Marathon Digital Holdings, Inc. (NASDAQ:MARA) ("Marathon" or "Company"), one of the largest enterprise Bitcoin self-mining companies in North America, reported financial results for the first quarter ended March 31, 2021.
First Quarter and Recent Financial Highlights
First Quarter and Recent Bitcoin Mining Highlights
First Quarter and Recent Corporate Highlights
Management Commentary
“As our financial and operational results for the first quarter demonstrate, 2021 is lining up to be a banner year for Marathon as we are transforming our business into one of the largest enterprise Bitcoin mining operations in North America during what is currently one of the most profitable mining environments in Bitcoin’s history,” said Fred Thiel, Marathon’s CEO. “Since the start of 2021, we have taken several steps to establish Marathon as one of the leading pure-play Bitcoin investment opportunities by increasing our hashrate over 689%, rebranding our organization, and increasing our total bitcoin holdings to over 5,324 bitcoins. We have continued to build on that leadership position by becoming the first Bitcoin miner to produce bitcoin that is fully compliant anti-money laundering laws and OFAC’s standards by directing all of our hashrate to the Marathon OFAC Pool. With new miners being delivered and installed every day, we remain on track to achieve 10.37 EH/s by early 2022, and we look forward to continuing to scale the business for the betterment of our shareholders and the broader Bitcoin ecosystem in the coming quarters.”
Marathon’s chief financial officer, Sim Salzman, commented, “The first quarter marked a substantial improvement in our financial performance as we grew revenues to $9.2 million, generated net income of $83.4 million, and earned $137.4 million in adjusted EBITDA. Additionally, we exited the quarter with $211.9 million in cash and with a total liquidity, defined as cash and bitcoin holdings, of approximately $504.5 million. While Bitcoin’s future price and the network difficulty rate are subject to change, we believe Marathon’s financial performance will continue to improve as more miners come online, increasing our ability to generate revenues and yielding better economies of scale, which will drive profitability.”
First Quarter 2021 Financial Results
Total revenue increased 1,445% to $9.2 million in the first quarter of 2021 from $592,000 million in the first quarter of 2020.
Operating loss was $47.1 million in the first quarter of 2021 compared to an operating loss of $1.1 million in the first quarter of 2020. In the first quarter of 2021, operating expenses included $54 million of non-cash items, including $52.1 million in non-cash compensation and $662,000 impairment of cryptocurrencies. Excluding non-cash items, operating gain in the first quarter of 2021 was $6.9 million.
Net income in the first quarter of 2021 totaled $83.4 million, or $0.87 per diluted share, compared to net loss of $1.1 million or $(0.12) per diluted share in the first quarter of 2020. The improvement in net income was primarily attributable to a $132 million unrealized gain from the change in value of Marathon’s $150 million Bitcoin investment via a fund-of-one made in January 2021.
Marathon previously generated net operating loss (NOL) carry-forwards for federal and state purposes of approximately $45.6 million and $27.2 million, respectively. As a result, the Company did not owe corporate income taxes as of March 31, 2021.
Adjusted EBITDA in the first quarter of 2021 was $137.4 million, compared to an adjusted EBTIDA loss of $479,000 in the first quarter of 2020.
In the first quarter of 2021, the Company generated 192 bitcoins. The Company last sold bitcoin on October 21, 2020, and since then, has been accumulating or “hodling” all bitcoin generated. The Company supports the blockchain development by sponsoring one of the developers in the form of a monthly grant paid using its mined bitcoin. As of March 31, 2021, the Company held approximately 5,129.8 bitcoins, including the 4,813 bitcoins the Company purchased for an average price of $31,168 by investing $150 million into a fund-of-one.
Marathon’s Digital Assets
For the first quarter ended March 31, 2021, the carrying value of Marathon’s digital assets (comprised solely of bitcoin) was $292.6 million, which reflects cumulative impairment charges of $662k since acquisition. Marathon accounts for its digital assets as indefinite-lived intangible assets, which are initially recorded at cost. Subsequently, they are measured at cost, net of any impairment losses incurred since acquisition. Marathon determines the fair value of its bitcoin based on quoted (unadjusted) prices on the active exchange that Marathon has determined is its principal market for bitcoin. Marathon considers the lowest price of one bitcoin quoted on the active exchange at any time since acquiring the specific bitcoin. If the carrying value of a bitcoin exceeds that lowest price, an impairment loss has occurred with respect to that bitcoin in the amount equal to the difference between its carrying value and such lowest price. Impairment losses are recognized as “Impairment of cryptocurrencies” in Marathon’s Consolidated Condensed Statements of Operations.
As of March 31, 2021, the average cost and average carrying value of Marathon’s mined bitcoins were approximately $36,014 and $33,926, respectively. As of May 6, 2021, at 6 p.m. EST, Marathon held approximately 5,324 bitcoins, of which 4,813 are held in an investment fund of one while the other 511 were generated by the Company’s operations. The market price of one bitcoin in the principal market on May 6, 2021 was approximately $56,135, and the approximate value of the bitcoins the Company has invested in and held as digital currencies was therefore over $503.2 million (*unaudited).
Investor Notice
Investing in our securities involves a high degree of risk. Before making an investment decision, you should carefully consider the risks, uncertainties and forward-looking statements described under "Risk Factors" in Item 1A of our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2020. If any of these risks were to occur, our business, financial condition or results of operations would likely suffer. In that event, the value of our securities could decline and you could lose part or all of your investment. The risks and uncertainties we describe are not the only ones facing us. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. In addition, our past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to anticipate results in the future. Future changes in the network-wide mining difficulty rate or Bitcoin hashrate may also materially affect the future performance of Marathon's production of Bitcoin. Additionally, all discussions of financial metrics assume mining difficulty rates as of May 2021. See "Safe Harbor" below.
Forward-Looking Statements
Statements made in this press release include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by the use of words such as “may,” “will,” “plan,” “should,” “expect,” “anticipate,” “estimate,” “continue,” or comparable terminology. Such forward-looking statements are inherently subject to certain risks, trends and uncertainties, many of which the Company cannot predict with accuracy and some of which the Company might not even anticipate and involve factors that may cause actual results to differ materially from those projected or suggested. Readers are cautioned not to place undue reliance on these forward-looking statements and are advised to consider the factors listed above together with the additional factors under the heading “Risk Factors” in the Company's Annual Reports on Form 10-K, as may be supplemented or amended by the Company's Quarterly Reports on Form 10-Q. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events, new information or otherwise.
About Marathon Digital Holdings
Marathon is a digital asset technology company that mines cryptocurrencies with a focus on the blockchain ecosystem and the generation of digital assets.
Marathon Digital Holdings Company Contact:
Jason Assad
Telephone: 678-570-6791
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
Marathon Digital Holdings Investor Contact:
Gateway Investor Relations
Matt Glover and Charlie Schumacher
Telephone: 949-574-3860
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
Marathon Digital Holdings
Condensed Consolidated Balance Sheets
| March 31, | December 31, | ||||||
| 2021 | 2020 | ||||||
| (Unaudited) | (Audited) | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 211,934,086 | $ | 141,322,776 | |||
| Digital currencies | 10,746,219 | 2,271,656 | |||||
| Other receivable | - | 74,767,226 | |||||
| Deposit | 128,869,316 | 65,647,592 | |||||
| Investment fund | 281,822,950 | - | |||||
| Prepaid expenses and other current assets | 2,513,812 | 2,399,965 | |||||
| Total current assets | 635,886,383 | 286,409,215 | |||||
| Other assets: | |||||||
| Property and equipment, net of accumulated depreciation and impairment charges of 7,200,501 and 6,480,359 for March 31, 2021 and December 31, 2020, respectively | 41,960,893 | 17,224,321 | |||||
| Prepaid service contract | 7,854,000 | 8,415,000 | |||||
| Right-of-use assets | - | 200,301 | |||||
| Intangible assets, net of accumulated amortization of 225,392 and 207,598 for March 31, 2021 and December 31, 2020, respectively | 984,608 | 1,002,402 | |||||
| Total other assets | 50,799,501 | 26,842,024 | |||||
| TOTAL ASSETS | $ | 686,685,884 | $ | 313,251,239 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued expenses | $ | 985,968 | $ | 999,742 | |||
| Current portion of lease liability | - | 121,596 | |||||
| Warrant liability | 1,914,333 | 322,437 | |||||
| Total current liabilities | 2,900,301 | 1,443,775 | |||||
| Long-term liabilities | |||||||
| SBA PPP loan payable | 62,500 | 62,500 | |||||
| Total long-term liabilities | 62,500 | 62,500 | |||||
| Total liabilities | 2,962,801 | 1,506,275 | |||||
| Commitments and Contingencies | |||||||
| Stockholders' Equity: | |||||||
| Preferred stock, 0.0001 par value, 50,000,000 shares authorized, no shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively | - | - | |||||
| Common stock, 0.0001 par value; 200,000,000 shares authorized; 99,370,465 and 81,974,619 issued and outstanding at March 31, 2021 and December 31, 2020, respectively | 9,937 | 8,197 | |||||
| Additional paid-in capital | 716,862,400 | 428,242,763 | |||||
| Accumulated other comprehensive loss | (450,719 | ) | (450,719 | ) | |||
| Accumulated deficit | (32,698,535 | ) | (116,055,277 | ) | |||
| Total stockholders’ equity | 683,723,083 | 311,744,964 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 686,685,884 | $ | 313,251,239 | |||
Marathon Digital Holdings
Condensed Consolidated Statements of Operations
| For the Three Months Ended | |||||||||
| March 31, | |||||||||
| 2021 | 2020 | ||||||||
| Revenues | |||||||||
| Cryptocurrency mining revenue | $ | 9,152,815 | $ | 592,487 | |||||
| Total revenues | 9,152,815 | 592,487 | |||||||
| Operating costs and expenses | |||||||||
| Cost of revenue | 2,406,415 | 1,153,241 | |||||||
| Compensation and related taxes | 52,405,786 | 233,657 | |||||||
| Consulting fees | 113,606 | 41,812 | |||||||
| Professional fees | 313,032 | 146,642 | |||||||
| General and administrative | 307,191 | 108,937 | |||||||
| Impairment of mined cryptocurrency | 662,199 | - | |||||||
| Total operating expenses | 56,208,229 | 1,684,289 | |||||||
| Operating loss | (47,055,414 | ) | (1,091,802 | ) | |||||
| Other income (expenses) | |||||||||
| Other income | (1,470 | ) | 106,408 | ||||||
| Change in fair value of investment in NYDIG fund | 131,822,950 | - | |||||||
| Realized gain (loss) on sale of digital currencies | (54 | ) | (4,221 | ) | |||||
| Change in fair value of warrant liability | (1,591,895 | ) | 9,786 | ||||||
| Change in fair value of mining payable | - | (66,548 | ) | ||||||
| Interest income | 183,828 | 1,880 | |||||||
| Interest expense | (1,203 | ) | (13,435 | ) | |||||
| Total other (expenses) income | 130,412,156 | 33,870 | |||||||
| Income (loss) before income taxes | $ | 83,356,742 | $ | (1,057,932 | ) | ||||
| Income tax expense | - | - | |||||||
| Net income (loss) | $ | 83,356,742 | $ | (1,057,932 | ) | ||||
| Net income (loss) per share, basic: | $ | 0.88 | $ | (0.12 | ) | ||||
| Net income (loss) per share, diluted: | $ | 0.87 | $ | (0.12 | ) | ||||
| Weighted average shares outstanding, basic: | 94,350,216 | 8,655,525 | |||||||
| Weighted average shares outstanding, diluted: | 96,251,240 | 8,655,525 | |||||||
Marathon Digital Holdings
EBITDA for the three months ended March 31, 2021 and 2020
| For the Three Months Ended | For the Three Months Ended | |||||||
| March 31, | March 31, | |||||||
| 2021 | 2020 | |||||||
| Revenues | ||||||||
| Cryptocurrency mining revenue | $ | 9,152,815 | $ | 592,487 | ||||
| Total revenues | 9,152,815 | 592,487 | ||||||
| Operating costs and expenses | ||||||||
| Cost of revenue | 2,406,415 | 1,153,241 | ||||||
| Compensation and related taxes | 52,405,786 | 233,657 | ||||||
| Consulting fees | 113,606 | 41,812 | ||||||
| Professional fees | 313,032 | 146,642 | ||||||
| General and administrative | 307,191 | 108,937 | ||||||
| Impairment on cryptocurrency | 662,199 | - | ||||||
| Total operating expenses | 56,208,229 | 1,684,289 | ||||||
| Operating loss | (47,055,414 | ) | (1,091,802 | ) | ||||
| Other income (expenses) | ||||||||
| Other income | (1,470 | ) | 106,408 | |||||
| Change in fair value of investment in NYDIG fund | 131,822,950 | - | ||||||
| Realized gain (loss) on sale of digital currencies | (54 | ) | (4,221 | ) | ||||
| Change in fair value of warrant liability | (1,591,895 | ) | 9,786 | |||||
| Change in fair value of mining payable | - | (66,548 | ) | |||||
| Interest income | 183,828 | 1,880 | ||||||
| Interest expense | (1,203 | ) | (13,435 | ) | ||||
| Total other (expenses) income | 130,412,156 | 33,870 | ||||||
| Income (loss) before income taxes | $ | 83,356,742 | $ | (1,057,932 | ) | |||
| Income tax expense | - | - | ||||||
| Net income (loss) | $ | 83,356,742 | $ | (1,057,932 | ) | |||
| Non-cash adjustments to Net Income (loss) | ||||||||
| Depreciation and Amortization of Fixed Assets | 720,142 | 528,575 | ||||||
| Impairment Loss | 662,199 | - | ||||||
| Server Maintenance Contract Amortization | 561,000 | 26,825 | ||||||
| Stock Compensation Expense | 52,087,311 | 23,238 | ||||||
| Total Non-cash adjustments to Net Income (Loss) | $ | 54,030,652 | $ | 578,638 | ||||
| Adjusted EBITDA | $ | 137,387,394 | $ | (479,294 | ) | |||
| Last Trade: | US$21.07 |
| Daily Change: | 0.28 1.35 |
| Daily Volume: | 41,954,848 |
| Market Cap: | US$6.200B |
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