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 second quarter ended June 30, 2021.
Second Quarter and Recent Financial
Highlights
- Increased total revenue to $29.3 million, a 220% increase from
$9.2 million in the first quarter of 2021 and a 10,147% increase
year-over-year from $286,000 in the second quarter of 2020
- Produced 654 newly minted bitcoins in the second quarter of
2021; as of June 30, 2021, produced 846 newly minted bitcoins in
2021
- Marathon’s investment fund, which purchased 4,812.66 BTC for
approximately $150 million in January 2021, increased in fair value
by $16.9 million during the first six months of 2021
- Non-GAAP income from operations*, which excludes the impact of
depreciation and amortization of fixed assets, impairment losses on
mined cryptocurrency, server maintenance contract amortization, and
stock compensation expense, was $20.1 million, or $0.21 per diluted
share
- As of June 30, 2021, cash and cash
equivalents was $170.6 million and total liquidity, defined as cash
and bitcoin holdings, was approximately $366.5 million
* Non-GAAP income from operations does not include the change in
fair value of the Company’s investment fund, which purchased
4,812.66 BTC for approximately $150 million in January 2021.
Second Quarter and Recent Bitcoin Mining
Highlights
- Increased the number of total miners deployed to 19,395 miners,
which could generate approximately 2.09 EH/s as of June 30,
2021
- As of June 30, 2021, held
approximately 5,784 bitcoins, each of which had a market price of
approximately $34,856; as a result, the approximate fair market
value of Marathon’s bitcoins held as digital currencies was
approximately $201.6 million
Second Quarter and Recent Corporate
Highlights
- Strengthened management team by appointing Fred Thiel to chief
executive officer as Merrick Okamoto remained executive chairman of
the board of directors
- Announced binding letter of intent with Compute North to host
approximately 73,000 of the Company’s previously purchased Bitcoin
miners as part of a new 300-megawatt data center
- Appointed Georges Antoun and Jay Leupp to the board of
directors, improving Marathon’s environmental protection and “green
energy,” as well as public accounting and investment banking,
expertise
- On May 31, 2021, announced that the Company’s bitcoin mining
pool, MaraPool, was adopting and implementing Bitcoin Core version
0.21.1
- Effective June 28, 2021, Marathon’s stock added to the Russell
2000 ® Index
- Subsequent to the quarter’s end, announced the purchase of an
additional 30,000 S19j Pro miners from Bitmain, which is expected
to increase Marathon’s mining operations to approximately 133,000
miners producing approximately 13.3 EH/s once all miners are
deployed
- Further enhanced the Company’s board
of directors with the appointments of Sarita James and Said Ouissal
in August 2021
Management Commentary“In the second quarter of
2021, we continued to effectively scale our operations by
increasing our hash rate 196% sequentially from 0.7 EH/s at the end
of the first quarter to approximately 2.09 EH/s by the end of
June,” said Fred Thiel, Marathon’s CEO. “As a result, we produced
654 bitcoins in the second quarter. Those figures are continuing to
improve in the third quarter as we produced 442.2 bitcoins in the
month of July alone, despite our miners being offline for five days
to accommodate scheduled maintenance and an annual inspection of
our facilities. As of August 12, we have now produced approximately
1,441 bitcoins year-to-date, and our total amount of bitcoins held
has increased to 6,378.
“During the quarter and subsequent to its end, we also enhanced
our leadership team, we announced a new agreement with Compute
North that sets a path for our mining operations to be 70% carbon
neutral by early next year without any capital expenditure, our
mining pool signaled for Taproot, and we purchased an additional
30,000 miners from Bitmain. With shipment schedules of our
previously purchased miners scheduled to accelerate in the second
half of this year, and our mining operations expected to generate
13.3 EH/s in 2022 once fully deployed, we believe we are well
positioned to continue the positive trends established in the first
half of 2021.”
Marathon’s CFO, Sim Salzman, commented, “When comparing Q2 2021
to Q1 2021, we grew our revenues by 220% to $29.3 million while
generating non-GAAP operating income of $20.1 million. We exited
the quarter with $170.6 million in cash and with a total liquidity,
defined as cash and bitcoin holdings, of approximately $366.5
million. Given the number of non-cash items that impact our
financial results, including but not limited to depreciation
expense and impairments on our mined bitcoin holdings, we have
introduced non-GAAP operating income. This metric portrays an
operational equivalent to our formerly reported metric, adjusted
EBITDA, and we believe it will help investors more objectively
track our financial progress. Bitcoin’s future price and the
network difficulty rate are subject to change. However, we maintain
our belief that Marathon’s financial performance will continue to
improve as more miners come online, increasing our probability of
earning bitcoin.”
Second Quarter 2021 Financial ResultsTotal
revenue increased to $29.3 million, a 220% increase from $9.2
million in the first quarter of 2021 and a 10,147% increase
year-over-year from $286,000 in the second quarter of 2020.
Income from operations improved to $4.6 million in the second
quarter of 2021 from a loss from operations of $47.1 million in the
first quarter of 2021 and a loss from operations of $1.8 million in
the second quarter of 2020. In the second quarter of 2021,
operating expenses included $15.4 million of non-cash items,
including $876,000 in non-cash compensation and an $11.1 million
impairment of cryptocurrencies.
Non-GAAP income from operations was $20.1 million, or $0.21 per
diluted share, compared to $8.3 million, or $0.10 per diluted
share, in the first quarter of 2021 and a loss of $1.3 million, or
($0.08) per diluted share, in the second quarter of 2020. Non-GAAP
income from operations excludes the impact of non-cash items, such
as depreciation and amortization of fixed assets, impairment losses
on mined cryptocurrency, server maintenance contract amortization,
and stock compensation expense. Additionally, this metric does not
include the change in fair value of the Company’s investment fund,
which purchased 4,812.66 BTC for approximately $150 million in
January 2021.
The Company’s investment fund increased in fair value by $16.9
million during the first six months of 2021. During the second
quarter of 2021, due to the price of Bitcoin decreasing from
$58,725 at March 31, 2021 to $34,856 at June 30, 2021, the
Company’s investment fund incurred a decrease in fair market value
of approximately $114.9 million.
Net loss in the second quarter of 2021 totaled $108.9 million,
or ($1.09) per diluted share, compared to net income of $83.4
million, or $0.87 per diluted share, in the first quarter of 2021
and net loss of $2.2 million, or ($0.13) per diluted share, in the
second quarter of 2020. In the first two quarters of 2021,
Marathon’s net income was materially impacted by changes in the
fair market value of the Company’s investment fund discussed
above.
In the second quarter of 2021, the Company generated 654
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 June 30, 2021, the Company held
approximately 5,784 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 second quarter
ended June 30, 2021, the carrying value of Marathon’s mined digital
assets (comprised solely of bitcoin) was $29.0 million, which
reflects cumulative impairment charges of $11.7 million
year-to-date. 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 mined cryptocurrency” in
Marathon’s Consolidated Condensed Statement of Operations.
As of June 30, 2021, the average cost and average carrying value
of Marathon’s mined bitcoins were approximately $41,935 and
$29,844, respectively. As of August 12, 2021, Marathon held
approximately 6,378 bitcoins, of which 4,813 are held in an
investment fund of one while the other 1,565 were generated by the
Company’s operations. The market price of one bitcoin in the
principal market on August 12, 2021 was approximately $44,298, and
the approximate fair market value of the bitcoins the Company has
invested in and held as digital currencies was therefore over
$282.5 million (*unaudited).
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, 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 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 August 2021. See "Safe Harbor" 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 mines cryptocurrencies
with a focus on the blockchain ecosystem and the generation of
digital assets.
Marathon Digital
Holdings Company Contact: Charlie
SchumacherTelephone:
800-804-1690Email: charlie@marathondh.com
Jason Assad Telephone:
678-570-6791 Email: Jason@marathondh.com
MARATHON DIGITAL HOLDINGS, INC. AND
SUBSIDIARIES |
CONSOLIDATED CONDENSED BALANCE SHEETS |
|
|
|
|
|
June 30, |
|
December 31, |
|
2021 |
|
|
|
2020 |
|
|
(Unaudited) |
|
(Unaudited) |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
170,615,847 |
|
|
$ |
141,322,776 |
|
Digital currencies |
|
28,966,404 |
|
|
|
2,271,656 |
|
Other receivable |
|
- |
|
|
|
74,767,226 |
|
Deposit |
|
121,582,865 |
|
|
|
65,647,592 |
|
Investment fund |
|
166,915,071 |
|
|
|
- |
|
Prepaid expenses and other current assets |
|
3,570,683 |
|
|
|
2,399,965 |
|
Total current assets |
|
491,650,870 |
|
|
|
286,409,215 |
|
|
|
|
|
Other assets: |
|
|
|
Property and equipment, net of accumulated depreciation and
impairment charges of $10,120,373 and $6,480,359 for June 30, 2021
and December 31, 2020, respectively |
|
80,151,147 |
|
|
|
17,224,321 |
|
Prepaid service contract |
|
11,095,026 |
|
|
|
8,415,000 |
|
Right-of-use assets |
|
- |
|
|
|
200,301 |
|
Intangible assets, net of accumulated amortization of $243,187 and
$207,598 for June 30, 2021 and December 31, 2020, respectively |
|
966,813 |
|
|
|
1,002,402 |
|
Total other assets |
|
92,212,986 |
|
|
|
26,842,024 |
|
TOTAL
ASSETS |
$ |
583,863,856 |
|
|
$ |
313,251,239 |
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
Accounts payable and accrued expenses |
$ |
2,626,242 |
|
|
$ |
999,742 |
|
Current portion of lease liability |
|
- |
|
|
|
121,596 |
|
Warrant liability |
|
718,329 |
|
|
|
322,437 |
|
Total current liabilities |
|
3,344,571 |
|
|
|
1,443,775 |
|
Long-term liabilities |
|
|
|
SBA PPP loan payable |
|
- |
|
|
|
62,500 |
|
Total long-term liabilities |
|
- |
|
|
|
62,500 |
|
Total liabilities |
|
3,344,571 |
|
|
|
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;
99,634,123 and 81,974,619 issued and outstanding at June 30, 2021
and December 31, 2020, respectively |
|
9,963 |
|
|
|
8,197 |
|
Additional paid-in capital |
|
722,543,196 |
|
|
|
428,242,763 |
|
Accumulated other comprehensive loss |
|
(450,719 |
) |
|
|
(450,719 |
) |
Accumulated deficit |
|
(141,583,155 |
) |
|
|
(116,055,277 |
) |
Total stockholders’
equity |
|
580,519,285 |
|
|
|
311,744,964 |
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY |
$ |
583,863,856 |
|
|
$ |
313,251,239 |
|
MARATHON DIGITAL HOLDINGS, INC. AND
SUBSIDIARIES |
CONSOLIDATED CONDENSED STATEMENT OF
OPERATIONS |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Revenues |
|
|
|
|
|
|
|
|
Cryptocurrency mining revenue |
|
$ |
29,321,857 |
|
|
$ |
286,161 |
|
|
$ |
38,474,672 |
|
|
$ |
878,648 |
|
Total
revenues |
|
|
29,321,857 |
|
|
|
286,161 |
|
|
|
38,474,672 |
|
|
|
878,648 |
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses |
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
6,993,834 |
|
|
|
740,483 |
|
|
|
9,400,249 |
|
|
|
1,893,724 |
|
Compensation and related taxes |
|
|
4,082,767 |
|
|
|
1,060,480 |
|
|
|
56,488,554 |
|
|
|
1,294,137 |
|
Consulting fees |
|
|
105,355 |
|
|
|
24,313 |
|
|
|
218,960 |
|
|
|
66,125 |
|
Professional fees |
|
|
2,160,775 |
|
|
|
162,552 |
|
|
|
2,473,807 |
|
|
|
309,194 |
|
General and administrative |
|
|
278,860 |
|
|
|
89,566 |
|
|
|
586,050 |
|
|
|
198,503 |
|
Impairment of mined cryptocurrency |
|
|
11,078,660 |
|
|
|
- |
|
|
|
11,740,859 |
|
|
|
- |
|
Total operating expenses |
|
|
24,700,251 |
|
|
|
2,077,394 |
|
|
|
80,908,479 |
|
|
|
3,761,683 |
|
Income (loss) from
operations |
|
|
4,621,606 |
|
|
|
(1,791,233 |
) |
|
|
(42,433,807 |
) |
|
|
(2,883,035 |
) |
Other income
(expenses) |
|
|
|
|
|
|
|
|
Other income |
|
|
64,484 |
|
|
|
- |
|
|
|
63,014 |
|
|
|
106,408 |
|
Loss on conversion of note |
|
|
- |
|
|
|
(364,832 |
) |
|
|
- |
|
|
|
(364,832 |
) |
Change in fair value of investment in NYDIG fund |
|
|
(114,907,879 |
) |
|
|
- |
|
|
|
16,915,071 |
|
|
|
- |
|
Realized gain (loss) on sale of digital currencies |
|
|
989 |
|
|
|
8,482 |
|
|
|
935 |
|
|
|
4,260 |
|
Change in fair value of warrant liability |
|
|
1,196,004 |
|
|
|
(6,563 |
) |
|
|
(395,892 |
) |
|
|
3,224 |
|
Change in fair value of mining payable |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(66,547 |
) |
Interest income |
|
|
141,379 |
|
|
|
499 |
|
|
|
325,207 |
|
|
|
2,379 |
|
Interest expense |
|
|
(1,203 |
) |
|
|
(7,549 |
) |
|
|
(2,406 |
) |
|
|
(20,984 |
) |
Total other (expenses)
income |
|
|
(113,506,226 |
) |
|
|
(369,963 |
) |
|
|
16,905,929 |
|
|
|
(336,092 |
) |
Income (loss) before
income taxes |
|
$ |
(108,884,620 |
) |
|
$ |
(2,161,196 |
) |
|
$ |
(25,527,878 |
) |
|
$ |
(3,219,127 |
) |
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net loss |
|
$ |
(108,884,620 |
) |
|
$ |
(2,161,196 |
) |
|
$ |
(25,527,878 |
) |
|
$ |
(3,219,127 |
) |
|
|
|
|
|
|
|
|
|
Net loss per share,
basic and diluted: |
|
$ |
(1.09 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.26 |
) |
|
$ |
(0.26 |
) |
Weighted average
shares outstanding, basic and diluted: |
|
|
99,466,946 |
|
|
|
16,291,610 |
|
|
|
96,922,964 |
|
|
|
12,473,568 |
|
Marathon Digital Holdings, Inc. and
SubsidiariesReconciliation of GAAP and Non-GAAP
Financial Information
The following is a reconciliation of non-GAAP
income from operations, which excludes the impact of (i)
depreciation and amortization of fixed assets (ii) impairment
losses on mined cryptocurrency (iii) server maintenance contract
amortization and (iv) stock compensation expense, to its most
directly comparable GAAP measures for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
|
June 30, |
|
|
June 30, |
|
|
|
2021 |
|
|
2020 |
|
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
non-GAAP income from operations: |
|
|
|
|
|
|
|
|
|
Income (loss) from Operations |
|
$ |
4,621,606 |
|
$ |
(1,791,233 |
) |
|
|
$ |
(42,433,807 |
) |
|
$ |
(2,883,035 |
) |
Depreciation and Amortization of Fixed Assets |
|
|
2,919,872 |
|
|
499,489 |
|
|
|
|
3,640,014 |
|
|
|
1,010,270 |
|
Impairment of mined cryptocurrency |
|
|
11,078,660 |
|
|
- |
|
|
|
|
11,740,859 |
|
|
|
- |
|
Server maintenance contract amortization |
|
|
561,000 |
|
|
- |
|
|
|
|
1,122,000 |
|
|
|
- |
|
Stock Compensation Expense |
|
|
875,972 |
|
|
23,238 |
|
|
|
|
51,907,115 |
|
|
|
671,987 |
|
Non-GAAP income (loss) from operations |
|
$ |
20,057,110 |
|
$ |
(1,268,506 |
) |
|
|
$ |
25,976,181 |
|
|
$ |
(1,200,778 |
) |
The above table does not incorporate any other income (expenses)
including but not limited to the change in fair value of the
Company’s investment fund, which purchased 4,812.66 BTC for
approximately $150 million in January 2021.
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