Q3 2023 Marathon Digital Holdings Inc Earnings Call

November 8, 2023

Speaker 1: music

Okay.

[music].

Speaker 2: Good day ladies and gentlemen and welcome to Marathon Digital Holdings third quarter earnings webcast and conference call. I would now like to turn the call over to your host, Chris Brenler, Vice President of Investor Relations. Please go ahead.

Good day, ladies and gentlemen, and welcome to Marathon Digital Holdings third quarter earnings webcast and conference call I would now like to turn the call over to your host Crisp Redler, Vice President President of Investor Relations. Please go ahead.

Speaker 3: Thank you, Sherry. Good afternoon and welcome to Marathon Digital Holdings third quarter 2003 earnings call. Thank you for joining us for our call today. With me on today's call are Chairman and Chief Executive Officer Fred Teel and our Chief Financial Officer Salman Khan.

Thank you Sheri good afternoon, and welcome to Marathon Digital Holdings third quarter 2003 earnings call.

Thank you for joining us for our call today with me on today's call are chairman and Chief Executive Officer, Fred Teal, and our Chief Financial Officer Simon Conn.

Speaker 3: Before we get started, I'd like to remind everyone that our prepared remarks may contain forward-looking statements which are subject to the risks and uncertainties

Before we get started I'd like to remind everyone that our prepared remarks may contain forward looking statements, which are subject to the risks and uncertainties.

Speaker 3: And we may make additional forward-looking statements during the question and answer session.

And that May we may make additional forward looking statements. During the question and answer session. These forward looking statements are subject to risks and uncertainties and actual results may differ materially when used in this call. The words anticipate could enable estimate intend expect believe potential will should project and similar expressions.

Speaker 3: These four looking statements are subject to risk in certain case and actual results may differ materially.

Speaker 3: When using this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as related to Marathon Digital Holdings are, as such, a fore-looking statement.

As it relates to marathon digital holdings are as such a forward looking statement. Please.

Speaker 3: Please refer to our earnings release for a full recitation of our forward-looking statements.

Please refer to our earnings release for a full reputation of our forward looking statements.

Speaker 3: Investors are calling all forward-looking statements involved risk, which may cause actual results to differ materially from those anticipated by Marathon at this time.

Investors are calling all forward looking statements involve risks.

Which may cause actual results to differ materially from those anticipated by marathon at this time.

Speaker 3: In addition, other risks are more fully described in Marathon's public filings with the U.S. Securities and Exchange Commission, which can be viewed at www.cc.gov and ir.marrow.com.

In addition, other risks are more fully described in marathons public filings with the U S Securities and Exchange Commission, which can be viewed at Www C.

<unk> dot Gov, and IR dot marrow dot com.

Speaker 3: Finally, visit that on today's call. We refer to certain non- GAAP financial measures in which marathonists include certain items at financial results. Please refer to our company's peer records on form 10K and 10Q and to our website for a full affiliation non-gap performance measures for the most comparable GAAP financial measures.

Finally, please note that on today's call, we will refer to certain non-GAAP financial measures measures and which marathon exclude certain items.

Financial results.

Please refer to our company's periodic reports on Form 10-K, and 10-Q and to our website for a full affiliations non-GAAP performance measures to the most comparable GAAP financial measures.

Speaker 3: Well, begin today's call with a pair of marks from Fred and Salmon. After their comments, we'll be going through some popular questions from investors before transferring to a live Q&A without covering an Alice. And with that out of the way, I'm going to turn the call over to Fred and kick things off. Fred?

Well begin todays call with prepared remarks from Fred and Saman. After their comments, we will be going through some popular questions from investors before transferring to a live Q&A with our covering analysts.

And without other way I'm going to turn the call over to Fred to kick things off Fred.

Thank you Chris.

Speaker 4: The third quarter was a landmark quarter for Marathon as we achieved several key milestones.

The third quarter was a landmark quarter for marathon, we achieved several key milestones to start the quarter. Our first international facility in Abu Dhabi powered up just six months after signing contracts even though this is the first site that was designed and built by marathon together with our JV partner.

Speaker 4: To start the quarter, our first international facility in Abu Dhabi powered up just six months after signing contracts, even though this is the first site that was designed and built by Marathon together with our JV part.

Speaker 4: In August , we reached our stated goal of 23 exahashes and established Marathon as one of the largest Bitcoin miners globally.

In August we reached our stated goal of 23 extra hashish and established marathon is one of the largest bitcoin miners globally.

Speaker 4: Then in September , we proactively restructured our convertible debt to further strengthen our balance sheet and prepare for opportunities that may be created by next year's.

Then in September we proactively restructured our convertible debt to further strengthen our balance sheet and prepare for opportunities that may be created by next year is having.

In addition to these key milestones. We also reported strong financial results with record revenue lower cost per coin mined and improving margin. Much of this success was the direct result of measurable progress on our 2023 priorities, which are energizing more capacity and optimizing our mining operation Let me provide some more.

Detail.

Speaker 4: In the third quarter, we increased our energized hash rate 8% from 17.7x to 19.1x to hash over the same period. Our average operational hash rate for the quarter increased 18%. The faster growth in realized hash rate was due to improved uptime that helped drive record Bitcoin production of 3,490 Bitcoin up 19% from the prior quarter as well as lower cost per coin.

In the third quarter, we increased our energized hash rate, 8% from $17 seven next ashes to $19 one fashion over the same period, our average operational hatch rate for the quarter increased 18% the faster growth in realized tax rate was due to improved uptime that helped drive record bitcoin.

Production of 3490, bitcoin up 19% from the prior quarter as well as lower cost for corn.

Speaker 4: The increase in uptime was driven by our optimization strategy and a more proactive approach to managing our domestic operations and hosting partners.

The increasing uptime was driven by our optimization strategy and a more proactive approach to managing our domestic operations and hosting partners.

Speaker 4: Over the course of 2023, we have built up our operations team adding key talent across site operations, power, hardware, software, networks, repair, and cooling. We are now directly managing our hosting partners to improve efficiency and increase up time. Our approach has included on-site marathon resources to direct operations.

Over the course of 2023, we have built up our operations team, adding key talent across site operations power hardware software networks repair and cooling we are now directly managing our hosting partners to improve efficiency and increase uptime. Our approach is included onsite meera.

Upon resources to direct operations upgrade equipment optimized network design as well as deploy our proprietary framework my.

Speaker 4: upgrade equipment, optimize network design, as well as deploy our proprietary firmware.

Speaker 4: By way of example, uptime in McCamey, Texas, increased by approximately 20% in the third quarter, even with an approximately 84% increase in curtailment hours relative to the second quarter.

By way of example, uptime and Mccamey, Texas increased by approximately 20% in the third quarter, even with an approximately 84% increase in curtailment hours relative to the second quarter.

Speaker 4: This progress is critically important as the improved operating efficiency lowered our direct cost for Bitcoin mined by 9% sequentially, excluding depreciation and amortization, despite a 9% increase in average network difficulty in the third quarter.

This progress is critically important as the improved operating efficiency lowered our direct cost per bit coin mined by 90% sequentially, excluding depreciation and amortization. Despite a 9% increase in average network difficulty in the third quarter.

Speaker 4: Our all-in-cost per coin, which includes GNA without stock base comp, dropped to 12% quarter of recorder and 41% euro.

Our all in cost per coin, which includes G&A without stock based comp dropped to 12% quarter over quarter and 41% year over year.

Speaker 4: This material improvement is not just the result of optimization.

This material improvement is not just the result of optimization. It also reflects a significant scale benefits that we have achieved that helped lower our all in cost per click on.

Speaker 4: also reflects the significant scale benefits that we have achieved that help lower our all-in cost per

Speaker 4: On a year-over-year basis, Bitcoin mined grew 467% in the third quarter as Marathon's block rewards represented 4% of the total available miner rewards in the third quarter.

On a year over year basis, Bitcoin mind grew 467% in the third quarter as marathons block rewards represented 4% of the total available minor rewards in the third quarter.

Speaker 4: Energization of more efficient mining rigs is also lowering our electricity consumption on a per hash base.

<unk> in a more efficient mining rigs is also lowering our electricity consumption on a per head basis are.

Speaker 4: Our mining fleet is already among the most efficient in the industry and growing our hash rate with ever more efficient machines will continue to lower our cost per coin.

Our mining fleet is already among the most efficient in the industry and growing our hatch rate with ever more efficient machines will continue to lower our cost per corn.

Speaker 4: This process is encouraging. Our operational priorities remain unchanged. We're still focusing on growing our market share on the most efficient and sustainable methods possible, while optimizing our operations to continually drive lower costs.

This process is encouraging our operational priorities remain unchanged and we're still focusing on growing our market share in the most efficient and sustainable methods possible, while optimizing our operations to continually drive lower costs.

Speaker 4: In a few minutes, I'll provide an update on our growth plans and how we're innovating to drive lower costs.

In a few minutes I'll provide an update on our growth plans and how we're innovating to drive lower costs.

Speaker 4: First, I'm going to turn the call over to Salman to discuss our financial results for the third quarter. Salman.

First I'm going to turn the call over to <unk> to discuss our financial results for the third quarter. So long.

Speaker 5: We had an excellent third quarter with record Bitcoin production in the higher margin.

We had an excellent third quarter with record bitcoin production and higher margins.

Speaker 5: The company reported net income attributable to common stockholders are $64.1 million or $35 cents per diluted common share in the quarter compared with the net loss of $72.5 million or $62 cents per share in the prior year.

The company reported net income attributable to common stockholders are $64 1 million or <unk> 35 per diluted common share in the quarter compared with a net loss of $72 5 million or <unk> 62 per share in the prior year quarter.

Speaker 5: On a sequential basis, we grew net income $85.4 million versus the second quarter of 20.

On a sequential basis, we grew net income $85 $4 million versus the second quarter of 2023.

Speaker 5: The sequential improvement and profitability was partially due to a one-time net gain on an extended debt of $82.6 million due to the notes table exchange trend.

The sequential improvement in profitability was partially due to a onetime net gain on extinguishment of debt or $82 6 million.

Due to the notes payable exchange transaction.

Speaker 5: Third quarter revenues were a record, $97.8 million, significantly higher than prior year revenues of $12.7 million. Average daily Bitcoin production grew to 38 Bitcoin per day, versus 7 Bitcoin, and third quarter of 2022, and up 18% from prior quarter level.

Third quarter revenues were a record $97 8 million significantly higher than prior year revenues of $12 7 million.

Average daily Bitcoin production grew to 38 bit quaint per day versus seven bitcoin and third quarter of 2022 and up 18% from prior quarter levels.

Speaker 5: Revenue also benefited from a 32% higher average Bitcoin price compared to last year's third

Revenue also benefited from a 32% higher average bitcoin price compared to last year's third quarter.

Speaker 5: Our hosting and energy costs for the three months ended September 30th were 59.6 million dollars compared to 13.8 million dollars last.

Our hosting and energy costs for the three months ended September 30 were $59 6 million compared to $13 $8 million last year.

Speaker 5: The increase was due to significantly higher Bitcoin production partially offset by lower production costs for coins. And one time exit costs for our Harden Montana facility last.

The increase was due to significantly higher bitcoin production, partially offset by lower production costs for <unk> and.

And one time exit costs for our Harden, Montana facility last year.

Speaker 5: Total cost of revenues, which includes depreciation and amortization was $113.2 million compared to $40.1 million last year, which is an increase of $1.2 million.

Total cost of revenues, which includes depreciation and amortization.

$113 2 million compared to $40 $1 million last year, which is an increase of 182%.

Speaker 5: Depreciation and amortization this quarter was $53.5 million, increasing by $27.3 million compared to the same quarter last year.

Depreciation and amortization this quarter was $53 5 million, increasing by $27 $3 million compared to the same quarter last year.

Speaker 5: As Fred mentioned, we have grown our mining rig cleat significantly since last.

As Fred mentioned, we have grown our mining fleet significantly since last year.

Speaker 5: And as a result, increase our energized hash rate from 3.8 exa- hashes in the third quarter of 2022 to 19.1 exa- hashes in the third quarter of 2020.

And as a result increased our energized hash rate from 3.8 extra high shares in the third quarter of 2022 to.

$19, one extra taxes in the third quarter of 2023.

Speaker 5: We also had one time accelerated depreciation of our hard and one-can-e facility of $5.7 million.

We also had one time accelerated depreciation of our hardened Montana facility of $5 $7 million last year.

Speaker 5: Gain on digital assets was $31 million in the current year quarter versus none in the prior year third quarter. Impairment of digital assets, on the other hand, increased by $10.5 million year-over-year to $11.9 million, reflecting the increased size of our Bitcoin holdings, which was up 29%.

Gain on digital assets was $31 million in the current year quarter versus none in the prior year third quarter.

Impairment of digital assets on the other hand increased by $10 $5 million year over year to $11 $9 million, reflecting the increased size of our bitcoin holdings, which was up 29% year over year.

Speaker 5: I want to note that the company's non-gap total margin excluding depreciation and advertising was $38.2 million in this court.

I want to note that the company's non-GAAP total margin, excluding depreciation and amortization was $38 $2 million this quarter.

Speaker 5: Up 39.3 million dollars from compared with the same quarter last

$39 $3 million from compared with the same quarter last year.

Speaker 5: This is representative of our increased hash rate and our strategy to systematically improve efficiency as mentioned by Fred earlier as well as higher Bitcoin prices in 2020.

This is representative of our increased cash rate and our strategy to systematically improve efficiency as mentioned by Fred earlier, as well as higher bitcoin prices in 2023.

Speaker 5: Adjusted EBITDA improved to $43.7 million versus a $6.1 million loss in the prior year.

Adjusted EBITDA improved to $43 7 million versus $6 $1 million loss in the prior year period. The drivers of the adjusted EBITDA improvement include total margin improved.

Speaker 5: The drivers of the adjusted EBITDA improvement include total margin improvement, excuse me, total margin improvement, excluding depreciation and amortization, and the net realized gains on Bitcoin sales, net off impairment, partially offset by an $8 million year- to year increase in general and administrative expenses to support the growth of our

Excuse me total margin improvement, excluding depreciation and amortization and net realized gains on bitcoin sales net of impairment, partially offset by an $8 million year over year increase in general and administrative expenses to support the growth of our business.

Speaker 5: General and Admiris Creative Expenses, excluding stock based compensation, were 14.6 million dollars in the current period as compared with 8.7 million dollars in the prior year.

General and administrative expenses, excluding stock based compensation were $14 $6 million in the current period as compared with $8 $7 million in the prior year period.

Speaker 5: This increase in expenses was primarily due to the increasing scale of business, including payroll and benefits, professional fees, and other costs.

This increase in expenses was primarily due to the increasing scale of business, including payroll and benefits professional fees and other costs.

Speaker 5: At the end of the third quarter, we had 48 employees, up from 20 a year ago as we continue to opportunistically add talent across the organization.

At the end of the third quarter, we had 48 employees up from 20, a year ago as we continued to opportunistically add talent across the organization.

Speaker 5: Turning to our Bitcoin holdings and cash position, unrestricted cash and cash equivalents total $101.2 million at September 30th, which was up $37 million compared to last.

Turning to our Bitcoin holdings in cash position unrestricted cash and cash equivalents totaled $101 2 million at September 30, which was up $37 million compared to last year.

Speaker 5: Also at September 30th, being held approximately 13,716 bitcoins with a carrying value of $287 million on the balance sheet.

Also at September 30, we held approximately 13716 bitcoin with <unk>.

<unk> value of $287 million on the balance sheet.

Speaker 5: Fair value of our holdings was approximately $370 million at quarter.

Fair value of our holdings was approximately $370 million at quarter end.

Speaker 5: The company's combined balance sheet of unrestricted cash and cash equivalents.

The company's combined balance sheet of unrestricted cash and cash equivalents.

Yeah.

Speaker 5: The company's combined balance of unrestricted cash and cash equivalents and fair value of Bitcoin was approximately $470 million.

The company's combined balance of unrestricted cash and cash equivalents and fair value of Big claims was approximately $470 million.

Speaker 5: We sold 2300 Bitcoin during the quarter, realizing cash proceeds of $65.6 million. These proceeds were utilized to fund operating expenses during the quarter, including cost of revenues for energy hosting and other cash operating.

We sold 2300 bitcoin during the quarter realizing cash proceeds of $65 6 million. These proceeds were utilized to fund operating expenses during the quarter, including cost of revenues for energy hosting and other cash operating expenses during.

Speaker 5: During the quarter, we generated $37 million from at-the-market equity sales, which we intend to use for growth.

During the quarter, we generated $37 million from at the market equity sales, which we intend to use for growth capital.

Speaker 5: Also, during the quarter, we took advantage of an opportunity to strengthen our balance sheet by exchanging $417 million in convertible notes for approximately $329 million in equity.

Also during the quarter, we took advantage of an opportunity to strengthen our balance sheet by exchanging $417 million in convertible notes for approximately $329 million in equity.

Speaker 5: This transaction reduces our debt by 56% and will save approximately $101 million or $0.55 per share in cash for our shareholders for principal and interest reduction.

This transaction reduced our debt by 56%.

And we will save approximately $101 million or.

<unk> 55 per share and cash for our shareholders for principal and interest reduction.

Speaker 5: The combined cash and cash equivalents and Bitcoin on our balance sheet along with reduced debt and access to at the market facility provides us ample amount of liquidity and optionality to strategically evaluate opportunities as the approach next years.

The combined cash and cash equivalents and bitcoin on our balance sheet, along with reduced debt and access to at the market facility provides us ample amount of liquidity and optionality to strategically evaluate opportunities as we approach next year is having.

Speaker 5: The increased value of combined cash and Bitcoin along with reduced debt is prudent risk management and a source of strength for the company's balance sheet as we enter a potentially turbulent time for the industry during halving the price.

The increased value of combined cash and bitcoin, along with reduced debt as prudent risk management and a source of strength for the companys balance sheet as we enter it potentially turbulent time for the industry during having next year.

Speaker 5: In fact, we have already started to see less efficient and undercapitalized miners looking to be acquired prior to the

In fact, we have already started to see less efficient and under capitalized minors looking to be acquired prior to the housing.

Speaker 5: As mentioned in our October production report, our unrestricted cash balance at October 31 was $156 million, and we held approximately 13,396 bitcoin with a fair value of $464 million.

As mentioned in our October production report, our unrestricted cash balance at October 31 was $156 million and we held approximately 13396 bitcoin with a fair value of $464 million.

Speaker 5: In total, we had over $0.6 billion in unrestricted cash and Bitcoin at end of the month.

In total we had over $1 6 billion in unrestricted cash and bitcoin at end of the last month.

Speaker 5: In addition, during third quarter, we began making enhancements to our treasury management

Okay.

In addition, during the third quarter, we began making enhancements to our Treasury management strategy.

Speaker 5: Specifically, we began hedging a portion of our Bitcoin holdings.

Specifically, we began hedging a portion of our bitcoin holdings.

Speaker 5: For those who are less familiar with the concept, hedging is designed to mitigate the impacts of extreme volatility in the near term, while maintaining the long-term strategy of maximizing the size and value of our treasure.

For those who are less familiar with the concept of hedging is designed to mitigate the impacts of extreme volatility in the near term, while maintaining the long term strategy of maximizing the size and value of our treasury.

Speaker 5: It is designed with predefined risk terms and protects Marathon from sharp downward price movements while still allowing us to take advantage of the market.

It is designed with pre defined risk terms and protects marathon from sharp downward price movements, while still allowing us to take advantage of upside gains.

Speaker 5: hedging is likely to have an impact on our earnings going forward as we recognize gains or losses from such hedging activity. Given Bitcoin's historical volatility, we believe this strategy is integral to improving the resilience of our organization, providing downside risk protection during volatile market conditions and maximizing our Bitcoin valuation.

Hedging is likely to have an impact on our earnings going forward as we recognize gains or losses from such hedging activity.

Given bitcoins historical volatility we believe this strategy is integral to improving the resilience of our organization.

Providing downside risk protection during volatile market conditions, and maximizing our bitcoin valuation potential.

Speaker 5: We expect our future Bitcoin holdings will generally increase but will fluctuate depending on operating in market conditions.

We expect our future bitcoin holders will generally increase but will fluctuate depending on operating and market conditions.

Speaker 5: We intend to add to our Bitcoin holdings primarily through our production activities and we will also continue to sell Bitcoin as a means of generating cash to fund monthly operating costs and for general corporate.

We intend to add to our Bitcoin holdings, primarily through our production activity and we will also continue to sell bitcoin as a means of generating cash to fund monthly operating cost and for general corporate purposes.

Speaker 5: And that completes my update. I'll now turn it back over to Fred, who will talk more about our operations and our ongoing plans.

And that completes my update I will now turn it back over to Fred who will talk more about our operations and our ongoing plans Fred.

Fred.

Thanks Tommy.

Speaker 4: Our strong results this quarter represent the culmination of several years of hard work. When we first detailed our asset light strategy in 2021, we believed investing in mining hardware over infrastructure was the most capital efficient way to scale quickly. Today, we are proud to say this strategy has worked as Marathon is now the leading public miner, public Bitcoin miner in the U.S.

Our strong results this quarter represent the culmination of several years of hard work. When we first detailed our asset light strategy in 2021, we believe investing in mining hardware over infrastructure was the most capital efficient way to scale quickly.

Today, we are proud to say this strategy has worked as marathon is now the leading public minor public pick one minor in the U S.

Speaker 4: In Q3, we mined 18% more Bitcoin and ended with 27% more hash rates than our closest competitor. This outstanding growth would not have been possible without our AssetLight strategy. We estimate the company was able to invest 30% more capital in hash rate growth, while our competitors were building interest.

In Q3, we mined 18% more bitcoin and ended with 27% more hatch rates than our closest competitor. This outstanding growth would not have been possible without our asset light strategy. We estimate the company was able to invest 30% more capital and hash rate growth, while our competitors we're building infrastructure.

Speaker 4: Marathon is now entered a new phase. One that prioritizes both capital and operating.

Marathon has now entered a new phase one that prioritizes, both capital and operating efficiency.

Speaker 4: Early in the third quarter, our joint venture in Abu Dhabi powered up, marking our first designed and operated site as well as our first international location.

In the third quarter, our joint venture in Abu Dhabi powered up marking our first designed and operated site as well as our first international location.

Speaker 4: This site began hashing less than six months after we signed the contract, a testament to the strength of both our operations team and our joint venture partner, Zero2.

This site began hashing less than six months. After we signed the contract a testament to the strength of both our operations team and our joint venture partner zero too.

Speaker 4: Last month, our second site in Masdar City began energizing and the entire 250 megawatts from both UAE locations are still on track to energize fully by end of the year.

Last month, our second site and whilst our city began energizing and the entire 250 megawatts from both UAE locations are still on track to energize fully by end of the year.

Speaker 4: In addition to proving out Marathon's technical expertise and execution capabilities, our success in the UAE is also helping shape the energy debate.

In addition to proving out marathons technical expertise and execution capabilities. Our success in the UAE is also helping shape the energy debate.

Speaker 4: at the official ribbon cutting last month in Mazda City. We heard firsthand how Marathon's UAE ventures, ability to collaborate with the local grid operator has been a resounding success. But this is just the beginning.

At the official ribbon cutting last month and most of our city, we heard firsthand marathons UAE ventures ability to collaborate with the local grid operator has been a resounding success, but this is just the beginning.

Speaker 4: As more countries become aware of Bitcoin mining's unique capabilities to support grid stabilization and monetize stranded energy, we expect to see continued international growth towards our target of diversifying our hash rate global.

As more countries become aware of bitcoin mining has unique capabilities to support grid stabilization and monetize stranded energy, we expect to see continued international growth towards our target of diversifying our hash rate globally.

Speaker 4: In addition, our UAE success also demonstrates how our immersion technology can unlock stranded energy even in the most challenging climates.

In addition, our UAE success also demonstrates how our emerging technology can unlock stranded energy even in the most challenging climate.

Speaker 4: As a matter of fact, a number of leading competitors recently requested to visit our Abu Dhabi facility to see for themselves how we achieved 99% uptime in such a challenging operating environment.

As a matter of fact, the number of leading competitors recently requested to visit our Abu Dhabi facility to see for themselves, how we achieved 99% uptime in such a challenging operating environment.

Speaker 4: Our success in UAE has opened up new international opportunities in Africa and Latin America, most recently in Paraguay, as we announced yesterday.

Our success in the UAE has opened up new international opportunities in Africa, and Latin America, most recently in Paraguay, as we announced yesterday.

Speaker 4: This new joint venture is powered by the Itaipu Dam, one of the largest hydroelectric power plants in the world. Paraguay produces approximately 32 terawatt hours of surplus energy per year, and Bitcoin miners have the unique ability to co-locate right at the source and take advantage of the stranded energy.

This new joint venture is powered by the type of day, one of the largest hydroelectric power plants in the world Paraguay produces approximately 32 terawatt hours of surplus energy per year, and bitcoin miners have the unique ability to co locate right at the source and take advantage of the stranded energy.

Speaker 4: that helps local power generators monetize excess energy, which otherwise would have been wasted or sold at a loss.

This helps local power generators, monetize excess energy, which otherwise would have been wasted or sold at a loss.

Speaker 4: without having to build expensive transmission lines and additional infrastructure.

Without having to build expensive transmission lines and additional infrastructure.

Speaker 4: For Marathon, it provides attractive power costs for baseload renewable energy. It is truly a win-win for both sides.

For marathon it provides attractive power cost per base load renewable energy. It is truly a win win for both sides.

Speaker 4: poster to home we recently announced a pilot project in Utah that is exclusively powered by land film methane gas

Closer to home, we recently announced the pilot project in Utah that is exclusively powered by landfill methane gas.

Speaker 4: Methane is 80 times more damaging to the environment than carbon dioxide, and marathon is uniquely positioned to capture and convert this environmentally harmful gas into inexpensive renewable energy.

Methane is 80 times more damaging to the environment and carbon dioxide and marathon is uniquely positioned to capture and convert this environmentally harmful gas into inexpensive renewable energy.

Speaker 4: This initial pilot is expected to have all-in hosting costs below $0.04 per kilowatt-hour, significantly below the average cost to mine in the U.S., but we think we can do even better. Our ultimate

This initial pilot is expected to have all in hosting costs below <unk> per kilowatt hour significantly below the average cost to mine in the U S.

But we think we can do even better.

Our ultimate goal is zero cost energy.

You may ask how is this possible.

Speaker 4: In addition to creating innovative ways to leverage energy that was previously inaccessible, we can repurpose the heat generated by Bitcoin mining towards revenue-generating projects such as heating greenhouses, shrimp farming, and other forms of low-grade industrial heat products.

In addition to creating innovative ways to leverage energy that was previously inaccessible we can repurpose the heat generated by bitcoin mining towards revenue generating projects, such as heating greenhouses shrimp farming and other forms of low grade industrial heat processes.

Speaker 4: We look forward to sharing more of the innovative projects that we're exploring in the months ahead.

Look forward to sharing more innovative projects that we're exploring in the months ahead.

Speaker 4: Why are we still focused on low cost or even zero cost energy?

Why are we still focused on low cost or even zero cost energy.

Speaker 4: As many of you know, Bitcoin mining revenues are impacted by the having events that occur every four years when block reward subsidies are reduced by 50% of Bitcoin terms. The next having is...

So as many of you know this coin mining revenues are impacted by the having events that occur every four years block reward subsidies are reduced by 50% a big credit terms.

The next having is less than six months away.

Speaker 4: over time, Bitcoin miners must reduce their reliance on block subsidies and increasing Bitcoin prices. We believe that long term, we can operate profitably by consuming wasted energy while monetizing heat offtake. The early results of our initial pilots look very promising.

Over time, the coin miners must reduce the reliance on block subsidies and increasing bitcoin prices. We believe that long term, we can operate profitably by consuming wasted energy, while monetizing heat offtake. The early results of our initial pilots look very promising.

Speaker 4: by reducing our dependence on block subsidies, we greatly improve the long-term viability of the enterprise. So what is Marathon doing to prepare?

By reducing our dependence on block subsidies, we greatly improved the long term viability of the enterprise.

So what does marathon doing to prepare.

Our strategy has been to reduce costs.

Speaker 4: and lower our risk profile as we continue to grow our hash rate. In addition to strong operating results, we also improved our financial profile.

And lower our risk profile as we continue to grow our hatch rate.

In addition to strong operating results, we also improved our financial profile this quarter.

Speaker 4: As Salmon mentioned, we took advantage of the steep discount and our convertible debt to strengthen our balance.

Maam mentioned, we took advantage of the steep discount on our convertible debt to strengthen our balance sheet.

Speaker 4: We believe this traction was accreted to our existing shareholders as the 21% on the principle amount to more than offset the additional equity issues. It also positions marathon to capitalize on any near term turbulence in the Bitcoin mining sector.

We believe this traction was accretive to our existing shareholders as the 21% on the principal amount to more than offset the additional equity issue. It also positions marathon to capitalize on any near term turbulence in the bitcoin mining sector.

Speaker 4: Our balance sheet is now a source of strength that allows us to focus on further increasing efficiency and lowering costs.

Our balance sheet is now a source of strength that allows us to focus on further increasing efficiency and lowering costs.

Speaker 4: In the meantime, we're still focused on growth. We expect to reach 26X to hash by the end of 2023 and plan to grow our hash rate by approximately 30% in 2024.

In the meantime, we're still focused on growth, we expect to reach 26 excess cash by the end of 2023 and plan to grow our hatch rate by approximately 30% in 2024.

Speaker 4: We will maintain a flexible approach, leveraging hosting providers and local experts to quickly test deployments in new geographies, while we continue to prioritize owned and operated sites for major deployment.

We will maintain a flexible approach leveraging hosting providers and local experts to quickly test deployments in new geographies, while we continued to prioritize owned and operated sites for major deployment we.

Speaker 4: We will also continue to innovate and continue to seek new ways of lowering costs by unlocking stranded energy and leveraging heat-off.

We will also continue to innovate and continue to seek new ways of lowering costs unlocking stranded energy and leveraging heat offtake with.

Speaker 4: With our strong results in recent progress on the strategic priorities, we believe we are on track to become one of the largest, most efficient, and technically advanced Bitcoin mining operations in the world.

With our strong results and recent progress on the strategic priorities. We believe we are on track to become one of the largest most efficient and technically advanced bitcoin mining operations in the world.

Speaker 4: Combined, Marathon is well positioned for the halving, regardless of where Bitcoin prices are heading next.

Combined marathon is well positioned for the having regardless of where bitcoin prices are heading next year, let me be clear we've never been more bullish on bitcoin the sustained growth in adoption use cases, and overall acceptance is very encouraging for the long term prospects and we are excited about our future.

Speaker 4: Let me be clear, we've never been more bullish on Bitcoin. The sustained growth in adoption, use cases, and overall acceptance is very encouraging to the long-term prospect and we are excited about it.

Speaker 3: Thanks, Fred. At this time, we're going to commence the Q&A section of today's call. We'll start by answering some of the most popular questions submitted by investors through our Q&A platform.

Thanks, Greg.

At this time, we're going to commence the Q&A section of todays call I will start by answering some of the most popular questions submitted by investors through our Q&A platform.

Speaker 3: Our first question comes from CK, who has actually the two part question. So the first part is...

Our first question comes from Teekay.

Actually the two part question. So the first part is.

Speaker 6: Why do analysts still favor Riot and CleanSpark over Marathon after taking extreme steps to extinguish long-term debt in Q3? Fred? Marathon's

Why do analysts still favor riot in clean spark over marathon after taking extreme steps to extinguish long term debt in Q3.

Fred.

Yeah.

Marathon is still has more debt than our peers.

And we're transitioning our business model.

Speaker 4: A reported cost for Bitcoin is all to higher, and we aim to close this gap in 2024. Also...

Our reported cost per bitcoin is also higher and we aim to close this gap in 2024.

Also.

As you look at our business.

Speaker 4: We believe that optimizing our costs.

We believe that.

Optimizing our costs through.

Speaker 4: through the benefit of some of the opportunities that will be available, post-having here will enable us to continue to drive costs down significantly.

Through the benefit of some of the opportunities that will be available post having here will enable us to continue to drive costs down significantly.

Great. The second part is if diluting to reduce debt in the mid $9 range is accretive to shareholders. While I have no insiders bought common stock when the stock is dipped into the eights.

Speaker 6: If saluting to reduce that in the mid-nine dollar range is accreted to shareholders, why have no insiders bought common stock when the stock is dipped into the eights?

You also mentioned that one Fred.

Speaker 4: Sure. So SEC rules restrict insider buying under certain conditions, especially when executives and insiders are party to material on public information.

Sure. So FCC rules restrict insider buying under certain conditions, especially when exec.

Executives and insiders are party to material nonpublic information.

Speaker 4: Typically public companies like Marathon would have a window that is open to buy stock that starts typically a few days after earnings release.

Typically public companies like marathon would have a window that is open to buy stock.

It's typically a few days after earnings release.

Speaker 4: and would close typically somewhere around one month before end of quarter, which is a very small window.

And would close typically somewhere around one month before end of quarter, which is a very small window.

Speaker 4: As we stated before, we have a lot of major initiatives underway, which means that the management team is currently very much in hold of or in, at knowledge of material, non-public information, which potentially would be a violation if we were in the market bind. That being said, we remain very bullish on the stock.

As we stated before we have a lot of major initiatives underway, which means that the management team is currently very much in hold up.

Knowledge of material nonpublic information, which potentially.

It would be a violation if we were in the market buying that being said, we remain very bullish on the stock.

Speaker 7: and we continue to look forward to seeing how we can drive shareholder value going forward.

We continue to look forward to seeing how we can drive shareholder value going forward.

Our next question comes from Garrett who asked.

Speaker 3: Why is Maristock not increased to the degree that Bitcoin has in the past month? So they have timely topics for everyone to give you a thought.

Why is <unk> not increase the degree of bitcoin has in the past month.

So in a timely topic, Fred when you give your thoughts.

So again as we said earlier.

Speaker 7: We're very focused on lowering our costs and leveraging our strong balance sheet.

We're very focused on lowering our costs and leveraging our strong balance sheet.

We believe that.

Speaker 7: shareholders are starting to look at the halving. And as you look across the whole mining sector, many of our peers have also seen their share prices declining, especially in the most recent few weeks.

Shareholders are starting to look at the having and as you look across the whole mining sector.

Many of our peers have also seen the share prices declining, especially in the most recent few weeks.

Speaker 7: We believe that there's certain concerns regarding the ETF launching and the impact that that may have on Bitcoin miners as well. But as I said earlier,

We believe that there are certain concerns regarding the ETF launching and the impact that that may have on big coin miners as well.

But as I said earlier, we remain very bullish and.

Speaker 8: And we think that this is going to be an excellent opportunity from our plan to continue to grow. Good.

And we think that this is going to be an excellent opportunity for marathon to continue to grow.

Let's move to our third question from Logan W. S.

Will you continue to dilute the shares.

Speaker 6: I didn't hear this one a lot recently, so I'm on you want to start on this one.

So when I heard there's been a lot recently some monumental start on this one.

Sure Logan. Thank you for the question.

Speaker 5: Use the equity capital for a creative growth capital.

These are equity capital for accretive growth capital.

Speaker 5: And as Fred had mentioned earlier in the call, we have a

Our growth projects and as Fred had mentioned earlier in the call we have a.

Speaker 5: We have a very strong pipeline of growth projects that we as a company and management team are very excited.

And we have a very strong pipeline of growth projects that we as a company and management team are very excited about.

Speaker 5: We have the, obviously we have the option to source the growth either through selling Bitcoin or accessing capital markets.

We have the obviously, we have the option to source the growth either through.

Selling bitcoin or <unk>.

<unk> capital markets.

Speaker 5: And what our internal analysis shows is a combination of Bitcoin sales to fund operating costs.

And what our internal analysis shows is a combination of bitcoin sales to fund operating costs.

Speaker 5: and equity for world's capital to be the best source of capital.

And equity for growth capital to be the best source of capital.

Speaker 5: Any additional shares that we sell through our, at the market, ATM are for a creative growth.

Any additional shares that we sell through our at the market.

ATM.

For accretive growth projects.

Speaker 5: And look, those projects have to meet our internal double digits hurdle rate, which means that the rate of returns have to be a creative to the shares that.

And look those those projects have to meet our internal double digit hurdle rates, which means that the rate of returns have to be.

Creatives to to the to the shares that we issue.

Speaker 5: Our management team needs once a month to revisit our source of capital. And this strategy has worked well for our company, but can be changed with changing market conditions and Bitcoin pricing situation, for which we will adjust according to.

Our management team meets once a month to revisit our source of capital and and.

And this strategy has worked well for our company, but can be changed with changing market conditions and bitcoin pricing situation.

Which we will adjust accordingly.

Speaker 5: Now this has allowed us to grow our Bitcoin holdings as you know we now have approximately half of them.

Now this has allowed us to grow our bitcoin holdings as you know we now have.

Approximately half a billion dollars worth of.

Speaker 5: Bitcoin on our balance sheet or dollar equivalent. And we have proven our ability to find an investor in a tract of growth opportunities as Fed of the Luted.

Bitcoin on our balance sheet.

Equivalent.

We have proven our ability to find and invest in attractive growth opportunities as Fred alluded to earlier.

Speaker 5: And summary, everything we do has only one or arching goal which is to maximize your hold of value. Hopefully depends on your questions.

In summary, everything we do has only one or Archie arching goal, which is to maximize shareholder value.

The to answer your questions.

Great.

Next question comes from Derek Gee, who S. Budd.

Speaker 6: What did Manchin choose to buy back the convertible debt instead of buying Bitcoin and increasing the total value up to the debt?

Blood management choose to buyback the convertible debt instead of buying bitcoin and increasing the hurdle value up to that level.

Speaker 6: a good way of looking at it. Maybe some on you can start on this one, but you can finish it up. Sure, thank you.

Hey, good way of looking at it maybe someone can start on this one but you can finish it up.

Sure. Thank you Derek for the question.

Speaker 5: We are the largest Bitcoin hotler in the public company, Mining Space. So we truly believe in Bitcoin and we hold to that hot milk.

We are the largest bitcoin corollary in the public comparable mining space. So we truly believe in bitcoin and we hold to that hurdle.

Speaker 5: that strategy as much as we can after paying for our operating costs.

But that strategy as much as we can after paying for our operating costs.

Speaker 5: And we continue to grow our Bitcoin holding beyond meeting or operating cash cost moves. As we went through the bear market analysis.

And we continue to grow our bitcoin holding.

Beyond meeting our operating cash cost moves.

As we went through the bear market analysis last year.

Became.

Speaker 5: important to reduce our debt and prepare for the next bear mark.

Important to reduce our debt and prepare for the next bear market.

Speaker 5: And we felt it was prudent balance sheet risk management to reduce the debt to prepare for turbulence.

We felt it was prudent balance sheet risk management to reduce the debt to prepare for turbulent times.

Speaker 5: As I said earlier, we are long on Bitcoin price. Yet we want to be prepared to weather the volatility.

As I said earlier, we're long on bitcoin price, yet we want to be prepared to weather the volatility.

Speaker 5: that could result during the having, given concerning macroeconomic environment.

That could result.

During the having given concerning macroeconomic environment.

Speaker 5: While we hope the Bitcoin price will act like previous having, the data shows us otherwise.

While we hope the bitcoin price will act like previous having the data shows us otherwise.

Speaker 5: hope is never a good strategy as it said. And certainly we hope that the prices behave like they did in the previous halvings, but certainly we want to be prepared for any bear market while being prepared to grow as the pricing.

Hope is never a good strategy as the edge.

As it said and certainly we hope that the prices behave like they did in the previous having but certainly we want to be prepared.

For any bear market, while being prepared to to grow into as the pricing.

Stabilizes.

Speaker 5: With that, Stronger Balance Sheet with Reduced Debt provides us options and ability to strategically

With that stronger balance sheet with reduced debt provides us options and the ability to strategically act when other inefficient or undercapitalized miners may not be able to survive.

Speaker 5: when other inefficient or undercapitalized minors may not be able.

Speaker 5: And the short-term drop in Bitcoin could be devastating for companies not appropriately capitalized.

And the short term dropping bitcoin could be devastating for our company was not appropriately capitalized as we talked about earlier.

Speaker 5: In addition to risk management, the economics of the notes exchange were attractive for us and resulted in over $100 million shareholder value creation in real cash cost savings.

In addition to risk management and the economics of the notes exchange were attractive for us and resulted in over $100 million.

Shareholder value creation, and real cash cost savings.

Which was icing on the cake.

Speaker 6: Excellent. Fred, do you want to add anything to that? Just giving out the... All right. Okay.

Excellent.

Adding into that just given up.

Perfect.

Speaker 7: Yeah, I think the, you know, to the point of why didn't we buy Bitcoin with equity, I think then we would just be emulating micro strategies strategy, where they lever up their balance sheet to buy Bitcoin. And that really is the primary driver of the value of that company, we believe is a Bitcoin miner.

Yes, I think the.

To the point of why didn't we buy bitcoin with equity.

I think then we would just be emulated in micro strategies strategy, where are they lever up their balance sheet to buy bitcoin.

<unk> is the primary driver of the value of our company. We believe is a bitcoin miner.

Speaker 7: We generate much more value by using capital to drive growth.

We generate much more value.

By using capital to drive growth.

Speaker 7: I think if you look at where we are positioned today with the growth we have ahead, initiatives that we're working on, we're a very well positioned today to take advantage of organic and inorganic opportunities as they present themselves. And as we've said before, we believe there will be many inorganic opportunities to acquire very low costs.

And I think if you look at where we are positioned today with the growth we have ahead.

Initiatives that we're working on.

We're very very well positioned today to take advantage of organic and inorganic opportunities.

<unk> themselves and as we've said before we believe there will be many inorganic opportunities to acquire very low cost assets.

Speaker 7: assets, especially attractive power contract in the potentially turbulent times ahead post ahead.

Especially attractive power.

Contract.

In the potentially turbulent times ahead post the having.

Speaker 3: That leads right into our last question from our shareholders, which is from Edgar M who has...

Great and that leads right into our last question from our shareholders, which is from Edgar M who has.

Speaker 3: What makes this company the best option when it comes to Bitcoin mining? What makes you different?

What makes this company the best option when it comes to Bitcoin mining what makes you different well, let you do that one Fred.

Okay.

Speaker 7: So I think really it comes down to a combination of things.

So I think.

Really it comes down to a combination of things.

Speaker 7: for the largest Bitcoin miner out there from a self-mining perspective, and we'll continue to grow.

Scale for the largest bitcoin miner out there from a self mining perspective, and we'll continue to grow.

Speaker 7: That also gives us certain advantages and that partners want to work with us. It gives us the ability to do joint ventures.

That also gives us certain advantages and that partners want to work with us and it gives us the ability to do joint ventures.

Speaker 7: with the excellent partners like we have in Abu Dhabi and other places. And as you'll continue to see.

With the excellent partners like we have in Abu Dhabi and.

And other places and as Youll continue to see.

Speaker 7: we grow especially in these new market areas, whether it be landfill natural gas or other places like that, we will continue to leverage this concept as a way to grow in an accelerated way, being able to optimize the leverage in our balance sheet in the most capital efficient way. The other thing is our tech stack.

As we grow, especially in these new market areas, whether it be landfilled natural gas or.

Or other places like that we will continue to leverage this concept as a way to grow in an accelerated way being able to optimize the leverage on our balance sheet in the most capital efficient way.

The other thing is our tech stack.

We're very unique.

Speaker 7: in the mining space in that we have a fully vertically integrated text stack.

In the mining space and that we have a fully vertically integrated tech.

Tech stack.

Speaker 7: As can be seen by what we've done in Abu Dhabi, our ability to deploy single phase immersion technology for cooling in most probably the most grueling environment in the world for Bitcoin miners has been a resounding success. Excellent up top.

As can be seen by what we've done at abboud Avi our ability to deploy single phase immersion technology for cooling and most probably the most grueling environment in the world for Bitcoin miners.

Has been a resounding success.

Excellent uptime.

And very efficient mining and.

Speaker 7: We believe that's the stage for how we'll expand with immersion going forward. But that's not all. We also have proprietary firmware where we now have the ability post-having to take our miners and run them in a more power-efficient way. Lowering our...

And we believe that sets the stage for how we will expand with immersion going forward, but that's not all we also have proprietary firmware, where we now have the ability post having to take our miners and run them in a more power efficient way.

Lowering our cost of mine bitcoin.

Speaker 7: or other people will have to run stock from where on their minors.

Our other people will have to run stock firmware on their miners.

Speaker 7: and not be able to dial back the power consumption and keep their miners running even though it may not be profitable to mine. Our balance sheet.

And not be able to dial back the power consumption and keep their miners running even though it may not be profitable combined.

Our balance sheet is extremely strong.

With <unk>.

Speaker 7: $600 million between cash and Bitcoin. That's the day's price.

$600 million between cash and bitcoin at today's prices.

Speaker 7: And we have great liquidity in our stock, which gives us the ability to be very opportunistic, should the creative and attractive growth opportunities appear.

And we have great liquidity in our stock, which gives us the ability to be very opportunistic.

Should accretive and attractive growth opportunities.

Yep.

<unk> in the market.

We also have optionality.

Speaker 4: because we're continually focused on lowering our cost per coin as we transition.

Because we're continually focused on lowering our cost per client as we transition.

We can grow.

Speaker 7: Energizing capacity and optimizing our existing capacity, which has an excellent effect.

Energize, new capacity and optimize our existing capacity, which has an excellent effect.

Speaker 7: on our results as you can see in the most recent quarter.

On our results as you can see the most recent quarter.

Speaker 7: And I think lastly, our people. I believe we have one of the best management teams in the industry and have some of the best talent across our organization in this industry.

And I think lastly, our people I believe we have one of the best management teams in the industry.

And have some of the best talent across our organization in this industry.

There are not many companies who can execute.

Speaker 7: who can execute the way our team has executed this year with as few people as we have generating the results that we've done. And I am very, very proud of our people and very grateful for all the hard work that they put in.

The way our team has executed this year.

With as few people as we have generating the results that we've done and I am very very proud of our people.

And very grateful for the hard work they put in.

Speaker 3: Couldn't agree more. Well done. An interesting time. I think we'll wrap up the section of the Q&A. Again, we really appreciate the questions and interests. I'm not going to turn the call back to our operator. Go with one of the questions from our covering analysts.

Couldn't agree more well done.

And at this time I think we'll wrap up this section of the Q&A again, we really appreciate the questions and interest I am now going to turn the call back to our operator to open the line to questions from our covering analysts Terry back to you.

Speaker 2: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Thank you.

He 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 kill you May Press Star two if he would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star he is.

Speaker 2: Our first question is from Chase White with Compass Plate. Please proceed.

Our first question is from clean slate with Compass point. Please proceed.

Thanks for taking my questions.

Speaker 9: So, my rough math suggests your hosting cost in the quarter, at least on a dollar per kilowatt hour basis, is something like 5.7 cents, which is much better than prior quarters. I mean, you can see it in...

So.

My rough math suggests you're hosting costs in the quarter on a at least on a dollar per kilowatt hour basis, something like five seven switches.

Much better than prior quarters, I mean, you can see in <unk>.

Speaker 9: average operating hash rate by 18% and costs only grew by 8%. So how should we think about that hosting cost on a particular wide hour basis going forward for the US fleet?

<unk>.

Average operating hash rate by 18% and costs only grew by 8% so.

How should we think about that hosting cost on a per kilowatt hour basis going forward for the U S fleet as we head into 2024.

Great question so.

Speaker 7: Obviously, when you begin an optimization effort like we did recently, there's some low-hang fruit and we've been able to take advantage of that. Hence the great results we had. There's still more fruit to harvest. We think...

Obviously, when you begin an optimization effort like we did recently there is some low hanging fruit and we've been able to take advantage of that.

Hence the great results we had.

Theres still more fruit to harvest.

We think as we continue to work with our hosting partners.

Speaker 7: with our hosting partners and actively manage them, there's still opportunities to drive further efficiencies in what we're doing.

And actively manage them, there's still opportunities to drive further efficiencies in what we're doing there are also opportunities for us to work with hosting partners to renegotiate some of the agreements, especially as now we are taking on a greater and greater responsibility for the operation.

Speaker 7: There are also opportunities for us to work with hosting partners to renegotiate some of the agreements, especially as now we are taking on a greater and greater responsibility for the operation.

Speaker 7: sites and optimization. And I think the combination of more owned and operated together with more efficiently managed sites is going to continue to drive decrease in cost to money Bitcoin.

And optimization.

The combination of more owned and operated together with more efficiently managed sites is going to continue to drive <unk>.

Decrease in Boston Manav Bitcoin.

Speaker 9: That's helpful. You mentioned 30% hash rate growth in 2024 from the expected 26 exa-hash at the end of this year. Could you just give us a sense of a roadmap for that 30% hash rate growth in 2024 and what pieces drive that?

Got it that's helpful and.

Yes.

You mentioned, 30% hatch rate growth in 2024 from the expected 26 X at Ash at the end of this year.

Could you just give us a sense of.

Our roadmap of that 30% pass rate growth in 2024, and what pieces kind of drive that.

So we've already talked a little bit about the Paraguay.

Speaker 7: There are other opportunities. We haven't announced that we're pretty far down the road.

Expansion.

There are other opportunities.

Haven't announced that we're pretty far down the road.

Speaker 7: in finalizing agreements and projects that will bear fruit in the first half of next year, as well as in the back half of next year. So I think it's gonna be a little lumpy to be fair. You'll see a few extra hash in the first half of the year and then the balance kind of backloaded towards the second half of the year. But the goal is really focusing on the cost side of it as we expand this capacity. So I think it's gonna be a little lumpy to be fair.

In finalizing agreements and projects that will bear fruit in the first half of next year as well as in the back half of next year. So I think it's going to be a little lumpy to be fair you'll see.

A few extra cash in the first half of the year and then the balance kind of back loaded towards the second half of the year.

The goal is really focusing on the cost side of it as we expand this capacity.

Got you very helpful. Thank you.

Speaker 2: Our next question is from Lucas Pipes with Be Rylee Securities. Please proceed.

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

Speaker 10: Yeah, hi, thank you very much operator. This is actually Nick Jowls on the call asking a question for Lucas. Fred and team, just wanted to get your sense of, how would you frame up a hurdle rate for the sector in terms of new projects?

Yeah, Hi, Thank you very much operator, this is actually Nick Charles on the call asking a question for Lucas.

Fred and team just wanted to get your sense of how would you frame up the hurdle rate for the sector in terms of new projects.

Speaker 7: Oh, gosh. I think each miner has their own individual weighted cost of capital. I'm not going to pine on our colleagues in the industry. We're looking typically at projects that we would, in an ideal world, should return

Oh gosh.

I think each miner has their own individual.

A weighted cost of capital.

And so I'm not going to opine on kind of our colleagues in the industry.

Yeah.

We're looking typically.

Projects that we would in an ideal world.

Should return north of 20%.

Speaker 10: That's helpful, Fred. I know one of your peers had called out a hurdle rate of around, you know, closer to 30 or 35 percent, so just was trying to understand what your take was. But, yeah, thank you very much for that. I'll return to the queue for now.

That's.

That's helpful. Fred I know one of your peers had called out a hurdle rate of around.

Closer to 30 or 35% so.

Just was trying to understand what your take was but thank you very much that ill return to the queue for now.

As a reminder.

Speaker 5: I'm sorry, I want to follow up and clarify a little bit on the answer. The hurdle rates is a funny business in the sense that it depends on what kind of pricing assumptions you have, and obviously our pricing may be a little bit more conservative than some of our competitors when it comes to next year. Hopefully, that answers the question.

Uh huh.

I'm, sorry, I want to follow up and qualified.

Clarify a little bit on the answer would be the hurdle rates.

It's a funny business in the sense that depends on what kind of pricing assumptions, you have and obviously, our pricing maybe a little bit more conservative than some of our competitors when it comes to next year.

Hopefully that answers the question.

Yeah.

Speaker 11: That's very, I appreciate that fault.

That's that's that's fair I appreciate that follow up.

Yes.

Speaker 12: As reminder, the star one on your telephone keypad, if you would like to ask a question, our next question is from Kevin TV with HCWaneRate. Please proceed. Hi, Fred. Salmon. Thanks for taking my question.

As a reminder, the star one on your telephone keypad, if he would like to ask a question. Our next question is from Kevin P. D with H C. Wainwright. Please proceed.

Hi, Fred Simon and thanks for taking my questions.

Speaker 12: Lots of them for you, Fred. I'll try to restrain myself. Can you give us some more insight on the 5x to hash you just bought and where you think that's going to go and what sort of, I mean, that's kind of a parallel to Chase's question. And then maybe you could offer a little bit more on your hedging strategy.

Lots of them for you Fred I'll try to restrain myself.

Can you give us some more insight on the five extra hash you you've just bought and where do you think that's going to go and what sort of I mean, that's kind of a parallel to chase's question.

And then maybe you could offer a little bit.

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