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.

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-and-answer session. These forward-looking statements are subject to risks and uncertainties and actual results may differ materially. When used in this call, the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions as they relate to Marathon Digital Holdings are as such a forward-looking statement. Please refer to our earnings release for a full recitation of our forward-looking statements. 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. Some of these risks and uncertainties are more fully described in Marathon's 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 margin. 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. 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 analysts. And with that out of the way, I'm going to turn the call over to Fred to kick things off. Fred?

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 sites. 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 4 months, we initiated, negotiated, closed and integrated our first 2 acquisitions comprised of 3 sites. The first 2 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. 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 operational 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 50 exahash by the end of this year. 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. 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-halving environment. 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 Slipstream alone. MARA Pool, which powers Slipstream, captured 1 block with 10 Bitcoin in transaction fees and another with 16, generating nearly 10% greater fees than FPPS pools at the time. 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, being at scale and deploying our proprietary technology stack. As a matter of fact, if you were to look at the 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, 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, our vertically integrated tech stack, and provide us with an opportunity to diversify our revenue streams. These products include our industry-leading MARA firmware, controller board and 2-phase immersion technology, which we call 2PIC. 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 and 2PIC has a pipeline that is in the tens of millions of dollars and growing. We're currently integrating 2PIC 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. 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 curtailments across multiple sites. 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 27 exahash. 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 and build redundancies and leverage economies of scale that stem from owning and operating multiple sites around the world. 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. 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, enabling us to achieve an all-time high operating hash rate of 27 exahashes this month. The transformer issues that negatively impacted our ability to convert megawatts into terahash, 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 to execute. 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. Salman?

Thank you, Fred, and welcome, Rob, to the team MARA. As Fred mentioned, our Bitcoin production faced challenges in the first quarter due to transformer and other issues. However, the positive trend in Bitcoin prices, our plan to gradually increase our Bitcoin holdings, and our team's consistent execution contributed to record financial results for the quarter. We reported a net income of $337 million, or $1.26 per diluted share, representing a 184% increase from the net income of $119 million, or $0.72 per diluted share, in the same quarter last year. This increase was mainly due to the favorable Bitcoin price, higher production levels, and the fair market value of digital assets on our balance sheet. Revenues surged by 223% to a record $165 million from $51 million in the first quarter of 2023. The increase in revenue was primarily driven by a $77 million rise in the average price of Bitcoin mined, which was 126% higher this quarter compared to the same period last year. We averaged 30.9 Bitcoin produced daily during this quarter, up from 24.4 Bitcoin each day in the previous year. These production improvements accounted for approximately $10 million of our revenue. Following our recent acquisitions, we are temporarily providing hosting services to existing customers during the transition period, generating $21 million in revenue, which we did not have a year ago. We anticipate this revenue will decline in the upcoming quarters as we finalize transition plans with current tenants and repurpose the space for our own growth. Our hosting and energy expenses were $71 million compared to $33 million last year, with the increase primarily due to the expansion of our mining fleet and related costs. In Q1 of 2024, the global hash rate or network difficulty continued to rise, having increased over approximately 86% since Q1 of 2023, which combined with operational issues at our third-party hosted sites resulted in a higher cost per coin. Our non-GAAP revenue cost without depreciation improved by 16%, decreasing from 53.7 per petahash per day in Q1 of 2023 to 45.2 per petahash per day in Q1 of 2024. We expect our marginal cost per coin to improve as we realize synergies from our recent acquisitions, ramp up production at our third-party hosted sites, and distribute fixed costs over a larger 50 exahash capacity. Total revenue costs, including depreciation and amortization, were $168 million, up from $151 million the previous year. Depreciation and amortization comprised $78 million, marking a $60 million increase compared to the same quarter last year, mainly due to the growth of our energized hash rate from 11.5 exahash to 27.8 exahash and the acquisition of two sites in Texas and Nebraska. Our non-GAAP total margin, excluding depreciation and amortization, was $75 million this quarter compared to $18 million in the same quarter last year, driven by higher Bitcoin prices, increased production, and greater operational efficiency. General and administrative expenses, excluding stock-based compensation, rose to $21 million from $11 million in the previous year, largely due to scaling the business. Our headcount increased from 30 employees at the end of Q1 last year to 60 by the end of Q1 this year, and we have since surpassed 100 employees. As we continue to grow thoughtfully, we are adding talent across the organization. Part of our treasury management strategy involves selling sufficient Bitcoin to cover operating expenses while retaining the remainder on our balance sheet. This approach has allowed us to dollar cost average into Bitcoin at a discount over the past several years. Given our lower production costs compared to Bitcoin prices, this dollar average strategy has proved beneficial for our shareholders. With new accounting rules requiring the measurement of crypto assets at fair value and Bitcoin prices rising nearly 150% from the end of Q1 last year to the end of Q1 this year, this strategy has been highly effective for us. In Q1 of this year, we increased our Bitcoin holdings by 15%, from 15,126 to 17,320 Bitcoins. Due to the substantial amount of Bitcoin on our balance sheet, we recognized a gain on digital assets of $489 million in the first quarter of 2024. This favorable value adjustment led to a 266% increase in our adjusted EBITDA, which rose to $529 million from $145 million in the prior year. It is important to note that fair value accounting captures the changes in market value of Bitcoin held on our balance sheet. In the current environment of increasing Bitcoin prices, we have continued to recognize gains in our income statement, reflecting the impact of our holding strategy. For instance, a $10,000 shift in Bitcoin price from one period to the next can affect our adjusted EBITDA by approximately $170 million to $200 million. Looking into our Bitcoin holdings and cash position, we had unrestricted cash and cash equivalents of $324 million, up from $125 million a year ago. Additionally, as of March 31, we held around 17,320 Bitcoins with a fair value of $1.2 billion on our balance sheet. Overall, our cash and Bitcoin balance was about $1.6 billion as of March 31, 2024. We sold 730 Bitcoins during Q1, generating cash proceeds of $45 million, which we used to cover operating expenses, including energy hosting costs and other general expenses. During the quarter, we raised $489 million through at-the-market equity sales, primarily intended for miners, infrastructure acquisitions, and general corporate purposes. We anticipate that our future Bitcoin holdings will generally increase, though they may fluctuate based on operating and market conditions. We aim to grow our Bitcoin holdings mainly through production while continuing to sell Bitcoin to generate cash for monthly operating costs and other corporate needs. As Fred mentioned, we have strategically deployed capital for growth and investments that our teams have successfully integrated in Q1. These acquisitions have not only reduced construction costs significantly but have also provided us the flexibility to relocate our miners from underperforming sites. Constructing such sites independently would have taken over a year and cost twice as much per megawatt, making these acquisitions highly advantageous for our shareholders. The sites we acquired in Granbury, Texas, and Kearney, Nebraska, have been classified as a business combination under FASB rules, resulting in the recognition of fair value for assets acquired and liabilities assumed on our balance sheet. Consequently, we also recorded goodwill of $30.9 million and intangible assets of $22 million, mainly related to customer relationships. Additionally, we accrued early termination expenses of $22 million due to terminating certain hosted customers. One more point worth mentioning is that Marathon was added to the S&P Small Cap 600 Index. The S&P Small Cap 600 tracks 600 U.S. companies with market capitalizations between $1 billion and $6.7 billion that report positive earnings over the most recent quarter and four quarters combined. We are proud to be the first Bitcoin miner included in the S&P Small Cap Index, which highlights our consistently improving financial performance as we have scaled and implemented effective strategies. That concludes my update. I'll now turn it back to Fred, who will discuss our future plans. Fred?

Thanks, Salman. 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. Starting in the second quarter, Marathon will be restructured into a matrix organization consisting of 3 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 2 of these verticals. Utility scale mining is our large scale global digital asset mining operations. 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. 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 thecompute investment dollars and reduce the total cost of operating sites. 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. 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 asset compute systems. This includes applications such as pre-heating materials in industrial processes, heating buildings and water for communities, and food production applications such as greenhouses and shrimp farms. 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 halving event, during which the block reward was reduced by 50%. As block rewards will continue to reduce by 50% every 4 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 we can do so successfully and we can, not only mitigate the impact of halving events, but also excel. 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. 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 products. Our pilot project in Utah, where we're capturing methane from landfill to power Bitcoin miners is our first energy harvesting project, and we expect to launch several others in the coming quarters. 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, 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 3 continents, our plan is to continue scaling our international business over coming years such that approximately 50% of our revenues come from overseas by 2028. In 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 exahash by the end of 2024 and 50 exahash by the end of '25. However, with the expansion capacity gained from our recent acquisitions and the 45 exahash of additional compute available to us between current orders and options, we're now targeting 50 exahash by the end of this year. We already have 12 exahash 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. This represents a doubling of our compute capacity and further increases our energy efficiency in under 1 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 50 exahash growth target this year. Q1 was a transformative quarter for Marathon, during which we battled against operational challenges to produce record financial results. We launched and began building the pipeline of our first product and we doubled the size of our portfolio of digital asset compute. With 11 sites diversified across 3 continents and the road to 50 exahash 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.

We'll start by answering some of the most popular questions submitted by investors through our Q&A platform. The first question comes from Alexander Ren who asks how MARA is in a better position to maintain profitability and growth after the halving compared to other mining companies. Fred, would you like to address that?

Sure. So a number of things. By acquiring sites and vertically integrating, 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 cost by as much as 20%. Additionally, the diversification of our revenue streams, technologies such as Slipstream, which enhance our ability to earn transaction fees over and above what normal FPPS pools earn, provide us with abilities to, in a lower Bitcoin block subsidy world such as post-halving generate, generally, greater revenues on a per block basis. So we believe we're very well positioned with our diversified revenue streams that we'll 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.

Our next question, and we have a couple of questions related to M&A, but Parminder S asks, is MARA 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 that we're acquiring hosting companies and the sites for capacity. Now, to date, these have been mostly sites where we have miners installed currently. So it's a very easy integration. The challenge with integrating and acquiring miners that have their own fleets of miners is the age of miners that they have in their fleets. Most companies today are still transitioning to the latest state-of-the-art S21 class of machines and may be running S19j Pros or even XPs. 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. But I think typically, most publicly traded miners have valuations which exceed essentially the cost to rebuild that infrastructure, and it comes down to a question of time to revenues. And what is it 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 market.

Our next question comes from Roshan U 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? Salman, I think this one is for you.

Roshan, in Q1, there was a general rotation out of miners into the recently launched ETFs. We believe the top-performing miners will see price appreciation as the 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 price. 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 low cost of capital to invest in accretive acquisitions or grow the company as we continue to use Bitcoin to fund our operating costs and G&A.

I think the next one is for you as well. Orlando C asks, what's your current breakeven for Bitcoin? You want to take that one?

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 is parked and all that stuff. So it's a difficult question to answer in terms of apples-to-apples comparison. So with that in mind, typically, you could look at multiple ways. One is, marginal cost of revenue without depreciation, which is cost of revenue minus depreciation non-cash items. And that's one way of doing it. The other way of doing it is to look at the cost per hash, which we believe is a better representation in this industry. So cost per petahash, 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 costs. All these costs will continue to show up in the future quarters as these synergies kick in and we integrate these acquisitions completely. 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 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 make us even more efficient. Moreover, just a quick reminder, our G&A per hash or coin remains one of the lowest in the sector, and that shows how efficiently the company has operated historically.

Our next question comes from Tarik P who asks, what are your plans for increasing efficiency and reducing the recent downtime at several bitcoin mining facilities? Fred?

Yes, great question, Tarik. 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. 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. One of the challenges with the Ellendale site were transformer issues, where some of the transformers that were installed could not operate at their stated specs. And so, as those transformers started to fail, they had to be replaced and/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 spec. 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 some of these built-in margins. And we also begin deploying our immersion technology. The 2PIC immersion technology does a number of things. 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 sites is higher. Using 2-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 cost, makes you more efficient, increases uptime. And the other advantage with 2PIC immersion is that you become fairly 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 than 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 site in 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.

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.

Our first question comes from Lucas Pipes with B. Riley Securities.

Fred, my first question is on the pool performance you mentioned. I think you said 40% better. To what extent was this chance versus you being able to pick off kind of above-average rewards?

Yes. So over the past week period, which that number comes from, it's about 40-point-something percent, not 44%. But there were certain transactions that had very high fees. And 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 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 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 transactions, that would be an index of 0. And then how does a pool perform against that with blocks? And most of the FPPS pools operate at a minus 1% to 2%, sometimes 3% below the optimum, where MARA Pool together with Slipstream has been performing above that. And for the period really for the early part of this year-to-date, it's been almost 6%, 7% and sometimes higher than FPPS 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 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 best-of-breed technologies and putting it together. 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 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. 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 pools.

I appreciate that, Fred. And from a modeling perspective, would it be too early to guide on an additional revenue on that? Or would you...

Yes. I think you could definitely work with Rob to look at the data. And you can actually just see this in 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. But I think that over time, 2%, 3% would be a conservative estimate to use for modeling purposes. And then there will be times where it's higher and there may be times where we operate at the same as FPPS pools, but 2%, 3% on average should be fine, which over time becomes quite a large number.

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 kind of more opportunities like the ones you've executed on recently in front of you? I would appreciate your thoughts on that.

Sure. So with the acquisitions we've already done, we have capacity to get to our 50 exahash 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, as I've said before, there's a mix of kind 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. And then there are true greenfield 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 3 of those buckets pretty equally. We believe that this period post-halving now is going to be quite rich when it comes to M&A opportunities. And we believe that there will be some great opportunities to acquire more capacity. We don't think that there will be a shortage of compute. 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-halving of compute. 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 kind of the 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 50 exahash and we look at '26, '27 and towards the halving in '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 provides you with a really robust and resilient business where you can weather ups and downs and then also get the leverage of being able to continually operate a little bit better than everybody else. That's the goal, be the most efficient, most optimized operator out there.

This is helpful. I want to turn it over. Fred, to you and the team, best of luck.

Our next question comes from the line of Joe Flynn with Compass Point Research.

I had a question regarding the Generate Capital acquisitions. I was wondering how many megawatts of capacities were currently hosted by legacy customers. And if you could provide more color on, ultimately, the timelines of freeing up that capacity and transitioning it to self-mining, that would be helpful.

Yes. So about 390 megawatts of total capacity of which we already had somewhere around 180-ish megawatts that we were using. There is 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% utilization of that site for our miners in Q3.

Great. And then a follow-up on kind of the power costs. The hash costs look to be impacted just due to the uptime. But just going forward, how should we think about maybe just power costs from a cost per kilowatt hour basis? And ultimately, how owning your own infrastructure can layer in to lower those costs and how much improvement can we see in kind of the second half as you install more efficient machines?

If you look at the sites in Texas where we can utilize several programs to monetize energy, we previously lacked the benefits of economic curtailment in power trading while operating through a third party. Now we do have those benefits, and we have already seen significant gains in the first quarter from this activity. However, these gains are quite opportunistic and depend on factors like temperature spikes and market conditions. The main difference between owning sites and using third-party sites is the removal of the approximately $0.02 per kilowatt hour that the hosting provider charged to cover their costs. We believe operating our owned sites will cost between $0.05 and $0.01 per kilowatt hour, depending on location and technology type. For instance, the more immersion technology we employ, the lower our operational costs. Power prices vary significantly, ranging from below $0.03 to upwards of $0.04 across different sites. The primary savings from moving to owned and operated sites come from eliminating the margin of the third-party provider, leading to a substantial cost reduction in mining of around $0.01 to $0.015 per kilowatt hour.

Our next question comes from the line of Kevin Dede with H.C. Wainwright.

Could you, Fred, maybe peel the onion back a little bit on power? I know you moved some rigs from Ellendale. Could you give us your thinking on when you might be able to move rigs back? And how 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 50 exahash this year?

Let me make sure I understood your question correctly. From a capacity standpoint, we will be utilizing much of the existing capacity during Q3 and slightly into Q4. As I mentioned before, we expect to have most of the hosted customers vacate by the end of this quarter and into early Q3. We have a large number of advanced S21 class miners ready to be plugged in. Regarding Ellendale, we have partially brought the site back online, currently operating at about 60% to 65% of its maximum capacity, and we are gradually increasing this each week as transformer repairs are completed. So far, we are ahead of schedule. We relocated 9,500 miners from Ellendale to Garden City since we had the capacity and it was straightforward to move them. This made logical sense. As Ellendale continues to come back online, we have machines ready to occupy those available slots. There has been no change in power costs related to this situation. The main challenge we face concerning energization is at Ellendale, but that is improving weekly, and we anticipate being fully operational in the coming months.

Well, the subtext of the question, Fred, apologies for not making it clear was, I thought that the 2 sites that came with Generate Capital offered you flexibility and 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 to expand capacity at any sites. The capacity that we have that is energizable, if you would. So no need for additional expansion covers us to 50 exahash. So anything at the Generate sites that would be an increase in site capacity would be additive and think of that as more 2025 growth target.

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.

Yes. 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 of landfills and we've talked about the pilots that we have running in Utah in that regard. You can also capture methane flare gas from oilfields, for example, and there is methane coming out of a variety of agricultural processes. Obviously, dairy farming generates a lot of manure. 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. 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 pre-heat the biomass that you're using to make ethanol, alcohol, for example, manufacturing, spirits, beer, et cetera. You have to do similar things for the fermentation mass. And in the case of agriculture, you'll find there's a lot of bio waste that can be used and then you can generate heat and feed that back into things like greenhouses or shrimp farms, et cetera. So heat reuse is very important. You also have the simple use case of just heating buildings. You can take electricity that normally is going to power a boiler and you can replace that boiler with our 2PIC technology with miners in it and you can generate hot water just the same. Same amount of energy generates, same type of water at a similar cost. And so, for the building owner, 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, but some of these sites potentially are 5 to 20 megawatts in size. 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, 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. It's very important that you start to develop this long tail of Bitcoin mining that I 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 because, over time, large utility-scale miners will eventually come into a place where you can't get energy at utility scale at a lower cost than its cost to produce in those cases. And if Bitcoin price trends upward but not at an accelerated pace, then over the next 4 to 8 years, potentially, utility scale mining will become 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. 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 the block subsidies are the primary driver of revenues for Bitcoin miners.

Our next question comes from the line of John Todaro with Needham & Company.

I guess 2, if you could just kind of remind us through the cadence of getting 50 exahash by the end of '24? And then second question, do you anticipate G&A to kind of stay mostly flat from here? It sounded like there was still some hires you needed to do. But just wondering if we could drill into that a bit more.

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 the 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 Ellendale back online fully and fill out the little nooks and crannies of capacity that exist out there. 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 uptime. And this is all before we start talking about the benefits of 2PIC immersion and what it can do from an overclock perspective with minimal impacts to efficiency. So I think longer term, these types of technologies are going to become really important because if you can overclock S21s to the tune of 50% or 60% and you can do it with a de minimis loss of efficiency, then you can save a lot of CapEx, 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 grow well beyond 50 exahash at the end of this year.

On the G&A, if you think about it from a cash G&A standpoint, excluding stock compensation, which is a non-cash item, we expect it to be flattish on a quarter-over-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.

Our next question comes from the line of Joe Flynn with Compass Point Research.

I had a question. I was wondering what the progress is on Auradine. And also, Fred, when you talk about having the latest and greatest S21, are you referring to 17.5 joules per terahash or the most recent Pro version where it's 15 joules per terahash?

Yes. Regarding Auradine, I won't go into detail about all the company's accomplishments, as I'd prefer the management team to address that. However, I can share that we are in the process of deploying Auradine in our two-phase immersion tanks. We will have the capability to fit nearly 800 kilowatts of mining capacity in an 8-foot container, which represents a significant power density. For context, at our UAE sites, each 40-foot container currently has about 1 megawatt. By retrofitting that container for dual-phase immersion, we can achieve 3.2 megawatts in the same format at a relatively low upgrade cost. This involves the same miners, just more units, along with an increased power availability. We believe this will be a key differentiator moving forward. The benefit of Auradine's miners is the advanced fleet management intelligence they incorporate. Like any fabless semiconductor business, Auradine is expanding wafer capacity with their suppliers and will continue to increase supply. We will keep purchasing their products as supply chains improve. Regarding the question about Bitmain, there is a mix of Pros and the 17 joules per terahash. The immersion version of the S21 does not have a Pro variant, but it operates more efficiently than the air-cooled version, which balances out the difference.

Thank you. There are no further questions. I'm going to turn the call back over to Rob Samuels for closing remarks.

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 [email protected], and thank you. Enjoy the rest of your day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.