Earnings call transcript Q1 2023

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Operator

Good day, ladies and gentlemen and welcome to Marathon Digital Holdings First Quarter Earnings Webcast and Conference Call.

I would now like to turn the call over to your host, Chris Brendler, Vice President of Investor Relations. Please go ahead.

Chris Brendler

Thank you, Sherry. Good morning and welcome to Marathon Digital Holdings first quarter 2023 earnings call. us call joining for you for today. our Thank our CEO, Gallagher. Fred me on and and call the Hugh With Thiel; Chairman our CFO,

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

cautioned actual time. uncertainties, statements that at this involve Investors differ forward-looking anticipated Marathon and those to from results risks all by are cause may which materially

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

measures for which from full to refer note call, excludes please today's measures the a its company's periodic we comparable to Marathon our performance its most XX-K to expenses in XX-Q will reconciliation non-GAAP Form Finally, certain GAAP and on financial financial GAAP Please refer financial that certain results. on non-GAAP measures. reports of

more from investors a with be Hugh. analysts. their with our today's to comments, call and questions live we begin will our the through of covering prepared going After transferring Q&A remarks Fred from before some We'll popular

the to I'm things on going to And to way, kick with call the over turn off. Fred? Fred that

Fred Thiel

for the you, We goals two started XXXX year. Chris. primary Thank with

more to XX to by to and our is performance second previously our efficient. middle is the our and reach optimize exahashes more of effective the first target to become mining energize purchased rigs of year The

our After production with demonstrate, been making our tested we've those executing quarter our initiatives. at notable XXXX weathering XXXX, we of productive monthly most that progress of to-date. started industry, resilience As tumultuous entire on both the

by We During our growing produced record rate X,XXX January improving the XX% than our hash three XX.X the rate exahashes on production. XX. during to up of X seven from quarter. increased March from increase our exahashes QX, on operational our network Bitcoin the is the rest we hash also uptime, year, we this prior Bitcoin increased months which By faster and first XX% a of

we on where May work April's well. double production and hard XX% the is to into which report our and to over XX the of hosting partners, Marathon’s as continued team trends exahash positive the target. operational we of these rate way hash published our XX Thanks exahashes, year now X that QX shows have started our

hash installed exahashes, has the goal. is hash our as rate, the installed, which energized, been our nearly Additionally, but yet approximately we way to rate that rate operational XX of not hash XX plus our define

still of are achieve of the we near on capacity this believe XX we progress, middle track recent our Given to year. exahashes

have pace energize reminder, one are pending in a point of where Texas. the the already this ongoing paid item gating some installed As at facilities, the all approvals to so miners regulatory been been the primary for, the construction installations have facility of miners and

remains path target know exahashes we what the sight. today, we XX clear to Given believe in the is and

to industry it the constantly moves our as innovation. milestone fast North us industry the XX of push extra must our largest America. Marathon leader, traded will as for position industry But hashes for will maintain Achieving publicly the and in be pace Bitcoin and establish as a miner we this

evolving. is of some discuss our quarter. results over organization going to first first, to the But Hugh In a I'll financial discuss the minutes, for to few ways our I'm the call turn which in

retiring Hugh shortly earnings finance us know, developing strategy, He team was finance will Hugh early and a call. all our from team you he more into after year As instrumental us valuable a has this sophisticated ago. since in joined be transition an member building stage our company been of our helping a organization.

So everyone Hugh service. thank Marathon, of your on behalf you at for

take And with Hugh? that, I'll away. it let you

Hugh Gallagher

Marathon, it. and Brad. been thanks, the thanks work here going everyone best appreciate Oh, at my to of Marathon accomplished do remarks, I I the here. time pleasure team during what forward. It’s wish has the I'm for kind And proud And really a at

on them previously through the the first our quarter. mentioned and But selling start the of the focus now a main generating to for were quarter, briefly. our prices, the Improving increased Bitcoin commencement of as plan you results cash for let's and Bitcoin of I'll means operating results take drivers production

year's increase offset Revenues than more prices, for production prior as average in the XX% quarter revenues was were slightly $XX.X by last million, year-over-year of a million year or compared Bitcoin to quarter. a Bitcoin share We quarter, $XX.X below per lower loss prior year the in net $X.XX in with or per million the share of $X.X loss quarter. $X.XX net a recorded compared of $XX.X million

three factors. The favorable in $X.X year-over-year variance by was net loss million main driven

digital sales that associated First, was of our on realized program asset with we $XX.X the million. gains sales the

increasing $XX.X remember the benefited loss. with it fund by and as digital year, such so this $X.X prices Bitcoin in this million we we from during last absence have million an year, that Bitcoin third, year improved last were of we generally investment had a Second And it assets loss impairment no quarter. unrealized had of you'll fund year-over-year

lesser versus margin year, these expense in million. a what of absence variances similar million. improved loss, tax to about from total the the million a impact of that $X.X by modest I DNA, excluding $XX.X of EBITDA quarter prior offset was EBITDA already Adjusted in $X.X digital income large $XX.X million sale mentioned, a in year the drivers of were extent assets, and reduction talking the EBITDA the to of was unrealized offsetting in the benefits and including in on current favorable million $XX.X benefit were to the Partially a and because gain prior margin period we're impairment, reduction those the lower adjusted of

flow held sheet, $XXX.X Bitcoin value increased of to Cash $XX.X Turning was holdings million was Also Holdings in and to on liquidity. at $XXX.X cash a Bitcoin single value of our during equivalents and million. approximately cash $XX,XXX carrying at the our we quarter a to of XX. March million with March balance $XXX.X care XX, value XX,XXX million Bitcoin the fair

$XX term loan facility on we both terminated credit Bank leverage the entire with million outstanding repaid our Silvergate the reduced and term We during facility quarter the revolving when facility. the the and loan

transaction, we those issuance record on no there costs debt loss $X.X Although a to small write-off primarily with associated of prepayment were related of unamortized extinguishment the did to this this million, facilities. debt of penalties related is

We ramp sold certain cash proceeds with quarter of during operating X,XXX hosting bitcoins utilized expenses conjunction in these activities. revenues to deposits Including realizing for of during operating the million, the of energy cost fund up we production cash $XX.X quarter. and the expenses and made cash proceeds were other

also our a quarter for million. as $XX cash good reducing while all the $XX leverage increased all, million, So position we by sheet by over in balance

million our value with held of a April our mentioned and XX,XXX we report, fair at was cash As in million. $XXX.X $XXX.X production Bitcoin XX balance April

is than much went not March on sheet. recent most that our So different results update the the through just balance I

through Bitcoin Holdings future expect to primarily increase, for intend means We will We of and our will fund and add Bitcoin and operating generally upon a our purposes. Bitcoin as operating fluctuate depending sell Holdings generating we also activities our to monthly to to corporate will cash but conditions continue general costs market production

And that completes my update.

will a operations over and little bit it to ongoing Fred, turn now more Fred? our our talk I'll who So back plans. about

Fred Thiel

all to miners commodity, techniques we Thanks, to we produce in commodity for the may your economic deploy in we hard Bitcoin maintain and Hugh, the Mining technologies be It's that difference. into and Mining of to Bitcoin. our pace fungible, the position constantly again innovation. form value thanks all commoditized. Bitcoin industry, convert The of the the electricity work. ensure the implement we make view All To push all as easy but need we develop leading produce

have believed because staying and it in us of performance ahead competitors. technology optimize our always curve, to the At our from allows Marathon, further we differentiate Marathon

latest in mining own mining energy most we're rigs publicly traded efficient We the only invested runs that have and the pool. continuously its miner

vertically Vertical Now aspect a is integration mining integrating is the own people we're term power in only industry data different process. in popular centers. is referencing really they're to develop mining the take when Marathon that further both. pool that a controls new to technology leaning of Mining Mining Bitcoin each technological most miner into this our We the term, and Mining efficiency to more the believe Bitcoin miner industry the the techniques in and of an use in that approach. proprietary strategy and is hardware software, Bitcoin all Bitcoin is and stack, stack, or either maintaining we we're speed tech only firmware, from game includes the a the This infrastructure. and directly way influences of our ASIC. mining the down edge innovation essential

to We block. us miners me and Let reduces key examples pool to of some operate how MaraPool, give own orchestrate our working competitive advantages. allows latency you our a and mining which when solve

boards, us flexibility controller Our team which has custom firmware. built over gives

the latest and most good mining we relationships hardware in We maintain efficient have invested with always and manufacturers.

SXX energy fully most And of immersion come hash that efficient improves from than XX% more at efficiency. infrastructure deploying energy and of and Bitcoin efficient XPs, designing, cooling rate be the maintenance expect co-developing miners the we reduces Once are prior been which XX% our generation. deployed, as we've one to will scale

the first Middle technology mining The disclosed help we press primary details operate facilities week. this develop in in a scale we earlier one East. our and release to large selected the In expertise fact, Two of which the of were Zero is immersion by reasons Bitcoin

dust for cooling running to has Two, pilot because with had have of infeasible. and immersion climatology, to air its has Middle While immersion in miners be a an Applied our Zero online of the challenging This Digital sustainable of of the Bitcoin. [Technical energy, should East part already We part mine successfully cooled it Abu deployment heat incredibly place Dakota. Bitcoin region an been the in the North first the Difficulty] the deploying in -- made been haven miners, due climate, Dhabi world month last came stranded facilities domestic at but abundance a program should is as

In cooled almost maintenance miners daily weather. weather, approximately cooled unfavorable attention. air even XX-days, Typically, air favorable in require every cleaning operations and need

XXX-days the most of ran one imaginable being the pilot without with Bitcoin in any maintenance we the challenging immersion However, Mining. miners for co-developed, needed, climates despite over for

climates harsh which in the we're to is opens type the suddenly reduces maintenance like and effectively in first Immersion that for opportunities, Dhabi. of new the deploying Marathon door runs several Abu

their immersion With port Mina we the joint the sites, to a operating Masdar and successfully developing of the establishing large two Zayed venture City, the is mining before site East. a facilities are were complete, by the for zone in year. to megawatt sustainability Bitcoin Dhabi. in selected two this the The are is for partner sites XX-megawatt pilot and Both in Middle we first which operational site be scale end Abu of in XXX expected be Zero hub

XX% our generate network of the our the we just And will represent total of project. Bitcoin through security XX% aggregate, be to the target. approximately will is to they exhahash for seven clear, XX In JV, additive exahashes and

just focused we from entered of into it in While example intently we expressed innovation first can the models. be the with this the And doesn't evolution. mining come are Zero optimizing joint tech stack, also technology, on is venture Two business

as to In remain the light, we year, simple. XXXX, allowed including than to outsourcing, It our upside on most were of avoid to competition that But as outsource the muscle being strategy was possible. fell exclusively invest of down operations XXXX and and many grow and scrappy lean us it faster capital business our to miners to able are are pitfalls power our almost we contracts. our as was be By over assets. asset of or debt into leveraging also which with their able revenue other generating in rigs, last mining to

to and in-house iterate they product begin and more begin business processes on market fit, year. essential growing we initially, This the once building but to they their on a resources which evolve. proof-of-concept in this bring model they've which ideally become profitable outsource businesses the to established was found now all stand and from optimize foundation strategy more to are Startups and their more run. But long to effective we

muscle Marathon two of going to after public, learned the we thesis taking year through and a some we initial beginning proving out muscle past role of evolving. the several we're are some growth We're and start is across the at in-house. active in cooling, last and taking and also years currently includes were this our as now growth management members investing strategy, essentially up a designing we of and new phase, current and includes of It while the over development build operations, deployments. what well starting immersion the future This technologies of as future the team more like our technology. in

our adding over we by hosting geographies. that more is asset intention no light, operations business. be been abandoning To agility, new in to past to we deploying aren't and a resilient of do rigs this creating mining believe have providers year clear, but the our our we We've principle losing applying diversification integral different

Zero the joint to it our with Two, with model. apply business we're starting venture Now to

can a play their When done party synergistic strengths. as to allows correctly, joint venture be each it to

capitalized We with record have models deep local, experience is technical mining Zero and well proven a a collaborator development. Two a business sites, a regional infrastructure with geographies. of expertise, variety of expertise mining and

was expand believe outcome. future innovation components our and challenges pursue circumstances flexible diversify DNA, And staying key in adaptation We will Marathon's ensure this our our match. footprint approach. operations. ideal an in we adapting the technological Each to remain continue comes requires and best to to are and curated we unique with a own to deployment as us, For of its the believe and and they

of more We're roadmap much our a resilient. We're were a strong a diversified, we result hitting with and We're now smarter balance year better to of ago company more a as team the mining target exahashes becoming network. sophisticated of ultimately middle to a us more sheet, than a experts, primary efficient growing a support the hash in position. to integrated to XX matter allowing that's our this Bitcoin stack technology subject unique of vertically that and capacity becoming near and more year, is a a increasingly expand effectively approach and rate

on our At working but advanced rigs that efficient and become portfolio most of mining extremely energize most mining Marathon, hard schedule ensure our one the world. energy optimize the that to largest, one we all not technologically companies Bitcoin we're operations and the of to just we of in

so And with that, I'll questions. with we turn it back can begin to Chris? Chris,

Chris Brendler

time, of going start section questions -- Thanks, commence to Q&A we're Fred. Q&A today's our of on this At the by the call. with We'll by platform. some investors answering submitted

Brandon. comes that Fred? costs, for it to minimum question first based Our profitability What is current from the sustain be B. would operating allow would you bitcoin on price

Fred Thiel

obviously current Mining breakeven of Bitcoin hash price the would and on So, is very of and rate if dependent global energy prices the you price Bitcoin.

rate our complex of cost and constantly on hash dependent kind to price But Bitcoin. optimizing mix operating it with is operations energy we're the of So sure the really very a of make that we're essentially, right question. the

online you see up to at our energy of that in pricing, demand are cost Bitcoin weather may some more just continue that to our is of rearview energy in continue obviously sort Bitcoin of summer hash for markets, month-by-month. the And and pricing and so look pricing due point of be come to for expectation But certain to as forward, we going which an kind as was what obviously edge hashrate average kind look for where you less. more the expectation global roll the forward, will think projections months seasonality mirror kind will can you QX. energy or breakeven in driving in in would at mine growth to at I look rate essentially So at

Chris Brendler

Great, okay.

Speakers] the per Our still the hash what June next question what our What's may cause We've last block over is course the never B. Also, goal? obstacles on way target we that And comes to from week. the catalyst? Jacob. get exahash achieve of are Yes, XX or hit by of rate [Multiple our we've seen. July? run numbers, second in

Fred Thiel

Yes. Thank you.

exahashes that the with. course foresee then that can that's kind to things way don't only have two middle to construction site this At Those goal. of challenges just we really currently we as we on still currently, this our one this call hit there. for and the reiterated What where some see we're just any energization. And down which approval regulatory are of going any it's of in year. the point, potential of risk machines Texas installed we're waiting kind So of obstacles by XX in we throughout final on, get

all Obviously, for delivered. waiting can installed to virtually And all and machines the been installed, just been what are has have be have be rest purchased, them completed. been of the buildings

very feeling confident we're about that. So

there. go needless performing data average the numbers BTC definitely at rate how analysts very produced of to Min But everybody stack hash about the that rate week, theory, Mining exists run should of just to of pure in many think luck even the hash the it's over you MaraPool with by what results of to have last many historical been of Pool love say. you over certainly, because that based say can in out the is we kind but If until with exahash the our see to expectations is per north factor and that we've performing. yet technology better-than-expected, going I'd kind familiar on are quite pleased comment of We're that your from not more I'm time And and make within Bitcoin performing looking from. put out. luck kind

Chris Brendler

okay. Great,

four on soon? for comes not, operations next If enough question the next any you do have you capital Bitcoin from for Are the Our years? Chaitre. planning selling A.

Fred Thiel

expenses take to sheet operating we year. expenses. balance any done We sell then we've that, on as that. Bitcoin huddle. Essentially cover energy Bitcoin the I costs operating and left will save put cover that's all after this And can

So to you in our some every year. when Dhabi majority We've fully we've essentially more exahash project funded or capital target vast produced. the month forward, we've going for of as holdings we our growth But funded Bitcoin as we sold the than Abu another. look potentially January increasing been degree the Other XX at well. than requirements, this

set not year. next years, cycle and comment So and expansion of at half that's next of to this this kind to industry going in see barring I'm perspective on well additional the whole we'll point. back the CapEx early go. pretty We're spend year a how things because from have in four this

Chris Brendler

Yes.

Sounds good, okay.

Bra. doing to go implementing like proposed M. position to you Yes, are Sweden large on or and countries What miners. against implement penalties or taxes? fight attempting are pass to the company tax and these the U.S. avoid Bitcoin Let's discriminatory

Fred Thiel

area. Well, so tax remove essentially very Sweden, fair was we're we to And did have had operations that that active no abatement be Sweden, in in and in what the discount. removed essentially not they they

energy had something just they center the back space to it those previously. Bitcoin wasn't went that completely, rates been targeting what And so affected data broad And miners.

way. In on the of another Bitcoin different used example this administration's in Biden unfair is tax excise targeted by U.S. specifically energy very of industry the being proposal story, an Mining an

homes. heating to of government restrict you're I on If instead used you going vast to and were industries. all industry, save about about an think energy majority think of ways if the energy wastage. for country And wasting then energy should seriously used of The is this in across to the restrict more cooling think different

are percent biggest a any country, energy carbon consume globally. the in reduce to renewable than generated the and want energy you of of of this users industry If miners Bitcoin emissions less

coal industry, to opposed as is focus administration when energy generation network fuel should offshore, within a economical for National still just targeting Bitcoin important U.S. which focused This our instead Mining the electrical of the XX% could something maintain were securing very I it you which comes we our fossil on if attempt is is trying veiled And Bitcoin the U.S. Bitcoin generation in think energy at potentially to threaten Mining industries. clearly a fair strong it's to the allowing push U.S. to believe by terms. Security Mining the we along operate position to and Bitcoin there

Chris Brendler

expand for Digital regarding briefly you Marathon its can valuation ask mission on growing dividends? Holdings [Indiscernible] and Okay. investors

Fred Thiel

dividends. not and of a happens that going In optimization. driven happening the really lot that to a in Companies dividends Bitcoin to comment because it's growth four the just having just the about Mining where rate we mature on I'm years. are are grow capacity, of and pay continue industry, increase our there's the every not -- typically difficulty industries Bitcoin to typically

at of to time year. continuing And we've target so year, we're We've and increase done capacity we were our already of huge the around hit this nearly our XX% grow. year to of very this where XX from by focused further the amount we're on a the we doubled beginning it exahash middle growth going the

maintain And I continue rate. not want to of could But We've so we'll much. the to made grow the that how as in to pronouncements hash minimally would share we public infer global think any our future. you

Going the day. Bitcoin our share maintain each forward awarded of are that to

Chris Brendler

interest turn over your line Okay. our to the the the really Well, of I have questions. to We Q&A. our call your operator in wrap of and our to this I'll analysts. now back from interest think part covering questions investors. to up open appreciate we'll to Thanks time, the

to back you. Sherry,

Operator

Thank with Research you. Flynn from [Operator Point Our first is Compass question proceed. Please Joe Instructions] Trading. and

Joe Flynn

like started the for in And April as it uptime lower Thanks could the We're [ordinals] March? just as to maybe drove up been incremental question. (ph) overall picking this you benefit Thanks. guys. getting you've on and the fee compared comment from network curious quarter looks early March? it and what the strong pretty activity, looks Hey, if

Fred Thiel

Sure.

April's the a heat, global the primarily. of Texas, due global in of hash in versus rate, mining, in XX-days as one of less rate, well day the increase because So in in combination to the what results And difficulty -- increase production drove XX-days curtailment the month. as are the some

average seen reward Bitcoin at ordinals, look we've up to typically of, X.X go were impact per than block were block Bitcoin fees kind fees Bitcoin seeing the been by block. reward network. the, the some various that is transaction blocked X.XX rewards by won per the block Where meaning previously of that in were the at considerably. somewhere provided obviously we've pools you greater As blocks over the There X.X

transactions a I think this above time, and trends ordinals. processed is but kind have a bit over frenzy recent of going of, find per I the is what the up likely kind more for see be use, BRC-XX people that of of, and fees. driven block. leveraging little levels kind to we'll at X transaction the the we'll as will BTC and competition fees initial abate normalized And tokens are historical, think periods, not an Still in processed getting most blocks

transaction Ordinals causing some I have come market, but BRC-XX to which the network enabled, around and competitive technologies will Bitcoin think as same without achieve that there'll the on outcome will be -- the as to likely fees. people the enable erase

back I'm data at and around And in we'll on at look record of innovation see to creation of -- accelerate, of network, above level, and business we've levels in the blockchain continue believer strong XXXX. seen the think top if you the and I on a of use Bitcoin cases the it's development or wallets the near applications Bitcoin this space

And in possible, country industry, strong obviously but development Development this blockchain. blockchain much interested a believe And so obviously on expanded best Bitcoin thing on not focus Bitcoin we because considerably. well. as fermenting have very this the huge as to team's is on the there's Bitcoin network a we're the as things for network the demand just build

Joe Flynn

if one in allocation just you And question going helpful. That's your Thanks. capital expand kind of, more then plans could forward. on,

As is CapEx miners you the for paid purchased. of JV and mentioned, all most are at the the

just point, Bitcoin discount? the like here, at specifically on have to buy a significant back on using cash considered you hand the convert more that So in

Fred Thiel

assets Yes, and on I'm as and possible. company's efficiently we obviously move plans And as but we'll comment continue growth opportunities the focused happen. opportunities managing of evaluate on to balance the going obviously we'll And we're they effectively to very convert, sheet kind as announce forward. not as

Joe Flynn

Alright. Thanks.

Operator

with proceed. Our is B. Securities. next Riley Lucas Please from question Pipes

Lucas Pipes

Thank on wanted kind take you to everyone. regarding would of you terms I power you. question. you very much, different back the the cost XXs hour circle earlier once taking a Thanks your outlook be what angle. question to kilowatt slightly comment per operator. my fully Fred, production and power QX? Good and XX.X for to morning, of Could up in cost exahash? ramped average cost for Thank In maybe the

Fred Thiel

Sure. pay The we But together. hosting some most cases, for actually as and baked you're in Lucas, is separately. aware, difficulty, our energy in it's hosting, of third-party

-- and can and out. envelope. energy a combined $X.XX kind talk our all costs range somewhere really costs see about broken I are energy So the, as numbers think only to probably energy $X.XX in of opposed posting an are But doing you just hosting there to at, I combined back the cost can look that of, most calculus kind of, the

it. the it break only it place be out out currently would could a The Mountain cost. really energy King that plus think where break our site only we is that's put I But to fair hosting place we place is separately. where again,

Lucas Pipes

$X.XX helpful. $X.XX Very And supply to ramp Thank you. the then that XX.X? would to fully

Fred Thiel

Yes.

Lucas Pipes

you see advances I then the to statement. in rather. vendors, to over of use, in you've buckets, what different three PP&E for on cetera. Dhabi of I elaborate Mountain or you the few Very of, could is And this in of to looking take want then or cash purchase joint Kings slightly I if ventures, example, each Abu got those maybe wondered investments already buckets related at flow to joint investments Again, in that. QX regards P&E helpful. angle that a also kind exactly, course is know of venture. And that Thank et questions a for And just I kind the year.

budget? So Thank based to on various also would of would you expect the end kind color much. very where appreciate the the you year at stand current on those of and these investments your buckets then

Fred Thiel

yes. I the look you, at Hugh. -- way it we mean, Thank

Hugh Gallagher

at just to for, would as related think I going jump That in. way mentioned, won't business mean the it forward. Fred where is Lucas, doesn't that. significant have we I look to any grow I'll we CapEx to exahash don't so real paid the continue is XX look the hitting

initial investment one get think it's on and clarity related so comment around the joint the XX% XX% you the million, in over earlier easily of on that $XX is little to is be Dhabi the range, $XXX the announcement probably in I that is said million. far. Abu that could million to our most JV, we the that all entire a bit We JV $XX share, venture, expected $XX is in the million so

kind we're through halfway that. So of

that's And way kind best walk I the through it. to you think of probably

some that nothing there really see containers in you already equipment of here purchases significant. the just are of because flow you can advances to things first immersion and see quarter vendors of receipt this what we've significantly like some for last new and equipment. most not and the as probably compare our to year's quarter cash As when was Any maybe happened said purchases most PP&E of any of lower, necessarily there that, quarter you

Lucas Pipes

luck. Thank helpful. I'll of the color Best turn very all it you is over. That for and

Fred Thiel

Thanks.

Operator

next Our DiMatteo proceed. question from with Tyler Please is BTIG.

Tyler DiMatteo

everyone. Thanks Good questions. the morning, for taking

to could, towards a color mining business emerging, thinking of a integration other you wanted pretty the into thing the from with example, there in for on technologies those follow-up year comments this how more speak kind Fred, maybe to your on rigs there next? you're the color of little Can that the and know stack. big about. some the you uptime about talk I it's tech that that looking So integrating Any through you provide I vertical you're of,

Fred Thiel

Sure.

on system over have have look So they numbers stack. They I their Apple these again, services. think In with have other the the that a industry, Apple a you on at device, their and and through to is at operating any hardware XX% telephone margins mobile industry are the if get don't share tech great of industry transactions than the integrated cloud less you way vertically done fee in you to kind hardware device, they gross mobile this because look and the of of They versus services of the would But operate chips. device. the cloud at generates XX% look vendor, the translate literally. if

scale They micro If services properly large and our if latencies, their of, different they huge you that to efficiencies, That have pools different control typically optimizing pool to connecting XX% efficient miners may Bitmain, creates in of, the industry. a our our different of kind has generations, of to the BT from denominator. third-party amount repeatedly, old is machines instructs miners you're rate challenge sorts be today. which different is variation a energy the SXs with to may SXXs stack, those, layer And what equivalent pool which SXX-XPs, miners machines, have as we've The the that industry what essentially correlate may the capacities tech amongst they cloud common them. have kind able in most are said will are pool, who to task means have most advanced to is old of have manage the miners of, the is by miner, the and most a inefficiency they they that equipment do. equally, and all in traditional orchestration third-party In the powerful be to coming pass us of for lowest pool.

of that's X%, X%, being in and X% incremental efficiency, efficiency very X%, increase our to to in make X% be going SXs can the And or in sense. add a huge increase a doesn't And denominator So does industry, efficiency. operational a SXXs of significant. it's common pool it optimized lower not while member a generate

the And own with so have pool by you don't operate and to third-parties pool, with start to it design mind. having our in essentially we

miners remove So can own to optimized second validate of we that our pool, We the because every a, in everything we into the pool, of latency connections. efficiency. issue have because an proprietary having be it's communication, do can to our it's don't

step save for example And can the process the we operational that so of on in pool.

down the that actually average pool potentially why, many potentially how allow few Bitcoin the pools reason saying like layer efficiency, points next outperform not but things allows of percentage it's single-digit layer to to site. is there operates perspective a produce? which our management So exahash The a the per they us that a gain out sometimes from of do

that built, machines together lots the with cover optimize And again comes the so vendor. using third-party we operating of the firmware of allows the have miner specifically us that stock opposed in that's to to which firmware or the firmware different has need the operation to our from that miner as a

updates miner. boards Our to our provide and down can work like optimize over layer, us also to the air, lets do again firmware is so do miner, a go update specifically specific performance controller to to all our and control things you the with go needs allows us hardware don't specifically operation us allows flashing the every and which pool and control have it remotely. greater our over the of you optimized miner controller physically boards It with their track It to to each the of site. us

a site, have you variations at temperature So on. going may specific

energy may changing. have prices You

of may curtailment. and company. very an the control things on stack operating the You entering the results start therefore intelligent a be technology significant of into site impact individual a doing like All miner, and having that

So it. of at look a kind that's to way

miner some of from much The to that other And ASIC critical view the that what and absolutely we will I time, layer the it is miner, you'll see board the industry in we've And think on been who I down look differentiation. we to pool over as through way basic down fully area. to announcements future is the think doing at even more only to a integrated going we're the very in be integrate itself.

Tyler DiMatteo

And great. you. then really I I appreciate that. follow-up. Okay, Thank want to

you You made more of mentioned other if JV. some allude color you're provide can didn't anything some towards But those, upon, the those a digital and comments touch immersion just well but have some you that just you you opportunities on bit may little applied working to presumably, there's please? of the now as on those

Fred Thiel

Yes.

media it throughout immersion, followers. industry is look the and one of, technology And company kind history then as an or in win Facebook, followers the there's isn't in you're wasn't this if Clearly, technology Google technology. either et who this first the a industry spent into back industry. and in use the XX-years -- you're the I've relates that, example So the fast the pioneer and first the pioneers the concept there's is and first industry cetera. people typical are get search a to their fast arrows engine, concept you and site, about called social in ones And

and learnings So follower the upon the much of it's typically pioneers do better. build a something fast can

it had of And was optimized systems we things Apple so looked that analog how one and and realized there cost controlled to see from develop uptime highest low out They have the able be with be an maintained deploy a again Apple. One to wait, -- a at And to many of into and and and It people as those. cost to much of a versions in come We be and we immersion. done as had CapEx a and to approach the the remotely. innovation it. with not that have. better to perspective how criteria X and typically and had design reliability the simplicity possible degree was immersion wanted lot couple shortcomings our to a efficiency, typically version had we we of those a some Gen is companies were first like sector. kind in of

that So on didn't people you ground. of large have team have to the

with the can few where as machines what a XXX-day done cost what kind maintaining totally that opens driven the to the lights to prove nobody say so in operate Mining -- out, do also number because the is have to fewer for on now industry typically have industry. been operating to pencil do is you economic barrier of up a, and ground lowers What pilot. And as were it of maintain Abu the things goes this XX is to relative operation you could scale sites having because best Bitcoin maintain just people on and There site. systems to your does sites, the because of doing to be that's Dhabi, the ground are it utility able lowering to north megawatts, now, ability machines be period, have And in we unheard uptime. to has of very the touching places where scale of you're people on smaller and that's the the sites,

of, we we downsize and believe up allows in with very opens for to a many go to member solution, that. the But sites, little that we to technology where globally which our can can do run we opportunities vastly, places if ability immersion wanted us with mine involvement operating kind so network distributed more team do

we're further technology evolve. to continuing adding do and highly speak now miner emerging to this even more Dhabi the and generation on. some design we're most That especially key that there's in we out it. as using So How that optimized and we're become we there technology really decisions there deploying with with Abu enhancements

firmware, will cetera. best best et efficient whether it's fastest what technology, whether you'll pool, best lead most I best it's the see think the machines, always boards, we is with technology immersion energy controller

Tyler DiMatteo

Okay. you. I'll Thank appreciate back it Great. Fred. that, Really to turn the queue.

Operator

with is question H.C. from Kevin proceed. next Our Wainwright. Please Dede

Kevin Dede

Good curtailment back taking announcement comment to the morning, questions. regard yes, that operation. the made gents. Thanks March can -- the go we with you for March or Fred, sorry, to

Fred Thiel

April? April. April. Right.

Kevin Dede

patterns? you're the look give know, your going partners to maybe you to do and threshold? what maybe How At Could little on do color or decide you to rely sort on how thinking you you just get hosting us What's around more some add don't curtailment at it? do And decide? I to weather your a that. manage just of point insight

Fred Thiel

Yes.

of of one it competitors of the at have some and way. Unlike generation of to the they think this their are the foibles subject hash our all from grid single coming have sources our one site. that power of site sites kind and rate So who operate

distributed across many have now our sites. We many, operations

differently site operational slightly an from And perspective. handles curtailment so each

unique sell rate what's current ourselves. Bitcoin global Texas, which for direct market. or is have to we're energy hash where to wind some Mountain of energy is, price energy a that it prices the there, King consume in decisions at example, Based the the as whether and PPA we For drives on in going grid

generated into and therefore which what in see is our typically how curtailment some it's limited enhancements that's optimize we down we systems the more really but seeing around that's upgrades here benefits issues case enhancements start also curtailment shut ability to our technology then being the is partners Texas BTC in third-party this have that have you'll it that grid is heat on have and place still deployed put with an being think would. is issue, -- how curtailment, them because number systems as a not by the U.S. if a shutdown. in operations with doing in go We'll to I summer you you we and of are heat higher kind important of of issue handled operations becoming the been the the you when months, where And are We've ground. intelligent

our the us optimize things clocking way do as allows at miners to heat. a firmware deal to of under is over with and both some custom clocking so And

curtailment different than though, With Dakota is, patterns, different with great issues, because different cetera. deal the different sites Mountain where weather of for APLD is again, specific, of very sites, location the those West Texas, example, site et we it's King kind seasonality how operators, North

very to So as to where build operations the in deploy exposure we less managing emerging and have capabilities fashion. our we And curtailment to immersion, continue we'll due to have our use In an a diversified as more around and we strategy allows us places to heat. automated diverse out continue explore technology curtailment.

you able for to in purchases, take will advancements some well, and get that there. advantage see as controlling as which we be you'll curtailment, exist pricing that where optimize we're operations of obviously efficiency opportunities blocks things I the there. some in power will And think like buying tools Energy hedging of the further involved and actually

throughout year. it just starting curtailment, journey benefits on continual this but So optimizing think see as they'll of this of we're

Kevin Dede

guess, you exahashes. that Can some more you how we all know on insight have us nameplate? carry I just know assume should the that Abu I by online? you the overclocking? Apologies. megawatts with it's insight? give Do think can I power the your just we you offer underclocking in I said you pilot then this please? in And Fred, Dhabi that and installation, seven talk Maybe discussion year. wasn't about I this a seven saw said Is that over comes there. -- to little Can end of year missed overclocking, XXX you or going maybe something the you'd details. performance

Fred Thiel

Sure.

site will the distant megawatts. not landed kind accelerating And in of order, of, and reverse more XXX it here installed. this in equipment gradually. like be then fully has, on the of So end Starting too deployments, by as see year, on ground operational the the and come future all any our you'll

to in months, demand. we'd there you'll see but curtailment So summer some you about curtailment due rather to if energy the want not heat, think specifically obviously

for symmetry the use I things. amongst think of they X conditioning I've summer As that there of exists run where all this gigawatts power have the generation in mentioned that other need energy they air you previously,

in And only about the that's winter, X gigawatt.

summertime, of the so there's of periods curtailment. And the in energy wintertime, where excess there day in are plenty the and be may there

period the summer won't some any likely and winter we'll see be obviously, So And in the curtailment. curtailment. months, some we numbers may seasonality in see there the then in

those in seasonality be numbers. there'll So

rate it overclocking et or things, cetera, site take numbers. try hash that of, on it's you clocking to of, just clocking. XX% assume, your then just technology a we'll when miner over into easy things: about XX%, two your by one, net about overclock because on lot if specific, we cooling kind hash dependent it specifically comment can XX%, to very And of under don't over And the oh, complicated et is And we All is too specific, talk rate to of cetera. XX%, gets XX%, talk nameplate.

to going as be underclock would otherwise time opposed when curtailed certain we by So sites energy summer hash to operating purposes. a to just where we keep be they heat there's that rate, months miners believe in way during nameplate talking as periods the purposes of for them

were will times year And is Abu there a Navy I can able how at our be Dhabi about of tell efficiency sites that are would I'm go. of the announced What overclock exceeded will the our achieve. our going see the the talk forward numbers not I expect to nameplate when you our specific results see times name the from percentage to of overclock. what where a in on we I'm of to ships submarines will normal and fast which pilot you XXX% rate be amount deep get kind sites certain hash expectations can we we not U.S. the those what rate at it of and or be to kind is closer our our including number, in But going is, quarters, in I overclock we think XX-ish as as just percentile. operational like to how otherwise

Kevin Dede

about we should How costs? think joint the ventures power

Fred Thiel

it you contract. So and contractual price over as kind goes in it's low-single-digit range I of the the up life think starts the of essentially marginally think should of that fixed

there share a specific we're of, of as working without, it a are show details cetera. number profit again, venture joint pricing consolidating end because on on year. We that. there each the operation, around just But Bitcoin still kind that's at may et risk an with, XX% those little So depending kind the all. we fixed there's our And that's It's out. on no based annual up how mine lot of, increase something a detail

Kevin Dede

Okay.

You of hands you to but talk conclusion mentioned to sure length of the actually the I talk can has you not if I’m contract? at that, apologize, the contract, -- the the you mentioned can assets on who

Fred Thiel

it’s commented there. venture And multi-year unwinding contracts or would there there's agreement. that haven't like joint in JV, the So an aspect it, extension liquidation the of provisions it. either on we that for And of expiration allow any a of that are process then at happen

that we have. atypical to is but it’s it agreements So hosting a duration the multi-year not the of typical -- agreement,

Operator

Dobson is Brian Chardan Our proceed. with Capital Markets. final Please from question

Brian Dobson

morning. thanks Hi, and good

Just the very venture, exciting. joint on is another which follow-up quick

management, a as ultimately guess And I Abu And really how choose you made that decide that partner? right you what was place? Dhabi also which were So you the did geographies considering?

Fred Thiel

Great question.

risk of it. of looking So at when you're opportunity, you kind at reward aspects look any the

had. so recently is power, And opportunity taxation, One risk, country UAE a power international existing cetera. of the excess attractive in have aspects operate addition or risk relative they just you're power the all as obviously regime they on locust, brought infrastructure had to stability, number new there, And it. of to X plant to an a you nuclear gigawatt going et the opportunity, in to very

which had problem challenge for they had so two-fold. This exists capacity, in them, a the mining. And power need creates there they generation also Bitcoin but is asymmetry excess that a or energy for

you degree summer One months. the are you months the in much is only energy winter generation your in monetizing to a lower than are

in is revenue not generating theory generation you're And when power months consuming so the in you that capital equipment for if that's energy needed not the there. would

a the to of which assets, and distribution things. to in And so way get would assets return that in the their in interested better the generation the way were power and allow the investors and a country owners a government power transmission to achieve very energy investment generating line on includes couple of a them in find

obviously generation generating and energy the the ROI we in as a way generate they that do today how we're distribution. on revenues not investment to is increase made One the

thing which way through the provides for generation is thing. monetize great people, government Bitcoin electricity is The to allow other subsidies the a a ability government is to way help energy in their to the of where Mining And to way instead can but the having this out energy do it, subsidize to in to operation use that as they're country. a costs the not do money a treasury the

you water systems essentially you're heat then vast is it in the the And and condense is to region essentially. water desalination steam source point water desalination from of essentially that you in the where to has distilled have. water lastly, that generation the have And you're seawater from And offtake region. majority primary what steam, energy the taking and of that the converts where that they to drives heating come the it

And the off all the the that so energy when take they generation don't drops the heat take. heat energy have from but they wintertime, generation, need in off

to was systems keep in you going these don't find can't if to the energy a profitable, way energy. had way would from that run they a the because to generation if So you you the heat want sell

provided So we ideal solution. the

heaven. really it was a in So made match

opportunity are you are in interest investors, think if would about of us, together ownership If who co-investors, our wealth members country. this which distribution there, you partners the fund, power the sovereign has also in generation with the obviously and an the in

to operate they operation the to going to And table not and And a be have able where so successfully if could et have perspective, capital risk a would wanted somebody significant from to to And wanted partner they were. energy going bring partner energy to also dramatically cetera. better they was we who contracts, post-launch said game we could ensure only skin in with that the pricing, to that we were energy we distribution, the decrease chosen a partner risk of with partner. the

Zero we are the partner, two, in country. such a proud investors to honored feel good largest be work to there. with a is very of their And great able partner entities the obviously and some

that who chosen else the had better. the ended there technology being of for work a attempted because partner could. number combination markets of to really the us a of up also we nobody So it nature that And advantage and our ability deliver other that was were a people unique solution risk, was of energy and in country to and region way kind

Brian Dobson

Thank you. excellent. Yes,

subsidizing I Do what base in you projects. on of talking that's load -- as other know, loan elsewhere what energy world? far line see you think a in might clean geographies you the really opportunities investors a that lot that, as, on consider? about And are the base with

Fred Thiel

question. great a Yes,

into U.S. of are risk. intended, of North very by no on diversified we Texas the the that And and Dakota focused pun diversifying So out token, parts we same other

Now looking in at diversifying like internationally. hemispheres. climates things We're for different optimizing different

period in if southern were coldest for with you're hemisphere. when is and hottest in do hemisphere And air the example, there northern in hemisphere, we the example, if operating hemisphere heat, southern the so to seasonality the southern you're for there, cooled the it's for

between essentially in And production seasonality by so could hemispheres. splitting offset the you of some and operations North South

to but locations just Latin think for some this to in America. let's not So there potentially point, the not have but that source opportunities say example growth renewable Two of our some very We're being that is in Gulf there's energy just which energy project UAE, at America, Latin We're are are name reputation region promising. are one that needs the similar kind also region. from systems countries for potential and there, interesting There's around similar in allows some going looking opportunities in who Africa look Zero in interesting renewable, we and quite the us leverage at geothermal in promising. good further energy

Europe. expansion in necessarily doing see won't us You any

hydro Asia There's opportunities where in see expansion some there's may energy certain attractive parts in of Asia. You also.

to of opportunities us size It more allows would be than maybe of being large So kind I if opportunities ourselves. remotely dispersed. our of advantage of what take built more of said geographically miner smaller to at scale we've kind the hands like up a that for that you able smaller off stack look to sites, I operate to sites kind about of are kind think going opens technology combination back normally open

ability self-sustaining And that opportunity, something because from by gas is would to energy more need production. eliminating we energy you're we those XX very then taking sites potentially generate essentially energy is the believe Converting and that dioxide energy it that consuming way, as it. opportunity in times also spoken have and we've carbon you where grid all a interesting And before not landfills methane than for at the to be damaging Bitcoin at example energy fully for about for using that.

significant consume so own climate. potential a having impact at And generate while the our time same energy, the energy, on own our

we look at forward. going So opportunities kind of those are how here

Brian Dobson

for Excellent. color. Thank much that very you

Operator

no back going I'm turn the remarks. over Thank at this closing questions call There Brendler to to further are you. Chris point. for

Chris Brendler

thanks Thanks, Sherry, and your everyone today. for time

to the any Please our at contact team you of free today today's answered not Relations additional have If call. Investor feel and during questions that enjoy day. were ir@mara.com. rest you your Thank

Operator

conclude does This today's conference. you. Thank

and your at You thank may participation. this lines for disconnect you time, your

Marathon Digital (MARA) 11 May 232023 Q1 Earnings call transcript