MARA (MARA) Q2 2025 Earnings Call Transcript

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DATE

Tuesday, July 29, 2025 at 12:00 a.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Fred Thiel

Chief Financial Officer — Salman Khan

Investor Relations — Robert Samuels

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TAKEAWAYS

Revenue: $238.5 million in revenue for Q2 2025, up 64% versus Q2 2024, marking the highest quarterly revenue in company history.

Net Income: Net income (GAAP) was $808.2 million for Q2 2025, reversing a net loss of $199.7 million (GAAP) a year earlier.

Earnings Per Share: $1.84 per diluted share for Q2 2025, compared to a prior-year GAAP net loss of $0.72 per diluted share.

Bitcoin Holdings: Increased by over 170% to nearly 50,000 BTC as of the end of Q2 2025, making the company the second largest corporate Bitcoin holder globally.

Market Value of Bitcoin Holdings: The market value of Bitcoin holdings increased by more than $4.2 billion, or 362% year over year, between Q2 2024 and Q2 2025.

Energized Hash Rate: Rose 82% to 57.4 exahash per second, from 31.5 exahash per second a year ago.

Bitcoin Production: Average of 25.9 BTC produced daily in Q2 2025, up from 22.9 BTC a year earlier, resulting in 300 more BTC mined compared to the prior year.

Blocks Won: Number of blocks mined increased by 52% compared to the prior year.

Purchased Energy Cost per Bitcoin: $33,735 per coin, described as among the sector's lowest.

Daily Cost per Petahash: Daily cost per petahash improved by 24% year over year.

Fleet Ownership: Approximately 70% of hash rate now comes from owned and operated mining sites.

Convertible Notes: $950 million zero percent convertible senior notes issued after the quarter, providing flexibility for strategic purposes.

Liquid Assets: Exceeded $5 billion in liquid assets as of June 30, 2025, plus ~$1 billion raised since quarter end.

Active Bitcoin Management: Nearly one-third of Bitcoin holdings were actively managed for yield, including through SMA with Two Prime.

Wind-Powered Data Center: Construction completed in Hanford County, Texas, expanding access to low-cost power.

Record Month: May 2025 was the company's highest single production month.

Three-Gigawatt Global Pipeline: Infrastructure expansion pipeline now exceeds three gigawatts worldwide.

75 Exahash Target: All miners are secured and funded except for $150 million expected to be paid in the second half of 2025.

SUMMARY

Management signaled a strategic focus on leveraging digital energy and compute infrastructure beyond Bitcoin mining, including grid-responsive load balancing and sovereign AI compute. The balance sheet was significantly strengthened through the convertible notes issuance and the scaling of actively managed digital asset strategies. New international initiatives were highlighted, with groundwork laid for operations in Saudi Arabia and France to capture demand for sovereign, energy-aligned compute platforms. Partnerships with entities such as TAE Power Solutions and Pado.ai were cited as key to entering adjacent high-growth markets. Management explicitly differentiated the company's approach from passive Bitcoin treasury peers by treating digital assets as productive, risk-managed resources that generate yield and support operational expansion.

Salman Khan said, "We produced an average of 25.9 BTC each day during Q2," directly linking increased output to operational improvements.

Fred Thiel emphasized, "We're actively managing our Bitcoin holdings to create long-term value for shareholders." underscoring an active asset management philosophy.

The company’s behind-the-meter wind facility enables direct access to near-zero marginal cost electricity, supporting margin expansion and future cost reductions.

Strategic investments in infrastructure are positioned to support both Bitcoin mining and AI inference workloads as AI becomes a dominant factor in compute economics.

INDUSTRY GLOSSARY

Energized Hash Rate: The actual computational power committed and powered up for cryptocurrency mining, expressed in exahash per second.

Behind-the-Meter: On-site generation or consumption of electricity that bypasses the utility grid, typically yielding lower energy costs.

Sovereign Edge Infrastructure: Compute or data platforms located within a particular jurisdiction to address regulatory, latency, or security requirements for sensitive workloads.

SMA (Separately Managed Account): A professionally managed investment account offering tailored asset management, in this context, for digital assets.

Exahash: A measure of computing power equal to one quintillion (1018) hashes per second, referencing mining capacity.

Full Conference Call Transcript

Fred Thiel: Good afternoon, everyone, and thank you for joining us. No matter how you look at it, Q2 was a record-breaking quarter for Marathon Digital Holdings, Inc. Setting new highs in revenues, adjusted EBITDA, net income, energized hash rate, lead efficiency, and blocks produced in a single month in May. Beyond performance, we continued to invest in the infrastructure that underpins our business. From scaling low-cost flexible load data centers to exploring international opportunities in regions with abundant energy and growing demand for sovereign compute. This quarter, in support of our strategy to support the load balancing needs of AIHPC data centers, we announced strategic partnerships with TAE Power Solutions backed by Google and Pado.ai backed by LG.

Together, we're co-developing grid-responsive load balancing platforms that support the next generation of AI infrastructure, enabling us to monetize our energy and compute capabilities across broader markets. As part of our low-cost energy strategy, we completed construction of a new behind-the-meter data center at our wind-powered site in Hanford County, Texas. This gives us access to low-cost power directly at the source, improving our margin structure and boosting energy efficiency. And subsequent to quarter end, our holdings surpassed 50,000 Bitcoin. This milestone solidifies Marathon Digital Holdings, Inc. as the second largest Bitcoin holder globally. More importantly, this is a treasury we built through disciplined infrastructure development, scaled operations, and focused execution.

Now, while some people may see us as a Bitcoin treasury company given the size of our Bitcoin hold, we don't consider ourselves as one. We're innovators, builders, and operators. We're actively managing our Bitcoin holdings to create long-term value for shareholders. Bitcoin remains our reserve asset, and we will continue to build on our holdings, whether through production or opportunistic purchases depending on market conditions. To that end, we made a minority investment in Two Prime, a digital asset management firm specializing in risk-optimized yield strategies who've been managing a portion of our holdings. We will continue to make prudent decisions around allocation and risk exposure based on broader macro and market conditions.

Regarding the current price of Bitcoin, our view is that things feel a little frothy at the moment. While there is persistent demand for Bitcoin, this is balanced by an ample supply owing to long-term holders taking profits from Bitcoin held in some cases since the earliest years of Bitcoin's infancy. Supply is currently being absorbed relatively well. But if the buying demand were to subside, we could see downward pressure as sellers attempt to lock in gains at these high price points. With our recent convertible notes offering, we have significantly bolstered our balance sheet to have the flexibility to act across a range of strategic priorities, including opportunistic Bitcoin purchases, debt repurchase, M&A, and general corporate purposes.

Whether Bitcoin goes up or Bitcoin goes down, we believe we are positioned to benefit. We're positioning Marathon Digital Holdings, Inc. at the forefront of what's increasingly being recognized as digital energy or the use of technologies and data to make energy systems more efficient, reliable, and sustainable. This strategic focus enables us to capture value at the intersection of compute and energy, a convergence that will define next-generation infrastructure economics. We're exploring ways to design infrastructure for hybrid workloads like AI inference, which is rapidly emerging as the dominant workload in AI infrastructure.

Another area that we believe will drive value is sovereign edge infrastructure, allowing enterprises and public sector customers to have jurisdictional and operational control over data, compute, and AI outputs. We see growing demand for compute infrastructure that is geographically sovereign, energy-aligned, and secure by design. We believe the addressable market is accelerating, particularly in Europe and emerging markets where data sovereignty and energy efficiency are critical factors in purchasing decisions. Our intent is to extend Marathon Digital Holdings, Inc.'s vertically integrated compute platform into edge environments that meet the unique needs of latency-sensitive, compliance-driven, and workload-diverse use cases. In this regard, we are working closely with government officials and major energy partners to extend our reach into global markets.

As part of these efforts, we've been laying the groundwork for a regional headquarters in Saudi Arabia, and we have established an entity in France as a European headquarters. We believe this approach will provide us access to low-cost energy by partnering with energy companies and infrastructure capital providers to lower our capital commitments. Through these efforts, we built a global growth pipeline exceeding three gigawatts, positioning us to scale efficiently across key markets. When you put it all together, as inference increasingly becomes the dominant cost center in AI, control over geography, latency, and energy costs becomes a strategic advantage. We'll continue to invest here to ensure Marathon Digital Holdings, Inc. is well-positioned to meet this demand.

We're excited to host our first-ever investor day this fall. This inaugural event will offer a deep dive into our long-term roadmap with insights into how we are activating our digital energy strategies across mining, infrastructure, and AI. To join us, please reach out to our Investor Relations team. To wrap up, Q2 was a milestone quarter. We grew our treasury, expanded our infrastructure, and proved once again that Marathon Digital Holdings, Inc. is far more than a Bitcoin mining company. We are the category leader in Bitcoin mining, but our value lies in the infrastructure that underpins it. Infrastructure that we're now leveraging to shape the future of compute.

Thank you for your continued support as we build what is next. Now I'll turn it over to Salman for additional insights on the quarter.

Salman Khan: Thank you, Fred. In Q2, we delivered record financial performance driven by strong execution and an improving Bitcoin price environment. Over the past year, we've remained laser-focused on aligning shareholder interests with Bitcoin ownership through disciplined operational execution. Between Q2 of 2024 and Q2 of 2025, our Bitcoin holdings surged by over 170%, going from approximately 18,500 BTC to nearly 50,000 Bitcoin. During the same period, our energized hash rate expanded by 82%, increasing from 31.5 exahash per second to 57.4. And the market value of our Bitcoin holdings increased by more than $4.2 billion or 362% year on year. Let me provide some financial highlights for the quarter. We broke some records.

Revenues increased 64% to $238.5 million from $145.1 million in the second quarter of 2024. This was the highest revenue quarter in the company's history. The increase was primarily driven by a 50% increase in the average price, which contributed $77 million. We produced an average of 25.9 BTC each day during Q2, compared to 22.9 BTC each day in Q2 of 2024, which resulted in 300 more BTC earned. Furthermore, we saw a 52% increase in the number of blocks won in the quarter compared to the second quarter of last year. May 2025 was the highest single month in our history.

We reported net income of $808.2 million or $1.84 per diluted share in the quarter compared to a net loss of $199.7 million or $0.72 per diluted share in the second quarter of last year. We recorded a $1.2 billion gain on digital BTC receivable during the second quarter of 2025. This reflects the impact of Bitcoin holdings on our balance sheet. Let's turn to cost structure. Our purchased energy cost for Bitcoin for the quarter was $33,735 per coin, which we believe is among the lowest in the sector. And our daily cost per petahash per day improved 24% year over year.

This improvement reflects our growing fleet of owned and operated sites, which now account for approximately 70% of our total hash rate. That transition continues to pay dividends both operationally and financially. Now let me talk about our Bitcoin holdings and asset management. Marathon Digital Holdings, Inc. is the second largest corporate public holder of Bitcoin, and we seek to generate returns on our holdings as Bitcoin price appreciates. Our dedicated Bitcoin asset management team, made up of seasoned professionals with decades of experience in hedge funds and crypto asset management, actively pursues risk-adjusted return opportunities to generate cash flows that support our operating expenses.

We deploy Bitcoin across a diversified portfolio of investment strategies, including lending, trading, and other structured arrangements designed to unlock incremental value. Our approach combines the potential for long-term Bitcoin appreciation with disciplined efforts to generate return while managing risk. To a lesser extent, we have also used Bitcoin as collateral to borrow under lines of credit. Let me deep dive a little bit. During the quarter, we entered into a separately managed account or SMA agreement with Two Prime, which is an external full-service registered adviser, and transferred 500 Bitcoin in mid-May of 2025, followed by an additional 1,500 Bitcoin in late June of 2025.

As of June 30, 2025, a total of 2,004 Bitcoin were held and actively managed within that SMA. The 500 Bitcoin transferred in May 2025 generated an additional 4 Bitcoin or an additional $0.4 million in a short period of time. We manage the SMA to generate returns while limiting risk, and it maintains liquidity with short-term notice following an initial one-year lockup. In addition, our Bitcoin asset management team may, from time to time, engage in various Bitcoin-denominated trades, such as options, futures, swaps, covered calls, and spot transactions, to generate additional returns on our Bitcoin holdings. I want to highlight that subsequent to quarter end, we issued $950 million of zero percent convertible senior notes due 2032.

With this upsized convertible notes offering, we have significantly bolstered our balance sheet. This additional liquidity gives us the flexibility to act strategically, whether by acquiring more Bitcoin, funding M&A, or repaying debt. Its purpose is not to fund day-to-day operations. We're under no pressure to deploy capital immediately. Instead, we're positioned to act in response to market conditions in order to maximize long-term shareholder value. We are different from other Bitcoin treasury companies, as Fred mentioned. Our core business is Bitcoin mining and large-scale data center operations. Even as we hold the second largest Bitcoin worldwide amongst public companies. Looking ahead, what sets us apart is our thought leadership, worldwide operational scale, and capital and operational efficiency.

As of June 30, 2025, we held over $5 billion in liquid assets, and with approximately $1 billion raised since, gives us flexibility to fund domestic growth and pursue international expansion. Unlike passive treasury companies, we treat our Bitcoin as a productive risk-managed asset. Through a disciplined asset management strategy, our holdings strengthen the balance sheet and help fund operations, which we believe will enhance long-term shareholder value. We don't just hold Bitcoin; we put it to work. Finally, we remain on track to reach our 75 ExaHash goal by the end of the year with all miners secured and funded except for $150 million that we expect to pay in the second half.

We are laying the groundwork for 2026 and beyond. We're executing on a pipeline of energy infrastructure projects both in the US and internationally. And we expect these investments to expand our capabilities while costs continue to be low. With that, I'll turn over to Christopher Charles Brendler from Rosenblatt Securities to begin our management interview. Chris?

Christopher Charles Brendler: Hey. Thanks, Salman, and thanks so much for inviting me to do this. This is super exciting to be able to dig through the results with you guys. And also to, you know, sort of get an update on the strategy. A lot is going on in Bitcoin and crypto these days. So I guess I wanted to start with the mining business, the core mining business, and maybe for Fred. Just give me an update on the current thinking around mining versus HPC, and we've seen a lot of competitors increasing. We look to move their power assets towards high-performance compute potentially, could sort of see a slowing of Bitcoin mining competition.

But at the same time, we know that the network hash rate is reaching new highs again even though we're in the middle of a pretty hot summer. So, we'd love to hear your sort of ten thousand foot view on the Bitcoin mining business as it stands today.

Fred Thiel: Thank you, Christopher, for joining us today. I think as you look at the marketplace today, there's a shift occurring. You have companies who previously were kind of in the mid-tier of Bitcoin mining, who have been working on a transition to HPC trying to leverage their energy assets. And you've been seeing really a couple of things happen. For one thing, not many of them have been able to secure contracts with hyperscalers, and some of them have moved towards essentially trying to go out and get customers, enterprise customers directly, who will host with them or leverage their capacity.

We personally think that business is, over time, going to be very price competitive and margins are going to compress because, in most cases, Bitcoin miners are really just providing power. And if they are building buildings and making the investments, which according to some analysts, can be as high as, you know, millions and millions of dollars per megawatt, well over ten million dollars a megawatt, it's going to be hard for them to acquire customers. Many enterprise customers want to work with people who have hosted enterprise customers before and understand how to run those types of data centers. And most Bitcoin miners don't.

So you still haven't seen really any large number of these companies transition successfully to HPC outside of a handful. At the same time, you're seeing new entrants come to this market. You know, you have Tether coming in. You have Bitmain, the single largest hardware vendor, effectively taking control of a company called Tango, transferring hash rate to that company, and becoming the number three, four, or five largest Bitcoin miner in direct competition with their customers. Tether themselves have stated a goal that they want to be the largest Bitcoin miner in the world. So you're seeing a whole new entrant of people coming into this marketplace and some people leaving the market.

We remain very focused on being a Bitcoin miner, but we're also very focused on looking at where you have the convergence of inference AI and the needs of enterprises, especially around sovereign data. We believe this is a unique area where we're positioned to be quite successful in the long term, and that's why we've been focused our efforts on developing relationships with sovereigns, with governments, with energy companies in regions where we think there's going to be a huge amount of investment that we can take advantage of to help grow our business along those lines. While at the same time continue to grow our Bitcoin mining business.

As we mentioned on the call, we have a pipeline of three gigawatts plus of power. And we intend to continue to grow at a very fast rate while also growing our business around sovereign data.

Christopher Charles Brendler: That's very helpful. I guess I'm going to drill down a little bit on the sovereign topic. You mentioned in your prepared remarks the potential for a headquarters in Saudi Arabia as well as France. And, you know, sort of mentioning that or highlighting the fact that location was important when it comes to inferencing. Does that suggest that you, you know, potentially will enter this business directly, or it seems more like you would do it through partnerships, so I'm guessing.

Fred Thiel: Exactly. The focus here is through partnerships. Partnerships with energy companies. Some people on this call may recall that four years ago at Mining Disrupt, I did a presentation that most people found a little startling, which basically said that Bitcoin miners will either have to become partners with energy companies or energy companies will take over their businesses. And I believe that unless you, as a Bitcoin miner, own your own energy generation, you have to become a partner with the energy company, not a customer of the energy company.

And so if you look at some of these regions, Europe, the Gulf region, for example, you have very top-down driven energy companies who are typically government-owned or government-run or have a substantial percentage of ownership by the government, and you have to partner with the government, partner companies. And in these regions, there is a big demand for sovereign data and AI because the enterprises in those regions do not want to have their data in clouds that are either owned and operated by the US or the Chinese or people outside of their regions. And so they want that data residing in their countries within their borders in close proximity to their enterprises.

And we believe that partnership of working with government and sovereign-controlled energy companies and operating data centers within their borders to provide them with sovereignty over data and AI is a combination of factors that could make us very successful.

Christopher Charles Brendler: Makes sense. Would this be similar to the experience and the success you've had in the UAE, where it's a joint venture, or are you envisioning a different type of partnership when you go about these kinds of relationships?

Fred Thiel: That's great that you mentioned the UAE. So when we did that transaction, it was very focused on Bitcoin mining and remains one of the most successful Bitcoin mining data centers that we built from a perspective of uptime and operations. It's, you know, an amazing site and is clearly still one of the leading immersion Bitcoin mining data centers in the world. That taught us a lot about working with sovereigns, especially in that region. It taught us what the right type of partnerships are and how to structure those partnerships.

And what you'll see going forward is something a little bit different, where you see the energy companies being more involved in the deal, and also where you see us having a greater degree of control over the terms and the relationships.

Christopher Charles Brendler: Great. Okay. I do remember that presentation you gave four years ago that was pretty prescient for sure, and definitely was surprising to think that energy companies would be directly working in the Bitcoin mining space, but that seems a lot more likely today. For sure. Speaking of Bitcoin mining, I wanted to ask a question. You know, it comes to acquiring power assets, and, you know, it seems like Marathon Digital Holdings, Inc.'s own path has slowed a little bit just in terms of growth. You know, I feel like based on the conversations and your pipeline you disclosed just now, there's a lot going on.

And is that because you're trying to balance, you know, your needs with your investment, or is it increasing competition from hyperscalers that are impacting the queue for power assets?

Fred Thiel: Well, we wouldn't have a pipeline of three gigawatts if we were competing with hyperscalers tooth and nail for power assets. We made a fairly concerted decision to focus on growing with the right types of assets versus just growing at any price. Growth at any price can be dangerous. You know, in a market where Bitcoin price is running high, and where hash rate is remaining relatively stable, because of constraints of either capital or compute or capacity, you can afford to grow in network-attached mode. And, you know, if you recall, we started as an asset-light company.

The reason we were successful in growing to be the largest Bitcoin miner in the world using an asset-light strategy was there were enough constraints in the market that you could grow most rapidly by controlling compute because there was ample capacity and there was ample access to capital, the three C's that constrain our business. Today, it's different. Today, if you are looking at using pre-attached energy at an average price of anywhere from four and a half to five cents a kilowatt hour, you are forced to replace your machines every three years, which is a significant capital cost.

And as you start looking at a halving in 2028, and another one after that in 2032, you really have to look at controlling your energy assets or being a partner with energy companies that can contribute energy and you contribute compute. That's the only way companies will be successful in the long run in this business. And so we've been very focused on executing the strategy of partnerships and controlling energy assets. And, yes, it takes a while to get that started, and we've spent a lot of time this year focused on getting that process started and initiated. And we've built the pipeline now. We built the relationships.

And we're in the phase where we start to begin to execute. And I think this will feed our growth over the next two to three years quite significantly.

Christopher Charles Brendler: That's awesome. And I don't want to get into breaking undisclosed ground here, but is it safe to assume that maybe the majority of that three-gigawatt pipeline is outside the United States?

Fred Thiel: Yeah. That would be undisclosed. So I think you can reference what we've said before that by 2028, about 50% of our revenue would come from international, and we're still focused on that.

Christopher Charles Brendler: Perfect. I'll have to stay tuned. I wanted to ask one more question on the Bitcoin mining business before moving on, actually two more, which was the I don't know where the industry stands from a hydro cooling perspective. I feel like it's relatively new technology for large-scale miners. You know, what are your thoughts on the S23 from Bitmain or similar models and coming into hydrocooling?

Fred Thiel: Yeah. I think the early generations of hydrocooling had lots of challenges. Leaky pipes, large consumption of water, you know, which is a no-no in many places. And a lot of just glitches. I think, you know, Bitmain has most probably figured out how to do this more effectively now. I think the other difference is the form factor for the hydro has changed. They're now doing proper two U rack mount devices, which means you can start using similar infrastructure for Bitcoin mining as AI, which, you know, as we've been talking all along, is what we view the future as being a mix of AI and Bitcoin mining in the same data centers.

You know, we in UAE, for example, chose Immersion Technology because at the time, hydro wasn't significantly developed in a way that was reliable to operate in those regions. Today, I think you can go either way. You can continue to go immersion or hydro. I think what's going to be very interesting in the future, and it's one of the things we've learned with our Tupac technology, is there is this very interesting middle ground around cold plate technology that potentially is the ideal transition, which is slightly different than liquid on chip, which is how the hydro works.

So I think we have yet another evolution to go through in this market before the world moves to the need to go to full immersion on AI. The heat densities in the next couple of generations will start getting to a point where you're going to have to go to full immersion. But today, you can still make it with, you know, liquid on chip and eventually cold plate.

Christopher Charles Brendler: Okay. Makes sense. Would like to talk about the Bitcoin mining in the quarter for a second. You know, one of the things that analysts have to realize is that these things could ebb and flow unless there is some randomness to Bitcoin mining operations. And sometimes you have good months and bad months. And this quarter, in particular, the market share kind of bounced around quite a bit between April and May was fantastic, and then it came back down in June. Was there any, you know, sort of structural uptime or downtime or curtailment that have impacted those numbers significantly, or was it just total randomness?

Fred Thiel: I think, you know, you can look at the year and look at seasonality. We have a large amount of our production in Texas. As you get into June, you start getting into warmer months and curtailment starts happening. There are also things like certain maintenance cycles and other things that can impact any given site from time to time. Definitely, May was an amazing month where we benefited from the randomness very well. But generally, we have found that when we look at what extent luck, as it's called in our industry, impacts us, we have over a long period had a minor degree of quite positive luck.

But that being said, you know, as you get into the summer months, you just have to expect a greater percentage of curtailment if you're operating in states where that's a requirement, which it is in Texas.

Christopher Charles Brendler: Sure. It makes sense. Okay. So that sort of big picture question. I'd love to hear your current thoughts on, and you mentioned that already in your prepared remarks, was the Bitcoin treasury strategy companies and their success and, you know, sort of this frothiness that we're seeing with companies can not only announce the Bitcoin treasury strategy, but other tokens and crypto assets now beginning to get lots of investor attention. You know, I think there's certainly a narrative here that Marathon Digital Holdings, Inc. is different. So it looks like your current thoughts on, you know, the Bitcoin treasuries and how we should see that difference play out in market values over time?

Between Marathon Digital Holdings, Inc. and some of the competitors.

Fred Thiel: I'm not sure who to attribute this quote to, but somebody at a recent event that I was at basically said, Bitcoin treasury companies are the new ICOs. If you go back to kind of 2017, you, as you said, you know, Bitcoin treasury companies, you can basically a whatever coin it is into a Bitcoin treasury company, raise money for it, and get investors. You know, there's even one for BNB coin that was announced recently. So I think there's a lot of money going at these things. I think a number of analysts and reporters have written about the fact that, you know, strategy has done an amazing job of creating this space.

You know, kudos to Michael and his team for what they've done there. But any advantage in any market starts disappearing when you have lots of companies going after it. I think it was earlier this week, somebody published $82 billion has been raised for Bitcoin treasury companies that are going to hit the market or sorry, crypto treasury companies, writ large. Across all the different coins and, you know, they can't all be successful. And what happens to those companies that are holding coins when their mNAV goes to one or worst case, like what happened to grayscale during a period, the mNAV goes negative. Likely will have to sell those coins.

So my concern and I think the concern of many people regarding the frothiness in the market today is you have a lot of people buying Bitcoin with other people's money. And if Bitcoin, especially for the newer treasury companies, sees a decline, they may be challenged. And people may sell the stock to get their money out. Realize, you know, Bitcoin treasury companies are not like an ETF. What people have to do to try and save their money is sell the stock in those companies. And I think, with as many companies doing this as there are, a certain percentage of them will likely fail. And that will negatively impact the price of Bitcoin.

You know, we've had wallets from 2011, I think that's this wallet that Galaxy recently traded. Nine billion dollars, 80,000 coins, I think it was. You know, people are selling at the peak. When the whales that have been holding are selling, it tells you something, you know. Historically, whales always sell leading into the peak. They sell into the top in the market. And every Bitcoin, I mean, 98 point something percent of all Bitcoin are in profit today. And the people who are buying and looking to build treasury companies are buying at the absolute top of the market. And at some point, demand will waver.

And you have to remember that Bitcoin from an institutional perspective still is a risk asset. It typically follows M2 on the asset side, liquidity. It also correlates inversely to the dollar. And to the equity markets, it's quite correlated at times. And so I think if we see a deterioration in the economy, if we see deterioration in the equity markets, and we start seeing an improvement in the dollar, you may have an environment where Bitcoin could see a drop. And, you know, I'm not saying it's going to drop 80%, but it could drop 20%, 30%. Great buying opportunity for many.

But you've again, you've got a lot of people who have been holding on for the right time to sell. And if you see any momentum to the downside, you may see a lot of selling which will just accelerate things. So I think that you have to be prudent. And it's important. You know, these treasury companies are, again, a bit like ICOs. And I think that too much of a good thing ruins the returns for everybody. So I would expect you'd start seeing the mNAV on these things to eventually just hit one. And at that point, you're better off holding spot.

Christopher Charles Brendler: Makes sense. How do you view the Marathon Digital Holdings, Inc. stack differently? I mean, it's gotten very large now. It's, you know, 50,000 coins, over $5 billion. And, you know, I think it's not really, you know, sort of tagged for growth purposes. I think you've been pretty clear this is a longer-term investment. But do you foresee, you know, sort of building forever, or is there a point where you would think about potentially selling some of your Bitcoin? Just given how large it's becoming relative to your market cap?

Fred Thiel: I think there's, unlike some treasury companies, there's always a point at which we would sell some Bitcoin. There may be a point where, for example, the appreciation of Bitcoin and the volatility of Bitcoin decreases to the point where it operates more like gold, for example. At which case the cost of us for the company of holding Bitcoin can be such that our average weight of capital is to run the business by leveraging equity to become too prohibitive, and it would make sense for us to, like we did in 2023, sell Bitcoin from production to pay for operating expenses. That's always an option. You know, we are a Bitcoin company.

We believe in Bitcoin for the long term. And as long as Bitcoin continues to perform, we have to do what's right for our shareholders, which is fiduciaries, is leverage Bitcoin while it continues to perform and if need be, sell Bitcoin.

Christopher Charles Brendler: Makes sense. And so there was good commentary, I think it was more on Salman's side, about actively managing the Bitcoin treasury and yield strategies with Two Prime. Maybe give us an update on the thinking around Two Prime and how large, you know, how much of your Bitcoin stack are you willing to try to monetize? And does the active management include hedging strategies? And I know there was a collar strategy in the past. Is that something that's on the table? If you think that it's a little extended, or are you still more focused on yield than actual hedging?

Salman Khan: Chris, when you think about our Bitcoin treasury, as you mentioned, 50,000 stack, a coin, sitting on our balance sheet. We are looking at not just capital appreciation from a long-term perspective, as a treasury asset, but also we want to create a yield and earn cash flows from that Bitcoin that's sitting on our balance sheet while it continues to appreciate for a longer duration of time. So it's a two-pronged approach and it's a financial decision. As Fred mentioned, we are a Bitcoin mining company. And we produce Bitcoin on a day-to-day basis, unlike treasury companies where they have to go and buy Bitcoin from the open market. We don't have to do that.

As we alluded to, we can produce it cheaper than going out and buying Bitcoin from the open market. Having said that, much newer than, you know, this industry is other industries. This is just the beginning. And we have tested multiple investment strategies over the last two years by testing the market, testing different partners, and placing Bitcoin with parties that we trust and we have verified their credibility from a delivery standpoint. And as a result of that evolution, now we have about a little bit shy of one-third of our Bitcoin is activated, as we call it, in the active Bitcoin asset management strategy.

With that, you know, it includes, I would say, hedging is when you say hedging, typically, people think hedge means that we're trying to protect from the price risk. That's not the objective. The objective is to create cash flows that could have covered calls, that could have multiple trading strategies where we either in-house or through our investment and partnership at Two Prime, we go out and we squeeze value out of the Bitcoin. As I've mentioned in the prepared remarks, within a very short period of one and a half months, from 500 Bitcoin, we were able to produce 4 Bitcoin. And look, it's in its infancy stage, newer industry, but we're testing these different strategies successfully.

And the plan would be as we test the waters, we continue to expand from here on a step-by-step basis, while keeping in mind the fiduciary responsibility that we have the stack on our balance sheet that our stock owners own by being a stockholder in this company.

Christopher Charles Brendler: Excellent. That's fantastic, Salman. Thank you. I want to go back to the higher bigger picture stuff and think about diversification beyond Bitcoin mining. I think there was a push at one time to try to diversify the top line and be less reliant on the ebbs and flows of the mining business. Where do you stand today on diversifying the business, and is the Bitcoin treasury yield strategy part of that diversification?

Fred Thiel: I mean, Bitcoin treasury yield is a way to generate yield off of an asset that we have. It's kind of like you think of old money. You know? What does old money do? They buy real estate, and then they live off the yield off the real estate. If we have enough Bitcoin, you can generate a yield off of it that it covers a good portion of our operating expenses, and that takes pressure off of the other businesses. So that we can continue to invest in diversifying revenue. So we are focused on investing significantly in growing our business around sovereign data and Inference AI.

As we come to a point where we're launching things and announcing things, it'll become quite clear. But for the moment, you know, I'll just leave it to say that we're very focused on building the next leg of Marathon Digital Holdings, Inc. So that for the future, we can leverage these great assets that we have, continue to grow them, and gain synergies from them as we also add additional revenue streams that let us leverage some of the benefits of those assets going forward well beyond the period we're having. Reduced Bitcoin rewards to much lower levels.

Christopher Charles Brendler: I'd imagine that would include, you know, sort of along with your international expansion goals as well as you sort of expand beyond the core US mining business.

Fred Thiel: Yeah. Absolutely.

Salman Khan: Chris, just to add to that, Chris, the diversification of revenues, there are two ways of unlocking value. One is diversification of revenues, and the other way is to reduce cost. Just a quick reminder for our listeners today, that Marathon Digital Holdings, Inc. started with an asset-light strategy years ago. And we grew very quickly over the years. And last year, we pivoted towards an asset-heavy strategy where we exited the year with 70% owned and operated. The result of that was that we reduced our electricity cost per coin to one of the lowest in the sector. Now we still have a portion of our business that is tied to an asset-light strategy from our historical contracts.

And there's an opportunity to reduce cost over time as those contracts expire. And as Fred has alluded to last time and we've talked about low-cost strategies, the diversification doesn't stop there. We also went out and bought a wind farm. That we just provided an update on in our prepared remarks a few moments ago. Those wind farms, just to pause on that or double click on it, in a traditional Bitcoin mining operation with grid-connected, compare that to the wind farm intermittent power, but just consumes power when the electricity is close to low-cost electricity. Marginal cost is almost zero.

At that point in time, you're all in cash operating costs of a traditional Bitcoin miner versus a wind farm is about 75% to 85% lower than a traditional Bitcoin mining operation. When we talk about diversification, it's not just diversification of revenues, but also the sources of power and the way we generate Bitcoin and in the future, it could be, yeah, depending on what is the best use of those electrons. So I wanted to highlight that important fact that diversification continues to happen at Marathon Digital Holdings, Inc. And our shareholders will get to see those benefits over a longer duration of time.

The only large-scale miner where we have the opportunity to further reduce cost with these third-party contracts expiring over years.

Christopher Charles Brendler: Yes. That's a great point. The improvement in cost has been phenomenal. And really helped improve the gross margins and for the position from a profitability standpoint. A quick question I had to follow up on, Salman, was from a CapEx perspective. You know, how much of the 75 exahash target has been already funded as of this quarter?

Salman Khan: As we mentioned earlier, almost all of it is funded except for $150 million in minor capital. There will be additional electron-related capital that may be added to it to get to the 75 exahash, but our eyes are laser-focused on the 75 exahash as we had publicly disclosed a few weeks ago. And we're excited about that.

Christopher Charles Brendler: Great. Well, again, thank you so much for all the time and the answers here. Pretty exciting stuff and look forward to hearing the future announcements on your plans. Thanks so much. I'll turn it back over to Robert Samuels.

Robert Samuels: Thanks, Chris. We're now going to take just a few questions from our retail shareholders. And the first one I'm going to address to you, Salman, and it's one that we get asked quite often. Can you talk a little bit more about Marathon Digital Holdings, Inc.'s cost to mine per Bitcoin?

Salman Khan: That's a very important question. And I want to address it point blank. When you think about our financials, you have to think about the evolution of the company. As I had alluded to earlier, we were an asset-light strategy company. We grew very quickly. But as a result of that, our costs were higher compared to some of the other peer group companies. We, as a strategic decision last year, made the decision to move towards an asset-heavy strategy. Or vertically integrated model where we own and operate our own sites. We paid cents to the dollar to acquire those sites compared to the market price and also, the build multiple. Less than 50% than the build multiple.

And now we're operating those sites. As a result of that, our electricity cost per coin is one of the lowest in the sector. And, you know, when you think about Bitcoin mining and Marathon Digital Holdings, Inc., Bitcoin mining is in our DNA, but we are also focused on other initiatives that Fred has alluded to. So we also own a mining pool. We have our own firmware. We are also investing in R&D that is the future of the business and diversification of the revenues that Fred mentioned around AI. And those costs, it's not fair to compare the total cost of the company on a coin basis because that cost is not attributable to the coin.

So if I have to do the math and look at our asset-light and asset-heavy combination of cost of revenue, cash costs, and look at our Bitcoin produced quarter over quarter, it hovers around $50,000 per coin. And that is still more than 50% cheaper than buying in the open market. Now with time, as I had said earlier, we expect these costs to further improve as our third-party mining operations that are more expensive than own and operate mining operations will expire over a period of time. As we exit those contracts and continue to build on the low-cost strategy with the wind farms and the NGON, which we plan to expand further.

The oil and gas operations where we consume natural gas that was being emitted into the air and we reduced the harmful gases by consuming that and put those electrons to use, those costs are tens to the dollar compared to a traditional mining operation. And with a combination of those things, our focus or our expectation would be that over time, our costs are going to continue to be going down from here as we expand.

Robert Samuels: Great. And then the second question is for Fred. How will the signing of the Genius Act affect Marathon Digital Holdings, Inc.'s path to Bitcoin mining?

Fred Thiel: So what the Genius Act does is essentially opens the floodgates to Stablecoins being integrated with the TradFi system. For example, today, we saw Circle announce that Fiserv and FIS are going to integrate Circle into their payment system. And you're seeing the credit card companies developing Stablecoins. You're seeing banks developing stablecoins. What happens when you have stablecoins is you now have liquidity that can flow 24/7, 365. For people today, wanting to buy Bitcoin, they have to move money from a bank account onto an exchange during banking hours, which means the predominant volume of Bitcoin that trades typically happens during banking hours, nine to five.

With Stablecoins, people can hold value in a digital currency the equivalent of a dollar. So it doesn't have the volatility of something like Bitcoin, for example. And they can move on a moment's notice, transfer to an exchange, and trade right away. What that does is likely creates a greater incentive for people to trade 24/7. Now there are many traders who take advantage of the lower volumes of trading that happens during nighttime cycles depending on the market you're in. Because there's lower volume, which means that if you're placing orders at different price points, you can potentially move the market a little easier.

But with stablecoins, I think what's going to happen is more liquidity will flow into Bitcoin. You've also seen things like Ray Dalio now say that you should have 15% of your assets in gold and Bitcoin. So I think with Stablecoins, essentially, liquidity will flow. When liquidity flows, people will move that liquidity into whatever asset they think is the best performing place to hold it. So stablecoins will increase the ability for people and especially institutions to potentially allocate bigger amounts of capital to things like Bitcoin. So I think it only bodes well.

Robert Samuels: Terrific. Well, that's all the time we have for today. Thanks, everyone, for joining us. If you have questions that were not answered during today's call, please feel free to contact our investor relations team at ir@marathon.com. Thanks very much, and enjoy the rest of the day.

Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

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