MARATHON DIGITAL HOLDINGS INC

Previous wording

Marathon Digital Holdings, Inc. is one of the world’s largest publicly traded bitcoin mining companies with operations in North America, the Middle East, and Latin America. The Company’s core business is utility-scale Bitcoin mining, which produces or “mines” bitcoin using one of the industry’s largest and most energy-efficient fleets of specialized computers. As of March 31, 2024, the Company had approximately 226,000 energized and operational mining rigs, capable of producing 27.8 exahashes per second with an efficiency of 25 joules per terahash, which we believe to be amongst the most efficient in the industry. The Company believes it has one of the most efficient bitcoin mining fleets in the industry. The Company is also committed to a future of carbon-neutrality and is actively transitioning its operations to sustainable energy. As of March 31, 2024, sustainable energy sources accounted for 55% of the fleet’s power usage.

Current wording

MARA is a global leader in leveraging digital asset compute to support the energy transformation with operations in North America, the Middle East, Europe, and Latin America. As of June 30, 2024, the Company has established a globally diversified portfolio of 13 digital asset data centers across four continents, with 1,100 megawatts of available energy capacity for computing. The Company uses different strategies and structures (self-owned and operated, joint ventures, and third-party hosted) to diversify risk across the organization. It is the Company’s intent that self-owned and operated sites will represent a greater proportion of our portfolio over time. The Company’s core business is Utility-Scale Computing, which produces or “mines” bitcoin using one of the industry’s largest and most energy-efficient fleets of specialized computers. As of June 30, 2024, the Company had approximately 250,000 energized and operational mining rigs, capable of producing 31.5 exahashes per second with an efficiency of 25 joules per terahash, which the Company believes to be amongst the most efficient in the industry. Additionally, as of June 30, 2024, the Company held approximately 18,488 bitcoin on the Condensed Consolidated Balance Sheets.

Previous wording

•On April 2, 2024, the Company, through its wholly owned subsidiary MARA USA Corporation, completed the acquisition of a bitcoin mining data center in Garden City, Texas, with a capacity of 200 megawatts, from Applied Digital Corporation, for a purchase price of $87.3 million cash consideration, which is subject to customary purchase price adjustments. This is the Company’s second major acquisition of data centers dedicated to bitcoin mining and increases the amount of self-owned and operated megawatts in the Company’s mining portfolio to 54%. The bitcoin mining data center in Garden City, Texas is located adjacent to a wind farm and uses predominantly renewable energy. We are currently converting approximately 100 megawatts into economic value via bitcoin mining. We expect to expand our presence at the site in 2024 by an additional 100 megawatts to accommodate a total of 200-megawatts of capacity dedicated exclusively to Marathon’s bitcoin mining operations.

Current wording

•On April 1, 2024, the Company, through its wholly owned subsidiary MARA USA Corporation, completed the acquisition of a bitcoin mining data center in Garden City, Texas, with a capacity of 200 megawatts, from Applied Digital Corporation, for a purchase price of $96.8 million cash consideration, including customary working capital adjustments that were paid during the second quarter of 2024. This is the Company’s second major acquisition of data centers dedicated to bitcoin mining and increases the amount of self-owned and operated megawatts in the Company’s mining portfolio to 54%. The bitcoin mining data center in Garden City, Texas is located adjacent to a wind farm and uses predominantly renewable energy. We are currently converting approximately 100 megawatts into economic value via bitcoin mining. We expect to expand our presence at the site in 2024 by an additional 100 megawatts to accommodate a total of 200-megawatts of capacity dedicated exclusively to MARA’s bitcoin mining operations.

Previous wording

•On April 19, 2024, a Bitcoin halving event occurred on the Bitcoin network. Halving is a key part of the Bitcoin protocol and serves to control the overall supply and reduce the risk of inflation in digital assets using a proof-of-work consensus algorithm. The Bitcoin halving event reduced the block subsidy by half from 6.25 to 3.125 bitcoin. Transaction fees, which together with the block subsidy comprise the block reward for successfully solving a block, is not directly impacted by the halving, although the Bitcoin network and the Company experienced an increase in transaction fees.

Current wording

•On April 19, 2024, a Bitcoin halving event occurred on the Bitcoin network. Halving is a key part of the Bitcoin protocol and serves to control the overall supply and reduce the risk of inflation in digital assets using a proof-of-work consensus algorithm. The Bitcoin halving event reduced the block subsidy by half from 6.25 to 3.125 bitcoin per block. Transaction fees, which together with the block subsidy comprise the block reward for successfully solving a block, is not directly impacted by the halving.

Previous wording

In addition to the Company’s results determined in accordance with GAAP, throughout this Quarterly Report the Company provides adjusted EBITDA and total margin excluding depreciation and amortization, which are non-GAAP financial measures. The Company provides investors with reconciliations from net loss to adjusted EBITDA and total margin to total margin excluding depreciation and amortization as components of Management’s Discussion and Analysis. The Company defines adjusted EBITDA as (a) GAAP net income (loss) plus (b) adjustments to add back the impacts of (1) depreciation and amortization, (2) interest expense, (3) income tax expense (benefit) and (4) adjustments for non-cash and non-recurring items which currently include (i) stock compensation expense, (ii) early termination expenses, (iii) gain on investments, and (iv) losses from extinguishment of debt. The Company defines total margin excluding depreciation and amortization as (a) GAAP total margin less (b) depreciation and amortization.

Current wording

The Company defines adjusted EBITDA as (a) GAAP net income (loss) plus (b) adjustments to add back the impacts of (1) depreciation and amortization, (2) interest expense, (3) income tax expense (benefit) and (4) adjustments for non-cash and non-recurring items which currently include (i) stock compensation expense, (ii) early termination expenses, (iii) gain on investments and (iv) losses from extinguishment of debt. The Company defines total margin excluding depreciation and amortization as (a) GAAP total margin less (b) depreciation and amortization.

Previous wording

The Company provides non-GAAP financial measures to provide information that may assist investors in understanding the results of operations and assessing the prospect of future performance. However, adjusted EBITDA and total margin excluding depreciation and amortization, as we present such information, may not necessarily be comparable to similarly titled measures presented by other companies. Non-GAAP financial measures are not intended to represent, and should not be considered to be more meaningful measures than, or alternatives to, measures of financial or operating performance prepared in accordance with GAAP. These non-GAAP measures are not meant to be considered in isolation and should be read only in conjunction with the Company’s Quarterly Reports on Form 10-Q and its Annual Reports on Form 10-K as filed with the SEC. Management uses adjusted EBITDA, total margin excluding depreciation and amortization, and the supplemental information provided herein as a means of understanding, managing, and evaluating business performance and to help inform operating decision making. The Company relies primarily on its Condensed Consolidated Financial Statements to understand, manage, and evaluate its financial performance and use the non-GAAP financial measures only supplementally.

Current wording

Management uses adjusted EBITDA and total margin excluding depreciation and amortization, along with the supplemental information provided herein, as a means of understanding, managing, and evaluating business performance and to help inform operating decision-making. The Company relies primarily on its Condensed Consolidated Financial Statements to understand, manage, and evaluate its financial performance and uses non-GAAP financial measures only supplementally.

Previous wording

(4) Cost per Petahash Rate per day is calculated using mining cost of revenues, excluding depreciation and amortization, divided by the Average operational Hash Rate, excluding the Company’s share of the hash rate for the equity method investee, the ADGM entity.

Current wording

(5) Cost per Petahash per day is calculated using mining cost of revenues, excluding depreciation and amortization, divided by the Average Operational Hash Rate, excluding the Company’s share of the hash rate for the equity method investee, Abu Dhabi Global Markets company (the “ADGM Entity”).

Previous wording

Revenues: The Company generated revenues of $165.2 million for the three months ended March 31, 2024, compared to $51.1 million in the prior year period. The $114.1 million or approximately 223% increase in revenues was primarily driven by an $82.9 million increase in the average price of bitcoin mined and other revenue, a $10.4 million increase in bitcoin production, and $20.8 million in revenues generated from providing hosting services as a result of the acquisition of GC Data Center Equity Holdings, LLC on January 12, 2024. Revenues during the quarter was negatively impacted by unexpected equipment failures, transmission line maintenance, and higher than anticipated weather-related curtailments at our Garden City and other sites which we are working to address. The average price of bitcoin mined was 126% higher than the average price of bitcoin mined in the prior year period and average daily bitcoin production was 30.9 bitcoin in the current year period compared with 24.4 in the prior year period.

Current wording

Revenues: The Company generated revenues of $145.1 million for the three months ended June 30, 2024, compared to $81.8 million in the prior year period. The $63.4 million or approximately 78% increase in revenues was primarily driven by a $78.6 million increase in the average price of bitcoin, partially offset by a $23.9 million decrease in bitcoin production, and the inclusion of $8.7 million in revenues generated from providing hosting services as a result of the GC Data Center Hosting, LLC acquisition in January of 2024. The average price of bitcoin mined was 136% higher than the average price of bitcoin mined in the prior year period and average daily bitcoin production was 22.9 bitcoin in the current year period compared with 32.2 in the prior year period. The Company produced 868 less bitcoin for the three months ended June 30, 2024 as compared to the prior year period primarily due to the halving event in April 2024, increased global hashrate and the continued impact of unexpected equipment failures at third-party operated sites and transmission line maintenance, partially offset by an improvement in average operational hashrate. Subsequent to June 30, 2024, the third-party site equipment failure and transmission line maintenance was completely resolved.

Previous wording

Cost of revenues – mining during the three months ended March 31, 2024, totaled $71.2 million compared to $33.4 million in the prior year period. The $37.9 million or approximately 113% increase was primarily driven by the growth in the Company’s hash rate from the deployment and energization of mining rigs in existing and new hosting facilities, which increased hosting and energy costs, compared to the prior year period. Cost of revenues was also negatively impacted by an increase in the global hash rate, which increased 86% in the current period compared to the prior year period. Partially offsetting the increase was the impact of unexpected equipment failures, transmission line maintenance, and higher than anticipated weather-related curtailment at our Garden City and other sites which resulted in downtime that reduced hosting and energy costs.

Current wording

Cost of revenues – mining during the three months ended June 30, 2024 totaled $85.8 million compared to $55.2 million in the prior year period. The $30.6 million or approximately 55% increase was primarily driven by the growth in the Company’s hash rate from the deployment and energization of mining rigs in existing and new facilities, which increased hosting and energy costs, compared to the prior year period. Partially offsetting the increase was the impact of unexpected equipment failures and transmission line maintenance, which resulted in downtime that reduced hosting and energy costs. The Company’s Cost per Petahash per day improved from $50.4 to $41.0, or approximately 18.7%, in the three months ended June 30, 2024 when compared with the prior year period, primarily due to increased capacity, improved efficiencies and a reduction of third-party costs. The Company believes Cost per Petahash per day to be a key metric to evaluate its operating costs and expects it to reduce as the Company grows its operations towards 50.0 exahash.

Previous wording

Cost of revenues – depreciation and amortization during the three months ended March 31, 2024 totaled $78.0 million compared to $17.7 million in the prior year period. The $60.3 million or approximately 340% increase was primarily due to the deployment of mining rigs since the prior year period from the increased scale of the business. Depreciation and amortization also increased $2.7 million as a result of the January 12, 2024, acquisition of GC Data Center Equity Holdings, LLC.

Current wording

Cost of revenues – depreciation and amortization during the three months ended June 30, 2024 totaled $87.8 million compared to $37.3 million in the prior year period. The $50.5 million or approximately 136% increase was primarily due to the deployment of mining rigs since the prior year period from the increased scale of the business and the acquisitions of GC Data Center Equity Holdings, LLC and the Garden City Acquisition.

Previous wording

Total Margin was a negative $3.0 million in the current year period compared to nearly zero in the prior year period, a decrease of approximately $3.0 million. The following table summarizes the factors that impacted the decrease in total margin for the three months ended March 31, 2024 as compared to the prior year period:

Current wording

Total Margin was a loss of $36.6 million in the current year period compared to a loss of $10.7 million in the prior year period, a decrease of $25.8 million or approximately 240%. The following table summarizes the factors that impacted the decrease in total margin for the three months ended June 30, 2024 as compared to the prior year period:

Previous wording

General and administrative expenses: General and administrative expenses were $73.3 million for the three months ended March 31, 2024, compared to $15.1 million in the prior year period, an increase of $58.2 million or approximately 384%. The Company’s general and administrative expenses included stock-based (non-cash) compensation expense of $51.9 million in the current year period and $3.9 million in the prior year period. The increase in stock-based compensation expense was primarily due to additional restricted stock unit awards granted in the current year period and as a result of an increase in the Company’s headcount, which grew from 30 employees as of March 31, 2023 to approximately 60 employees as of March 31, 2024. General and administrative expenses excluding stock-based compensation was $21.4 million in the current year period compared with $11.4 million in the prior year period. The $10.0 million or approximately 88% increase in expenses was primarily due to the increased scale of the business, including payroll and benefits, professional fees, and other third-party costs associated with the growth in the business.

Current wording

General and administrative expenses: General and administrative expenses were $57.1 million for the three months ended June 30, 2024, compared to $19.8 million in the prior year period, an increase of $37.3 million or approximately 188%. General and administrative expenses excluding stock-based compensation was $28.8 million in the current year period compared to $15.4 million in the prior year period. This $13.4 million or approximately 87% increase in expenses was primarily due to the increased scale of the business and acquisitions, including payroll and benefits, professional fees, facility and equipment expenses, and other third-party costs associated with growth in the business. The increase in stock-based compensation of $28.3 million in the current year period compared to $4.5 million in the prior year period resulted from issuing the Company's 2023 performance-based stock awards in January 2024 and the introduction of a new long-term performance-based stock award program for 2024 in May 2024. The Company’s increased headcount from 40 employees as of June 30, 2023 to approximately 109 employees as of June 30, 2024 further contributed to the increase in stock-based compensation expense.

Previous wording

Change in fair value of derivative: The Company acquired a commodity swap contract as a result of its January 12, 2024 acquisition of GC Data Center Equity Holdings, LLC. The commodity swap contract hedges price variability in electricity purchases and expires December 31, 2027. The commodity swap contract is a derivative instrument and remeasured at fair value each reporting period with changes recognized on the Consolidated Condensed Statement of Operations. The change in fair value of derivative is the result of the change in estimated fair value of the derivative as of March 31, 2024 compared to January 12, 2024, the acquisition date of GC Data Center Equity Holdings, LLC.

Current wording

Change in fair value of derivative: The Company acquired a commodity swap contract as a result of its January 12, 2024 acquisition of GC Data Center Equity Holdings, LLC. The commodity swap contract hedges price variability in electricity purchases and expires on December 31, 2027. The commodity swap contract is a derivative instrument and remeasured at fair value each reporting period with changes recognized on the Condensed Consolidated Statements of Operations. The fair value increased for the three months ended June 30, 2024, primarily due to the increase in the electricity forward curve prices during the current period compared to the contracted fixed price.

Previous wording

Research and development: Research and development expenses were $2.5 million for the three months ended March 31, 2024 compared to $0.2 million in the prior year period. Research and development expenses consisted primarily of contractor costs, equipment, supplies, personnel, and related expenses for research and development activities which increased in the current year period.

Current wording

Research and development: Research and development expenses were $3.8 million for the three months ended June 30, 2024 compared to $0.7 million in the prior year period. These expenses consisted primarily of contractor costs, equipment, supplies, personnel, and related expenses for our mining and technology businesses.

Previous wording

Amortization of intangible assets: During the three months ended March 31, 2024, the Company recorded a $3.0 million amortization expense for intangible assets. The Company acquired customer relationships in the January 12, 2024 acquisition of GC Data Center Equity Holdings, LLC, in addition to intellectual property purchased during the three months ended March 31, 2024. There was no amortization expense of intangible assets in the prior year period.

Current wording

Amortization of intangible assets: During the three months ended June 30, 2024, the Company fully amortized the customer relationships acquired in the GC Data Center Equity Holdings, LLC acquisition for $19.3 million, due to the Company’s strategic decision to exit hosting services business and termination of customer relationships during the period. There was no amortization expense of intangible assets in the prior year period.

Previous wording

Other non-operating income: Other non-operating income was $2.6 million during the three months ended March 31, 2024 compared to income of $0.8 million in the prior year period. The $1.8 million increase was primarily due to the higher balance of cash and cash equivalents and an increase in interest rates in the current year period.

Current wording

Interest income: Interest income was $2.2 million for the three months ended June 30, 2024 compared to $0.1 million in the prior year period. The $2.1 million increase was primarily due to the higher balance of cash and cash equivalents and an increase in interest rates in the current year period.

Previous wording

Interest expense: Interest expense was $1.3 million for the three months ended March 31, 2024 compared to $3.8 million in the prior year. The $2.5 million, or approximately 67% decrease was primarily a result of lower interest costs following the exchange of $416.8 million aggregate principal amount of Notes for shares of the Company’s common stock during the year ended December 31, 2023. Additionally, the Company prepaid and terminated its revolving line of credit and term loan facilities during March 2023.

Current wording

Interest expense: Interest expense was $1.4 million for the three months ended June 30, 2024 compared to $2.8 million in the prior year period. The $1.5 million, or approximately 52% decrease was primarily a result of lower interest costs following the exchange of $416.8 million aggregate principal amount of Notes for shares of the Company’s common stock during the year ended December 31, 2023.

Previous wording

(1) Includes 171 bitcoin representing the Company’s share of the equity method investee, the ADGM entity, for the three months ended March 31, 2024.

Current wording

(1) Includes 268 bitcoin representing the Company’s share of the equity method investee, the ADGM entity, for the six months ended June 30, 2024.

Previous wording

(5) Includes approximately $2.6 million of depreciation and amortization from the Company’s share in the results of its equity method investee, the ADGM entity, reported in Equity in net earnings of unconsolidated affiliate for the three months ended March 31, 2024.

Current wording

(2) Includes approximately $6.1 million of depreciation and amortization from the Company’s share in the results of its equity method investee, the ADGM entity, reported in Equity in net earnings of unconsolidated affiliate for the six months ended June 30, 2024.

Previous wording

Cost of revenues – hosting services of $19.0 million primarily includes cost of power and other hosting related operating costs to provide hosting services. Hosting services includes results beginning from January 12, 2024, the acquisition date of GC Data Center Equity Holdings, LLC.

Current wording

Cost of revenues – hosting services of $27.0 million primarily includes cost of power and other hosting related operating costs to provide hosting services. Hosting services includes results beginning from January 12, 2024, the date of the acquisition of GC Data Center Equity Holdings, LLC.

Previous wording

Gains on digital assets: The Company recognized a gain on digital assets of $488.8 million, compared to a gain of $137.4 million in the prior year period. The $351.4 million or approximately 256% increase was primarily related to the increase in the price of bitcoin as of March 31, 2024 of $71,289 compared to $28,474 for the prior year period ended March 31, 2023.

Current wording

Change in fair value of digital assets: The Company recognized a gain on digital assets of $340.8 million, compared to a gain of $162.6 million in the prior year period. The $178.2 million or approximately 110% increase was primarily related to the increase in bitcoin price from $42,288 to $62,668 from December 31, 2023 to June 30, 2024, respectively and the underlying digital assets held at the respective dates. As of June 30, 2024, the Company had 18,488 bitcoin, an increase of 47% compared to the prior year period. The Company views bitcoin on its Condensed Consolidated Balance Sheets an important treasury reserve asset and expects to continue to invest in future.

Previous wording

Early termination expenses: On January 30, 2024, the Company entered into a termination and transition agreement (“Agreement”) with the operator, US Bitcoin Corp (“USBTC”), of the two sites from the January 12, 2024, acquisition of GC Data Center Equity Holdings, LLC. The Company and USBTC agreed to terminate the acquired operating agreement for a termination fee of $13.5 million. In addition, the Company entered into an agreement to early terminate a data center hosting agreement with one of its customers and in accordance with the agreement, the Company forgave the outstanding accounts receivable balance of $8.6 million.

Current wording

Early termination expenses: On January 30, 2024, the Company entered into a termination and transition agreement (“Agreement”) with the operator, US Bitcoin Corp (“USBTC”), of the two sites from the January 12, 2024, acquisition of GC Data Center Equity Holdings, LLC. The Company and USBTC agreed to terminate the acquired operating agreement for a termination fee of $19.5 million, net of deposit refund. In addition, the Company finalized an agreement to early terminate a data center hosting agreement with one of its customers and in accordance with the agreement, the Company forgave the outstanding accounts receivable balance of $8.3 million.

Previous wording

Net loss from extinguishment of debt: In March, 2023, the Company prepaid the outstanding balance on its term loan facility with Silvergate Bank and terminated the term loan facility. The Company and Silvergate agreed to also terminate therevolving credit (“RLOC”) facilities. In connection with the termination of the credit facility, the Company recorded a lossin the amount of $0.3 million to “Netloss from extinguishment of debt” in the Condensed Consolidated Statements of Operations.

Current wording

Net loss from extinguishment of debt: In March 2023, the Company prepaid the outstanding balance on its term loan facility with Silvergate Bank and terminated the term loan facility. The Company and Silvergate agreed to also terminate the Company’srevolving credit facilities. In connection with the termination of the credit facility, the Company recorded a lossin the amount of $0.3 million to “Netloss from extinguishment of debt” in the Condensed Consolidated Statements of Operations.

Previous wording

Equity in net income of unconsolidated affiliate: During the three months ended March 31, 2024, the Company recorded its share of net earnings for its 20% interest in the Abu Dhabi Global Markets company (the “ADGM Entity”) in the amount of $1.3 million, which began mining operations during the third quarter of 2023. The Company’s share of the ADGM Entity’s operating results included earnings from the production of 171 bitcoin, a $4.1 million impairment of property, plant and equipment and approximately $2.6 million of depreciation and amortization during the three months ended March 31, 2024.

Current wording

Equity in net earnings of unconsolidated affiliate: During the six months ended June 30, 2024, the Company recorded its share of net earnings for its 20% interest in the ADGM Entity in the amount of $1.3 million, which began mining operations during the third quarter of 2023. The Company’s share of the ADGM Entity’s operating results included earnings from the production of 268 bitcoin, a $4.1 million impairment of property, plant and equipment and approximately $6.1 million of depreciation and amortization during the six months ended June 30, 2024.

Previous wording

Loss on hedge instruments: During the three months ended March 31, 2024, the Company recorded a $2.3 million realized loss related to bitcoin hedging activities. The Company has significant bitcoin holdings on its balance sheet and from time to time will evaluate as part of its risk management and treasury management process, short-term hedging or yield enhancing opportunities. The Company has an Investment Committee composed of members of its senior executive team, that evaluates market conditions to set hedging, investments, and monetization of bitcoin strategies. There were no outstanding hedging transactions as of the three months ended March 31, 2024 and there were no such activities in the prior year period.

Current wording

Loss on hedge instruments: During the six months ended June 30, 2024, the Company recorded a $2.3 million realized loss related to bitcoin hedging activities. The Company has significant bitcoin holdings on its balance sheet and from time to time will evaluate, as part of its risk management and treasury management process, short-term hedging or yield enhancing opportunities. The Company has an Investment Committee composed of cross functional members of its senior executive team that evaluates market conditions to set hedging, investments, and monetization of bitcoin strategies. There were no outstanding hedging transactions as of the six months ended June 30, 2024 and there were no such activities in the prior year period.

Previous wording

Income tax expense: The Company recorded income tax expense of $38.1 million for the three months ended March 31, 2024 compared to an income tax expense of $0.1 million in the prior year period. The $38.1 million tax expense was primarily due to the establishment of deferred tax liabilities for the significant increase in fair value of bitcoin during the current year period partially offset by the release of its valuation allowance associated with deferred tax assets. During the three months ended March 31, 2024, the Company determined that sufficient taxable income will be generated to support the utilization of its deferred tax assets.

Current wording

Income tax expense: The Company recorded income tax expense of $6.4 million for the six months ended June 30, 2024 compared to an income tax expense of $0.3 million in the prior year period. The $6.4 million tax expense was primarily due to the establishment of deferred tax liabilities for the significant increase in fair value of bitcoin during the current year period partially offset by the release of its valuation allowance associated with deferred tax assets.

Previous wording

Net income: The Company recorded net income of $337.2 million for the three months ended March 31, 2024 compared to net income of $118.7 million in the prior year period. The $218.5 million, or approximately 184%, increase in earnings was primarily driven by the favorable mark-to-market adjustment of digital assets, an increase in the average price of bitcoin and production, and revenues generated from providing hosting services as a result of the January 12, 2024 acquisition of GC Data Center Equity Holdings, LLC. These increases were partially offset by increased mining costs associated with the growth in our energized hash rate as we deployed additional mining rigs, increased general and administrative expenses, and increased costs related to the acquisition and operation of our new data centers, including early termination fees incurred to exit customers in pursuit of the Company’s objective to self-mine at these sites.

Current wording

Net income: The Company recorded net income of $137.5 million for the six months ended June 30, 2024 compared to net income of $109.7 million in the prior year period. The $27.8 million or approximately 25% increase in earnings was primarily driven by the favorable mark-to-market adjustment of digital assets, an increase in the average price of bitcoin, an increase in the change of fair value of derivative instruments, and revenues generated from providing hosting services. These increases were partially offset by a decrease in bitcoin production, increased mining costs associated with the growth in our energized hash rate as we deployed additional mining rigs, increased general and administrative expenses, and increased costs related to the acquisition and operation of our new data centers, including early termination fees incurred to exit customers in pursuit of the Company’s objective to self-mine at these sites.

Previous wording

Adjusted EBITDA: Adjusted EBITDA was $528.8 million for the three months ended March 31, 2024 compared to an adjusted EBITDA of $144.5 million in the prior year period. The $384.3 million increase was primarily driven by favorable fair value adjustments to digital assets of $488.8 million and higher production of bitcoin.

Current wording

Adjusted EBITDA: Adjusted EBITDA was $443.7 million for the six months ended June 30, 2024 compared to adjusted EBITDA of $180.4 million in the prior year period. The $263.3 million increase was primarily driven by favorable fair value adjustments to digital assets of $340.8 million and an increase in the average price of bitcoin.

Previous wording

The following table presents a summary of the Company’s cash flow activity for the three months ended March 31, 2024 and 2023:

Current wording

The following table presents a summary of the Company’s cash flow activity for the six months ended June 30, 2024 and 2023:

Previous wording

Cash flows for the three months ended March 31, 2024: Cash and cash equivalents totaled $324.3 million at March 31, 2024, a decrease of $33.0 million from December 31, 2023.

Current wording

Cash flows for the six months ended June 30, 2024: Cash, cash equivalents and restricted cash totaled $268.0 million at June 30, 2024, a decrease of $89.3 million from December 31, 2023.

Previous wording

Cash flows from operating activities resulted in a use of funds of $88.3 million, as net income, adjusted for non-cash and non-operating items, in the amount of $56.7 million was more than offset by the use of cash of $145.0 million from changes in operating assets and liabilities. When the Company produces and holds bitcoin on its Condensed Consolidated Balance Sheets, it excludes such produced and held bitcoin from its operating cash flows. As the Company monetizes bitcoin in the future, those proceeds are reported as cash flows from investing activities. Changes in cash flows from operating assets and liabilities were driven by a use of funds associated with changes in digital assets of $144.4 million due to the non-cash adjustment for bitcoin mining revenues and deposits of $1.3 million resulting from increased deposits associated with hosting agreements.

Current wording

Cash flows from operating activities resulted in a use of funds of $203.5 million, as net income, adjusted for non-cash and non-operating items, in the amount of $70.7 million was more than offset by the use of cash of $274.2 million from changes in operating assets and liabilities. When the Company produces and holds bitcoin on its Condensed Consolidated Balance Sheets, it excludes such produced and held bitcoin from its operating cash flows. As the Company monetizes bitcoin in the future, those proceeds are reported as cash flows from investing activities. Changes in cash flows from operating assets and liabilities were driven by a use of funds associated with changes in digital assets of $280.7 million due to the non-cash adjustment for bitcoin mining revenues and deposits of $16.5 million resulting from increased deposits associated with hosting agreements.

Previous wording

Cash flows from investing activities resulted in a use of funds of $416.6 million, primarily resulting from the use of funds for advances to vendors of $225.2 million, payment for the acquisition of a business of $183.8 million, payment of a deposit for the GC Data Center Equity Holdings, LLC acquisition of $25.0 million, capital expenditures of $9.1 million, purchase of digital assets of $7.3 million, purchase of $8.0 million of Auradine’s preferred stock, and an investment in an equity method investee of $3.0 million, partially offset by proceeds from the sale of digital assets of $44.8 million.

Current wording

Cash flows from investing activities resulted in a use of funds of $694.6 million, primarily resulting from the use of funds for advances to vendors of $465.3 million, payment for the acquisition of businesses of $275.9 million, capital expenditures of $26.3 million, purchase of digital assets of $19.0 million, purchase of $8.0 million of Auradine’s preferred stock, and an investment in an equity method investee of $13.8 million, partially offset by proceeds from the sale of digital assets of $113.7 million.

Previous wording

Cash flows from financing activities resulted in a source of cash of $471.9 million, primarily from the periodic issuance of common stock under the Company’s 2023 ATM (as defined below) of $489.3 million and the repurchase of shares in settlement of employee taxes upon restricted stock vesting.

Current wording

Cash flows from financing activities resulted in a source of cash of $808.8 million, primarily from the periodic issuance of common stock under the Company’s 2024 ATM (as defined below) of $834.2 million and the repurchase of shares in settlement of employee taxes upon restricted stock vesting.

Previous wording

Bitcoin holdings as of March 31, 2024: At March 31, 2024, the Company held approximately 17,320 bitcoin on its Condensed Consolidated Balance Sheets with a fair value of$1,234.7 million. The Company’s holdings as of March 31, 2024 excluded 61 bitcoins owned by the Company’s equity method investee, the ADGM Entity, but allocable to the Company, and pending distribution to the Company. At March 31, 2024, the fair value of a single bitcoin was approximately$71,289. As a result, the fair market value of the Company’s bitcoin holdings at March 31, 2024, was approximately $1,234.7 million. The Company expects that its future bitcoin holdings will generally increase but will fluctuate from time to time, both in number of bitcoin held and fair value in US dollars, depending upon operating and market conditions. The Company intends to add to its bitcoin holdings primarily through its production activities and will also continue to sell bitcoin as a means of generating cash to fund monthly operating costs and for general corporate purposes.

Current wording

Bitcoin holdings as of June 30, 2024: At June 30, 2024, the Company held approximately 18,488 bitcoin on its Condensed Consolidated Balance Sheets with a fair value of$1,158.6 million. The Company’s holdings as of June 30, 2024 excluded 50 bitcoins owned by the Company’s equity method investee, the ADGM Entity, but allocable to the Company, and pending distribution to the Company. At June 30, 2024, the fair value of a single bitcoin was approximately$62,668. As a result, the fair market value of the Company’s bitcoin holdings at June 30, 2024, was approximately $1,158.6 million. The Company expects that its future bitcoin holdings will generally increase but will fluctuate from time to time, both in number of bitcoin held and fair value in U.S. dollars, depending upon operating and market conditions. The Company intends to add to its bitcoin holdings primarily through its production activities and from time to time purchases. The Company historically sold bitcoin as a means of generating cash to fund monthly operating costs and for general corporate purposes. During the six months ended June 30, 2024, the Company purchased 271 bitcoin for $16.1 million. Subsequent to the quarter end, the Company announced acquiring $100.0 million bitcoin as part of its strategy to hold bitcoin and not sell for the foreseeable future. As a result of the Company’s adoption of the aforementioned strategy, the Company anticipates funding its operations and investing activities principally from available cash and cash equivalents and from its financing activities.

Previous wording

Liquidity and Capital Resources: Cash and cash equivalents totaled $324.3 million and the fair value of bitcoin holdings was $1,234.7 million at March 31, 2024. The combined value of cash and cash equivalents and bitcoin, as of March 31, 2024, was $1,559.0 million.

Current wording

Liquidity and Capital Resources: Cash and cash equivalents, excluding restricted cash, totaled $256.0 million and the fair value of digital asset holdings was $1,175.7 million at June 30, 2024. The combined value of cash and cash equivalents, excluding restricted cash, and digital assets, as of June 30, 2024, was $1,431.8 million.

Previous wording

The Company expects to have sufficient liquidity, including cash on hand, cash received from sales of its bitcoin holdings, and access to public capital markets to support ongoing operations. The Company will continue to seek to fund its business activities, and especially its growth opportunities, through the public capital markets, primarily through periodic equity issuances using its at-the-market facilities.

Current wording

The Company expects to have sufficient liquidity, including cash on hand and access to public capital markets to support ongoing operations. The Company will continue to seek to fund its business activities, and especially its growth opportunities, through the public capital markets, primarily through periodic equity issuances using its at-the-market facilities.

Previous wording

•Challenges in the bitcoin mining space and/or additional contagion events (such as the FTX collapse and subsequent bankruptcies of bitcoin mining companies in 2022 and 2023) which could damage the credibility of, and therefore investor confidence in, companies engaged in the digital assets space including Marathon;

Current wording

•Challenges in the bitcoin mining space and/or additional contagion events (such as the FTX collapse and subsequent bankruptcies of bitcoin mining companies in 2022 and 2023) which could damage the credibility of, and therefore investor confidence in, companies engaged in the digital assets space, including MARA;

Previous wording

•Declines in bitcoin prices and/or production, including the impacts from the bitcoin halving event, which would impact both the value of the Company’s bitcoin holdings and its ongoing profitability;

Current wording

•Declines in bitcoin prices and/or production, as well as impacts from bitcoin halving events, which would impact both the value of the Company’s bitcoin holdings and its ongoing profitability;

Previous wording

The Company contracts with service providers for hosting its equipment and operational support in data centers where the Company’s equipment is deployed. Under these arrangements, the Company expects to pay at a minimum approximately (i) $182.8 million during the remainder of calendar year 2024, (ii) $708.9 million in total payments during the calendar years 2025 through 2027, and (iii) $15.7 million in total payments during the calendar year 2028. Under certain of these arrangements, the Company is required to pay variable pass-through power and service fees in addition to these estimated minimum amounts.

Current wording

The Company contracts with service providers for hosting its equipment and operational support in data centers where the Company’s equipment is deployed. Under these arrangements, the Company expects to pay at a minimum approximately (i) $110.5 million during the remainder of calendar year 2024, (ii) $595.8 million in total payments during the calendar years 2025 through 2027, and (iii) $1.6 million in total payments during the calendar year 2028. Under certain of these arrangements, the Company is required to pay variable pass-through power and service fees in addition to these estimated minimum amounts.

Previous wording

The Company has purchase agreements to purchase miners and other mining equipment for a total purchase price of $517.3 million that are expected to be delivered during 2024. To date, we have made installment payments totaling $261.1 million. We expect to make periodic payments in accordance with the payment schedule with the final payment expected to occur during 2024.

Current wording

The Company has purchase agreements to purchase miners and other mining equipment for a total purchase price of $508.0 million that are expected to be delivered during 2024. To date, we have made installment payments totaling $448.0 million. We expect to make periodic payments in accordance with the payment schedule with the final payment expected to occur during 2024.

Previous wording

Assuming the Notes due 2026 are not converted into common stock, repurchased or redeemed prior to maturity, (i) remaining interest payments relating to the Notes will approximate $2.5 million through the remainder of the calendar year 2024, (ii) annual interest payments of approximately $3.3 million in each calendar year from 2025 through 2026, and (iii) principal in the amount of $330.7 million upon the maturity in November 2026, will be payable under the Notes due 2026. Refer to Note 12–Debt, for further information.

Current wording

Assuming the remaining Notes are not converted into common stock, repurchased or redeemed prior to maturity, (i) remaining interest payments relating to the Notes will approximate $1.7 million through the remainder of the calendar year 2024, (ii) annual interest payments of approximately $3.3 million in each calendar year from 2025 through 2026, and (iii) principal in the amount of $330.7 million upon the maturity in November 2026, will be payable under the Notes. Refer to Note 13–Debt, for further information.