Crypto Miner Marathon Digital Posts $192M Net Loss in Q2

Cryptocurrency miner Marathon Digital recorded a net loss of about $192 million during the second quarter — primarily driven by bitcoin’s price plunge, the company said Monday. 

The loss was up from its net loss of $109 million in the second quarter of 2021. The mining rig operator also posted a record $127 million impairment on its bitcoin holdings in the three-month period.

Marathon mined 707 bitcoins in the second quarter, a 44% decrease from the prior quarter, due to energization delays in Texas, as well as maintenance and weather-related issues that impacted its power generating facility in Montana.

Marathon Digital’s stock price closed at $14.43 on Monday — up about 1.8% on the day. The stock, which is down 56% year to date, has rallied roughly 85% over the last month. 

“The second quarter was challenging for the industry and Marathon in particular,” Marathon Digital CEO Fred Thiel said during the company’s earnings call on Monday. “Bitcoin mining is a nascent industry…and there is no playbook. However, given our progress, we’re confident that we remain on track to grow our position as a leader in this space.”

The company has hosting arrangements in place to achieve its target of 23.3 exahashes per second of compute power by mid next year, Thiel added.

The results come after the company said last week it had expanded its credit facilities with crypto-focused Silvergate Bank. Marathon refinanced its existing $100 million revolving line of credit and added an $100 million term loan on July 28. Both facilities are secured by bitcoin and mature in July 2024.

Compass Point Research & Trading analysts Chase White, David Rochester and Joe Flynn wrote in an Aug. 5 research note that mature miners such as Marathon Digital and Riot Blockchain have started to outperform among miners — up 150% and 95%, respectively, quarter to date. 

Miners are down an average of 67% so far this year, and Stronghold Digital, which is down 80%, has led the decline. 

The Compass Point analysts, who previously anticipated Marathon would need to start selling bitcoin to make ends meet, wrote that the additional cash from the loans will allow the company to instead potentially capture upside on a bitcoin price reversal. 

“We think it was advantageous of Marathon to shore up its balance sheet with cash during the current market downturn, which should also allow MARA to make existing payments for scheduled miner deliveries,” White, Rochester and Flynn said. “We also believe the terms are favorable and evidence of MARA’s ability to receive lower-cost financing given its scale.”

As of July 31, Marathon held 10,127 bitcoins (BTC), valued at about $236 million. About 3,000 of those bitcoins are outstanding as collateral, Chief Financial Officer Hugh Gallagher said during the earnings call.

Charlie Schumacher, Marathon’s vice president of corporate communications, told Blockworks last month that the company’s decision to continue holding bitcoin is a strategic one, not necessarily a principle. 

Executives said on the call Monday that as production ramps up, Marathon may sell a portion of its monthly bitcoin production to fund monthly operating costs.

Though industry watchers have said they expect the mining industry to consolidate amid the crypto bear market, Thiel said that acquiring another miner can be challenging.

“We have yet to find an opportunity where we can acquire a miner and have an ongoing operating cost and capital expenditure model that beats just going out and buying state-of-the-art [equipment] and deploying them behind the meter at wind farms, solar sites and partnering with energy companies,” the CEO said. “But we’ll see — there may be a firesale that is just too good to say no to.”

Updated Aug. 8, 2022, 6:00 pm ET.

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