cash use, hosting commitments and the funding required for expansion, including whether planned ATM issuance causes material dilution.
- Integration, cost savings and operating results from the January 2024 site acquisition, plus progress and economics of international joint ventures.
- Remediation of the revenue-control material weakness and resolution of outstanding SEC staff comments, including any further accounting changes or restatements.
- Recovery prospects for the Compute North claim and developments in the disclosed litigation and SEC inquiry.