Marathon Digital Holdings, Inc.
(NASDAQ:MARA) ("Marathon"
or "Company"), one of the largest enterprise Bitcoin
self-mining companies in North America, reported financial results
for the first quarter ended March 31, 2021.
First Quarter and Recent Financial
Highlights
- Total revenues increased to $9.2 million from $592,000 in the
first quarter of 2020
- Primarily due to a $132 million unrealized gain from the change
in value of Marathon’s $150 million Bitcoin investment made in
January 2021, net income improved to $83.4 million, or $0.87 per
diluted share, from net loss of $1.1 million, or ($0.12) per
diluted share
- Adjusted EBITDA improved to income of $137.4 million from a
loss of $479,000 in the first quarter of 2020
- As of May 6, cash was approximately
$204.4 million and total liquidity, defined as cash and bitcoin
holdings, was approximately $503.2 million
First Quarter and Recent Bitcoin Mining
Highlights
- Produced 192 newly minted bitcoins in the first quarter of
2021; as of May 6, produced 386 newly minted bitcoins in 2021
- Increased the number of active miners to 6,800 miners,
generating 0.71 EH/s in the first quarter of 2021; as of May 6, the
Company’s total active mining fleet consisted of 13,644 miners,
generating approximately 1.46 EH/s
- As of May 6, 2021, held
approximately 5,324 bitcoins, each of which had a market price of
approximately $56,135; as a result, the approximate value of
Marathon’s bitcoins held as digital currencies was approximately
$298.8 million
First Quarter and Recent Corporate
Highlights
- Purchased 4,812.66 bitcoins for $150 million (average purchase
price of $31,168 per BTC)
- Rebranded to Marathon Digital Holdings, reflecting the
Company’s position as a leading digital asset technology
company
- Strengthened management team by appointing Fred Thiel to chief
executive officer as Merrick Okamoto remained executive chairman of
the board of directors
- Became the first North American
enterprise Bitcoin miner to produce Bitcoin in a manner that
adheres to anti-money laundering (AML) and the U.S. Department of
the Treasury’s Office of Foreign Asset Control’s (OFAC’s) standards
by directing all of the Company’s hashrate to the Marathon OFAC
Pool
Management Commentary“As our financial and
operational results for the first quarter demonstrate, 2021 is
lining up to be a banner year for Marathon as we are transforming
our business into one of the largest enterprise Bitcoin mining
operations in North America during what is currently one of the
most profitable mining environments in Bitcoin’s history,” said
Fred Thiel, Marathon’s CEO. “Since the start of 2021, we have taken
several steps to establish Marathon as one of the leading pure-play
Bitcoin investment opportunities by increasing our hashrate over
689%, rebranding our organization, and increasing our total bitcoin
holdings to over 5,324 bitcoins. We have continued to build on that
leadership position by becoming the first Bitcoin miner to produce
bitcoin that is fully compliant anti-money laundering laws and
OFAC’s standards by directing all of our hashrate to the Marathon
OFAC Pool. With new miners being delivered and installed every day,
we remain on track to achieve 10.37 EH/s by early 2022, and we look
forward to continuing to scale the business for the betterment of
our shareholders and the broader Bitcoin ecosystem in the coming
quarters.”
Marathon’s chief financial officer, Sim Salzman, commented, “The
first quarter marked a substantial improvement in our financial
performance as we grew revenues to $9.2 million, generated net
income of $83.4 million, and earned $137.4 million in adjusted
EBITDA. Additionally, we exited the quarter with $211.9 million in
cash and with a total liquidity, defined as cash and bitcoin
holdings, of approximately $504.5 million. While Bitcoin’s future
price and the network difficulty rate are subject to change, we
believe Marathon’s financial performance will continue to improve
as more miners come online, increasing our ability to generate
revenues and yielding better economies of scale, which will drive
profitability.”
First Quarter 2021 Financial ResultsTotal
revenue increased 1,445% to $9.2 million in the first quarter of
2021 from $592,000 million in the first quarter of 2020.
Operating loss was $47.1 million in the first quarter of 2021
compared to an operating loss of $1.1 million in the first quarter
of 2020. In the first quarter of 2021, operating expenses included
$54 million of non-cash items, including $52.1 million in non-cash
compensation and $662,000 impairment of cryptocurrencies. Excluding
non-cash items, operating gain in the first quarter of 2021 was
$6.9 million.
Net income in the first quarter of 2021 totaled $83.4 million,
or $0.87 per diluted share, compared to net loss of $1.1 million or
$(0.12) per diluted share in the first quarter of 2020. The
improvement in net income was primarily attributable to a $132
million unrealized gain from the change in value of Marathon’s $150
million Bitcoin investment via a fund-of-one made in January
2021.
Marathon previously generated net operating loss (NOL)
carry-forwards for federal and state purposes of approximately
$45.6 million and $27.2 million, respectively. As a result, the
Company did not owe corporate income taxes as of March 31,
2021.
Adjusted EBITDA in the first quarter of 2021 was $137.4 million,
compared to an adjusted EBTIDA loss of $479,000 in the first
quarter of 2020.
In the first quarter of 2021, the Company generated 192
bitcoins. The Company last sold bitcoin on October 21, 2020, and
since then, has been accumulating or “hodling” all bitcoin
generated. The Company supports the blockchain development by
sponsoring one of the developers in the form of a monthly grant
paid using its mined bitcoin. As of March 31, 2021, the Company
held approximately 5,129.8 bitcoins, including the 4,813 bitcoins
the Company purchased for an average price of $31,168 by investing
$150 million into a fund-of-one.
Marathon’s Digital AssetsFor the first quarter
ended March 31, 2021, the carrying value of Marathon’s digital
assets (comprised solely of bitcoin) was $292.6 million, which
reflects cumulative impairment charges of $662k since acquisition.
Marathon accounts for its digital assets as indefinite-lived
intangible assets, which are initially recorded at cost.
Subsequently, they are measured at cost, net of any impairment
losses incurred since acquisition. Marathon determines the fair
value of its bitcoin based on quoted (unadjusted) prices on the
active exchange that Marathon has determined is its principal
market for bitcoin. Marathon considers the lowest price of one
bitcoin quoted on the active exchange at any time since acquiring
the specific bitcoin. If the carrying value of a bitcoin exceeds
that lowest price, an impairment loss has occurred with respect to
that bitcoin in the amount equal to the difference between its
carrying value and such lowest price. Impairment losses are
recognized as “Impairment of cryptocurrencies” in Marathon’s
Consolidated Condensed Statements of Operations.
As of March 31, 2021, the average cost and average carrying
value of Marathon’s mined bitcoins were approximately $36,014 and
$33,926, respectively. As of May 6, 2021, at 6 p.m. EST,
Marathon held approximately 5,324 bitcoins, of which 4,813 are held
in an investment fund of one while the other 511 were generated by
the Company’s operations. The market price of one bitcoin in the
principal market on May 6, 2021 was approximately $56,135, and the
approximate value of the bitcoins the Company has invested in and
held as digital currencies was therefore over $503.2 million
(*unaudited).
Investor NoticeInvesting 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, 2020. 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 hashrate 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 2021. See "Safe Harbor"
below.
Forward-Looking StatementsStatements 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 HoldingsMarathon is a
digital asset technology company that mines cryptocurrencies with a
focus on the blockchain ecosystem and the generation of digital
assets.
Marathon Digital
Holdings Company Contact:Jason AssadTelephone:
678-570-6791Email: Jason@marathonpg.com
Marathon Digital Holdings Investor
Contact:Gateway Investor RelationsMatt Glover and Charlie
SchumacherTelephone:
949-574-3860Email: MARA@gatewayir.com
Marathon Digital
HoldingsCondensed Consolidated Balance
Sheets
|
March 31, |
|
December 31, |
|
2021 |
|
|
|
2020 |
|
|
(Unaudited) |
|
(Audited) |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
211,934,086 |
|
|
$ |
141,322,776 |
|
Digital currencies |
|
10,746,219 |
|
|
|
2,271,656 |
|
Other receivable |
|
- |
|
|
|
74,767,226 |
|
Deposit |
|
128,869,316 |
|
|
|
65,647,592 |
|
Investment fund |
|
281,822,950 |
|
|
|
- |
|
Prepaid expenses and other current assets |
|
2,513,812 |
|
|
|
2,399,965 |
|
Total current assets |
|
635,886,383 |
|
|
|
286,409,215 |
|
|
|
|
|
Other assets: |
|
|
|
Property and equipment, net of accumulated depreciation and
impairment charges of 7,200,501 and 6,480,359 for March 31, 2021
and December 31, 2020, respectively |
|
41,960,893 |
|
|
|
17,224,321 |
|
Prepaid service contract |
|
7,854,000 |
|
|
|
8,415,000 |
|
Right-of-use assets |
|
- |
|
|
|
200,301 |
|
Intangible assets, net of accumulated amortization of 225,392 and
207,598 for March 31, 2021 and December 31, 2020, respectively |
|
984,608 |
|
|
|
1,002,402 |
|
Total other assets |
|
50,799,501 |
|
|
|
26,842,024 |
|
TOTAL
ASSETS |
$ |
686,685,884 |
|
|
$ |
313,251,239 |
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
Accounts payable and accrued expenses |
$ |
985,968 |
|
|
$ |
999,742 |
|
Current portion of lease liability |
|
- |
|
|
|
121,596 |
|
Warrant liability |
|
1,914,333 |
|
|
|
322,437 |
|
Total current liabilities |
|
2,900,301 |
|
|
|
1,443,775 |
|
Long-term liabilities |
|
|
|
SBA PPP loan payable |
|
62,500 |
|
|
|
62,500 |
|
Total long-term liabilities |
|
62,500 |
|
|
|
62,500 |
|
Total liabilities |
|
2,962,801 |
|
|
|
1,506,275 |
|
|
|
|
|
Commitments and
Contingencies |
|
|
|
|
|
|
|
Stockholders' Equity: |
|
|
|
Preferred stock, 0.0001 par value, 50,000,000 shares authorized, no
shares issued and outstanding at December 31, 2020 and December 31,
2019, respectively |
|
- |
|
|
|
- |
|
Common stock, 0.0001 par value; 200,000,000 shares authorized;
99,370,465 and 81,974,619 issued and outstanding at March 31, 2021
and December 31, 2020, respectively |
|
9,937 |
|
|
|
8,197 |
|
Additional paid-in capital |
|
716,862,400 |
|
|
|
428,242,763 |
|
Accumulated other comprehensive loss |
|
(450,719 |
) |
|
|
(450,719 |
) |
Accumulated deficit |
|
(32,698,535 |
) |
|
|
(116,055,277 |
) |
Total stockholders’
equity |
|
683,723,083 |
|
|
|
311,744,964 |
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY |
$ |
686,685,884 |
|
|
$ |
313,251,239 |
|
Marathon Digital
HoldingsCondensed Consolidated Statements of
Operations
|
|
For the Three Months Ended |
|
|
|
March 31, |
|
|
|
|
2021 |
|
|
|
2020 |
|
|
Revenues |
|
|
|
|
|
Cryptocurrency mining revenue |
|
$ |
9,152,815 |
|
|
$ |
592,487 |
|
|
Total
revenues |
|
|
9,152,815 |
|
|
|
592,487 |
|
|
|
|
|
|
|
|
Operating costs and
expenses |
|
|
|
|
|
Cost of revenue |
|
|
2,406,415 |
|
|
|
1,153,241 |
|
|
Compensation and related taxes |
|
|
52,405,786 |
|
|
|
233,657 |
|
|
Consulting fees |
|
|
113,606 |
|
|
|
41,812 |
|
|
Professional fees |
|
|
313,032 |
|
|
|
146,642 |
|
|
General and administrative |
|
|
307,191 |
|
|
|
108,937 |
|
|
Impairment of mined cryptocurrency |
|
|
662,199 |
|
|
|
- |
|
|
Total operating expenses |
|
|
56,208,229 |
|
|
|
1,684,289 |
|
|
Operating
loss |
|
|
(47,055,414 |
) |
|
|
(1,091,802 |
) |
|
Other income
(expenses) |
|
|
|
|
|
Other income |
|
|
(1,470 |
) |
|
|
106,408 |
|
|
Change in fair value of investment in NYDIG fund |
|
|
131,822,950 |
|
|
|
- |
|
|
Realized gain (loss) on sale of digital currencies |
|
|
(54 |
) |
|
|
(4,221 |
) |
|
Change in fair value of warrant liability |
|
|
(1,591,895 |
) |
|
|
9,786 |
|
|
Change in fair value of mining payable |
|
|
- |
|
|
|
(66,548 |
) |
|
Interest income |
|
|
183,828 |
|
|
|
1,880 |
|
|
Interest expense |
|
|
(1,203 |
) |
|
|
(13,435 |
) |
|
Total other (expenses)
income |
|
|
130,412,156 |
|
|
|
33,870 |
|
|
Income (loss) before
income taxes |
|
$ |
83,356,742 |
|
|
$ |
(1,057,932 |
) |
|
Income tax expense |
|
|
- |
|
|
|
- |
|
|
Net income
(loss) |
|
$ |
83,356,742 |
|
|
$ |
(1,057,932 |
) |
|
|
|
|
|
|
|
Net income (loss) per
share, basic: |
|
$ |
0.88 |
|
|
$ |
(0.12 |
) |
|
Net income (loss) per
share, diluted: |
|
$ |
0.87 |
|
|
$ |
(0.12 |
) |
|
Weighted average
shares outstanding, basic: |
|
|
94,350,216 |
|
|
|
8,655,525 |
|
|
Weighted average
shares outstanding, diluted: |
|
|
96,251,240 |
|
|
|
8,655,525 |
|
|
Marathon Digital HoldingsEBITDA
for the three months ended March 31, 2021 and 2020
|
|
For the Three Months Ended |
|
For the Three Months Ended |
|
|
March 31, |
|
March 31, |
|
|
|
2021 |
|
|
|
2020 |
|
Revenues |
|
|
|
|
Cryptocurrency mining revenue |
|
$ |
9,152,815 |
|
|
$ |
592,487 |
|
|
|
|
|
|
Total
revenues |
|
|
9,152,815 |
|
|
|
592,487 |
|
|
|
|
|
|
Operating costs and
expenses |
|
|
|
|
Cost of revenue |
|
|
2,406,415 |
|
|
|
1,153,241 |
|
Compensation and related taxes |
|
|
52,405,786 |
|
|
|
233,657 |
|
Consulting fees |
|
|
113,606 |
|
|
|
41,812 |
|
Professional fees |
|
|
313,032 |
|
|
|
146,642 |
|
General and administrative |
|
|
307,191 |
|
|
|
108,937 |
|
Impairment on cryptocurrency |
|
|
662,199 |
|
|
|
- |
|
Total operating expenses |
|
|
56,208,229 |
|
|
|
1,684,289 |
|
Operating
loss |
|
|
(47,055,414 |
) |
|
|
(1,091,802 |
) |
Other income
(expenses) |
|
|
|
|
Other income |
|
|
(1,470 |
) |
|
|
106,408 |
|
Change in fair value of investment in NYDIG fund |
|
|
131,822,950 |
|
|
|
- |
|
Realized gain (loss) on sale of digital currencies |
|
|
(54 |
) |
|
|
(4,221 |
) |
Change in fair value of warrant liability |
|
|
(1,591,895 |
) |
|
|
9,786 |
|
Change in fair value of mining payable |
|
|
- |
|
|
|
(66,548 |
) |
Interest income |
|
|
183,828 |
|
|
|
1,880 |
|
Interest expense |
|
|
(1,203 |
) |
|
|
(13,435 |
) |
Total other (expenses)
income |
|
|
130,412,156 |
|
|
|
33,870 |
|
Income (loss) before
income taxes |
|
$ |
83,356,742 |
|
|
$ |
(1,057,932 |
) |
Income tax expense |
|
|
- |
|
|
|
- |
|
Net income
(loss) |
|
$ |
83,356,742 |
|
|
$ |
(1,057,932 |
) |
|
|
|
|
|
Non-cash adjustments to Net
Income (loss) |
|
|
|
|
Depreciation and Amortization of Fixed Assets |
|
|
720,142 |
|
|
|
528,575 |
|
Impairment Loss |
|
|
662,199 |
|
|
|
- |
|
Server Maintenance Contract Amortization |
|
|
561,000 |
|
|
|
26,825 |
|
Stock Compensation Expense |
|
|
52,087,311 |
|
|
|
23,238 |
|
|
|
|
|
|
Total Non-cash
adjustments to Net Income (Loss) |
|
$ |
54,030,652 |
|
|
$ |
578,638 |
|
|
|
|
|
|
Adjusted
EBITDA |
|
$ |
137,387,394 |
|
|
$ |
(479,294 |
) |
|
|
|
|
|
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