Q1 2024 Marathon Digital Holdings Inc Earnings Call
Operator: Good day, ladies and gentlemen. Welcome to Marathon Digital Holdings' first quarter 2024 earnings webcast and conference call. I would now like to turn the call over to your host, Robert Samuels, Vice President of Investor Relations. Please go ahead.
Good day, ladies and gentlemen, welcome to Marathon digital holdings first quarter 'twenty 'twenty four earnings webcast and conference call.
Operator: I'd now like to turn the call over to your host Robert Samuels, Vice President of Investor Relations. Please go ahead.
Robert Samuels: Thank you, operator. Good afternoon, and welcome to Marathon Digital Holdings' first quarter 2024 earnings call. Thank you for joining us for our call today. With me on today's call are our Chairman and Chief Executive Officer, Fred Thiel, and our Chief Financial Officer, Salman Khan. Before we get started, I'd like to remind everyone that our prepared remarks may contain forward-looking statements, and that we may make additional forward-looking statements during the question-
Robert Samuels: Thank you operator.
Robert Samuels: Afternoon, and welcome to Marathon Digital Holdings first quarter 2024 earnings call.
Robert Samuels: 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 as they relate to Marathon Digital Holdings are such forward-looking statements. Please refer to our earnings release for a full recitation of our forward-looking statement. Investors are cautioned that all forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from those anticipated by Marathon at this time.
Robert Samuels: Thank you for joining us for our call today.
Robert Samuels: With me on today's call are our chairman and Chief Executive Officer, Fred Steel and our Chief Financial Officer, some on time.
Robert Samuels: Some of these risks and uncertainties are more fully described in Marathon public filings with the U.S. Securities and Exchange Commission, which can be viewed at www.sec.gov and ir.mara.com. Finally, please note that on today's call, we will refer to certain financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including adjusted EBITDA and non-GAAP total margins. Marathon believes these non-GAAP financial measures are important indicators of its operating performance because they exclude certain items that are unrelated to, and may not be indicative of, its GAAP financial results.
Robert Samuels: Before we get started I'd like to remind everyone that our prepared remarks may contain forward looking statements that 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.
Robert Samuels: When used in this call. The words anticipate could enable estimate intend expect believe potential will should project and similar expressions as they relate to marathon digital holdings are such a forward looking statement.
Robert Samuels: Please refer to our earnings release for a full reputation about forward looking statements.
Robert Samuels: Vessels are cautioned that all forward looking statements involve risks and uncertainties, which may cause actual results to differ materially from those anticipated by marathon at this time.
Robert Samuels: Some of these risks and uncertainties are more fully described in marathon public filings with the U S Securities and Exchange Commission, which can be viewed at www dot SEC dot Gov, and IR dot narrow dot com.
Robert Samuels: Finally, please note that on today's call, we will refer to certain financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including adjusted EBITDA and non-GAAP total margin.
Robert Samuels: Marathon believes these non-GAAP financial measures are important indicators of its operating performance because they exclude certain items that are unrelated to and may not be indicative of its GAAP financial results.
Robert Samuels: Please refer to our company's periodic reports on Form 10-K, and 10-Q and to our website for a full reconciliation of these non-GAAP performance measures to the most comparable GAAP financial measures.
Robert Samuels: Please refer to our company's periodic reports on Form 10-K and 10-Q and to our website for a full reconciliation of these non-GAAP performance measures to the most comparable GAAP financial measures. As usual, we'll begin today's call with prepared remarks from Fred and Salman. After their comments, we will be going through some of the more popular questions from investors before transferring to a live Q&A with our covering analyst. And with that out of the way, I'm going to turn the call over to Fred to kick things off. Fred?
Robert Samuels: As usual, we'll begin today's call with prepared remarks from Fred and summer after their comments, we will be going through some of the more popular questions from investors before transferring into a live Q&A with our covering analysts and with that out of the way I'm going to turn the call over to Fred to kick things off Fred.
Frederick G. Thiel: Thank you, Rob. The first quarter of 2024 was one of our most transformative to date. We officially transitioned Marathon from being an asset-light Bitcoin miner and laid a solid foundation on which we are building this organization into a globally diversified company that leverages digital asset compute to build a more sustainable and inclusive future. During the quarter, we significantly grew and improved the resilience of our portfolio of digital asset compute by acquiring and integrating our first fully owned and operated Bitcoin mining site.
Fred: Thank you Rob the first quarter of 2024 was one of our most transformative to date, we officially transitioned to marathon from being an asset light bitcoin miner and lays a solid foundation on which we are building. This organization into a globally diversified company that leverages digital asset compute to build a more sustainable and inclusive future.
Frederick G. Thiel: During the quarter, we significantly grew and improved the resilience of our portfolio of digital assets contribute by acquiring and integrating our first fully owned and operated bitcoin mining sites.
Frederick G. Thiel: At the end of last year, our portfolio consisted of 584 megawatts of capacity, only 3% of which we directly owned and operated. In less than four months, we initiated, negotiated, closed, and integrated our first two acquisitions, comprised of three sites, the first two being the sites in Granbury, Texas and Kearney, Nebraska, and the second being the site in Garden City, Texas, that is adjacent to a wind farm.
Frederick G. Thiel: At the end of last year, our portfolio consisted of 584 megawatts of capacity only 3% of which we directly owned and operated.
Frederick G. Thiel: It's in four months, we initiated negotiated closed and integrated our first two acquisitions comprised of three sites. The first two being the sites in Grand Prairie, Texas in Kearney, Nebraska, and the second being the site in Garden City, Texas that is adjacent to a wind farm.
Frederick G. Thiel: We purchased these assets for approximately $458,000 and $437,000 per megawatt, respectively, which is approximately half the cost of what some of our competitors have paid to build new sites. In Q1, we effectively doubled the size of our portfolio to 1.1 gigawatts of capacity, and we gained far more direct influence over our operations by taking direct ownership and operation control of 54% of the portfolio. We did this while generating significant savings for our shareholders relative to building sites the way our competitors have, and we quickly gained enough capacity to meet our near-term growth targets of 50x a hash by the end of this year.
Frederick G. Thiel: We purchased these assets were approximately 458004 hundred 37000 per megawatt respectively, which is approximately half the cost of what some of our competitors have paid to build new sites.
Frederick G. Thiel: In Q1, we effectively doubled the size of our portfolio to one one gigawatts of capacity and we gained far more direct influence over our operations by taking direct ownership and operation and control of 54% of the portfolio.
Frederick G. Thiel: We did this while generating significant savings for our shareholders relative to building sites. The way our competitors have and we quickly gained enough capacity to meet our near term growth targets of 50 <unk> by the end of this year.
Frederick G. Thiel: As we cost-effectively laid this path to accelerate our scale and enhance our operational influence, we also launched our first products and services as an organization, each of which demonstrates our commitment to expanding and diversifying revenues by creating advanced technologies that transform digital infrastructure and diversify our revenue streams. In February, we launched Slipstream, which is a direct Bitcoin transaction submission service that is designed to streamline confirmations of large or non-standard Bitcoin transactions.
Frederick G. Thiel: As we cost effectively laid this path to accelerate our scale and enhance our operational influence. We also launched our first products and services as an organization each of which demonstrates our commitment to expanding and diversifying revenues by creating advanced technologies that transform digital infrastructure and diversify our revenue stream.
Frederick G. Thiel: In February we launched slipstream, which has a direct bitcoin transactions submission service that is designed to streamline confirmations of large or nonstandard bitcoin transactions in essence that provides sophisticated users with a simple transparent and trusted means of adding complex bitcoin transactions to the blockchain.
Frederick G. Thiel: In essence, it provides sophisticated users with a simple, transparent, and trusted means of adding complex Bitcoin transactions to the blockchain, provided they adhere to Bitcoin's protocol, and it provides Marathon with an opportunity to increase revenue by capturing more transaction fees, which is particularly advantageous in a post-hacking environment.
Frederick G. Thiel: Provided they adhere to bitcoins protocol and it provides marathon with an opportunity to increase revenue by capturing more transaction fees, which is particularly advantageous in a post having it environment.
Frederick G. Thiel: Although the service is only a few months old, it has already proven valuable. Last month, just before the halving, we earned an additional 4.25 Bitcoin from Flipstream alone. Mara Pool, which powers Clipstream, captured one block with 10 Bitcoin in transaction fees and another with 16, generating nearly 10% greater fees than FPPS pools at the time.
Frederick G. Thiel: Although the service is only a few months old it is already proving valuable.
Frederick G. Thiel: Last month, just before the having we earned an additional $4 to five bitcoin from slipstream alone.
Frederick G. Thiel: Mara pool, which powers slipstream captured one block with 10, bitcoin and transaction fees and another with 16 generating nearly 10% greater fees and Fps pools at the time.
Frederick G. Thiel: While these numbers are small relative to our overall production, Slipstream serves as a tangible example of the strategic importance of operating our own mining pool, of being at scale, and of deploying our proprietary technology stack. As a matter of fact, if you were to look at mempool.space for the past week and look at mining pools, you would see that Marathon's pool performed 40% above average. As we demonstrated in March, Flipstream was just the beginning.
Frederick G. Thiel: While these numbers are small relative to our overall production slipstream serves as a tangible example of the strategic importance of operating our own mining pool of being at scale and are deploying our proprietary technology stack.
Frederick G. Thiel: The matter of fact, if you were to look at the man pooled out space for the past week and look at mining tools, you would see that marathons pool performed 40% above average.
Frederick G. Thiel: As we demonstrated in March slipstream was just the beginning during the first quarter. We also brought our first products to market all of which contribute to one of our key competitive advantages are vertically integrated tech stack and provide us with an opportunity diversify our revenue streams. These products include our industry, leading Mara firmware.
Frederick G. Thiel: During the first quarter, we also brought our first products to market, all of which contribute to one of our key competitive advantages, our vertically integrated tech stack, and provide us with an opportunity to diversify our revenue stream. These products include our industry-leading Mara firmware, controller board, and two phase immersion technology, which we call two. We showcased each of these products at the Empower Conference in March, and the reception was overwhelmingly positive.
Frederick G. Thiel: Troll aboard in two phase immersion technology, which we call Tuesday.
Frederick G. Thiel: We showcased each of these products at the empower conference in March and the reception was overwhelmingly positive we already have paying customers for our firmware to pick as a pipeline that is in the tens of millions of dollars and growing.
Frederick G. Thiel: We already have paying customers for our firmware, and 2PIC has a pipeline that is in the tens of millions of dollars. We're currently integrating Toothpick at some of our own sites, which is part of our strategy to optimize our performance by increasing uptime, improving efficiency, and reducing maintenance downtime and cost.
Frederick G. Thiel: We're currently integrating to pick up some of our own sites, which is part of our strategy to optimize our performance by increasing uptime, improving efficiency and reducing maintenance downtime and costs for the market. Our goal is to begin shipping. These systems in volume to third parties by the end of this year.
Frederick G. Thiel: For the market, our goal is to begin shipping these systems in volume to third parties by the end of this year. While the quarter was highlighted by the significant expansion of our portfolio of digital assets compute and the launch of our first products and services geared towards transforming digital infrastructure, our Bitcoin production was negatively impacted throughout the first quarter by unexpected equipment failures, predominantly transformers at our third-party hosted sites, utility company transmission line maintenance, and the higher-than-anticipated weather-related curtailment across multiple sites.
Frederick G. Thiel: While the quarter was highlighted by the significant expansion of our portfolio of digital assets compute and the launch of our first products and services geared towards transforming digital infrastructure. Our bitcoin production was negatively impacted throughout the first quarter by unexpected equipment failures predominantly transformers that are third party hosted sites Youtube.
Frederick G. Thiel: The company transmission line maintenance and the higher than anticipated weather related curtailments across multiple sites. However, I am pleased to say that we have mitigated a number of these issues and are currently operating at a record high level of 27 ex ash.
Frederick G. Thiel: However, I'm pleased to say that we have mitigated a number of these issues and are currently operating at a record high level of 27XF. While there will always be the potential for exogenous events that impact operations, we believe we can mitigate their impact over time as we continue to scale, standardize equipment, diversify globally, build redundancies, and leverage economies of scale that stem from owning and operating multiple sites around the world.
Frederick G. Thiel: While there will always be the potential for <unk> events that impact operations. We believe we can mitigate their impact over time as we continue to scale standardized equipment diversified globally and build redundancies and leverage economies of scale that stemmed from owning and operating multiple sites around the world.
Frederick G. Thiel: In the meantime, we can always control how we respond to challenges, and just as we always have, our team quickly began working on solutions that were within our control. We were able to immediately take advantage of the newly available capacity from our recent strategic acquisitions. Once it became clear that the transformer issues at Ellendale were more complicated than originally believed, our team quickly began reallocating miners from this site to Garden City, where there was available capacity.
Frederick G. Thiel: In the meantime, we can always control, how we respond to challenges and just as we always have our team quickly began working on solutions that were within our control.
Frederick G. Thiel: We were able to immediately take advantage of the newly available capacity from our recent strategic acquisitions. Once it became clear that the transformer issues at <unk> were more complicated than originally believed our team quickly began reallocating miners from this site to garden City, where there was available capacity, we successfully moved 9005.
Frederick G. Thiel: We successfully moved 9,500 idle miners from Ellendale and simultaneously began energizing new machines to expand our capacity. Our ability to adapt, combined with the uptime improving across our sites, these challenges were resolved, enabled us to achieve an all-time high operating hash rate of 27 exa-hashes this month. The transformer issues that negatively impacted our ability to convert megawatts into tera hash, and therefore Bitcoin, have been challenging. But with our hash rate continuing to grow to record levels, we have clearly been able to work through the challenges and execute.
Frederick G. Thiel: The idled miners from Helen del and simultaneously began an energizing new machines to expand our capacity our ability to adapt combined with the uptime improving across our sites. These challenges were resolved enabled us to achieve an all time high operating has triggered a 27 ex ashes this month.
Frederick G. Thiel: The transformer issues that negatively impacted our ability to convert megawatts since the terra hash and therefore, a bitcoin had been challenging but with our hatch rates continuing to grow to record levels. We've clearly been able to work through the challenges and to execute unfortunately, the resilience, we've built into our diversified portfolio our ability to adapt to change.
Frederick G. Thiel: Unfortunately, the resilience we've built into our diversified portfolio, our ability to adapt to change and changing circumstances, and our HODL strategy allowed us to still capitalize on Bitcoin's positive momentum. Despite the operational challenges, we still produced record financial results during the first quarter. To unpack our financial results, I'm now going to turn the call over to Salman, who will cover the results in more detail. Okay.
Salman: And changing circumstances and are huddled strategy allowed us to still capitalize on bitcoin positive momentum. Despite the operational challenges, we still produced record financial results during the first quarter to impact our financial results I'm now going to turn the call over to <unk>, who will cover the results in more detail Soma.
Salman H. Khan: Thank you, Fred, and welcome, Rob, to Team Mara. As Fred mentioned, our Bitcoin production was negatively impacted in the first quarter by Transformer and other issues. Despite these challenges, the positive momentum in the Bitcoin price, our strategy to increase our Bitcoin holdings over time, and our team's consistent ability to execute helped us drive record financial results for the quarter. Let's dig into the details.
Salman: Thank you Fred and welcome Rob <unk> Mara.
Salman H. Khan: As Fred mentioned, our bitcoin production was negatively impacted in the first quarter by transformer and other issues. Despite.
Salman H. Khan: Despite these challenges.
Salman H. Khan: Positive momentum in bitcoin price our strategy to increase our bitcoin holdings over time, and our teams consistent ability to execute helped us drive our record financial results for the quarter.
Salman H. Khan: Let's dig into the details.
Salman H. Khan: He reported net income of $337 million, or $1.26 per diluted share, in the quarter. This was a 184% increase from net income of $119 million, or $0.72 per diluted share, in Q1 of last year. The increase in net income was primarily driven by favorable Bitcoin price, higher production, and fair market value of digital assets on our balance sheet. Revenues increased 223% to a record $165 million from $51 million in the first quarter of 2020.
Salman H. Khan: We reported net income of $337 million or $1.26 per diluted share in the quarter.
Salman H. Khan: This was a 184% increase from net income of $119 million or 72 per diluted share in Q1 of last year.
Salman H. Khan: The increase in net income was primarily driven by favorable bitcoin price higher production and fair market value of digital assets on our balance sheet.
Salman H. Khan: Revenues increased 223% to a record $165 million from $51 million in the first quarter of 2023.
Salman H. Khan: With the average price of Bitcoin mined being 126% higher this quarter than the year-ago period, the increase in revenue was primarily driven by a $77 million increase in the average price of Bitcoin mined. We produced an average of 30.9 Bitcoin each day during the quarter compared to 24.4 Bitcoin each day in the prior year period. These improvements in production also contributed approximately $10 million to our top line as a result of closing the recent acquisitions. We are temporarily providing hosting services to existing hosted customers during the transition period.
Salman H. Khan: The average price of Bitcoin mine being 126% higher this quarter than the year ago period. The increase in revenue was primarily driven by a $77 million increase in the average price of bitcoin Mike.
Salman H. Khan: We produced an average of $30 nine bitcoin each day during the quarter compared to $24 four point each day in the prior year period.
Salman H. Khan: These improvements in production also contributed approximately $10 million to our top line.
Salman H. Khan: As a result of closing the recent acquisitions.
Salman H. Khan: We are temporarily providing hosting services to existing hosted customers during the transition period.
Salman H. Khan: The revenue we generated from hosting revenues was $21 million, which was not present a year ago. We expect this revenue to taper off in the coming quarters as we work with current tenants of the clients on their transition plans and use that space for our own growth. Our hosting and energy costs were $71 million compared to $33 million last year. In both time periods, the increase was primarily due to growth in our mining fleet and related costs. In the first quarter of 2024, global hash rate, or network difficulty levels, continued to increase.
Salman H. Khan: The revenue we generated from hosting revenues was $21 million.
Salman H. Khan: Which was not present a year ago.
Salman H. Khan: We expect this revenue to taper off in the coming quarters as we work with current tenants of the sites on their transition plans and use that space for our own growth.
Salman H. Khan: Our hosting and energy costs were $71 million compared to $33 million last year in both time periods. The increase was primarily due to growth in our mining and related costs.
Salman H. Khan: In the first quarter of 2024 global hash rate our network difficulty levels continuing to increase.
Salman H. Khan: The average global hash rate has increased by more than approximately 86% since Q1 of 2020. That combined with operational issues at our third-party hosted sites in Q1 of 2024 resulted in a higher cost for us. Our non-gap cost of revenue without depreciation has improved 16% from $53.7 per petahash per day in Q1 of 2023 to $45.2 per petahash per day in Q1 of 2023. As we realize synergies from our recently announced acquisitions, re-energize production at our third-party hosted sites, and spread the fixed costs over a larger 50 exa-hash capacity, we expect our marginal cost per coin to improve.
Salman H. Khan: Average global hash rate has increased by more than approximately 86% since Q1 of 2023.
Salman H. Khan: That combined with operational issues at our third party hosted sites in Q1 of 2024 resulted in a higher cost per claim.
Salman H. Khan: Our non-GAAP cost of revenue without depreciation has an improved 16% from 53 seven <unk> per day in Q1 of 2023 to $45 two per <unk> per day in Q1 of 2024.
Salman H. Khan: As we realize synergies from our recently announced acquisitions.
Salman H. Khan: <unk> production at our third party hosted sites and spread the fixed costs over a larger fixed 50 extra extra hash capacity, we expect our marginal cost per coin to improve.
Salman H. Khan: Total cost of revenues, which includes depreciation and Amortax, $168 million compared to $151 million. [inaudible] Depreciation and amortization were $78 million, a $60 million increase from the same quarter in the prior year. The change was predominantly the result of growing our energized hash rate from 11.0 exahash to 27.8 exahash and recent acquisition of two sites in Texas and Nebraska.
Salman H. Khan: Total cost of revenues, which includes depreciation and amortization.
Salman H. Khan: $68 million compared to $151 million.
Salman H. Khan: Two of last year.
Salman H. Khan: Depreciation and amortization was $478 million.
Salman H. Khan: A $60 million increase from the same quarter in the prior year.
Salman H. Khan: The change was predominantly the result of growing our energized hash rate from 11 <unk> to 'twenty seven index of Ash and recent acquisition of two sites in Texas in Nebraska.
Salman H. Khan: Our non-GAAP total margin, excluding depreciation and amortization, was $75 million this quarter, compared to $18 million in the same quarter last year. The change was predominantly related to higher Bitcoin prices, increased production, and increased operational efficiency. General and administrative expenses, excluding stock-based compensation, were $21 million, compared with $11 million in the prior year period.
Salman H. Khan: Our non-GAAP total margin, excluding depreciation and amortization was $75 million this quarter compared to $18 million in the same quarter last year the.
Salman H. Khan: The change was predominantly related to higher bitcoin prices increased production and increased operational efficiency.
Salman H. Khan: General and administrative expenses, excluding stock based compensation were $21 million compared with $11 million in the prior year period.
Salman H. Khan: This increase in expenses was primarily due to the increasing scale of the business. Headcount grew from 30 employees at the end of Q1 last year to 60 employees at the end of Q1 this year, which subsequently has increased to over 100 employees. As we thoughtfully grow our company, we continue to opportunistically add talent across the organization.
Salman H. Khan: This increase in expenses was primarily due to the increased scale of the business.
Salman H. Khan: Headcount grew from 30 employees at the end of Q1 last year to 16 closed at the end of Q1. This year with subsequently has increased to over 100 employees.
Salman H. Khan: As we thoughtfully grow our company, we continue to Opportunistically add talent across the organization.
Salman H. Khan: Part of our treasury management strategy involved selling enough of the Bitcoin we produced to cover operating expenses and then hodling the remainder on our balance. By employing this strategy, we have essentially been dollar cost averaging into Bitcoin at a discount for the past several years. With our cost to produce a coin significantly lower than the Bitcoin price, the dollar average strategy generally has been even more accretive for our stock. With the new accounting rules that require the measurement of crypto assets at fair value and with Bitcoin's price appreciating nearly 150% from the end of Q1 last year to the end of Q1 this year, this strategy has proven very effective.
Salman H. Khan: Part of our strategy Treasury management strategy involved.
Salman H. Khan: Selling enough off the big quantity produced to cover operating expenses and then hardly the remainder on our balance sheet.
Salman H. Khan: By employing this strategy, we have essentially being dollar cost averaging into bitcoin at a discount for the past several years with.
Salman H. Khan: With our cost to produce a coin significantly lower than the bitcoin price. The dollar average strategy generally has been even more accretive for our stockholders.
Salman H. Khan: With the new accounting rules that require the measurement of crypto assets at fair value and with the big points price appreciating nearly 150% from the end of Q1 last year to the end of Q1. This year. This strategy has proven very effective for us.
Salman H. Khan: In Q1 of this year, we increased our Bitcoin holdings 15% from 15,126 to 17,320 Bitcoin. Because of the significant amount of Bitcoin we hold on our balance sheet, we recognize a gain on digital assets of $489 million during the first quarter of 2020. Primarily due to this favorable value adjustment, our adjusted EBITDA increased 266% to $529 million from $145 million in the prior year.
Salman H. Khan: In Q1 of this year, we increased our bitcoin holdings, 15% from 15, $1 26 to 17320 bitcoin.
Salman H. Khan: Most of the significant amount of bitcoin, we hold on our balance sheet, we recognized a gain on digital assets are $489 million.
Salman H. Khan: During the first quarter of 2024.
Salman H. Khan: Primarily due to this favorable value investment, our adjusted EBITDA increased 266% to $529 million from $145 million in the prior year period.
Salman H. Khan: A reminder that fair value accounting reflects the changes in the market value of Bitcoin that we hold on our balance. In the current environment of Bitcoin price depreciation in recent quarters, we have continued to recognize gains through our income statement, reflecting the impact HODL's strategy has had on our financial system. For example, every $10,000 change in Bitcoin price, period over period, can impact our adjusted EBITDA by approximately $170 to $200 million.
Salman H. Khan: A reminder, that the fair value accounting reflects the changes in market value of bitcoin that we hold on our balance sheet.
Salman H. Khan: In the current environment of Bitcoin price appreciation in recent quarters. We have continued to recognize gains through our income statement, reflecting the impact huddle strategy has had on our financial statements.
Salman H. Khan: For example, every 10000 change in bitcoin price period over period can impact our adjusted EBITDA by approximately $170 million to $200 million.
Salman H. Khan: Digging more into our bitcoin holdings and cash position, unrestricted cash and cash equivalents total $324 million, up from $125 million a year. Also, at March 31, we held approximately 17,320 Bitcoin with a fair value of $1.2 billion on the balance. Combined, our balance of cash and Bitcoin was approximately $1.6 billion as of March 31, 2020. We sold 730 Bitcoin during Q1, realizing cash proceeds of $45 million. These proceeds were utilized to fund operating expenses, including the cost of revenues for energy hosting and other cash operating expenses and general administrative. During the quarter, we raised $489 million from at-the-market equity sales, which we primarily intended to use for the acquisition of infrastructure and for other general corporate purposes. We expect our future Bitcoin holdings will generally increase, but that will fluctuate depending on operating and market conditions.
Salman H. Khan: Digging more into our bitcoin holdings in cash position unrestricted cash and cash equivalents totaled $324 million up from $125 million a year ago.
Salman H. Khan: Also at March 31, we held approximately 17320 bitcoin with a fair value of $1 2 billion on the balance sheet.
Salman H. Khan: Combined our balance of cash and bitcoin was approximately $1 6 billion as of March 31 2024.
Salman H. Khan: We sold seven 730 bitcoin during Q1, realizing cash proceeds of $45 million.
Salman H. Khan: These proceeds were utilized to fund operating expenses, including cost of revenues for energy hosting and other cash operating expenses and general and administrative expenses.
Salman H. Khan: During the quarter, we raised $489 million from at the market equity sales, which we primarily intended to use.
Salman H. Khan: For minors acquisition off infrastructure and for other general corporate purposes.
Salman H. Khan: We expect our future Bitcoin holdings will generally increase.
Salman H. Khan: But it will fluctuate depending on operating and market conditions.
Salman H. Khan: We intend to add to our Bitcoin holdings primarily through our production act. And we will also continue to sell Bitcoin as a means of generating cash to fund monthly operating costs and general corporate. As Fred mentioned, we have systematically deployed capital for creative growth and strategic investments, which our teams have been able to integrate successfully in Q1. These acquisitions have not only been almost half the construction cost but have allowed us the flexibility to move our miners from asset-light sites with operational issues, as discussed above.
Salman H. Khan: We intend to add to our <unk> 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 general corporate purposes.
Salman H. Khan: As Fred mentioned, we have systematically deployed capital for accretive growth and strategic investments.
Salman H. Khan: Our teams have been able to integrate successfully in Q1 of this year.
Salman H. Khan: These acquisitions have not only been almost half the construction cost, but also have allowed us flexibility to move our miners from asset light sites with operational issues as discussed above.
Salman H. Khan: If we were to construct such sites on our own, it would have taken us more than a year to energize them and likely cost twice the amount on a per megawatt basis, making these acquisitions highly attractive for our shoppers.
Salman H. Khan: If we are if you were to construct such sites on our own it would have taken us more than a year to energize and likely cost twice the amount on a per megawatt basis.
Salman H. Khan: Making these acquisition acquisitions highly accretive for our stockholders.
Salman H. Khan: The acquisition of sites in Granbury, Texas, and Kearney, Nebraska, has been accounted for as a business combination for FASB, and we have recognized the fair value of the assets acquired and liabilities assumed on our balance. As a result, we also recognize goodwill of $30.9 million and intangible assets of $22 million, primarily related to customer relations. We also accrued early termination expenses of $22 million as we terminated certain hosted customers
Salman H. Khan: The acquisition of sites in Grand Prairie, Texas in Kearney, Nebraska has been accounted for as a business combination for fast <unk> and we have recognized a fair value of the assets acquired and liabilities assumed on our balance sheet.
Salman H. Khan: As a result, we also recognized goodwill of $30 9 million and intangible assets of $22 million primarily related to customer relationships.
Salman H. Khan: We also accrued early termination expenses of $22 million as we terminated certain hosted customers subsequently.
Salman H. Khan: One other item worth highlighting is that Marathon was added to the S&P Small Cap 600 Index. Just a reminder, the S&P Small Cap 600 tracks 600 U.S. companies with a market cap between $1 billion and $6.7 billion that have positive earnings over the most recent quarter and four quarters combined. We are proud to be the first Bitcoin miner added to the S&P small cap index. This inclusion is a testament to the consistently improving financial performance of our organization, as we have scaled and implemented effective strategies to capitalize on market conditions. And that completes my introduction. I'll now turn it back over to Fred, who will talk more about our future. [inaudible]
Salman H. Khan: One other another item worth highlighting is that marathon was added to S&P small cap 600 index.
Fred: Just a reminder, the S&P small cap 600 tracked 600 U S companies with a market cap between 1 billion and $6 7 billion.
Fred: And that have positive earnings or the most recent quarter and four quarters combined.
Salman H. Khan: We are proud to be the first bitcoin minor added to the S&P small cap index.
Salman H. Khan: This inclusion is a testament to the consistently improving financial performance of our organization as we have scaled and implemented effective strategies to capitalize on market conditions.
Fred: And that completes my update.
Salman H. Khan: I'll now turn it back over to Fred who will talk more about our future plans.
Fred: Thanks Soma over.
Frederick G. Thiel: Over the past year, we've evolved from outsourcing our operations to third-party hosting providers to owning and operating sites, developing and marketing technology products, and using waste and stranded power to generate energy and recycle heat. During Q1, we laid the foundation for Marathon to become a globally diversified company that leverages digital asset compute to build a more sustainable and inclusive future. And as we transition into the second quarter, we are reorganizing the internal structure of the business to better align with our growth opportunities, sharpen our strategic focus, bolster accountability, and maintain our speed and agility as we scale.
Fred: Over the past year, we've evolved from outsourcing our operations to third party hosting providers to owning and operating sites, developing and marketing technology product and using waste and stranded power to generate energy and recycle heat.
Frederick G. Thiel: During Q1, we laid the foundation for marathon to become a globally diversified company that Leverages digital asset compute to build a more sustainable and inclusive future and as we transition into the second quarter. We are reorganizing the internal structure of the business to better align with our growth opportunities sharpen our strategic focus bolster our Cao.
Frederick G. Thiel: Stability and maintain our speed and agility as we scale.
Frederick G. Thiel: <unk> in the second quarter marathon will be restructured into a matrix organization, consisting of three business units utility scale mining technological innovations and energy harvesting and supporting organizations, such as Mark Com finance et cetera.
Frederick G. Thiel: Starting in the second quarter, Marathon will be restructured into a matrix organization consisting of three business units, utility-scale mining, technological innovations, and energy harvesting, and supporting organizations such as MarCom Finance, et cetera. In my opening remarks, I spoke at length about the first two of these orders.
Frederick G. Thiel: In my opening remarks, I spoke at length about the first two of these verticals utility scale mining as our large scale global digital asset mining operations. This verticals with marathon is primarily known for today large scale digital asset compute that's geared towards enhancing grid stability and security of the world's preeminent blockchain ledger.
Frederick G. Thiel: Utility Scale Mining is our large-scale global digital asset mining operation. This vertical is what Marathon is primarily known for today, large-scale digital asset compute that's geared towards enhancing grid stability and the security of the world's preeminent blockchain ledger. Our technology division is focused on creating advanced technologies that transform digital infrastructure. This group has already launched its first series of products, and going forward, its mission will be to deliver innovative hardware, software, and services that maximize energy efficiency, improve performance, and unlock new opportunities for those who operate at the edge and for those who are building the foundation of the digital future.
Frederick G. Thiel: Our technology Division is focused on creating advanced technologies that transform digital infrastructure.
Frederick G. Thiel: This group has already launched its first series of products and going forward. Its mission will be to deliver innovative hardware software and services that maximize energy efficiency improved performance and unlock new opportunities for those who operate at the edge and for those who are building the foundation of the digital future.
Frederick G. Thiel: In March, at the Empower Conference, we demonstrated how the combination of Mara firmware and 2PIC immersion enabled us to operate state-of-the-art digital asset miners at significantly higher performance levels with near minimal impact on energy efficiency. Using this solution enables digital asset miners to significantly increase the productivity of their digital mining assets, earn a higher return on the compute investment dollars, and reduce the total cost of operation. Our third vertical, which I did not discuss in my opening remarks, is energy harvesting. The mission of energy harvesting is to support the energy transformation by converting environmentally harmful waste energy, stranded clean energy, or otherwise underutilized sources of energy into economic value.
Frederick G. Thiel: In March at the empower conference we demonstrated how the combination of Mara firmware and to pick immersion enabled us to operate state of the art digital asset miners at significantly higher performance levels with minimal impact to energy efficiency.
Frederick G. Thiel: Using this solution enables digital asset miners to significantly increase the productivity of their digital mining assets earn a higher return on the compute investment dollars and reduce the total cost of operating sites.
Frederick G. Thiel: Our third vertical which I did not discuss in my opening remarks is energy harvesting.
Frederick G. Thiel: The mission of energy harvesting is to support the energy transformation by converting environmentally harmful waste energy stranded clean energy or otherwise underutilized sources of energy into economic value for now it's perhaps easiest to think of this as the next evolution of bitcoin mining involving leveraging digital asset compute to convert waste and.
Frederick G. Thiel: For now, it's perhaps easiest to think of this as the next evolution of Bitcoin mining, involving leveraging digital asset compute to convert waste into energy, sequester methane, and generate and reuse heat for industrial and commercial purposes. This last part is quite important, as nearly 50% of total energy use is used for heat, and a portion of that is low-grade heat, i.e. sub-50 degrees Celsius, that can be provided by heat harvested from our digital acid compute systems. This includes applications such as preheating materials and industrial processes, heating buildings and water for communities, and food production applications such as greenhouses and shrimp farms.
Frederick G. Thiel: <unk> Energy's sequester methane and generate and reuse heat for industrial and commercial purposes.
Frederick G. Thiel: This last part is quite important as nearly 50% of total energy use is used for heat.
Frederick G. Thiel: And a portion of that is low grade heap I E. Sub 50 degrees Celsius that can be provided by heat harvested from our digital asset compute system.
Frederick G. Thiel: This includes applications, such as pre heating materials, and industrial processes heating buildings and water for communities and food production applications, such as greenhouses and shrimp farms.
Frederick G. Thiel: We created these business units in response to the opportunities we saw in the market and how we believe this industry will evolve. As you all know, the industry just underwent a heavy event during which the block reward was reduced by 50%. As block rewards will continue to be reduced by 50% every four years, it is critical to find new ways to leverage expertise and create value for others in order to maintain a position as a leader in the industry. And we believe that if we can do so successfully, then we can not only mitigate the impact of having events but also excel.
Frederick G. Thiel: We created these business units in response to the opportunities we saw in the market and how we believe this industry will evolve.
Frederick G. Thiel: As you all know the industry just underwent a happy event during which the block reward was reduced by 50% as block rewards will continue to reduce by 50% every four years. It is critical to find new ways to leverage expertise and create value for others in order to maintain our position as a leader in the industry and we believe.
Frederick G. Thiel: We can do so successfully then we can not only mitigate the impact of having events, but also excelled.
Frederick G. Thiel: While utility-scale mining is by far the most significant portion of our business today, we believe each of these businesses will contribute meaningfully to our organization over the coming years. In the long term, our goal is for 50% of our revenues to come from non-utility scale mining. It will take time to reach that scale, but these new businesses are already showing progress. We already have a pipeline valued at tens of millions of dollars for our technology. Our pilot project in Utah, where we're capturing methane from landfills to power Bitcoin miners, is our first energy harvesting project, and we expect to launch several others in the coming quarter.
Frederick G. Thiel: While utility scale mining is by far the most significant portion of our business today. We believe each of these businesses will contribute meaningful meaningfully to our organization over the coming years.
Frederick G. Thiel: Long term our goal is for 50% of our revenues to come from non utility scale mining. It will take time to reach that scale with these new businesses are already showing progress we already have a pipeline valued at tens of millions of dollars for our technology products.
Frederick G. Thiel: Our pilot project in Utah, we're capturing methane from landfills the power of the coin miners as our first energy harvesting project and we expect to launch several others in the coming quarters.
Frederick G. Thiel: The demand for these verticals isn't just domestic; it's global, and we're chasing after it. In April, we announced that we had appointed a new managing director to lead our expansion in Europe, the Middle East, Africa, and parts of Asia. Since his appointment, our team has generated promising opportunities across the region, from Finland in the north to Kenya in the south. While Marathon is already operating on three continents, our plan is to continue scaling our international business over the coming years, such that approximately 50% of our revenues come from overseas by 2028.
Frederick G. Thiel: The demand for these verticals isn't just domestic it's global and we're chasing after it in April we announced that we appointed a new managing director to lead our expansion in Europe Middle East Africa, and parts of Asia. Since his appointment our team has generated promising opportunities across the Ritchie from Finland in the north to Kenyan them.
Frederick G. Thiel: <unk>.
Frederick G. Thiel: While marathon is already operating on three continents. Our plan is to continue scaling our international business overcoming years, such that approximately 50% of our revenues come from overseas by 2028.
Frederick G. Thiel: In the more immediate term, we're doubling down on our utility scale mining. We originally targeted to grow our operations to 35 or 37 exa-hash by the end of 2024 and 50 exa-hash by the end of 2025. However, with the expansion capacity gained from our recent acquisitions and the 45 exa-hash of additional compute available to us between current orders and options, we're now targeting 50 exa-hash by the end of this year. We already have 12 exa-hash of new miners arriving in early Q3 to take advantage of our acquired and expanded capacity, with more coming to fill waiting capacity over the balance of this year.
Frederick G. Thiel: And the more immediate term, we're doubling down on our utility scale mining business. We originally targeted to grow our operations to 35 or 37 extra hashed by the end of 2024 and 50 <unk> by the end of 'twenty five however, with the expansion capacity gain from our research our recent acquisitions and the 40 <unk>.
Frederick G. Thiel: <unk> <unk> of additional compute available to us between current orders and options. We're now targeting 50 <unk> by the end of this year, we already have 12 extra how should reminders, arriving in early Q3 to take advantage of our acquired and expand capacity with more coming to fill waiting capacity over the balance of this year. This represents a doubling of our <unk>.
Frederick G. Thiel: This represents a doubling of our compute capacity and further increases our energy efficiency in under one year and will strongly extend our position as the leader in our industry. While we will always be raising capital to continue growing our business, we currently have ample liquidity to fully fund the balance of our 50x cash growth target. Q1 was a transformative quarter for Marathon, during which we battled operational challenges to produce record financial results.
Frederick G. Thiel: <unk> capacity and further increases our energy efficiency in under one year and we will strongly extend our position as the leader in our industry.
Frederick G. Thiel: While we will always be raising capital to continue growing our business. We currently have ample liquidity to fully fund the balance of our 50 of cash growth targets. This year.
Frederick G. Thiel: Q1 was a transformative quarter for marathon during which we battled against operational challenges to produce record financial result, we launched and began building the pipeline of our first product and we doubled the size of our portfolio of digital assets compute.
Frederick G. Thiel: We launched and began building the pipeline for our first product, and we doubled the size of our portfolio of digital asset compute. With 11 sites diversified across three continents and the road to 50X a hash clear ahead of us, we look forward to evolving into and excelling as a globally diversified company that leverages digital asset compute to build a more sustainable and inclusive future for all. And with that, I'll turn it back to Rob for Q&A.
Frederick G. Thiel: With 11 sites diversified across three continents, and the road to <unk> clear ahead of US we look forward to evolving into an <unk> is a globally diversified company that leverages digital ASIC compute to build a more sustainable and inclusive future for all and with that I'll turn it back to Rob for Q&A Rob.
Rob: Thanks, Brad.
Robert Samuels: At this time, we are 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. So our first question comes from Alexander Ren, who asks, post-halving, in what ways is Mara in a better position to stay profitable and grow compared to other mining companies. Fred, you want to take that one? Sure.
Rob: At this time, we are going to commence the Q&A session of today's call will start by answering some of the most popular question submitted by investors through our Q&A platform.
Fred: So our first question comes from Alexander <unk>, who asks post having and what lasers narrow in a better position to stay profitable and grow compared to other mining companies.
Fred: Want to take that one.
Robert Samuels: Sure.
Frederick G. Thiel: So a number of things by acquiring sites and vertically integrating integration, we lower our cost structure. So, essentially, taking out the middleman who was the third party hosting operator and taking out their margin, which in some cases can lower our costs by as much as 20%. Additionally, the diversification of our revenue streams, technologies such as Flipstream, which enhance our ability to earn transaction fees over and above what normal FPPS pools earn, provide us with the ability to, in a lower Bitcoin block subsidy world, such as post-halving, generate generally greater revenues on a per block basis.
Fred: So a number of things by acquiring sites and vertically integrated.
Frederick G. Thiel: Integrating we lower our cost structure.
Frederick G. Thiel: Essentially taking out the middleman, who was the third party hosting operator and take their margin, which in some cases can lower our costs by as much as 20%.
Frederick G. Thiel: Additionally, the diversification of our revenue streams technologies, such as slipstream, which enhance our ability to earn transaction fees over and above what normal PPS pools earn provides us with the abilities to in a lower bitcoin blocked subsidy world such as post having generate <unk>.
Frederick G. Thiel: Greater revenues on a per block basis. So we believe we're very well positioned with our diversified revenue streams that will be developing over the coming years to be positioned to take advantage of whatever the market brings to us in the near and long term.
Frederick G. Thiel: So we believe we're very well positioned with our diversified revenue streams that we'll be developing over the coming years to take advantage of whatever the market brings us in the near and long term.
Frederick G. Thiel: Thanks. Our next question, and we had a couple of questions related to M&A, but Parminder asks, is NARA looking for a merger or planning to buy out other miners in the short term? Fred, do you want to take that one as well? Well, we've already shown
Speaker Change: Thanks, Our next question and we had a couple of questions related to M&A Department.
Fred: <unk> is now looking for a merger or are planning to buyout of the miners in the short term, but I do want to take that one as well.
Frederick G. Thiel: Well, we've already shown the for Acquiring, hosting companies, and the sites for capacity. Now, to date, these have mostly been sites where we have minors installed currently, so it's a very easy integration.
Fred: Well, we've already shown that.
Fred: We are acquiring.
Frederick G. Thiel: Hosting companies and the sites for capacity now to date. These have been mostly sites, where we have minors.
Fred: Installed currently so it's a very easy integration.
Frederick G. Thiel: The challenge with integrating and acquiring miners that have their own fleets of miners is the age of the miners that they have in their fleet. Most companies today are still transitioning to the latest state of the art S21 class of machines and maybe running S19J pros or even XPs.
Fred: The challenge with integrating and acquiring miners that have their own fleets of miners as the age of miners that they have in their fleet. Most companies today are still transitioning to the latest state of the art.
Frederick G. Thiel: 21 class of machines, and maybe running S 19, J pros or even next piece.
Frederick G. Thiel: The challenge is, if we were to acquire a miner today and attribute any value to their fleet of existing machines, especially if their machines were S19J Pro or older, that wouldn't be a very smart idea. So essentially, as we acquire miners, you'll tend to find that pricing will be very focused on the infrastructure value as opposed to the miners that are installed, unless, of course, they have state-of-the-art miners installed, at which point you can value them at their replacement cost.
Frederick G. Thiel: The challenge is if we were to acquire a minor today and attribute any value to their fleet of existing machines, especially if their machines were S 19, J pro or older.
Frederick G. Thiel: That wouldn't be very smart idea.
Frederick G. Thiel: So essentially as we acquire miners you'll tend to find that pricing will be very focused on the infrastructure value as opposed to the miners that are installed unless of course, they have state of the art miners installed at which point you can value them at their replacement cost, but I think typically most publicly traded miners have.
Frederick G. Thiel: But I think typically most publicly traded miners have valuations that exceed essentially the cost to rebuild that infrastructure, and it comes down to a question of time to revenues and what it is worth for you to acquire a miner that has capacity running and miners installed versus building it yourself, and how much extra do you want to pay for that time to revenues.
Frederick G. Thiel: Valuations, which exceed essentially the cost to rebuild that infrastructure and it comes down to a question of time.
Frederick G. Thiel: Revenues and what is it worth for you to acquire a minor that hedge capacity running in miners installed.
Frederick G. Thiel: Versus build it yourself and how much extra do you want to pay for that time to market.
Speaker Change: Thanks, Brad.
Robert Samuels: Our next question comes from Rojan Yu, who asks, What's the status of your open ATM? And do you think this is the reason that Mara has not been tracking the price of Bitcoin?
Frederick G. Thiel: Our next question comes from Roche on <unk>, who asks what's the status of your open ATM and do you think this is the reason the naira has not been tracking the price of Bitcoin, Tom and I think this one is for you.
Salman H. Khan: Salman, I think this one's for you.
Rojan Yu: Thank you for asking the question Roger.
Salman H. Khan: Thank you for asking the question, Roger. In Q1, there was a general rotation out of minors and into the recently launched ETM. We believe the top performing miners will see price appreciation as investors see the results. Similar to other industries like oil and gold, ETFs have their own position in the value chain, while oil and gold companies create value for their stockholders and generally track the commodity price with a premium on top of the commodity.
Salman H. Khan: In Q1, there was a general rotation out of minors and into the recently launched Etfs.
Salman H. Khan: Leaves the top performing miners will see price appreciation as the investors see the results are similar to other.
Salman H. Khan: Other industries like oil and gold Etfs have their own position.
Salman H. Khan: In the value chain, while oil and gold companies create value for their stockholders and generally track the commodity price a premium on top of the commodity price.
Salman H. Khan: In terms of the ATM, as of March 31, 2024, we had not accessed the new ATM, and subsequently, we raised about $200 million. As a reminder, the ATM gives us a low cost of capital to invest in creative acquisitions or grow the company as we continue to use Bitcoin to fund our operating costs in G&A.
Salman H. Khan: In terms of the ATM as of March 31, 2024, we have not accessed the new ATM and subsequently we raised about $200 million.
Salman H. Khan: As a reminder, the ATM gives us low cost of capital to invest in accretive acquisitions or drove the company as we continued to use <unk> to fund our operating costs and G&A.
Robert Samuels: Thanks, Salman. I think the next one is for you as well. Orlando C. asks, what's your current break-even point for Bitcoin? You want to take that one? Great question, Orlando.
Speaker Change: Thanks, Omar I think the next one is for you as well Orlando asks what is your current breakeven for Bitcoin you want to take that one.
Salman H. Khan: Great question Orlando. There seems to be a lot of diversity in the industry in terms of how the companies report their costs and where it's parked and all that stuff. So it's a difficult question to answer in terms of the apples to apples comparison. So with that in mind, you could typically look at it in multiple ways. One is the marginal cost of revenue without depreciation, which is the cost of revenue minus depreciation on cash items.
Orlando: Great question Al and there seems to be a lot of diversity in the industry in terms of.
Salman H. Khan: How the companies report their costs.
Salman H. Khan: Whereas it parked and all that stuff. So it's a difficult question to answer in terms of the apples to apples comparison.
Salman H. Khan: With that in mind.
Salman H. Khan: Typically you could look at multiple ways one is.
Salman H. Khan: Marginal cost of revenue without depreciation.
Salman H. Khan: Cost of revenue minus depreciation noncash item and.
Salman H. Khan: That's one thing it the other way of doing it is to look at cost per hash, which we believe is a better representation in this industry.
Salman H. Khan: And that's one way of doing it. The other way of doing it is to look at cost per hash, which we believe is a better representation in this industry. So cost per hash, as we talked about previously in our prepared remarks, we have improved about 16%. And as we fully integrate these recently announced acquisitions, as Fred had mentioned, some of those acquisitions can save up to 20% on our... All these costs will continue to show up in future quarters as these synergies kick in and we integrate these acquisitions completely.
Salman H. Khan: So cost per <unk> as we've talked about previously in our prepared remarks.
Salman H. Khan: Have improved about 16%.
Salman H. Khan: Yeah.
Salman H. Khan: And as we fully integrate these recently announced acquisitions as Fred had mentioned.
Salman H. Khan: Some of those acquisitions can be can save up to 20% on our.
Salman H. Khan: Cost all of these costs will continue to show up in the in the future quarters as these synergies kicking in we integrate these acquisitions completely.
Salman H. Khan: As a reminder, our mining fleet remains the industry's one of the most efficient, which will even get better and more efficient as we progress with time and we hit the 50 ExaHash mark towards the end of the year. And that larger scale of ExaHash will allow us to spread the fixed cost. Across the larger pool, which on a unit basis will help make us even more efficient. Moreover, just a quick reminder, our GNA per hash or coin remains one of the lowest in the sector, and that shows how efficiently the company has operated.
Salman H. Khan: As a reminder, our mining fleet remains the industry's one of the most efficient.
Salman H. Khan: Which which you can get better and more efficient as we progress with time and hit the 50 X Ashworth at the end of the year and that's larger scale.
Salman H. Khan: <unk>.
Salman H. Khan: It will allow us.
Salman H. Khan: To spread the fixed cost.
Salman H. Khan: Across a larger pool, which which on a unit basis.
Salman H. Khan: Make us even more efficient.
Salman H. Khan: Moreover, just a quick reminder, our G&A per hash or coin remains one of the lowest in the sector.
Salman H. Khan: That shows how efficiently the company has operated historically.
Frederick G. Thiel: Salman. Our next question comes from Tariq P., who asks, what are your plans for increasing efficiency and reducing the recent downtime at several Bitcoin mining facilities? Fred?
Speaker Change: Thanks, Tom Our next question comes from Terry <unk>, who asks what are your plans for increasing efficiency and reducing the recent downtime at several bitcoin mining facilities Fred.
Frederick G. Thiel: Yeah, great question, Terry. So, if you think about what happened in Q1, as I mentioned in my prior remarks, we had transformer issues at third-party hosted sites, and we had utility line maintenance that was done that shut down one of our sites for a short period of time, and then we had weather events. All of these are exogenous factors.
Fred: Yes, Great question Terry So if you think about what happened in Q1 as I mentioned in my prior remarks, we have transformer issues at third party hosted sites and we had a utility line maintenance that was done that shut down one of our sites for a short period of time and then we had weather events all.
Frederick G. Thiel: All of these are exogenous factors, if you think about when you own and operated sites.
Frederick G. Thiel: If you think about when you own and operate sites, you look to do things like standardize equipment across sites so you have standard operating procedures. You also have spare parts for everything you're doing.
Frederick G. Thiel: We'll look to do things like standardized equipment across sites. So you have standard operating procedures. You also have spare parts for everything you're doing one of the challenges with the <unk> site, where transformer issues, where some of the transformers that were installed could not operate at their stated spec and so as those transformers started.
Frederick G. Thiel: One of the challenges with the Elendale site were transformer issues, where some of the transformers that were installed could not operate at their stated specifications. As those transformers started to fail, they had to be replaced or modified. And had we built that site, we most probably would not have used Chinese transformers but rather transformers of higher quality that would operate within specifications.
Frederick G. Thiel: To fail they had to be replaced under modified.
Frederick G. Thiel: And had we built that site, we most probably would not have used.
Frederick G. Thiel: Chinese transformers, but rather transformative higher quality that would operate within spec. So again over time as more and more of the sites that we operate at come under our own control I think we will see uptime continued to tick up we will see performance improve.
Frederick G. Thiel: So, again, over time, as more and more of the sites that we operate at come under our own control, I think we'll see uptime continue to tick up, and we'll see performance improve. When you think about just operating efficiencies, again, stripping out the third-party hosting provider dramatically impacts your cost because you're stripping out somebody's built-in margin. And we have also begun deploying our immersion technology. The 2PIC immersion technology does a number of things.
Frederick G. Thiel: When you think about just operating efficiencies.
Frederick G. Thiel: Again stripping out the third party hosting provider dramatically impact your cost because they're stripping out somebody's built in margin and we also begin deploying our emerging technologies to pick immersion technology does the number of things for one thing it increases the <unk>.
Frederick G. Thiel: For one thing, it increases the lifespan of miners because these miners that traditionally would be air-cooled in many sites essentially have to be serviced every 30 days; they have to be cleaned, filters have to be changed, fans have to be replaced, and the mechanical load at the site is higher. Using two-phase immersion, you don't have a lot of those issues. We have immersion systems that have run for months without having to be serviced at all, and so that reduces the overhead at the site, which reduces your operating costs, makes you more efficient, increases uptime, and the other advantage with two-pick immersion is that you become fairly immune to heat waves, because at the end of the day, the liquid in this tank is boiling, which means that it's likely to be hotter in the tank than the ambient temperature would be
Frederick G. Thiel: Essentially the lifespan of miners because.
Frederick G. Thiel: These miners that traditionally would be air cooled in many sites.
Frederick G. Thiel: Essentially have to be serviced every 30 days they have to be cleaned filters have to be changed Vance have to be replaced and the mechanical loaded the site's entire using two phase immersion you don't have a lot of those issues.
Frederick G. Thiel: Have immersion systems that have run for months without having to be serviced at all and so that reduces the overhead at the site, which reduces your operating cost. It makes you more efficient increases uptime and the other advantage with two pick immersion is that you become fairly.
Frederick G. Thiel: Immune from heat waves because at the end of the day the liquid in this tank is boiling which means that it's likely to be hotter in the tank and the ambient temperature would be so that makes heat much less of an issue, especially in places like Texas and in the UAE for example, and if you look at our.
Frederick G. Thiel: So that makes heat much less of an issue, especially in places like Texas and in the UAE, for example. And if you look at our site in the UAE, that site operates with 99.8% uptime. And this is in an environment where the ambient temperature is over 100 degrees and humidity is well into the 90% range. So I think that's a great example of how our sites operate more efficiently and more effectively when they're under our control.
Frederick G. Thiel: In the UAE that site operates with 99, 8% uptime.
Frederick G. Thiel: And this is in an environment, where the ambient temperatures over 100 degrees in humidity is.
Frederick G. Thiel: Well into the 90% range. So I think that's a great example of how our sites operate more efficiently and more effectively when they are under our control.
Robert Samuels: Thanks, Fred. In the interest of time, I think we'll have to wrap up this section of the Q&A, and again, we really appreciate the questions and interest. I'm now going to turn the call back to our operator to open the line to questions from our covering analysts. Alicia, back to you. Thank you.
Speaker Change: Thanks, Brad and the interest of time I think we'll have to wrap up this section of the Q&A and again, we really appreciate the questions and interest now going to turn the call back to our operator to open the lines for questions from our covering analysts Alicia back to you.
Operator: Thank you. We will now be conducting a question and answer session. 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
Alicia: Thank you we will now be conducting a question and answer thank.
Operator: If he would like to ask a question. Please press star one on your telephone keypad Econ for me until we indicate your line is in the question queue. You May Press star two if he would like to remove your question from the queue for participants.
Operator: Lipids using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Operator: One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Lucas Pipes with B. Riley Securities. Please proceed with your question.
Operator: One moment, please while we poll for questions.
Operator: Thank you. Our first question comes from the line of Lucas pipes with B Riley Securities. Please proceed with your question.
Lucas Nathaniel Pipes: Thank you very much, operator. Good afternoon, everyone.
Lucas Nathaniel Pipes: Thank you very much operator, good afternoon, everyone.
Lucas Nathaniel Pipes: Fred, my first question is on the pool performance you mentioned. I think you said 44% better. To what extent was this chance versus you being able to pick off kind of above-average rewards?
Lucas Nathaniel Pipes: My first question is on the on the pool performance you mentioned I think you said, 44% better.
Lucas Nathaniel Pipes: Mhm.
Lucas Nathaniel Pipes: To what extent was this chance versus being able to pick off.
Lucas Nathaniel Pipes: Above average.
Frederick G. Thiel: Thank you very much for that.
Lucas Nathaniel Pipes: Rewards. Thank you very much for us for that.
Frederick G. Thiel: Yeah, so over the past week period, from which that number comes, it's about 40 points something. Not 44%.
Speaker Change: Yes so.
Frederick G. Thiel: Over the past week period, which that number comes from and it's about 40 something percent.
Frederick G. Thiel: But there were certain transactions that had very high fees. And, you know, at the end of the day, you have to win the block to get paid for the transactions. But what Slipstream enables us to do is essentially generate additional fees on top of the standard fees that the pool otherwise would earn. And so even if you look over longer periods of time, whether it's, you know, October through May, October of last year through May, Mara Pool has performed amongst the top pools from an average fee structure. A way to look at it is if you were to optimally fill a block with the highest-value transaction, that would be an index of zero.
Speaker Change: 44%, but thanks.
Frederick G. Thiel: There were certain transactions that had very high fees and you know at the end of the day you have to win the block to get paid the transactions, but what slipstream enables us to do is essentially <unk>.
Frederick G. Thiel: <unk> additional fees on top of the standard fees.
Frederick G. Thiel: <unk>.
Frederick G. Thiel: Pool, otherwise would earn and so even if you look over longer periods of time, whether it's October through mid October of last year through may.
Frederick G. Thiel: Mara pool has performed amongst the top pool from an average fee structure.
Frederick G. Thiel: Way to look at it is.
Frederick G. Thiel: If you were to optimally fill a block with the highest value transactions that would be an index of zero and then how does a pool performed against that with blocks and most of the Fps pools operate at a minus.
Frederick G. Thiel: And then how does a pool perform against that with blocks? And most of the FPPS pools operate at minus one to two, sometimes 3% below the optimum, where MaraPool, together with Slipstream, has been performing above that for the period.
Frederick G. Thiel: One to two sometimes 3% below the optimum where more appropriate slipstream has been performing above that and for the period.
Frederick G. Thiel: Really, for the early part of this year to date, it's been almost 6-7% and sometimes higher than at PPS pools that it competes against. So this is an advantage that, over time, may decline as more people start trying to leverage the types of technologies that are built into our pool. But this is the whole reason why having a vertically integrated tech stack is so important. It allows us to do things that you can't when you're just buying the best of breed technologies and putting them together.
Frederick G. Thiel: Really for the early part of this year to date, it's been almost six 7% and.
Frederick G. Thiel: And sometimes higher than at PPS pools that it competes against so this is an advantage that overtime made decline as more people start trying to leverage the types of technologies.
Frederick G. Thiel: Built into our pool, but this is the whole reason why having a vertically integrated tech stack is so important it allows us to do things that you can't when you just buying best of breed technologies and putting it together.
Frederick G. Thiel: An analogy some people use when describing what we're doing is it's kind of the difference between the PC industry and the Apple ecosystem. Apple is vertically integrated from their own chips through their own software, their own cloud services, etc. Whereas the rest of the industry uses microprocessors from one vendor, an operating system from another vendor, graphics, etc. from other vendors. So we believe a very tightly integrated tech stack allows you to operate large-scale digital asset compute in a much more efficient and optimized manner than just buying third-party services and leveraging third-party
Frederick G. Thiel: An analogy some people.
Frederick G. Thiel: Use when describing what we're doing because it is kind of the difference between the PC industry and the Apple ecosystem Apple is all vertically integrated from their own chips through their own software their own cloud services et cetera, whereas the rest of the industry uses microprocessors from one vendor operating system from another vendor graphics et cetera from other vendors.
Frederick G. Thiel: We believe a very tightly integrated tech stack allows you to operate large scale digital asset compute in a much more efficient and optimized manner than just buying third party services and leveraging third party pools.
Lucas Nathaniel Pipes: I appreciate that. Thank you, Fred.
Speaker Change: I appreciate that thank you Fred from a modeling perspective.
Speaker Change: Would it be too early to guide on an additional revenue on that or what you.
Frederick G. Thiel: And from a modeling perspective, would it be too early to guide on additional revenue on that, or would you? Yeah, I think you could definitely work with Rob to look at the data. And you can actually just see this in, you know, mempool.space. You can just run reports for different periods of time, and you can see how our pool fees have averaged compared to others.
Lucas Nathaniel Pipes: Yes.
Frederick G. Thiel: I think you could definitely work with Rob to look at the data and you can actually just see this man pools out space you just run reports for different periods of time, you can see how our pool fees have averaged compared to others.
Lucas Nathaniel Pipes: But I think that over time, yeah, you know, 2-3% would be a conservative estimate to use for modeling purposes. And then there'll be times where it's higher, and there may be times where we operate the same as FPS tools. But, you know, 2-3% on average should be fine, which over time becomes quite a large number. Thank you, Fred. And turning quickly to M&A, I know this has come up before, but where are you spending your energies right now? And are there more opportunities like the ones you've executed on recently in front of you? We would appreciate that.
Frederick G. Thiel: But I think that over time to three <unk>.
Speaker Change: Percent would be a conservative estimate to use for modeling purposes, and then there'll be times, where tire and there may be times, where we operate at the things that Pierre pools, but 2% to 3% on average should be fine, which over time becomes quite a large number.
Lucas Nathaniel Pipes: Okay.
Speaker Change: Thank you Fred.
Speaker Change: Turning quickly to M&A I know this has come up before but.
Speaker Change: Where are you spending your energies.
Speaker Change: Now and.
Speaker Change: Are there.
Speaker Change: More opportunities like the one that you've executed on recently in front of you, but would appreciate your thoughts on that.
Frederick G. Thiel: Sure. So, with the acquisitions we've already done, we have the capacity to get to our 50x a hash goal by the end of this year, and we obviously have the miners inbound to fill that available capacity. So as we look at acquisitions going forward, we believe that, you know, as I've said before, there's a mix of third-party hosting sites that may be attractive. There's a mix, potentially, of sites where somebody has tied up power but hasn't fully built out the infrastructure.
Lucas Nathaniel Pipes: Sure.
Lucas Nathaniel Pipes:
Frederick G. Thiel: With the acquisitions, we've already done.
Frederick G. Thiel: We have capacity to get to our 50 extra hash goals by the end of this year and we obviously have the miners.
Frederick G. Thiel: In bound to fill that available capacity.
Frederick G. Thiel: So as we look at acquisitions going forward.
Frederick G. Thiel: We believe that.
Frederick G. Thiel: As I've said before there is a mix of kind of.
Frederick G. Thiel: Third party hosting sites that may be attractive there is a mix potentially of sites, where somebody has tied up power, but hasnt fully built out the infrastructure and then there are true greenfield, where you're out talking to energy companies.
Frederick G. Thiel: And then there are true greenfields where you're out talking to energy companies, solar project developers, wind project developers, and trying to negotiate power deals and then having to build infrastructure from the ground up. So we're looking across all three of those buckets.
Frederick G. Thiel: Your project developers wind project developers.
Frederick G. Thiel: Trying to negotiate power deals and then having to build infrastructure from the ground up so we're looking across all three of those buckets pretty.
Frederick G. Thiel: We believe that this period post-halving is going to be quite rich when it comes to M&A opportunities, and we believe that there'll be some great opportunities to acquire more capacity. We don't think that there will be a shortage of compute power. We look at pricing in the marketplace, and what we're seeing is more efficient rigs coming to market at essentially the same prices as they are now. And we don't see an additional buying wave now post-having of compute.
Frederick G. Thiel: Pretty equally.
Frederick G. Thiel: We believe that this period post having now.
Frederick G. Thiel: Is gonna be quite rich when it comes to M&A opportunities and we believe that.
Frederick G. Thiel: There'll be some great opportunities to acquire more capacity.
Frederick G. Thiel: We don't think that there will be a <unk>.
Frederick G. Thiel: Shortage of compute.
Frederick G. Thiel: Look at pricing in the marketplace and what we're seeing is more efficient.
Frederick G. Thiel: Rigs coming to market at essentially the same prices as they are now.
Frederick G. Thiel: And we don't see an additional buying wave now post having of compute so we think that that market will likely remain fairly stable with relatively easy access to.
Frederick G. Thiel: So we think that that market will likely remain fairly stable with relatively easy access to be able to buy more rigs. And we continue to think that capacity, in other words, sites are the kind of shortage, and there's a lead time if you're going to build sites also. So we think that as we look towards 2025 expansion, because obviously we're not going to stop at 50x a hash, when we look at 26, 27, and towards the heavy and 28, we think that companies like Marathon, where you have very large-scale, utility-scale mining, if you would, combined with energy harvesting and technology sales, provide you with a really robust and resilient business where you can weather ups and downs, and then also get the Be the most efficient, most optimized operator out there. This is helpful.
Frederick G. Thiel: Be able to buy more rigs.
Frederick G. Thiel: Continuing to take that capacity in other words sites are the kind of the shortage and there is a lead time, if youre going to build track sulfur so.
Frederick G. Thiel: We think that as we look towards 2025 expansion because obviously, we're not going to stop at 50 ex ash when we looked at 'twenty six 'twenty seven and towards the heavy in 'twenty eight.
Frederick G. Thiel: Think that.
Frederick G. Thiel: Okay.
Frederick G. Thiel: Companies like Marathon, where you have very large scale utility scale mining if you would.
Frederick G. Thiel: Combined with energy harvesting and technology.
Frederick G. Thiel: Sales provides you with a really robust and resilient business, where you can weather ups and downs and then.
Frederick G. Thiel: Also get the leverage of being able to continually operate a little bit better than everybody else. That's the goal.
Frederick G. Thiel: Most efficient most optimized operator out there.
Lucas Nathaniel Pipes: This is helpful. I want to turn it over to you and the team. Best of luck.
Speaker Change: This is helpful I want to turn it over.
Speaker Change: Fred to you and the team best of luck.
Lucas Nathaniel Pipes: Okay.
Lucas Nathaniel Pipes: Okay.
Speaker Change: Thank you.
Joe Flynn: Our next question comes from the line of Joe Flynn with Compass Point Research. Please proceed with your question.
Lucas Nathaniel Pipes: Next question comes from the line of Joe Flynn with Compass Point Research. Please proceed with your question.
Joe Flynn: Hi guys, thanks for the question. I had a question regarding the Generate Capital acquisitions. I was wondering how many megawatts of capacity are currently hosted by legacy customers. If you could provide more color on, ultimately, the timelines for that, freeing up that capacity, and transitioning it to self-monitoring, that would be helpful.
Joe Flynn: Hi, guys. Thanks for the question.
Joe Flynn: I had a question regarding the Gary capital acquisitions.
Joe Flynn: Just wondering how many megawatts of.
Joe Flynn: Capacity is.
Joe Flynn: Currently hosted by legacy customers, maybe you could provide more color on ultimately the time timelines of that freeing up that capacity and.
Joe Flynn: Transitioning into self money and that'd be helpful.
Frederick G. Thiel: Yeah, so about 390 megawatts of total capacity, of which we already had, somewhere around 180-ish megawatts that we were using. There's about 75 or 80 megawatts which will be vacated by the end of June, and then the balance, we think, shortly thereafter. So we think we'll have 100 percent utilization of that site for our own miners in Q3.
Speaker Change: Yes. So it was about 390 megawatts of total capacity of which we already had.
Frederick G. Thiel: Somewhere around 180 ish megawatts.
Frederick G. Thiel: That we were using.
Frederick G. Thiel: <unk>.
Frederick G. Thiel: It was about 75 or 80 megawatts, which will be vacated by the end of June and then.
Frederick G. Thiel: The balance we think shortly thereafter so.
Frederick G. Thiel: We think we'll have 100% utilization of that site for own miners in Q3.
Frederick G. Thiel: Great, and then follow up on kind of the power costs, you know, like hash costs look to be impacted just due to the, you know, the uptime, but just going forward, how should we think about, you know, maybe just power costs from a cost-per-kilowatt-hour basis, and ultimately, how owning your own infrastructure can, you know, layer in to lower those costs and how much improvement we can see in kind of Sure.
Speaker Change: Great and then.
Frederick G. Thiel: Follow up on kind of the power costs.
Frederick G. Thiel: Cash costs look to be impacted due to the the uptime.
Frederick G. Thiel: But.
Frederick G. Thiel: Going forward, how should we think about.
Frederick G. Thiel: Power costs from our cost per kilowatt hour basis, and ultimately yes.
Frederick G. Thiel: Now owning your own infrastructure can layer into lower those costs and how much improvement we can see in kind of a second half has installed more efficient machines.
Frederick G. Thiel: Sure. So, um...
Speaker Change: Sure so.
Frederick G. Thiel: If you look at the sites in Texas where we can take advantage of a variety of programs to monetize energy, when we were using sites that were operated by a third party, we didn't get the benefit of economic curtailment and power trading, which is something we now have the benefit of. And we have actually reaped some, you know, very material gains, already in the first quarter from some of that activity. But that's very opportunistic.
Frederick G. Thiel: If you look at the sites in Texas, where we can take advantage of a variety of programs to monetize energy when we were using.
Frederick G. Thiel: Sites that were operated by a third party, we didn't get the benefit of economic curtailment and.
Frederick G. Thiel: In power trading, which is something we now have the benefit of and we have actually reached.
Frederick G. Thiel: Some.
Frederick G. Thiel: Very material gains.
Frederick G. Thiel: Already in the first quarter from <unk>.
Frederick G. Thiel: Some of that activity.
Frederick G. Thiel: But that's very opportunistic it depends on the temperature spikes things that happened in the market that allows you to really benefit from that the big chunk of the big difference rather with owning sites versus using third party sites as you strip out this kind of upwards of two kilowatt hour that the hosting provider was charging you which was.
Frederick G. Thiel: It depends on, you know, temperature spikes, things that happen in the market that allow you to really benefit from that. The big difference, rather, with owning sites versus using third-party sites is that you strip out this kind of upwards of two cents a kilowatt hour that the hosting provider was charging you, which was their way of covering their infrastructure costs, their operating costs, etc. We believe we can operate sites that we own for somewhere between half a cent and one cent per kilowatt hour.
Frederick G. Thiel: Their way of covering their infrastructure costs or operating costs et cetera.
Frederick G. Thiel: We believe we can operate sites that we own for somewhere between half a cent in one cents per kilowatt hour it kind of depends on where we're and what type of technology.
Frederick G. Thiel: It kind of depends on where and what type of technology. The more immersion technology we have, the lower the cost to operate the site, as we know. When it comes to power prices, there's some, you know, wide ranges, from, you know, PPAs that are in the sub-three cent range to things that run upwards of four cents. So, somewhere in that range across the different sites, but the key savings from the shift from asset light to owned and operated are stripping out that margin of the third party hosted provider. You know, you can imagine that one to one and a half cents a kilowatt hour reduction in your cost to mine is pretty significant.
Frederick G. Thiel: More immersion technology, we have the lower cost offerings. So that's an example.
Frederick G. Thiel: When it comes to power prices Theres some wide ranges.
Frederick G. Thiel: Ppas that are in the sub <unk> range to things that run upwards of four.
Frederick G. Thiel: Somewhere in that range across the different sites.
Frederick G. Thiel: But the key savings from the shift from asset light too.
Frederick G. Thiel: Owned and operated is stripping out that margin in the third party hosted providers.
Frederick G. Thiel: You can imagine one to one and half cent per kilowatt hour reduction in your cost to mine is pretty significant.
Joe Flynn: Great, thanks. That's all for me.
Frederick G. Thiel: Great Thanks itself right.
Operator: Thank you. Our next question comes from the line of Kevin Dede with HC Wren White. Please proceed with your question.
Speaker Change: Thank you.
Joe Flynn: Our next question comes from line of Kevin <unk>.
Kevin Darryl Dede: With Etsy Red White. Please proceed with your question.
Kevin Darryl Dede: Good afternoon, Fred, and Salman. Thanks for having me on. Could you, Fred, maybe peel the onion back a little bit on power?
Kevin Darryl Dede: Good afternoon, Fred Solomon, Thanks for having me on.
Kevin Darryl Dede: Could you Fred maybe Peel, the onion back a little bit on power.
Kevin Darryl Dede: I know you moved some rigs from Elendale. Could you give us your thinking on when you might be able to move rigs back? How do you plan on building or filling out? I think you have available capacity at the old Generate capital sites. Just give us some feeling for where you're going with power and how you'll be able to support 50xDash this year.
Kevin Darryl Dede: I know you moved some rigs from from Ellen Dale could you give us your thinking on when you might be able to move rigs back.
Kevin Darryl Dede: On.
Kevin Darryl Dede: How you plan on building or filling out I think you have available capacity.
Kevin Darryl Dede: At the old.
Kevin Darryl Dede: Generate capital sites, just give us some feeling for where youre going with power.
Kevin Darryl Dede: And how you'll be able to support 50 X to ash this year.
Frederick G. Thiel: So, let me see if I understand your question properly. So from a capacity perspective, We'll be filling out a lot of the existing capacity in Q3 and a little bit into Q4 as well. As I said earlier to somebody's prior question, we should be seeing most of the hosted customers vacated, most of the capacity really by the end of this quarter and bleeding into a little bit into Q3, and we have a whole slew of miners coming in to plug in that are all state-of-the-art S21s class machines.
Speaker Change: So let me see if I understood your question properly.
Frederick G. Thiel: So from a capacity perspective.
Frederick G. Thiel: We'll be filling out.
Frederick G. Thiel: A lot of the existing capacity over Q3, and a little bit into Q4.
Frederick G. Thiel: As well.
Frederick G. Thiel: As I said earlier to somebody's. Prior question, we should be seeing most of the hosted customers vacated.
Frederick G. Thiel:
Frederick G. Thiel: Most of the majority of the capacity really by end of this quarter and leading into a little bit into Q3, and we have a whole slew of miners coming into plug in that are all state of the art is 21.
Frederick G. Thiel: Classroom machine.
Frederick G. Thiel:
Frederick G. Thiel: Within the case of Ellendale, you know, power has, you know, we've been able to bring the site back partially online. Right now, it's operating at about 60-65% of its max capacity, and each week, a little bit more comes online as transformer fixes are made by Applied on that site, and so far, we've been ahead of schedule there. So we have miners ready to go to plug in there. We moved 9,500 miners from Ellendale to Garden City just as a way to ensure that we had the capacity. It was easy to make the move for the miners, and so it made sense to do that.
Frederick G. Thiel: But in the case of Allendale power has we've been able to brew.
Frederick G. Thiel: Bringing the site back up.
Frederick G. Thiel: Partially.
Frederick G. Thiel: Right now it's <unk>.
Frederick G. Thiel: Operating at about 60% 65% of its.
Frederick G. Thiel: Max capacity in each week, a little bit more comes online. This transformer fixes are made by applied.
Frederick G. Thiel: On that site and so far we've been ahead of schedule. There. So we can mine is ready to go to plug in there. We moved 9500 miners from Ellen Delta Garden City, just as a way to go.
Frederick G. Thiel: We have the capacity was easy to make the move to the miners and so.
Frederick G. Thiel: Made sense to do that.
Frederick G. Thiel: As Ellendale continues to come back online we have machines ready to go to plug in to take up those empty slots. So, you know, no change in power cost, if that's what you were asking for in regards to power or if that was more related to energization, but essentially the only site that we're really seeing a challenge at from an energization perspective is just, you know, what's left to do at Allendale, but that's progressing on a weekly basis, as I mentioned, and that'll be all back up, you know, over the balance of the next coming months.
Frederick G. Thiel: Ellen Dell continues to come back online, we have machines ready to go to plug in to take up.
Frederick G. Thiel: Those empty slots.
Frederick G. Thiel: No change in power cost if thats, what you were asking for it in regards to power or if that was more related to energy station.
Frederick G. Thiel: Yes, but essentially the only the only site that we're really seeing a challenge that from an energy station perspective, its just whats left to do at Allendale, but that's progressing on a weekly basis as I mentioned and that will be all.
Frederick G. Thiel: Backup.
Frederick G. Thiel: Over the balance of the next coming months.
Kevin Darryl Dede: Well, the subtext of the question, Fred, apologies for not making it clearer, was... I thought that the two sites that came with Generate Capital offered you flexibility in adding capacity, power capacity. I was just wondering how you were thinking about that and whether or not you thought you might need it this year to reach 50. No, we don't need it.
Speaker Change: Well the subtext to that question Fred apologies for not making it clear was.
Kevin Darryl Dede: I thought that there the two sites that came with generate capital offered you flexibility and adding.
Kevin Darryl Dede: Adding capacity power capacity and.
Kevin Darryl Dede: And I was just wondering how you were thinking about that and whether or not you saw at unite might needed this year to reach 50.
Frederick G. Thiel: No, we don't need to expand capacity to any sites. The capacity... that we have that is energizable, if you would. So no need for additional expansion covers us to 50XX. So anything at the generated sites that would be an increase in site capacity would be additive. And think of that as more 2025.
Kevin Darryl Dede: No, we don't need to expand capacity to any type of capacity.
Frederick G. Thiel:
Frederick G. Thiel: That we have that has energized the ball if you would so no need for additional expansion covers up to 50 ex ash.
Frederick G. Thiel: So anything at the generated sites that would be an increase in site capacity would be additive.
Frederick G. Thiel: And think of that as more of a 2025.
Frederick G. Thiel: Great.
Frederick G. Thiel: One more, if you let me, Fred. Could you add a little color, please, to your energy harvesting theme and your heat reuse theme? You mentioned a couple of things on calls, but not a ton of detail.
Speaker Change: One more if you let me Fred.
Frederick G. Thiel: Would you add a little color please to your.
Frederick G. Thiel: Your energy harvesting theme and your reuse theme you mentioned I've mentioned, a couple of things on calls but.
Frederick G. Thiel: And not a not a ton of detail.
Frederick G. Thiel: Yeah, so... Again, energy harvesting is taking essentially wasted or stranded energy. And that can come in multiple forms, right? It can come in the form of methane coming off landfills. And we've talked about the pilots that we have running in Utah in that regard.
Fred: Yeah. So.
Frederick G. Thiel: We get an energy harvesting is taking me essentially.
Frederick G. Thiel: <unk> stranded energy.
Frederick G. Thiel: And that can come in multiple forms right. It can come in the form of methane coming up landfills and we've talked about the pilots that we have running in Utah.
Frederick G. Thiel: You can also capture methane flare gas from oil fields, for example, and there is, you know, methane coming out of a variety of agricultural processes. You can take a lot of these things, such as bio-waste, think of food processing plants, essentially the waste that comes out of that, the stuff that comes out of ethanol and methanol manufacturing, which is all agricultural product-based.
Frederick G. Thiel: In that regard.
Frederick G. Thiel: You can also capture methane flare gas from oil fields for example, and there is no methane coming out of.
Frederick G. Thiel:
Frederick G. Thiel: A variety of.
Frederick G. Thiel: Agricultural processes, you know, obviously dairy farming generates a lot of manure.
Frederick G. Thiel: You can take a lot of these things such as Ah Biowaste think of a food processing plant.
Frederick G. Thiel:
Frederick G. Thiel: The essentially the waste that comes out of that stuff.
Frederick G. Thiel: The stuff that comes out of ethanol and methanol manufacturing, which is all agricultural product base, you can take those based products and through.
Frederick G. Thiel: You can take those base products and, through anaerobic digesters, generate electricity with them. You then use Bitcoin miners to consume that electricity, and then the heat generated by the miners can be fed back into the industrial process. So in the case of ethanol and methanol manufacturing, you need to preheat the biomass that you're using to make ethanol. Alcohol, for example, manufacturing spirits, beer, etc. You have to do similar things for the fermentation mass.
Frederick G. Thiel: Through anaerobic digesters to generate electricity with them. You then use bitcoin miners to consume that electricity and then the heat generated by the miners can be fed back into the industrial process. So in the case of ethanol and methanol manufacturing you need to pre heat.
Frederick G. Thiel: Biomass that you're using to make ethanol.
Frederick G. Thiel: Alcohol for example, manufacturing spirits beer etcetera, you have to do similar things for the fermentation.
Frederick G. Thiel: Matt.
Frederick G. Thiel: And in the case of agriculture, you'll find there's a lot of biowaste that can be used, and then you can generate heat and feed that back into things like greenhouses or shrimp farms, etc. So, heat reuse is very important. You also have the simple use case of just heating buildings. You know, you can take electricity that normally is going to power a boiler, and you can replace that boiler with our two-pick technology with miners in it, and you can generate hot water just the same. The same amount of energy generates the same type of water at similar costs.
Frederick G. Thiel: <unk>.
Frederick G. Thiel: And.
Frederick G. Thiel: In the case of agriculture.
Frederick G. Thiel: You'll find there is a lot of BIOLASE that can be used and then you can generate heat and feed that back into things like green houses or shrimp farms et cetera.
Frederick G. Thiel: So.
Frederick G. Thiel: Heat reuse is very important you also have the simple use case of just heating buildings.
Frederick G. Thiel: You can take electricity that normally is going to power a boiler and you can replace that boiler with our two pic technology with miners in it and you can generate cutwater just the same.
Frederick G. Thiel: Same amount of energy generated same type of water.
Frederick G. Thiel: And so if, for the building owner, if it's cost neutral to them, or even a cost savings to them, to deploy our solution versus traditional boilers or heating, or even more importantly, if they're transitioning to electric heat from natural gas or oil as part of the energy transition, then they can get the benefit of having potential cost savings. And we essentially get a situation where our cost to mine Bitcoin is free. And long term, the benefit of energy harvesting is that the processing of the waste material and the sale of the heat back into an industrial process should hopefully mitigate 100% of your energy cost. And so the mining of Bitcoin is done for free. Now, granted, these are smaller-scale sites. Some of these sites are potentially 5 to 20 megawatts in size.
Frederick G. Thiel: <unk> cost and so if.
Frederick G. Thiel: For the building owner.
Frederick G. Thiel:
Frederick G. Thiel: If it's cost neutral to them or even a cost savings to them to.
Frederick G. Thiel: To deploy our solution versus a traditional boilers or.
Frederick G. Thiel: Heating or even more importantly, if they are transitioning to electric heat from natural gas or oil.
Frederick G. Thiel: As part of the energy transition.
Frederick G. Thiel: Then they can get the benefit of having potential cost savings and we essentially get a situation where our cost of mine bitcoin is free.
Frederick G. Thiel: Long term the benefit of energy harvesting is that the.
Frederick G. Thiel: Processing of the waste material and the sale of the heat back into an industrial process.
Frederick G. Thiel: Should hopefully mitigate 100% of your energy cost and so the mining of Bitcoin is done for free now granted these are smaller scale sites, but some of these sites potentially a 5% to 20 megawatts in size.
Frederick G. Thiel: And you have the additional benefit that, eventually, if transmission lines were available, you could just sell the electricity you're generating. So we believe that as a way to diversify our business, lower our costs, and decentralize the mining of Bitcoin. And this is an important factor because with the halving, you're going to see more and more concentration of Bitcoin mining amongst the big miners. So it's very important that you start to develop this long tail of Bitcoin mining that I've talked about, where you essentially have hundreds of thousands, if not millions of things out there that are leveraging energy to mine Bitcoin, all to secure the Bitcoin blockchain and process transactions.
Frederick G. Thiel: And you have the additional benefit that eventually.
Frederick G. Thiel: If transmission lines for available you could just sell the electricity are generating so we believe that as a way to diversify our business lower our costs decentralize the mining of Bitcoin and this is an important factor because with the having you're going to see more and more concentration of bitcoin mining amongst the big miners.
Frederick G. Thiel: It's very important that you start to develop this long tail of bitcoin mining that I've talked about where you essentially have.
Frederick G. Thiel: Hundreds of thousands if not millions of thing.
Frederick G. Thiel: Things out there that are leveraging energy to mine bitcoin.
Frederick G. Thiel: All to secure the bitcoin blockchain and processed transactions because over time.
Frederick G. Thiel: Because over time, large utility scale miners will eventually come to a place where you can't get energy at utility scale at a lower cost than it's cost to produce in those cases. And if the Bitcoin price goes upward, but not as much as a, David Morgan, Co-Founder & CEO, Accelerated Pace, potentially a more challenging business. And so the combination of technology, the combination of using alternative energy sources, all these things become really important to optimizing your operations.
Frederick G. Thiel: Large utility scale miners will eventually come to a place where you can't get energy use.
Frederick G. Thiel: Utility scale at a lower cost than its cost to produce in those cases.
Frederick G. Thiel: And if bitcoin price.
Frederick G. Thiel:
Frederick G. Thiel: Trends upward, but not are they.
Frederick G. Thiel: Accelerated pace then over the next four to eight years potentially utility scale mining will become.
Frederick G. Thiel: And our goal is to remain one of the lowest cost operators when we get to the next halving and be positioned to really continue to lead the industry well beyond the point where, you know, block subsidies are the primary driver of revenues for Bitcoin.
Frederick G. Thiel: A.
Frederick G. Thiel: A more challenging business and so the combination of technology. The combination of using alternative energy sources. All of these things become really important to optimizing your operations and our goal is to remain one of the lowest cost operators, when we get to having and be positioned to really continue to lead the industry well.
Frederick G. Thiel: Beyond.
Frederick G. Thiel: The point, where.
Frederick G. Thiel: The block subsidies so the primary driver of revenues for the coal miners.
Speaker Change: Thank you.
Operator: Our next question comes from the line of John Barrow, with Needham and Cummings. Please proceed with their questions. [inaudible]
Frederick G. Thiel: Our next question comes to the line of John toward.
John Barrow: So with Needham and company. Please proceed with your question.
John Barrow: Great. Thanks, Thanks for taking my question here I guess, two if you could just kind of remind us the cadence of getting 50 access by the end of 'twenty four.
John Barrow: And then second question do you anticipating DNA that kind of thing most new classroom here. It sounded like there was still some hires you need to do.
John Barrow: But just wondering if we could drill into that a bit more.
unknown: So I'll let Salman answer the G&A question, but relative to the cadence of deployment, as I said before, capacity at the sites starts freeing up really at the end of this quarter and early part of Q3. We have a large number of miners inbound to fill that capacity, and then the balance of Capacity Growth will happen over the latter part of Q3 and into Q4 as we continue to get Allendale back online fully and fill out the little nooks and crannies of capacity that exist out there.
Operator: Yeah.
John Barrow: So I'll, let <unk> answer the G&A question, but relative to the cadence of deployment.
Salman: As I said before capacity.
unknown: The sites starts freeing up really at the end of this quarter and early part of Q3, we have a large number of minors inbound to fill that capacity.
Speaker Change: Then the balance of.
unknown: Of capacity growth will happen over the latter part of Q3 and into Q4.
Salman: As we continue to.
unknown: Get allendale back on online fully and fill out the little nooks and crannies of capacity.
Frederick G. Thiel: You know, we're at the same time also upgrading some of the sites that we acquired from air to immersion and doing things which will increase efficiencies and increase up time. And this is all before we start talking about the benefits of toothpick immersion and what it can do from an overclock perspective with minimal impact on efficiency. So I think, longer term, these types of technologies are going to become really important because if you can overclock S21.
Salman: That exist out there we're at.
Frederick G. Thiel: At the same time also upgrading some of the sites that we acquired from air to immersion and do anything which will increase.
Frederick G. Thiel: Efficiencies and increased uptime.
Frederick G. Thiel: And this is all before we start talking about the benefits of to pick immersion and what it can do from an overclock perspective with minimal impacts to efficiency.
Frederick G. Thiel: I think longer term. These types of technologies are going to become really important because.
Frederick G. Thiel: If you can overclock F 'twenty ones.
Frederick G. Thiel: Student of 50 or 60 percent, and you can do it with a de minimis loss of efficiency, then you can save a lot of capex, uh plus have the flexibility to overclock underclock all depending on energy cost and bitcoin price it gives you a lot more flexibility and potentially saves a lot of capital so we're very excited about kind of the impact of that on the longer term especially as we, you know, grow well beyond 50X the hash at the end of it.
Frederick G. Thiel: To the tune of 50 or 60%.
Frederick G. Thiel: And you can do it with a de Minimis loss of efficiency. Then you can save a lot of capex.
Frederick G. Thiel: Plus have the flexibility to overclock under clock, all depending on energy cost in the corn price that gets you a lot more flexibility.
Frederick G. Thiel: Petition saves a lot of capital. So we're very excited about kind of the impact of that on the longer term.
Frederick G. Thiel:
Frederick G. Thiel: Especially as we grow well beyond the 50 extra cash at the end of this year.
Salman H. Khan: On the GNA, if you think about it from a cash GNA standpoint, excluding stock compensation, which is a non-cash item, we expect it to be flattish on a quarter-on-quarter basis going forward from here. It's a quick reminder that on a unit basis, we continue to improve from here as we deploy more ExaHash in the company and spread that across the larger ExaHash network.
Frederick G. Thiel: On the G&A.
Frederick G. Thiel: If you think about it from a cash G&A standpoint, excluding stock compensation, which is a noncash item, we expect it to be flattish on a quarter over quarter basis going forward from here.
Salman H. Khan: A quick reminder, that on a unit basis.
Salman H. Khan: We continued to improve from here as we deploy more excess cash in the company and spent that across that larger it's ashton.
unknown: Got it. Thanks, guys. I appreciate it.
Speaker Change: Got it thanks, guys I appreciate it.
Speaker Change: Thank you.
Operator: Thank you. Our next question comes from the line of Joe Flynn with Compass Point Research. Please proceed with your question.
unknown: Thank you. Our next question comes from the line of Joe Flynn with Compass point research.
Joe Flynn: Proceed with your question.
Joe Flynn: Hi guys, I have a question. I was wondering what the progress is on Aerodyne and also when you talk about having the latest and greatest S21, are you referring to 17.5 joules per terahatch or the most recent pro version where it's 15 joules per terahatch?
Joe Flynn: Hi, guys I had a question I was wondering what the progress is on aerodyne.
Joe Flynn: So right when you talk about the Kevin the latest and greatest at 21.
Joe Flynn: During 2017, and a half Joseph tear at the most recent pro Virgin where it's 15 Joseph garage. Thanks.
Joe Flynn: Thanks.
Joe Flynn: Oh.
Frederick G. Thiel: Yeah, so on Aurodyne, you know, I'm not going to comment specifically on all the company's achievements because I'll let the management team do that. But what I will say is, you know, we are in the process of deploying Auradine in our two-phase immersion tanks. We'll have essentially the ability to put almost 800 kilowatts of mining capacity in an eight-foot container, which is a huge power density factor. And, you know, you can essentially take what is today a. If you look at our UAE sites, we have essentially each 40-foot container is about one megawatt. Well, we can retrofit that container to dual-phase immersion and end up with 3.2 megawatts in that same form factor at a fairly low cost for the upgrade.
Joe Flynn: Yeah, so on Oregon.
Speaker Change: I'm not going to comment specifically.
Frederick G. Thiel: All the company's achievements because all of the management team to do that.
Frederick G. Thiel: But what I will say is we.
Frederick G. Thiel: We are in the process of.
Frederick G. Thiel: We will be deploying or a dining in our two phase immersion.
Frederick G. Thiel: Tanks.
Frederick G. Thiel: We will have essentially the ability to put almost 800 kilowatts of mining capacity in a eight foot container, which is a huge power density factor and you can essentially take a what is today a.
Frederick G. Thiel: If you look at our UAE sites, we have essentially each 40 foot containers about one megawatt well, we can retrofit that container to dual phase immersion and end up with three two megawatts in that same form factor.
Frederick G. Thiel: At fairly low cost for the upgrade same miners.
Frederick G. Thiel: Same miners, just more of them, and the ability to consume more power, more power available. So we believe that that's going to be a big differentiator going forward. The advantage with Orodine's miners for us is a lot of the intelligence that's built into them regarding fleet management. And like any fabulous semiconductor company, you know, Orodine is building wafer capacity with its vendors and will continue to grow supply. And we'll continue to buy products from them as the supply chain increases.
Frederick G. Thiel: Just more of them.
Frederick G. Thiel: And the ability to consume more power more powers available. So we believe that that's going to be a big differentiator going forward. The advantage with Oregon's miners for US is a lot of the intelligence built into them regarding fleet management and like any.
Frederick G. Thiel: Fabless semiconductor company.
Frederick G. Thiel: Oregon is building a wafer capacity with their vendors and continue to grow supply and will continue to buy product from them as the supply chain increases in regards to the bit main question.
Frederick G. Thiel: In regards to the Bitmain question, yeah, there's a mix of pros and cons, and the 17 joules per terahash. The immersion version of the 21 does not come in a pro version, but the immersion version operates more efficiently than the air version, so it kind of mitigates the two. Hopefully that answers your question.
Frederick G. Thiel: Yeah, Theres, a mix of pros and.
Frederick G. Thiel: The 17.
Frederick G. Thiel: <unk> procure hash the immersion version of the.
Frederick G. Thiel: 21 does not come in pro version, but the immersion version operates more efficiently than the Arab version, so kind of mitigates the two.
Frederick G. Thiel: Hopefully that answers your question.
Joe Flynn: Yeah, I appreciate the car. Thanks.
Speaker Change: Yes, I appreciate the color. Thanks.
Robert Samuels: Thank you. There are no further questions. I'm going to turn the call back over to Rob Samuel for closing remarks.
Speaker Change: Thank you there are no further questions.
Rob Samuel: I'm going to turn the call back over to Rob Samuels for closing remarks.
Robert Samuels: Thank you all for your time today. If you have any questions that were not answered during today's call, please feel free to contact our investor relations team at ir.mara.com. Thank you. Enjoy the rest of your day.
Rob Samuel: Thank you all for your time today, if you have questions that were not answered during today's call. Please feel free to contact our investor relations team at IR <unk> com. Thank you enjoy the rest of your day.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Rob Samuel: This concludes todays teleconference.
Operator: You may disconnect your lines at this time thank you.
Operator: You for your participation.
Operator: Yeah.
Operator: Yeah.
Operator: [music].
Operator: Yes.
Operator: Yeah.