Marathon Digital Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 6, 2026

Key Takeaways

  • Positive Sentiment: MARA expects its power portfolio to reach approximately 4.8 gigawatts after completing the Long Ridge transaction and securing the Matagorda County, Texas site, which could support up to 2 gigawatts subject to approvals.
  • Positive Sentiment: The company said Long Ridge is expected to contribute approximately $144 million in annualized EBITDA, with roughly 70% of its power output covered by long-term contracts. MARA also said tenant demand for its AI infrastructure sites has exceeded initial expectations and that it remains confident of signing at least two leases by year-end.
  • Negative Sentiment: Second-quarter revenue fell to $174.9 million from $238.5 million a year earlier, while MARA reported a $611.3 million net loss, primarily reflecting lower Bitcoin prices and a $343 million unrealized digital-asset mark-to-market loss.
  • Neutral Sentiment: MARA expanded borrowings by $600 million through Bitcoin-backed credit facilities at a weighted average cost of 7.56% and expects to assume about $900 million of Long Ridge debt. The financing is non-dilutive but increased the share of its Bitcoin holdings pledged as collateral to 54%.
  • Positive Sentiment: Mining efficiency continued to improve: energized hashrate rose 22% year over year to 70.3 exahash per second, while daily operating cost per petahash declined 4% to $27.7. The company expects the expiration of hosted-mining agreements beginning in 2027 to reduce third-party hosting costs over time.
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Earnings Conference Call
Marathon Digital Q2 2026
00:00 / 00:00

Transcript Sections

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Operator

Greetings. Welcome to MARA's second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will turn the conference over to your host today, Robert Samuels, VP of Investor Relations. Thank you. You may begin.

Robert Samuels
VP of Investor Relations at MARA

Thank you, operator. Good afternoon, everyone. Welcome to MARA's second quarter fiscal year 2026 earnings call. Thanks so much for joining us today. With me on today's call are our Chairman and Chief Executive Officer, Fred Thiel, and our Chief Financial Officer, Salman Khan. Today's call includes forward-looking statements, including those about our growth plans, liquidity, and financial performance. These involve risks and uncertainties. Actual results may differ materially. We disclaim any obligation to update these statements except as required by law. For more details, see the risk factors section of our latest 10(k) and other SEC filings. We will also reference non-GAAP financial measures, like adjusted EBITDA, which we believe are important indicators of MARA's operating performance because they exclude certain items that we do not believe directly reflect our core operations. Please see our earnings release for reconciliations to the most comparable GAAP measures.

Robert Samuels
VP of Investor Relations at MARA

We hope you've had the chance to read our shareholder letter and look forward to your feedback. We will begin with some prepared remarks from Fred and Salman. After their comments, we will open the call to Q&A. I am going to turn the call over to Fred to get things started. Fred?

Fred Thiel
Chairman and CEO at MARA

Thank you, Rob. Good afternoon, everybody. Thank you for joining us. For much of the past two years, the AI conversation has focused on models, chips, and capital. Underneath all of that is a more basic requirement: power. That is becoming the central infrastructure challenge of the AI era. The market has no shortage of ambition or investment. What it lacks is enough energized, permitted capacity in the right places, available on a timeline customers can use. The question is no longer who can fund the next wave of compute, it is who has the power. That question goes directly to MARA's strengths. We did not arrive at this opportunity by chasing a new trend. We arrived here after more than a decade of solving the same operating problem at global scale: securing power, deploying compute, and running infrastructure efficiently around the clock.

Fred Thiel
Chairman and CEO at MARA

Through Bitcoin mining, we built one of the world's largest distributed compute platforms, spanning 19 data centers across four continents. Along the way, we accumulated strategic land and power assets, deep technical expertise, and a disciplined framework for deciding where each megawatt can create the most value. Today, MARA is applying that foundation more broadly. We own, develop, and operate digital infrastructure across power, land, and compute. Depending on the opportunity, we can convert electricity into higher value compute ourselves or provide infrastructure to customers who need it. That flexibility matters. Many companies entering this market are still searching for sites, power, and operating capabilities we have spent years assembling. Our move into AI infrastructure is therefore not a break from MARA's history. It is the next use of the platform we created. The second quarter marks another important step in that evolution.

Fred Thiel
Chairman and CEO at MARA

We advanced the Long Ridge transaction towards closing. After quarter end, we announced that we acquired the rights to a strategically located power site in Matagorda County, Texas, with the potential to support approximately 2 GW of future capacity upon ERCOT and interconnection approval. On completion of the pending transactions and required approvals, we expect our power portfolio to reach approximately 4.8 GW, which would more than double our current capacity. We believe that would establish one of the largest powered land portfolios in the industry and create a significant platform for long-term shareholder value. As the opportunity becomes clearer, so has our focus. MARA operates one integrated digital infrastructure platform built around power, land, and compute. Digital infrastructure is our primary growth focus. That is where we are developing campuses and pursuing long-term customer relationships at scale.

Fred Thiel
Chairman and CEO at MARA

Exaion and our technology initiatives add targeted capabilities around that core. They help us address specialized customer needs, improve the utilization of our infrastructure, and extend the value of the assets we own. We manage all of these capabilities as one platform. We allocate capital across them using the same filters: expected returns, customer demand, execution risk, and contribution to long-term shareholder value. Let me spend a few minutes on digital infrastructure, our primary growth focus. The demand picture is straightforward. AI infrastructure investment is accelerating, while the supply of power-ready sites is not keeping up. Industry estimates suggest that the four largest hyperscalers alone could invest approximately $725 billion in AI infrastructure during 2026, and that annual capital spending could exceed $1 trillion by 2027. The power requirement is rising just as quickly.

Fred Thiel
Chairman and CEO at MARA

U.S. data center electricity demand is expected to grow from about 31 GW in 2025 to 41 GW in 2026 and 66 GW in 2027. New generation and transmission are not coming online at the same pace. That imbalance is increasing the value of infrastructure that's already energized or can be delivered with greater certainty. Our strategy is designed for that environment. Own scarce powered assets and create as much long-term value from them as possible. The Matagorda County site is expected to add approximately 2 GW in one of the country's largest power markets. Just as important, it's expected to provide enough wholly owned capacity to support our transition away from hosted mining as existing agreements expire. That should increase our operational control, improve unit economics, and give us greater flexibility in allocating capital. The pending Long Ridge acquisition is equally important.

Fred Thiel
Chairman and CEO at MARA

We believe it will transform our existing Hannibal campus by adding adjacent land while contributing positive EBITDA at closing. With more than 70% of Long Ridge's power output contracted under long-term agreements, we expect the transaction to enhance earnings while significantly expanding our AI infrastructure opportunity. Together, these transactions reflect our infrastructure investment model. We acquire scarce powered assets, enhance their strategic value, develop high-quality digital infrastructure, and secure long-term customers. As those assets are developed, they can become durable cash flow generators that remain in our portfolio or can be monetized, allowing us to recycle capital into future opportunities. Speed, certainty, and reliability are principles that define how we invest, how we build, and how we aim to serve customers. Speed matters because customers cannot wait years for power.

Fred Thiel
Chairman and CEO at MARA

Our portfolio of energized sites can support earlier in-service dates than many competing developments, giving customers access to capacity when they need it. Certainty matters because infrastructure must be delivered on time, on budget, and to specification. We believe our development strategy, our relationships with utilities and equipment providers, and our partnership with Starwood will give customers greater confidence in execution. The Starwood partnership also gives us the ability to scale with proportional capital support. Reliability matters because mission-critical AI workloads require experienced operators. MARA brings years of experience designing, owning, and operating large-scale compute infrastructure. Starwood adds engineering, procurement, construction, and development capabilities backed by more than 7 GW of delivered infrastructure for many of the world's leading hyperscalers and frontier AI companies. Together, we offer a combination of operating experience, development expertise, and capital discipline that we believe few competitors can match. Commercial momentum continues to build.

Fred Thiel
Chairman and CEO at MARA

Our goal is a diversified customer base across hyperscalers, AI-native cloud providers, silicon vendors, and enterprises with the right balance of credit quality, returns, and long-term portfolio value. Working alongside Starwood, we are progressing lease discussions across multiple sites, and we remain confident in our ability to sign at least two leases before year-end. The objective is not merely to sign tenants. It's to establish durable customer relationships that maximize the value of our infrastructure over decades. Within that integrated platform, Exaion gives us a targeted capability in sovereign AI infrastructure. The customer need is becoming clearer as AI moves from experimentation into day-to-day operations. Once AI becomes mission-critical, enterprises care much more than raw compute. They also care about where their data sits, which rules govern the infrastructure, how resilient the service is, and how much control they retain. That is the market Exaion was built to serve.

Fred Thiel
Chairman and CEO at MARA

As a European company, Exaion can provide private cloud infrastructure governed under a European jurisdiction. For enterprises and public sector organizations operating within the EU regulatory framework, that is a meaningful advantage. Customers can deploy advanced AI workloads while keeping control of their infrastructure, data, and operations. For critical infrastructure, regulated industries, and government-adjacent services, that level of sovereignty is moving from a preference to a requirement. The addressable market is also much larger than new AI applications alone. Roughly 80% of enterprise data still sits outside the public cloud. As organizations modernize that data and infrastructure for AI, they will need providers that can meet demanding standards for security, compliance, and operational resilience. Exaion already has credibility in those environments. It operates critical infrastructure supporting EDF's nuclear reactor operations, where reliability is simply non-negotiable.

Fred Thiel
Chairman and CEO at MARA

For those who are not aware, EDF is one of the largest operators of nuclear power in the world. Its selection for the EON consortium, an EU-backed initiative targeting approximately 3 GW of AI-ready data center capacity, provides further validation. We are also advancing opportunities outside Europe, which supports our view that sovereign AI infrastructure is becoming a global requirement, not just a regional trend. Our technology initiatives are another targeted capability within our digital infrastructure platform. It takes operating knowledge developed inside MARA and turns it into technology that can improve our assets and serve outside customers. Running a large distributed compute platform has taught us a great deal about power management, infrastructure optimization, and digital asset management. Some of the tools we built for ourselves now have clear applications beyond our own fleet. Vertebra AI is one example.

Fred Thiel
Chairman and CEO at MARA

The platform manages power allocation and infrastructure performance in real time. In our mining operations, it has helped us add computing capacity with the same electrical footprint. In other words, more output without needing more power. As power becomes more valuable, that capability should matter well beyond mining. AI data centers, independent power producers, and other energy-intensive businesses face the same need to improve utilization, operate more efficiently, and lower costs. The second platform is Hashrate Under Management or HUM, our blockchain financial infrastructure platform. This is the first time we're discussing HUM publicly. We're doing so from a position of demonstrated commercial traction, not simply future potential. Both HUM and Vertebra AI reflect the same principle. Innovation should increase the value of the infrastructure we own and create value for customers at the same time. That brings me to Bitcoin mining.

Fred Thiel
Chairman and CEO at MARA

It remains an important part of MARA, not because it defines the limits of our future, but because it continues to strengthen the broader platform. Mining gave us the foundation, strategic power assets, experience operating large-scale compute, and the capital allocation discipline we use today. In that sense, mining was never the final destination. It was the platform we could build from. It still plays three important roles. First, it generates cash flow that supports investment across the business while we continue to operate with one of the industry's lowest cost structures. Second, it gives us flexibility. We can deploy mining equipment quickly at a newly energized site and begin monetizing the power while an AI facility is being designed, permitted, and built. When customer demand is ready, that same site can transition toward AI or high-performance computing without leaving the infrastructure idle in the meantime.

Fred Thiel
Chairman and CEO at MARA

Third, mining is still one of our best sources of operating insights. The work of optimizing power use, improving compute efficiency, and managing mission-critical systems at scale directly informs how we approach AI infrastructure. We will keep improving the mining business through disciplined fleet modernization and intelligent power management. As more efficient machines replace older equipment, we can increase compute within the same electrical footprint and improve the economics of the operation. We do not see Bitcoin mining and AI infrastructure as competing businesses. They are different applications of the same underlying asset, power. The capital allocation question is therefore simple. Where can each megawatt create the most value? In one market, the answer may be Bitcoin mining, and in another it may be AI infrastructure, sovereign cloud, or enterprise computing.

Fred Thiel
Chairman and CEO at MARA

Our advantage is that we have the assets, expertise, and flexibility to make that decision dynamically as market conditions change. We believe that flexibility is a meaningful competitive strength and an important driver of long-term shareholder value. The first half of 2026 was about expanding and transforming the platform. We grew our portfolio of powered infrastructure, advanced transformational transactions, strengthened the commercial pipeline, and continued investing in the initiatives that can drive MARA's next phase of growth. The second half of the year is about execution. Our focus is clear. Convert infrastructure into long-term shareholder value by signing customers, bringing assets online, and demonstrating the earning power of the platform we have spent years assembling. Over the coming months, we expect to complete the Long Ridge acquisition, advance lease discussions across the digital infrastructure portfolio, expand Exaion's international presence, and continue commercializing our technology initiatives.

Fred Thiel
Chairman and CEO at MARA

Most importantly, we expect the investments we have made over the past decade to become increasingly visible in our financial results. The foundation has been built. Our focus now is monetizing it. Later this year, we look forward to hosting our Investor Day. We plan to provide a deeper look at our strategy, showcase our infrastructure portfolio, and demonstrate how the pieces of our business work together to maximize the value of every megawatt we own. So let me come back to the question raised at the start. Who can power, build, and operate the next wave of compute? MARA has spent more than a decade building an answer. We have assembled one of the industry's largest portfolios of powered digital infrastructure and developed an operating experience to put those assets to work.

Fred Thiel
Chairman and CEO at MARA

The opportunity in front of us is to turn that foundation into a broader platform for the next generation of compute, and to do it with the same discipline that built the company. Bitcoin mining provided the foundation, digital infrastructure, Exaion, and our technology initiatives expand the value we can create from that foundation. Together, they position MARA across multiple layers of the AI infrastructure value chain while maintaining discipline in how we allocate capital. Ultimately, our shareholders should judge us not by our vision, but by our execution. The AI infrastructure market is moving quickly, and credibility will be earned by consistently delivering results. Power is becoming the defining resource of the AI infrastructure market. Our objective is to convert the power, assets, and expertise we have assembled into durable value and to establish MARA amongst the leaders of that market.

Fred Thiel
Chairman and CEO at MARA

Thank you for your continued support and confidence in MARA. With that, I will turn the call over to Salman.

Salman Khan
Salman Khan
CFO at MARA

Thank you, Fred. Good afternoon, everyone. Two things defined Q2 for MARA. Bitcoin prices created a challenging revenue environment, we used the quarter to fundamentally transform our power portfolio and capital structure. That context matters as I walk through the numbers. During Q2, we made meaningful progress in building MARA's digital infrastructure platform. Taking actions that we expect will expand our total power portfolio to 4.8 GW, nearly 2.5x its size at the beginning of the year, and secure our position as one of the industry's largest holders of digital infrastructure power capacity. After quarter end, we acquired rights to 1,200 acres at a strategically located powered land site in Matagorda County, Texas, representing up to 2 GW of potential capacity, subject to ERCOT and interconnection approvals. Our confidence continues to be reinforced by encouraging interest from prospective tenants.

Salman Khan
Salman Khan
CFO at MARA

We have also advanced the Long Ridge acquisition by securing approval from holders of Long Ridge's senior secured notes to assume the notes at closing. The transaction will close after FERC approval, which we expect to occur soon, as guided previously. Subsequent to quarter end, we further advanced the Long Ridge acquisition by entering into 2 Bitcoin-backed credit facilities with Coinbase and Two Prime at a weighted average cost of debt of 7.56% for incremental borrowings under these facilities of $600 million. In addition, we refinanced our existing $150 million facility with Coinbase and consolidated it into the new Coinbase facility. This borrowing, originally due in Q1 of 2027, will now mature in two years, along with the incremental $600 million. These financings strategically activate a portion of MARA's Bitcoin reserves as a non-dilutive funding source while preserving our exposure to Bitcoin's potential long-term appreciation.

Salman Khan
Salman Khan
CFO at MARA

The facilities will be used towards funding the cash consideration for the acquisition, together with the assumption of certain of Long Ridge's existing indebtedness, provide funding towards completing the transaction. To be direct, we are funding a $1.5 billion enterprise value acquisition through a Bitcoin-backed debt and assumption of Long Ridge's balance sheet, all non-dilutive financings. This is the capital discipline we committed to. Once completed, the Long Ridge acquisition is expected to contribute approximately $144 million in annualized EBITDA and durable free cash flow, with roughly 70% of its output secured under long-term contracts.

Salman Khan
Salman Khan
CFO at MARA

These contracted cash flows will diversify our revenue base beyond Bitcoin mining. While our capital-light partnership with Starwood will preserve balance sheet flexibility as we develop AI and high-performance computing opportunities across our own power portfolio. Together, these attributes strengthen our financial position and reinforce our disciplined approach to capital allocation. None of this happened overnight.

Salman Khan
Salman Khan
CFO at MARA

It is the result of deliberate work across the organization, that work continued to gain momentum this quarter. With that context, I will turn to Q2 financial performance, capital allocation, and balance sheet activity. The Bitcoin price environment remained challenging, reflecting broader pressure across risk assets, driven by macro uncertainty, tighter risk appetite, and continued pressure on mining economics. It is important to view this alongside the substantial progress we are making to build a more diversified digital infrastructure platform. Revenues during the second quarter of 2026 were $174.9 million, compared to $238.5 million in the prior year period. Bitcoin production contributed a $7.2 million increase year-over-year, though this was offset by a 28% decrease in Bitcoin's average price, which reduced revenue by $65.9 million.

Salman Khan
Salman Khan
CFO at MARA

Other revenues declined approximately $4.9 million, primarily reflecting lower revenue from other digital assets and elimination of our hosting services compared to the same period. During the quarter, we mined 2,422 Bitcoin or 26.6 Bitcoin per day, approximately 64 more Bitcoin than prior year period. We won 700 blocks, up 1% year-over-year and up 8% from Q1 of 2026. We held a total of 35,577 Bitcoin at the end of the quarter, valued at approximately $2.1 billion, at a $58,524 spot price, down from 49,951 Bitcoin held a year ago. Of the total Bitcoin held, approximately 26%, or 9,270 Bitcoin, were loaned or pledged as collateral. Of that, 4,742 Bitcoin were loaned under our digital asset management strategy, generating approximately $4.3 million of interest income during the quarter. We delivered energized hashrate of 70.3 exahash per second, increasing 22% from 57.4 in Q2 of 2025.

Salman Khan
Salman Khan
CFO at MARA

Sequentially, hashrate was down modestly from 72.2 exahash as we phased out legacy miners. This reflects continued fleet optimization and opportunistically upgrading our infrastructure by phasing out legacy miners to boost our total hashrate. Our share of available mining rewards reached 5.9%, up from 5.5% in Q1 of 2026. Approximately $343 million of our net loss this quarter was driven by unrealized mark-to-market fair value adjustment for digital assets, a direct reflection of the drop in Bitcoin price during the quarter. In total, we reported a net loss of $611.3 million, or -1.6 per diluted share, compared to net income of $808.2 million, or 1.84 per diluted share in the second quarter of 2025. As a reminder, every $10,000 change in Bitcoin price results in an approximate $350 million impact on the fair value of digital assets on our income statement, which is an unrealized non-cash adjustment.

Salman Khan
Salman Khan
CFO at MARA

Accordingly, adjusted EBITDA for the quarter was -$360.9 million, similarly dominated by Bitcoin mark-to-market change compared to $1.2 billion in the prior year period. We use adjusted EBITDA as a supplemental measure of operational performance, and a full reconciliation to net loss is included in our shareholder letter and earnings deck. Our daily cost for petahash per day improved 4% year-over-year to $27.7 from 28.7 in Q2 of 2025, and over the past nine quarters has improved by 27%, which we believe remains among the lowest at scale in our sector. That is the cost structure behind the efficiency Fred referenced earlier, and it is the cost structure we expect to bring to every megawatt we convert to AI infrastructure. Our cost per kilowatt-hour was $0.04 for our own sites in Q2 2026.

Salman Khan
Salman Khan
CFO at MARA

Purchased energy cost per Bitcoin for our own mining sites was $38,690, up from $33,735 in Q2 of 2025, primarily due to higher network difficulty driven by growth in global hashrate. Our own efficiency metrics improved. The per Bitcoin cost increase is entirely a function of rising global difficulty, a market dynamic outside our control. Despite the increased difficulty levels, Bitcoin production at our own mining sites increased 2% over the same period. Looking ahead, our most significant third-party hosting arrangements are set to expire beginning in the third quarter of 2027, with all the arrangements concluding by the first quarter of 2028, at which point in time we expect to eliminate third-party hosting costs and improve our cost per kilowatt-hour. General and administrative expenses, excluding stock-based compensation, were $69.5 million for the quarter, compared to $40.1 million the prior year period.

Salman Khan
Salman Khan
CFO at MARA

The increase reflects the scaling of our operations, higher personnel costs associated with headcount growth from the prior year period, and administrative fees in support of our expanded global footprint. Acquisition and integration costs burden our G&A by $15.4 million. We also incurred a $10.2 million litigation settlement representing the amount paid in connection with the final resolution of a patent dispute. Excluding both items, underlying G&A was approximately $43.9 million and more comparable to the prior year. Compared to Q1 of 2026, G&A benefited from lower headcount costs related to the previously announced reduction in force. We expect our quarterly G&A run rate, excluding stock-based compensation and acquisition and integration costs, to continue to trend lower as these savings are realized over time. Now let me turn to the balance sheet and liquidity.

Salman Khan
Salman Khan
CFO at MARA

We ended the quarter with $421.3 million in cash and cash equivalent and approximately $2.5 billion in combined cash and Bitcoin. Our capital allocation strategy remains disciplined and focused on supporting long-term shareholder value. Following the expected close of the Long Ridge acquisition, we anticipate assuming approximately $900 million of Long Ridge's debt. As I mentioned previously, MARA has recently added $600 million in borrowings, which are secured by our Bitcoin holdings. As a result, 54% of our Bitcoin holdings have been pledged as collateral under our borrowings. These financings strategically activate a portion of MARA's Bitcoin reserves as a non-dilutive funding source while preserving our exposure to Bitcoin's potential long-term appreciation. With that, I will turn it back over to the operator. Operator?

Operator

Thank you. At this time, we'll conduct a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one at this time. One moment while we poll for the first question. The first question comes from Greg Lewis with BTIG. Please proceed.

Greg Lewis
Greg Lewis
Analyst at BTIG

Yeah. Hi, thank you, good afternoon, and thanks for taking my questions. I did want to touch a little bit on Long Ridge. I guess a couple things about Long Ridge. The first is around the potential timing. Has there been any feedback from the federal, local, or state levels about the potential closing? Are there hurdles that need to be done? I guess that's my first question.

Fred Thiel
Chairman and CEO at MARA

We haven't received any feedback yet. We don't think there's anything at this stage that's going to block the approval. If you look recently, Wolf just got approval for one of their acquisitions. We expect FERC to respond to us definitely before year-end, but much sooner than that.

Greg Lewis
Greg Lewis
Analyst at BTIG

Okay, super helpful. Then just as we think about the opportunity set in Hannibal, as you're negotiating with potential HPC customers, is there a little bit of chicken and egg where, really until the deal goes through and the land that is required to build this out is in place, we're kind of in a holding pattern? Is that kind of a fair way to think about it?

Fred Thiel
Chairman and CEO at MARA

Well, we're in a holding pattern from signing a lease. That being said, we are very actively engaged with prospective tenants in evaluating exactly what they're going to build, how they're going to do it, how the fiber is going to be laid, et cetera. We're moving along at about the same pace as if the deal was already closed. If you're familiar with how these lease discussions go from when you have kind of a letter of intent from a prospective tenant, it can be 60 days sometimes, plus just talking about design and how you're going to permit and all that stuff. There's nothing holding us back now other than closing, really, the transaction. Things are moving along at a very good pace with the tenant.

Greg Lewis
Greg Lewis
Analyst at BTIG

Super helpful. Thank you very much.

Operator

The next question comes from Paul Golding with Macquarie. Please proceed.

Paul Golding
Paul Golding
Analyst at Macquarie

Thanks so much, congrats on the announcement of the new site in Texas. I wanted to ask, with the recent developments around the Texas audit process tacked onto the batch study process, are you getting any additional interest, or is there a market repricing on your existing energized sites that are available? I have a follow-up. Thank you.

Fred Thiel
Chairman and CEO at MARA

There's broad demand across a number of sites, with multiple tenants in discussions on multiple sites. The Matagorda site in and of itself is a hugely attractive site for tenants, everybody assumes that this is going to eventually go through, meaning the Batch Zero and Batch One processes that Greg Abbott has delayed. If you look at these requests and the queues, for a number of years it's been pretty prevalent that people have submitted requests because they haven't had to put down huge deposits, there are a lot of phantom requests in the system. By going through the audit process that Greg Abbott has requested be done, this'll flush out a lot of those. We're very pleased that for our particular site, there's no infrastructure improvements that the utilities have to do to bring power to the sites.

Fred Thiel
Chairman and CEO at MARA

We already have multiple transmission lines coming into the site. We're very close to the power-generating source in one of the biggest power markets in Texas. We feel very confident that as this audit process progresses, we'll progress through the queue as well. It's just a question of things happening in the right way.

Paul Golding
Paul Golding
Analyst at Macquarie

Thanks, Fred. Then maybe just to follow up on the Matagorda County site itself.

Paul Golding
Paul Golding
Analyst at Macquarie

It seems that the purchase structure is potentially favorably set up in terms of milestone payments relative-

Paul Golding
Paul Golding
Analyst at Macquarie

to approval. Could you just give some more color around how that was struck and some of those details, just working off of the presentation with the result? Thank you.

Fred Thiel
Chairman and CEO at MARA

Yeah. I think the way to look at it is this, is that obviously, because when we did the transaction, there wasn't 100% certainty about Batch Zero approval. There are contingencies that drive the deal, so the idea is that from our perspective, we have the ability to wait until Batch Zero, but there is, at some point, a terminal point in time where we either have to close or step away. It is structured in a way that benefits us, so.

Salman Khan
Salman Khan
CFO at MARA

Paul, just to add to that, as what Fred mentioned, this is attractive for us and our shareholders as it aligns our and counterparty's interest together with the development of the project. As we progress, everyone progresses.

Paul Golding
Paul Golding
Analyst at Macquarie

Thanks, Salman. Maybe just, I'll try to sneak a third one in, sorry, does this fall within the Starwood partnership if you were to do a deal and have a capital partner through them for development of that site?

Fred Thiel
Chairman and CEO at MARA

Any deal has the opportunity to fall within the partnership. The deals that were already allocated to the partnership were those that were in the portfolio at the time we signed the deal.

Paul Golding
Paul Golding
Analyst at Macquarie

Understood. Thank you both.

Salman Khan
Salman Khan
CFO at MARA

Thank you.

Operator

The next question comes from Chris Brendler with Rosenblatt. Please proceed.

Chris Brendler
Chris Brendler
Analyst at Rosenblatt

Hi. Good afternoon. Thanks for taking my questions. I would love to hear more about how we should think about the revenue opportunity from Exaion, EDF, as well as HUM. I don't know if you talked about it at all, because I'm listening to two calls at once, but I'd just love to hear how we should think about it as the revenue base if the revenue base will diversify with these initiatives. Thanks.

Fred Thiel
Chairman and CEO at MARA

Yeah. The HUM has no contractual revenues. They're not going to be material to the overall total revenues in the near-term. HUM is essentially an instrument that allows Bitcoin mining pools to gain a little bit more certainty in how they're paying out their fees. You could think of it as a way to leverage our hashrate and take part of our Bitcoin and use it as a way to provide more stability to pools. There's a certain limit to where it can grow. It is definitely an eight-digit a year business on an annualized basis. That will be not necessarily material, but it'll still contribute nicely. As we look at Exaion is just coming out of the fold, if you would.

Fred Thiel
Chairman and CEO at MARA

Exaion's revenues this year will be in the low eight digits, most likely, we expect them to continue to grow as Exaion diversifies their customer base. Having been captive with EDF, it takes a little while to kind of go from building interest with new customers to closing contracts, but we're already seeing good traction there. We're very bullish long-term on Exaion, especially when you think about how the continuum from powered shelves, which is essentially what we're doing together with Starwood. As you go to campuses where you're moving from just a powered shell to potentially co-location type contracts, to then moving to potentially platform as a service, or think of it as GPU rental, to then fully managed.

Fred Thiel
Chairman and CEO at MARA

An important thing to think about is that, this has been reported in the news by analysts more and more frequently now, is the frontier models are great for certain work, they are hugely expensive to use for doing the bread and butter work that many people use AI for, such as analyzing emails, writing materials, coding, things like that. You're seeing a growing interest in open source models and open weight models that people want to deploy, a lot of the forecasts are showing that these models will grow as a percentage of the overall amount of compute that's deployed, this is Exaion's forte.

Fred Thiel
Chairman and CEO at MARA

One of the things they do for EDF historically has been manage a portfolio of models where somebody who's going to run a particular task can choose the model they want to run, it's all running on their infrastructure. With the combination of the needs for sovereign compute, the needs to keep your data within your own firewalls, the desire to lower token costs substantially, we believe a lot of these open source models will gain significantly in traction, which is very additive from an Exaion perspective. We think, if you think of the market, we're addressing it kind of from two ends, they will come and merge towards the middle.

Chris Brendler
Chris Brendler
Analyst at Rosenblatt

That's great color, Fred. Thanks so much for that. My second question was on Starwood, just thinking back to our very helpful meeting we had in Vegas, where you provided a lot of color on not just the timeline, but also the numbers. I just wanted to

Chris Brendler
Chris Brendler
Analyst at Rosenblatt

the potential, I guess, what the potential numbers could look like. I just wanted to see as you are getting closer to actually executing on one of these transactions, any changes in your view, any more greater confidence, pricing, demand, and timelines? Are they all sort of as expected or any changes to that over the last three months? Thanks.

Fred Thiel
Chairman and CEO at MARA

I think we've been surprised by the demand being greater than what we initially expected. At least the response from the tenants, but that's obvious given the fact that there's not a lot of available power, and we just happen to have a lot. I think the expectations regarding the quality of discussions that Starwood was going to bring us into have been definitely exceeded. I think the professionalism of the team, how they drive conversations regarding build and design, because we're kind of at that stage with a handful of these things, have been very good. Financially, there's no difference in the calculus. I think we're very pleased with how things are going with Starwood, and the team has been great to work with. We're very pleased with that. I think they are quite pleased with kind of how things are shaping up.

Chris Brendler
Chris Brendler
Analyst at Rosenblatt

That's great to hear. Looking forward to that first transaction. Thanks so much, Fred.

Fred Thiel
Chairman and CEO at MARA

Yep.

Operator

The next question comes from Michael Donovan with Compass Point. Please proceed.

Michael Donovan
Michael Donovan
Analyst at Compass Point

Hi, thanks for taking my question. The hybrid energy storage prototype system with TAE Power Solutions. What performance and economic thresholds does it need to meet before MARA considers broader development?

Fred Thiel
Chairman and CEO at MARA

We're in the process. We're currently running Vertebrae, which is where that partnership Fits within our solution set. We're running Vertebrae, we developed originally Vertebrae to operate at our wind farm because we needed to be able to do load following, or rather follow the amount of energy being generated by the wind farm and operate our compute to maximize every electron the wind farm was generating, as opposed to having a substantially lower threshold and just running it at that level. We adapted the technology so it can now do the same thing regarding load following. If you have a system that has a varying demand, we can take the other side of the power equation and then load the batteries and at the same time create a load that uses that excess energy.

Fred Thiel
Chairman and CEO at MARA

The last area where Vertebrae is actually very exciting in the data center world is when you fire up a new data center, you have to use load banks to simulate load. Vertebrae as a solution together with mining, is a perfect load bank for startup of data centers. We expect to see some great utilization there. That's where the TAE relationship works. It's their technology that we've worked with them on to integrate into Vertebrae that allows us to do what we do so effectively there.

Michael Donovan
Michael Donovan
Analyst at Compass Point

Appreciate that, Fred. Just to switch over to more of the blockchain side. This past week there's been a lot of discussion with Slipstream and Coldcard wallets.

Michael Donovan
Michael Donovan
Analyst at Compass Point

Looking at Slipstream, how you guys think about monetizing that further?

Fred Thiel
Chairman and CEO at MARA

Slipstream was a platform we developed originally back in the time when Ordinals and these non-standard kind of payloads were very attractive and there were great transaction fees. Over time, demand for Ordinals has declined. When the Coldcard incident happened, we made a decision that we were basically going to allow people to use Slipstream as a way to move their coins in a way that the hackers wouldn't be able to take advantage of it. Longer term, I think Slipstream is a tool that our foundation, the MARA Foundation, really controls. The MARA Foundation's efforts are really around supporting Bitcoin and ensuring Bitcoin's continued development and safety. We're very active in the quantum resilience piece of what's going on in the Bitcoin market there. Slipstream is really viewed as kind of a utility that we're providing to the market there.

Fred Thiel
Chairman and CEO at MARA

I wouldn't allocate significant revenues to it at all. It's more sort of a tool that we believe is really better for the community to utilize. Over time, if Bitcoin begins to see increases in the need for payloads that are not just traditional transactions, then Slipstream could very well be a great product and service in that area to generate revenue. Currently we don't see a lot of demand in that area, but you never know.

Michael Donovan
Michael Donovan
Analyst at Compass Point

Thanks, Fred. One more, if I may.

Fred Thiel
Chairman and CEO at MARA

Yeah.

Michael Donovan
Michael Donovan
Analyst at Compass Point

Obviously, adding Matagorda would increase your portfolio quite a bit. Looking at the non-hosted capacity, I believe you mentioned before you're considering about 90% of, or evaluating 90% of that for AI. How should we think about that percentage now as you guys are looking at this more deeply?

Fred Thiel
Chairman and CEO at MARA

If you think about our overall power portfolio or our Bitcoin mining portfolio, about a little less than 30% is hosted today. The rest is owned and operated. The 90% relates to that 90% of the 70%. As the 30% approximately comes off of contract, we could run that at Matagorda while sites are being developed for AI. You have to realize that as power comes on in Matagorda, it may take 18, 24 months, whatever the build time is for tenants. In the meanwhile, we can monetize all that power using Bitcoin mining if we want. Again, the power doesn't come on all at once. It comes in gradually over about two years' time.

Fred Thiel
Chairman and CEO at MARA

What that gives us is the ability to not lose that hashrate when the hosting contracts come off, but rather just reallocate a portion of Matagorda to that for a period of time. It serves two purposes. One is it lowers our cost of mine quite significantly compared to what we were paying in the hosted environment. It allows us to use power and have an offtake for that power that we can monetize the power while the data centers are being built. It's a very symbiotic kind of shift.

Michael Donovan
Michael Donovan
Analyst at Compass Point

Appreciate that, Fred. I'll hop back to you.

Operator

Thank you. At this time, I would like to turn the call back over to Mr. Robert Samuels for closing comments.

Robert Samuels
VP of Investor Relations at MARA

Thanks, operator. Thank you everyone for joining us today. If you do have any questions that were not answered during today's call, please feel free to contact our investor relations team at ir@mara.com. Thanks very much and enjoy the rest of your day.

Operator

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.

Executives
Analysts
    • Robert Samuels
      VP of Investor Relations at MARA
    • Fred Thiel
      Chairman and CEO at MARA
    • Greg Lewis
      Analyst at BTIG
    • Paul Golding
      Analyst at Macquarie
    • Chris Brendler
      Analyst at Rosenblatt
    • Michael Donovan
      Analyst at Compass Point
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