MARA - Earnings call transcript Q2 2022 | Marathon Digital Holdings, Inc.

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Operator

Good day, ladies and gentlemen. Welcome to the Marathon Digital Holdings Second Quarter 2022 Earnings Webcast and Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Charlie maker, Vice President of Corporate Communications. Sir, please go ahead.

Charlie Schumacher

Vikram. you, Thank welcome earnings and Digital second Holdings Hello, to XXXX call. quarter everyone, Marathon

on our Joining Fred call today's me are our Hugh Thiel; Chairman CFO, Gallagher. and CEO, and

earnings believe, that to for may subject of statements, which reputation forward-looking These the project results subject Marathon may expect, started, and such, to materially. I'd risks a we and Before and and statements. question-and-answer relate Inc. our cautioned to results that forward-looking which are anticipated uncertainties, used in Investors Holdings, involve uncertainties, as remarks this forward-looking may cause our by are, actual differ statements we as they actual forward-looking remind session. make Please to get additional should, everyone all risks When to time. contain and release may will, our Marathon call, Digital could, differ those uncertainties like at and are statement. forward-looking that a words full the risks similar statements enable, prepared potential, forward-looking during statements are intend, expressions estimate, this anticipate, to from refer

are with at Exchange risks described other addition, Securities public Commission, filings fully In Marathon's the which in www.sec.gov. can more reviewed and U.S. be

with popular financial turn Hue. our non-GAAP Fred our Marathon covering prepared GAAP most to please comments, Fred? reconciliation of analysts. with certain refer expenses full call, on to to certain remarks things GAAP their going performance will to covered, from live transferring investors measures. and periodic that we it And begin which today's results. We'll before more our XX-Q today's measures over through the Q&A measures we Form going note XX-K kick Please a in excludes After a that to off. some with I’m non-GAAP Fred our from be Finally, will reports its refer comparable financial for to financial from and on its company's of questions call to

Fred Thiel

thank today Thank us joining and our you, call. Charlie, you earnings for all for

be today, The for our But discuss and believe bitcoin positioned the a proves recent challenging proved well leader Marathon. broader second peers Marathon a as progress quarter securing and to market industry, the we in we'll for relative grow to is XXXX our to supporting ecosystem. its as time that

has industry. During of the equipment Russia's increased XX%. are declined electricity price quarter, Bitcoin's overpaying profits to for stop margins many compressed in for to our forced prices have factors been combination reduced the approximately part Ukraine. mining. same invasion energy running due At and The both or old time, of who in miners

centers hash has and of the a difficulty have or seen grown Marathon, we year, As we are tend the projecting since the expenditures have for of a do result, power fairly peers even rate from global this our we assets. environment not large than to far May. end were multiple data start relative insulated operation, at At analysts adjust lean rate the downwards be many run asset-light, the since macro to we capital and slower we well times

macro to past our in obstacles addition from we had unique Marathon work financial quarter, impact to the second environment, results that quarter. production but through negatively to we far this impacted depressed demonstrate, also the However, a In immune directly are as we several asset. results our and as the maturing tied to are challenging to new

miners Harden power issues energization delayed process installed with station that in bitcoin discussed generating reports, we've was regulatory reduced the the in Texas. Montana, due during substantially of our maintenance at downtime production to As production quarter an monthly second our coupled our the elongated and in

all uptime, facility generating time. it Montana came power amount our of XX% which the in that effect until power. downtime the fleet our have seemed For in by in electricity with approximately into to area, Murphy's during an energization bitcoin supply miners the tax storm the to produce a and postponed struggled Montana, XX% they And farm, our if miners of being miners running passed represented of power are could when they and of exempt at XX,XXX the less repeatedly miners June, more our adequate provider storm damaging an the active the most power law frustratingly to through region, of approximately and our of installed line where have quarter, plant be the target. Outside The supply electricity in wind with our theoretically quarter the our than miners XX% caused taking at of to XX,XXX dates which the inconsistent of was confirmed. the in offline is the from Texas been severe long-term of produce

we facilities. installed XX,XXX And or or these to could August of approximately By had we across we expedite miners QX, we was preparation continue where as installed end have green new miners X, the increased the to and to that pending, confirmation approximately XX,XXX of X.X ashes light process, X.X ex pressure energize. While number receiving ex ashes. to applied in miners the of

finally us. are Fortunately, these behind delays

West wind last at energized. Texas Just farm in week, be to started the miners

to detail. results immense and I'm to quarter remainder turn position, progress However, to the the our for we've financial procure call made miners, before bolster the subsequent of our our hosting Hugh over to in going Hugh? second the discussing energize financial installed our fleet to quarter's discuss end

Hugh Gallagher

second to June including Fred. fund on for recent the significant put end place today July. results and more at our operating on quarter our to financing credit provide be of facilities in focus the the from new activities, will color and investment some comment we the Thanks, withdrawal My in

million period. and of margins. and loss, net to our the I'm million with operating a year First, We this the of revenues quarter recorded increase of components $XXX.X $XX.X in walk loss in loss results. $XXX.X going a increase in prior the loss compared an is through net during with starting million This

Harden and as As with as of we we XXXX. This June real million quarter, in XXXX, operational revenues million during million months driven generated decrease -- ended compared was some Fred challenges mentioned XX, prices which our this for the the in X mentioned driven by the bitcoin compared ended I by less totaled -- had primarily revenues revenue $X.X which is the faced energy, that release, XX, $XX.X June X% the and other increasing mentioned we Cost production $XX.X $X.X a mentioned million increase X accelerated Bitcoin and the and months current $X.X accelerated by decrease million, mined increase in total the compared months per amounted lower from an prior this partially about $XX.X $XX.X and per million per associated our and was the to $X.X of margin, $XX X bitcoin XX, market million of revenue by year $XX.X for earlier lesser during the offset Bitcoin revenues period This lower we the of define million lower effect in period. hosting to year when resulted to period, for that with revenues, and year quarter, the This ended million. activity a during with revenue driven of exit $X.X by period. compared cost $XX.X year prior extent, XXXX, cost in higher million, revenue Bitcoin cost prior to energy, mined. June cost the as million other about million hosting of early in Harden recognition from

current This was larger We about acceleration impact as of a $XX also of depreciation the exit to [ph]. million was $XX.X quarter second depreciation into caption is just and revenues, quarter. related D&A million the expense $XX.X included having million this result depreciation in remaining our the a of recorded increase The fleet called during of year-over-year. cost the in of to decision increase in Harden a the amortization,

digital the largest So depreciation in currencies, margin. was year covers our the the that loss lower our significant in value during driver $XXX.X of prices quarter-over-quarter. variance by We quarter. expense/fair steeper value million driven a to recorded an with impairment $XX.X period million the earnings of prior compared that million decline of decline quarter during in current the sort $XXX.X unfavorable the bitcoin single carrying the the the of period of But combined and quarter

offsetting increased activities million saw gain costs million, on the which equipment development of of entered we certain $XX.X Mountain into agreed at of $XX tax sell a December related also King to XXXX, interest and million. variances to the our Partially unfavorable a in expense commercial equipment with convertible in We of was the facility. $X with these contract conjunction we In sale of about about around million. income expenses $X.X associated of notes of expense operating

both sold million and EBITDA, we for During a of $XXX.X total -- with $XX million we the of finally, X realized gain define This And million I digital -- million. by cash we compared value about in X loss carrying a of months $XX was a adjusted lower it, from gain shipments sent ended of as margin, assets, impairments our value offset decline primarily the fair $XXX.X million of which of $XX.X the earlier, in last on market changes and year's EBITDA resulted equipment. spoke the sale total quarter. in adjusted and in approximately a proceeds gain June, of equipment partially loss decline

and the of of few more finished recent equipment can the these the say million a sold on coming related are Now, we that with are million another in now July, to In accelerated hard recognition up cost the I'll briefly expect updates sale. final gain King see of we shipment record third -- Mountain. $XX we proceeds the exit. that quarter quarter. $XX that associated also to turn -- to received We the things the of We on next

additional of million cost month in July, million costs. depreciation other accelerated and recorded revenues, $X During cost the and an of hosting $XX in energy we of

moving reports for assets. in definitive of We as appropriate report are selling on process and our efforts more production once the these monthly of now we'll outcome we harden to and/or the in miners, plans these have

bit to XX, Bitcoin briefly million. which X,XXX around collateral. the Holdings. being as market At of of value remaining held $XXX.X approximately our unrestricted utilized June was were The we XX,XXX Turning X,XXX bitcoin, Point fair

had about hand We $XX.X million. also cash on unrestricted of

time management mining to through As as activities. to for sell in for to our treasury periods over mining monthly increase, And holdings to our to general future the we purposes. operations activities we Bitcoin Holdings, of or a expect portion our fund purposes may produced Bitcoin add continue corporate

from previously direct on company reported, investment and ownership. our X,XXX bitcoin fund June we As withdrew transferred XX, into

the quarter, Bitcoin bit point X,XXX accounting the classified fund sheet As no XXX formerly result, our we and held Fit July around in terminated Bitcoin longer XX. treasury receive the we as wanted support actions on are the of management we Also of placed loan coin a consolidate These we balance financing, mark-to-market for that in will digital the currencies. now of to anticipated during were our investment bitcoin. the which holdings on Silvergate

$XX are mature there's X.XX%. credit term and $XXX million secured that of the a we our the got $XX XXXX. additional at Speaking we and revolving into includes term draw carried term facility credit that delayed facility. draw that interest And to XXX an up to August refinanced we've have Bitcoin loan million a $XXX loan million loan, days a financing, to executed of closing, and entered The of we which an Both by choose million in draw rate facility. revolving

statements. flow cash the to Turning

of These $XX at investments. borrowings June our Our outstanding from server total end to expenditures $XXX of million, credit partially million million $XXX offset proceeds around stock common in under sales of decrease capital proceeds a million. was and repaid. of equity vendors cash advances by orders restricted of of including million of from $XX million primary expenditures The $XX uses extent, since $XX equivalents and the and related facility to that about $XXX that issuance revolver has drivers were million, related right asset Bitcoin cash cash, a to been from cash were the position, proceeds million, $XX of million $XX and, year-to-date related to cash and this lesser was to of

than investment, forward miners the the related remainder be substantially we to lower previously date. shipping what incurred ordered Looking including we've fiscal for shipped costs to to for of cash will needs be that year, see

now be in completes estimating to Fred. $XXX of comments. million. $XXX to I’ll And are this back million the to that We it range my turn

Fred Thiel

Thanks, Hugh.

The and our our resourcefulness. second resilience quarter tested

at quarter's and only our end. even news At to power have and operational of on received farm we been capitalized a As result, has miners be the energized have the waiting financial times, recent start to improve wind the as but been difficult we that events on demonstrated, opportunities weathered to subsequent much could not that confirmed July, anticipated the Texas. position exemption company in the we the the end

Just that energized. will started to power last this provider the center eventually miners online the energy and the XX,XXX XX,XXX are at our facility, installed approximately miners. are being feeding already energizing week, now data Of and come

our and online time, morning, and hashes this new energizing year. X.Xx which by According this a at be the of facility, in this had energized should quarter end miners schedules, that the Bitcoin process for XX,XXX our complex process secure transactions constructed of bitcoin online, added miners should of we At occur that As is this [indiscernible] investors. Marathon approximately brought facility much latest to and stages. to capacity approximately the a working third will produce we have to the X,XXX ledger,

With and XXX Applied worth are North with hosting this and energizing In by potential to in recently quality farm we hosting, geographic arrangements securing of power. other XXX the achieve agreement in also the the a cost blockchain electricity eliminated hosting XX diversity surrounding Texas, is of approximately major a to in arrangements, mind, miners our megawatts signed new addition at targets. hosting the megawatts of we to of megawatts new we in rate deployment, securing -- future operator, speed Dakota. addition source prioritized new our hosting which of Texas, wind When vetting the prior uncertainty while hash capacity, capacity in of

across As ability exercise the to facilities applied option. to an of bringing add have a all of megawatts blockchain choose this part arrangement, we we hosting the of the XXX to megawatts amount XX the capacity, additional of total if

it's with capacity the Grandbury, an Compute Additionally, agreement hosting several XX to support to megawatts providers speaking of capacity in to [ph]. and providers at include our we additional understanding hosting Based our with facility target will middle target total, smaller ex-hash In miners expand enough XXXX. enough schedules, reach the the our secured we we we're construction expanding have by XX.X installed of that prior opted from to our hosting on that of in with Texas, North also U.S.

others, and to the operating hosting we In financial substantial previously of procure made installed position addition Marathon's to half arrangements taken we progress have miners into second to energize measures for enhance XXXX. going

contracts, from were we last protection. from As in published of which listed the year, our in price December SXX purchased XPs Bitmain benefit [ph]

we still Montana, [ph]. portion capital price For were track them. opted At the a when the persist rates if SXX Marathon, backs on current July adjustment of We question we and and we in year. market line to decision reduced target reduce our compressing This have we It of achieve that how relocate shipments than the These on installed margins in Bitcoin receive to adjustments current will Bitcoin's ex-hash boost our the in August conditions similar market of conditions. our rather adjustments potential costs we Hard are looking performance, miners XXXX. for current Hugh our the market XPs is shipments, belief first with have -- our a declined through in of that XX.X materially energy always received price to miners. relatively that for mentioned, as expenditures sell all end and especially conditions prices we're increased

fleet replacing anticipation with to the and to Js of additional we As and of Bitmain opted by currently in upgrade our April of using the part our We're purchase year. margin an XP. strategy, of S-XX XX,XXX potentially some new industry-wide S-XX these process of miners PROs this in in this SXXPsifrom compression,

achieve but machines, generation. our XX.X a cost are still converting And are on ASHs, energy our the XX% upgrades, with electricity on We the from approximately goal target we by XP coming terahash be The per XPs. these the decreasing prior to will than prior of more SXX of to basis. XX.Xx is efficient exahash XX%

but of with once terahash the mentioning be mining update we're the will As relates a other installed, Marathon's fleet on only most basis. hosting not Compute North. largest, fleet fully a one our One arrangement among result, per believe we to energy-efficient

Our of as and agreements small energy original them portion for as fixed on our price overall profit hosting the a included with a well share fleet.

the Given opted to maximize dynamics, contracts current market to the we renegotiate potential profitability. these

makes industry sense arrangements, when in have now in as there be sell this there the energy continue and wind rate We will fixed the share. for at Texas. we to grid to agreements, it so ability profit pay will fixed Bitcoin mine when have new the in The the as In industry, quarter price our to on the eliminated particular. joint back the hosting, in facility grid is remaining playbook. us potential venture Under we and able miners an can new from curtailed, some being was we the our have extremely of to is participating energy in attractive a no we are West control than gives and our be selling mining hedging use benefit now to to to passed has can times industry demonstrated, we because curtailment of it benefit nascent and it is we for the upside. for benefit do programs through back when to summary, Bitcoin. in last the recently grid which electricity opportunity our will have now more pricing, the from have to energy profitable economic Under our call, a I second and peers Marathon mentioned challenging the participate

track position are progress, a online However, as space. given coming grow in leader this remain Miners our we're in we Texas. our confident on to that

exahash year. secured mid-next target of to our XX.X arrangements have We by achieve hosting

state-of-the-art, most predominantly is fleet bitcoin mining of available in miners the market. consisting Our efficient the

position, the supporting the leader a bitcoin can a half begin remain taking we to have entered in year of ecosystem. point that, our we back on grow improve. Charlie continued We with questions. our the warchest second in as that sheet confidence Charlie? position it big Overall, balance we so liquidity I’ll securing have track to and to added With turn

Charlie Schumacher

this questions of have total, to start call. the We platform. of the about a let do our Q&A commence we cover investors going but investor tackle fantastic. time them base. received also, we the At today, XXX to of questions. interest In I'll Fred. uploaded We'll Thanks, want how all all opportunity of today's time, the by which new questions, dialogue with won't some our some to of to answering by looks much more section we have submitted appreciate And most and know the Q&A on we're Marathon in you

the rigs they be We approval got comes line. give first start, asked, you to us time when from Bill into the an they and FERC capacity? update from were energization So the full about question who curious Gee, on please can will plugged and

covered curious, in just we've the a receiving in to of I or Fred prepared approval release. actually energize. want But starting think today's earnings and to color bit on So provide and the this of that either remarks little you any you process

Fred Thiel

energize site, essentially could it FERC at which proceed approval power turn took time. was chunks. of Well, XXX on on one once They in days. megawatts the provider turn can't kind number They the of the beginning a certain XX-megawatt with received, to

site the expect installed be with XX,XXX miners have XX,XXX miners so will September. energized by of the we site, time, installed And energized and be those a fully megawatts the we end at on to XX at while

Charlie Schumacher

Excellent.

years? Tami resiliency kind in for around within of asks, of how guess, question Marathon's occur coming or cryptowinter? prepared the that plans the market comments kind I comes downturns Gee, are any So severe model Our any of the crypto who next from survive we're what may to

Fred Thiel

different because PPAs can to ability This the have side on than take this. operations Hugh these to who the structuring if of miners is where do other obliged part the I touch other mining power we're energy. becomes will But and on the way mining of this have of unprofitable. comment curtail we they’re agreements, have essentially, maybe our may a

strengthened that And believe forward. so we it we will strategy, have us and this help going

big may let this relates it the side affect comment of to pricing other how us, you that. on and corn Hugh, I’ll As

Hugh Gallagher

point want you into whole is the Fred, right? So with optionality think, flexibility I to Again, processes. your this optionality, build and

as goes cost production your And we're in us in probably portion we mentioned, said, helping regardless long bitcoin goal. we think to or as cost where your up bid a that would addition the more is the That's considering of order other of of at. using need thing we month every As completed a achieve with we financing first where look what But to we within you're the I is, of way produce cover I down, mentioned, the that month. something issue. which same going cost say point matching production is the looking to bitcoin here, certainly you at

The can financial will that flexibility, building the in so second absorb is market. you come continue in one to fluctuations

Charlie Schumacher

of a unique? probably related next how compare who market? This kind what or from what other good touched stand P, other is our the Noah besides segue Marathon's question, or which comes actually to in miners us just makes additional any from Marathon differentiators So out you. comments asked on into does Thank

Fred Thiel

parties flexibility. well. CapEx see, huge a for have you the especially would of our infrastructure, amount can the flexibility, and energizing we’ve is lot different do than with the and But our vertically storm the as of many it us delays calls we think weathered where I earnings having as to we company. to our provides in integrated. as of many in strategy to asset-light think situation with hosting times public been a model, with given quite think opposed working we’ve been We I the a that stated disclosures, in certainly very expenditures strategy us provide investments with had and for I our colleagues operate us that energy third miners we in great industry an different has presentations, make incurred being And financial think

Charlie Schumacher

esoteric, little a is Suspension you will. more if

was the atriums So shift? that to maybe this impact stake, there on of you. or B about be move of think I'll any may Marathon as do a to you Ivan pass of over earnings wondering sort result proof

Fred Thiel

on not I’m whether it will earnings. to impact going Yes, directly our comment

platform Ethereum I Bitcoins marketplace, a contracts platform the that decentralized and really And for really ownership Ether developing independently and them of is think operate all to just where each this as And will ideally generally other. very really network X for cryptocurrency. is designed of assets. in the is applications tracking smart around a Bitcoin I of think the continue

still there’s think be to versions Ethereum of I different going [ph] classic.

doing have current people the I commenting And of be another here. by really in X there’s You news version impacted won’t yet think the that serum and bitcoin about much.

Charlie Schumacher

asked, in B, of Nicklin... future comes is Mark a there question from a dividend Next paid potential who

Fred Thiel

or is not the I tell. as current but option know, I future plan. in team, don't management will a something This we think that may think an be in we've not, It discussed, time it's the

Charlie Schumacher

Great.

might Hugh, maybe, one be a question, good Next this for you.

New additional adding potentially DS Marathon shares, hence, increasing is dilution. considering

bit of capital strategy Hugh, can So that you some of available? levers on allocation touch we different sort maybe a have the the and

Hugh Gallagher

Sure.

in facility about source earlier, have we've year. months at and mentioned the So of first of that that's was million $XXX active that And using. X a we're this ATM an market I we the --

to needs in on, the growth the continue in less months. X that that in, will probably And mode that's first we the coming up continue will although X us. we that's next So available we're months -- lean option and given an to

we can mind a to will of and overboard equity little structure. fits because adding to make that debt to with side, as growth. we're equity the question keeping needed try equity also tap The flexibility that this be on of bit bit long-term available debt. that in raise We that optionality why you we we've view for equity a to where always been your your And long-term quarter keeping to and needs split whatever keep answer much short to company debt doing yes, go the sure able in yourself? comfortable is, how term capital markets capacity in a lever little and the short that's felt debt the finance we always of to want continue Don't of

good not want we for the where point. to put there we think which tapping is that operating get to this pay point we’ve to expenses, we’re the been monthly out the capital message I is to clearly where markets

Charlie Schumacher

you. Thank Great.

do think question a bit. here kind we'll I before one more gears we little of switch

last Marathon David one digital maybe planning Fred, asked Jay and besides point question any on little? to touch out want cryptocurrencies branching you at a So other mining Bitcoin. that is, on

Fred Thiel

focus. At this We and is our learn Bitcoin Bitcoin understand do but to and point, different our operate, just focus may is experimentation primary only some focus. how cryptocurrencies

Charlie Schumacher

Great.

wish we from more answer in the of So interest, wrap line I I I'm appreciate open had operator to the of back questions we really questions interest time to them. our going to over for and turn the the analysts. time, we'll think and to But all call up now, the section of covering the Q&A. the Again, our to

So the is yours. mic Vikram,

Operator

first from with question Jefferies. the Petersen very Instructions] a have you sir. Jon of line [Operator We Thank much,

Jon Petersen

your into energization like of through progress the last with guess, the congrats half first I we're my level of confidence that talk question, to Maybe or deployments. anything I us going guess all And level I mean, delays the run next that first you the the the year, second Okay. not we over that had on and weeks. think if the few some half delays of about in deployments

Fred Thiel

Sure.

site running year initial second at the deploying the half So it. the with we're of has capacity in applied already blockchain

we're than that anything issue else. the is site there doing that really So more is a expansion construction of

energization any foresee don't we So issues there.

delivered their additional with up of the is, operating confident inventory other this the be that second time. tied to XPs year, second of that, And fairly happen good The of hosting there. shortly. predominantly and thing energization that look are King capacity miners be historical the will of we've be feel Mountain today, it's that will all site, deployed experience, very the The that on the providers, you if that with will based on we at we half here have fully absorbed yet

So if will the anything, or we gating deliveries item believe it's energization. than construction more be really

Jon Petersen

Okay. the it. deliveries, from if able purchase that quantify to $XX you And sure Terahash. – a I for that you’re original discounted right, the remember if us? and you not paid you think if mentioned guys on I’m then can Got August price. the deliveries I July were

I is market that by imagine payment from would think a I X/X the than is final down your third. rate, more

less where to So there rate that I’m we than maybe of think renegotiate you that? the how just just Or that than curious buying? lower XX% if paid, contract, ways should the amount about miners is market you’re are increase terahash

Fred Thiel

you hash, think should get a pay we're amount to about we're think the of will going XX.Xx to it be benefiting deployed. decrease have in to from we CapEx and essentially I a those deploying as liners

of on in obviously XP the secondary your or aggressively. estimates come the think in those you prices numbers ballpark, market the I see pricing see down market to already probably most can kind pretty the definitely market, in starting secondary

to I it's comment for that about going So think obvious on all we're reasons.

Operator

line Brendler from We the with have DA Chris next of Davidson. question

Chris Brendler

sources on you much you love well orders maybe the go material sure North the you your this some Not how really cash point that on as like to than peers And been the repaid expected. to but that selling big it quarter that have all? did. loan? able lot detail Can the at just looking payments as of you is the give specifically hear impressive or a of -- quantify these Hugh, little so has like for any -- quarter, this Can on a I'd was compute less you back progress. on were for Congratulations in more a of of without through at not Fred

Hugh Gallagher

Sure.

Chris, So compute no been on there's the activity North loan.

still that's So outstanding.

standpoint during we -- stock a We -- as period pulled revolver. was And of it We the So source our ATM not despite periodically were -- the we did a well, that quarter funds single tremendous well. was sale proceeds the not million. the of -- from the also miners, -- the $XX on keptapping of X that price. sources the a largest was that from the

course, end in July X miners. they point sources a that in minor funds came a of of July. main -- and funds. very of continued impact come clearly lot the use June of on is our for of pricing payments biggest was and adjustments And So the were Important

on said, for did the not have year. is at -- impact significant just that as looking we if a of you're So look It if remainder And you of forward the quarter. around months, the the miners. of an current I as impact our over advances next you are, forecast look $XXX And our for $XXX is X $XXX number million around at months, the we first is X million. million where in think to more

Chris Brendler

back us transaction at a question, hosting on new how get in in LD, AP a The kilowatt North hour your are? much but Compute a think give hosting the really per signed lot follow-up another any by impressed was I about you've -- you today's just I'll What attractive with talk at arrangement so is deals all My all more, do always $X.XXX what's and given indication have was other new I back higher XX.X%. that's in to happened and contracts prices, got December I environment. Can Great. in can energy that -- complete you facility, pricing new pricing? queue. couple you've the of the

Fred Thiel

Yes.

we agreements efficiency, relatively we'll a announced XPs compute look energy is we'll exact there And in it price sort that price North. at fact deploying the you contract. as haven't price, have the same ballpark that think that still and if with fixed we be be fixed I of the While prior with

Chris Brendler

relatively efficiency offsets in so quality XP cost increase stable? the is the for power, your So

Fred Thiel

way it. at look that's great a Yes, to

Operator

of from line question Point. Compass the next with Chase White have We

Chase White

purchase So that what back portion, point that this of participate agreements the the you're just power sell power a have portion to mentioned certain curious, actually and in ability at the curtailment programs? able you mean I to market. do to

just of I'm So is curious power kind amount that? subject what of to

Fred Thiel

price. is Mountain we wind wind a the attractive King site, farm, fixed the which in price, to a has energy very have that fixed So relation

And ARCO market this something like the example, that. look at a so sudden forward megawatt you for $XXX week, if or and it

that. below significantly are We

mine very the it. when only energy it to with gives to energy, big so we want it And back. grid wind that opportunity and need take us we The sell a

we not sell benefit energy, to if it sell that's the we But grid. have back. XXX% So energy we that from the wind

Chase White

I then, just Got is efficiency say of XX% at efficiency the the prior the to the to you. everything average I safe implying, stay effectively that like something power mean, That’s follow-up question mean helpful. And same. price the but it blended a but here is higher of the as of XPs? that guess, the comes fixed should go given kind the electricity you I are up, kind down, costs

Fred Thiel

look with think a with where been way is I stay to good line they've XPs, estimated in Yes, it at our costs before. operating

Operator

you. Thank

of next with Lucas line B. Securities. Pipes question Riley We from have the

Lucas Pipes

May so much, this I up on last in you follow operator. wanted of to year. question Thank last

the I megawatt hour. per cost kilowatt $X.XXX roughly think you disclosed hour per

think component today? North rate that we the So agreement Compute side that's on the about how cost should of changed. that the was

Fred Thiel

Right.

curtailment. good that. price to optimize lower picture to back. profit selling no we've the energy back PPA. negotiated we've we the liked a curtailing the for benefit So considerably is price take grid or unless and get energy and the we piece rights agreement, was now What prior to whether We done sell we with wind instead full was not, didn't were energy than the from of fixed-price in we site, it of the had Arcos that It had original the -- the very benefit the

we pass-through the have a On on energy, the grid full the side energy. of

that So we want energy. have the do to ability we whatever with hedge

well. as optimize so And we'll there

energy grid volatile the you at be XXXX meaning very be current because that just the want prices. a to of to we we is from And to So didn't short-term XXXX, decided price energy energy markets, look going if in picture, locked X-year futures a needed We the for on to optimize ourselves a desired be hedge fixed wanted optionality the to profitability. and price market to off and current as instead at to turn and conditions. term by have energy able on based

on So more us the restructuring agreement. that's optionality. why a It gives we lot focus

Lucas Pipes

That’s helpful.

XXX megawatts currently floating. before. somewhat then is locked or rate grid, was That And So it rate. than higher – you the can at remainder you’re a on the in on you so, of presumably fixed

Fred Thiel

is then energy wind lower considerably if opportunity for is very obviously, a than had example, by -- $XX an megawatt. or $X.XX the of before $XX a megawatt current for And kilowatt significant you paying air that The benefit so $XXX pricing then price, we the we're received we rate interesting or factor. use that we a profit megawatt. hour energy, generates And $XXX a megawatt, cot a the that. old a could sell a If

So really we structured that's the why way. areas that

Lucas Pipes

That very is helpful.

Fred Thiel

that issues to and offset profit market pricing going like other spot fund is with well as hedging. futures any Yes. That health as for grid things

Lucas Pipes

Thanks. color. the appreciate I

Operator

have We Cowen. next Stephen of the from with line [ph] question

Unidentified Analyst

construction a your the and can where for the Thanks Fred, question. XXX constructed today? be needs just on lines on I time stand infrastructure you discuss in have follow-up. megawatts done? of to they the still Dakota arrangements, hosting and What's do new -- Applied's North what Texas And

Fred Thiel

will Bitmain versus essentially this you construction. item turned how And is is an I'm many there. on the just Texas going give gating per specific be But where to existing month it's really is from miners site our of the site that site. the So deliveries expansion not

we'll later So recede receiving up miners this give per about take if basically our or we're few each XX,XXX seeing month. a you month. thousand think about here start deliveries, month, which

through Dakota deploying first will blockchain of the December May miners that through item really then frame North seeing applied you'll time the there site, next around right gating we start going starts that's sites. so of in Is the year. And and that go -- deployment as the -- continue probably the

Unidentified Analyst

there Okay. here be release with price Silvergate or collateral for And triggered X,XXX sales would and any for liquidation in what I Bitcoin potentially? risk contract utilizes a highlighted of think the the Bitcoin Is press is that borrowings roughly.

Hugh Gallagher

Well, the have outstanding, since we amount been repaid. that's

So where is you bitcoins we collateral, we are X,XXX-some-odd the issue of talking XX,XXX. our today, outstanding if that that's probably and as you're about look at have

So that. about we're not concerned overly

to it we've financing. do you and prices once also time, you And we're kind think have that and collateralized do sell time to to you Bitcoin get issue get the pretty since you we I around right the rough. of you're you of $XX,XXX, down right the And feel the can also that. once if also have over picked all if But is remember, you choose, things can closely, bitcoin off watching like now, loan. the pay wish,

over keep is keep something to do sure eye not particularly So have and getting holdings Because want me we're an some our on but skis. we I'm that it there's an to eye on out make level worried sort right? we not about thing to our view is for for important bitcoin a is The that ramping, borrowings. production there's of utilize most we of that,

an Holdings. well. your that It that we that loan. term gives it's as delayed less the why holdings less Bitcoin production of us your drawdown percentage in could up, increase As and opportunity on less that's amount as And our ramps feature debt of got becomes that important our and a a to that so the Bitcoin overall and grow because drawn concern bar into less becomes be

Unidentified Analyst

That's it. Appreciate helpful.

Operator

Lewis We line Greg of have next the question with from BTIG.

Greg Lewis

on is those guess afternoon on either as of if you cost rigs rigs what that, I going existing up move look could of good market bit you're to your everybody. And rigs even footprint, to and selling the of selling those and you the shutting reposition about you how are potentially think types much drivers hard there? down at Could I rigs, announced follow rigs as to that little where we -- be about go? those were it wanted those we or the for would rigs on. off. decisions? moving And guess talk to I a What

Fred Thiel

Sure.

else. being anywhere So let XX.X the me saying from miners hardened not exahash is that start by any installed does include number

happen And have much we what XX is we -- are SXX, months. be prices in So energy do high, meaning we that no to for in possible around to XPs of months of that's XX to that, going in be to the believe to the We as machines, XX They the as most especially been because probably where use the market run, miners. the deploy those going marketplace. think latest state-of-the-art older they've need benefit generally need efficiency. next long energy to the very use us

filings, are [ph]. if the low harden, could that to XXs go into So calculate were cost per you miners our back in terahash our those at somewhere the miners that you acquire

that So current the essentially, you around if look ballpark. machines, market it's for used at

And clean that so be cost The so would that. essentially, their if to near or those loss condition very relocate of small in in machines just somewhere million really move deploying and a I around them we of focused machines latest $X.X were of But could we're them we getting on. if kind on at number. be mean, breakeven I to we current million, sold a out harden exiting, can kind are break do to think we the were $X move

Greg Lewis

selling facility what we kind should should power ash. ex just don’t how talk – look or helpful. on of about pricing as into is basis. as opportunities, most utilization it’s of Any the want say, in super color versus, the I there mean, if to at models, exahash the the it’s about our we be you there? given demand most of kind Have I of And the these did guys little think build going even i.e., that then, for Fred, say, know annual about want wind sell power color guess you of be guess, I out would we utilization any the pricing the when opportunities, tends quarterly you we should clearly, a little think year any more Okay, be each facility. when I I to at parts about thinking bit mentioned, there’s to of of you that attractive stable. those other a to I realizing have a Is differently. summer that way locations that grid. to

Fred Thiel

question. very the when on and seasonality there, provider It the what wind the actual doing. just power it's calculus the great not out because energy working been with a a very capacity is blows, operator dependent and of We've figure wind markets the complex are farm. the It's to

amount of the hours varies, lot so it during the generates course of seasonality. vary And the wind of year, day of the a the that

operator obviously it's very XX farm for on They've models think been I operating years at this wind has point. some nearly the site sophisticated So this this.

relying mine, But to the they to experience, generally, look this. So more the really have the profitable is mine if we're then their models this. the the energy. it's lot sell we'll energy to a more will at on it's and If profitable of -- selling calculus than sell energy,

this to you that take process most impact so to understand But would, the perspective, a real real going to quarters to going whether few the where and probably it’s And a if us from the the profitability. for to whether goal Bitcoin profitability. of optimizing maximize seasonality is just to this. is cash really be we’re And flow it’s company, it’s or Viacurrency, a optimize

Greg Lewis

not power are blowing -- just then But up to And ability are there want you guess pricing from prices those the is because I did question we the now middle the grid sometimes Or I plug night. of in is, super the is power an power that draw event draw maybe guess because that available, negative, attractive the is in rigs the wind it's Okay. grid? wind probably when the follow is can to power you for to across typically or... I

Fred Thiel

XX% energy to the uptime the the mean So I optimize grid. the back Absolutely. is goal wind XX/X, doesn't sell right? blow to or

we to wind of energy only difference have our that Part Barco And go So into the energy. in that's who lot wind energy. our means the grid redundant wind at stranded only is of a is again, some We using that by lessons grid the buying having wind energy, that by and energy can't because there's not it. sit model hardened our learned competitors want of are no we the farm

is cheaper. But grid draw so we to that's profitability. thing have be benefit maximum of also of that extremely able And The on the incentives operator does the the the off get for power energy. low site that, pricing as the same being to when we that tends good have the we benefit to operate

company situation energy creates provider, on the mining the to things power business we're a one at unique directly are so the incentives by of energy looking very think operating grid with very unique about, I directly point as strategy. for talked it we're fully at year aligned kind the over a where operating the aligned partnering have people is we've here do. And gosh, and really how this of in that your ability your a And don't with

model And of proven colleagues somewhat again, some so to going is industry. be I in our than the here think, be better to our

Greg Lewis

a Thank of Fred. rest you day. all to the the time. for Great hear, great Have

Operator

the Kevin We H.C. Dede have Wainwright. line next of from with question

Kevin Dede

into optimization. Redirect of [ph] way your you and it. what gains can got about your a No we any for Is And talk that your Marpol and there sort I’ve follow-up questions can see? on back operation ongoing strategy leaving that efficiency you. or

Fred Thiel

things future I’ll hear the just say in stay tuned on on that, and not-too-distant you’ll that.

Q –Kevin Dede

Fair you Marathon’s enough. when how implementation? gone Then immersion in given Brent, multiple could sites experimentation. have with Texas, see expect And we far your to

Fred Thiel

question. Great

evaluated emerging of a vendors of number have different we technologies. So

very We much. have kind that we of honed like in on X

have think well vendors a scale to I at the don't you as immersion quite our aware, of deploy the lot yet. may scale be

we Dakotas them based, in have to of in year, very for are even current climatology blockchain different Ken the all deployments, applied and and a both the air for operate the even applied so the able The these where site the at And that of may sites. air. be sites these overclock benefit Mountain exercise portion blockchain

So that's a benefit there.

are I Gen think those. lot I a amounts up whether X that see we But to that technologies you'll or technology. have focused. later in water. either Immersion haven't portion future XXXX in going Immersion the deployed announced And make still yet at is of you very again, that's been think of look copious require of be deployments new A again, we ESG as XXXX, relatively a

or step We'd behind our of where cool the really being we're renewable to the deploy neutral we position lake love end of at to miners. and be don't of carbon energy goal We a have this to out having year. water want sources, in

our will we leverage systems at microgrid technologies, not different to of And solutions much are kind in nature. deployment. deployment, still those more and believe, that better types we also but operational emerging And closed we're their loop term, looking of in stages, so scale us utility just longer at that provide are look early deployment, stability as but allow are

Kevin Dede

Well, you appreciate Fred. my -- Pardon thanks entertaining for diving on that, the in pun questions.

Fred Thiel

Kevin. Thanks,

Operator

you. Thank

question next line [ph] Gustavo with of from have the We Gala Truist.

Unidentified Analyst

follow-up one a clarification. This a is a of bit

XXX you've megawatts incremental the out that for been that for with XXX North been So particularly by of able megawatts has Applied. to Dakota the book, operators? connection I'm approved the grid respective asking to the

Fred Thiel

So not as have do XXX% the completed, I'm has to been they approved. the load grid study I it's approved. whether been sure full know but operator,

Unidentified Analyst

orders talk that peers the the Got of been the year and little not at you the you. able a on, looking be up for the with That’s might can space all that’s consolidation, helpful. about And even for opportunity just mature. dislocation it of going picking a sense bit or some to things that be in pay

Fred Thiel

great question. Yes,

rate. miners acquiring -- the the they the problem current CapEx I infrastructure think what have hash the another challenge is the required mining company, of is so of is condition cost

state-of-the-art de have model. a yet We and behind still So no been been on they've just years, novo old how acquisition it, cost square years, miner at we an Part X and partnering the deploying hosting X XPs have CapEx have and years operating ongoing their wind where you minor of back model and that -- operating with defined year, can a buying energy sort is, have X are at them only as think if companies. may you're and kind model solar we've beats meter that them, opportunity idea who's maybe looked X rigs you treated. out have left the to agreements S-XX and beats sites going of we The farms, the acquire for one. then challenge of an

those of won't on So production. deals with pricing and deployments bitcoin sales their potentially. to fire rate as That some struggle to peers just global a there's here on and continue that our be some energy our there -- opportunity mean are going minor for some doesn't based hair is lot our deploying. hash we just grow what think of some of Clearly,

model. to just preference [ph]. But may is So through but sale model be a de to that say a too think novos we still the good there is de no grow better see we'll to, novo fire our

Operator

Thank have you. Ladies question-and-answer the end and the we session. of reached gentlemen,

the Over turn to Charles Now I'd sir. to remarks. back call maker like for to you, over closing

Charlie Schumacher

Thank you all your time for today.

not the day. were answered If please Thank during contact to you rest ir@marathondh.com. that our free call, at Investor of today’s enjoy have the Relations you, feel questions team and

Operator

Thank you and today's very much. Ladies this concludes gentlemen, conference.

You may at lines this your disconnect time.

Marathon Digital (MARA) 9 Aug 222022 Q2 Earnings call transcript