Greetings. Welcome to MARA's Q3 2025 Earnings Conference Call. Please note, this conference is being recorded. I will now turn the conference over to Robert Samuels, VP of Investor Relations. Thank you. You may begin.

Thank you, operator. Good morning, and welcome to MARA's Third Quarter 2025 Earnings Call. Thank you for joining us today. With me on today's call are our Chairman and Chief Executive Officer, Fred Thiel; and our Chief Financial Officer, Salman Khan. Today's call includes forward-looking statements, including those about our growth plans, liquidity, and financial performance. These involve risks and uncertainties, and actual results may differ materially. We disclaim any obligation to update these statements, except as required by law. For more details, see the Risk Factors section of our latest 10-K and other SEC filings. We'll also reference non-GAAP financial measures like adjusted EBITDA and return on capital employed, which we believe are important indicators of MARA's operating performance because they exclude certain items that we do not believe directly reflect our core operations. Please see our earnings release for reconciliations to the most comparable GAAP measures. We hope you've had the chance to read our shareholder letter and look forward to your feedback. We'll begin with some brief prepared remarks from Fred and Salman. After their comments, we are going to be conducting an analyst interview with management. Today's session will be conducted by Reggie Smith, analyst at JPMorgan. And with that out of the way, I'm going to turn the call over to Fred to kick things off. Fred?

Thanks, Rob, and thank you all for joining us. This quarter, we continued to evolve MARA from a pure-play Bitcoin miner into a vertically integrated digital infrastructure company, one that converts energy into both value and intelligence. At the heart of our strategy is a simple belief, electrons are the new oil. Energy is becoming the defining resource of the digital economy, powering everything from Bitcoin mining to artificial intelligence. And we believe those who control abundant, low-cost energy will shape the future of both finance and intelligence. Bitcoin has now entered its institutional phase. We're seeing financial leaders such as BlackRock, Citicorp, and now even JPMorgan integrating Bitcoin into traditional frameworks. And we're seeing the establishment of strategic Bitcoin reserves by corporations and governments alike and even the Secretary of Treasury has posted positive notes about Bitcoin on X. What miners have always understood is now being recognized by global markets. Bitcoin is digital energy, a mechanism for storing and transmitting value. As one of the largest Bitcoin miners in the world, MARA sits at the center of this shift. Our energy to value infrastructure allows us to convert raw power directly into Bitcoin that we hold on our balance sheet, a distinct advantage that grounds our broader mission, transforming energy into intelligence. Every electron has potential value and artificial intelligence represents the next frontier of this transformation of energy into even higher value. We believe that inference AI, where the value of AI is actually created and derived, and not training in foundational models is where the AI industry will create the greatest amount of value over time. Every insight produced by an AI model has a cost per token, driven by the cost to build and operate the data center, of which the energy cost makes up a major component. Over time, compute and the cost to build the data center will drop as technology advances such as low-cost ASICs, open-source models and the ability to operate in less sophisticated and less costly data centers drive efficiencies resulting in rapidly declining costs per token, making the AI data centers of today unable to compete on cost per token over time without significant technology refreshes requiring even more and higher capital injections. We believe energy, not compute, really becomes the primary constraint on AI growth. We are already seeing the alternatives to GPUs enter the market and open-source AI is making it far easier and much less expensive for companies to deploy advanced AI systems directly in their own private cloud environments. In the past, most models were only available through public cloud APIs, which meant enterprises had to send data off-site and pay high per token fees to access AI capabilities. But today, many of the world's most capable models like Llama, Mistral, and others are available in open-source form, giving companies full control to run AI more cost efficiently and fine-tune their models privately. This is a major inflection point for enterprise computing and a shift that plays directly to our strengths as we build out low-cost, high-efficiency compute powered by our own energy infrastructure. We believe we're positioned to provide the kind of private, scalable environments enterprises need to deploy these open models securely. MARA is positioning itself at the nexus of these two AI trends. Open-source AI is expanding the addressable market for private cloud compute. We believe that the future infrastructure will be built to serve that demand efficiently and profitably. This is where MARA's expertise in securing and operating low-cost power gives us a distinct advantage. Just as we optimize for the lowest cost per petahash in mining, we're now optimizing for the lowest cost per token in AI inference. Our long-term vision is to integrate these two energy pathways, Bitcoin and AI into a single platform. Bitcoin mining monetizes underutilized energy and stabilizes grids, while AI inference transforms that same energy into intelligence and productivity. By bringing Bitcoin and AI together, we seek to maximize the value of every megawatt hour we manage. We've already begun executing on this strategy. This quarter, we installed our first AI inference racks at our Granbury site within a modular non-water-cooled containerized data center. This site currently has 300 megawatts of nameplate capacity with potential opportunities to expand our growing AI inference business in combination with our Bitcoin mining operations at the site. This milestone marks a significant step forward in proving out our AI infrastructure and next-generation inference hypothesis. It also demonstrates the versatility of our platform, underscoring the potential flexibility of our mining sites to support AI workloads along with Bitcoin mining. Two major initiatives this quarter are propelling our strategy going forward. First, our pending acquisition of Exaion, a subsidiary of EDF in France. Once regulatory approvals are completed and closing conditions have been met, Exaion will expand our capabilities into enterprise-grade AI-optimized private cloud and HPC infrastructure. We believe this will position MARA as a credible partner for enterprises seeking secure localized inference capacity. Second, today we announced an initiative with MPLX, a separately traded public company formed by Marathon Petroleum Corporation, the largest petroleum refinery operator in the United States, to develop and operate multiple integrated power generation facilities and state-of-the-art data center campuses in West Texas. Under this initiative, MPLX will provide long-term access to lower-cost natural gas at scale, where MARA will develop and operate on-site power generation and compute infrastructure. The initial capacity is expected to reach 400 megawatts with the option to expand to up to 1.5 gigawatts across three plant sites. We are also evaluating additional prospective sites to support modular AI and HPC data centers alongside mining operations, creating optionality for future AI inference workloads. MARA's approach is to deploy smaller, modular facilities directly at lower-cost power sites instead of building hyperscaler campuses. We believe this distributed model will enable us to capture value at the inference layer while continuing to monetize mining and grid sales. This modular structure also gives MARA the optionality to shift capacity towards HPC over time as and if economics and infrastructure maturity support greater AI utilization. We believe MARA is positioned to capitalize on a key structural advantage as power becomes the primary constraint in AI growth. Together, Exaion and MPLX connect the two sides of our AI and data center business, energy and compute, and strengthen our ability to control both cost and performance from power to inference. Internationally, we're deepening relationships across Europe and the Middle East, where we see significant opportunity to deploy our integrated energy and compute model. Our pending Exaion acquisition exemplifies this, and we're honored to welcome Gérard Mestrallet, President Macron’s special energy onboard as an advisor tomorrow. His expertise strengthens our global strategy as we pursue our goal of driving 50% of revenue from international operations by 2028. On the financial front, we continue to operate with discipline and transparency. We ended the quarter with 52,850 Bitcoin, having mined over 2,100 BTC during Q3. We remain focused on improving free cash flow through ongoing cost optimization, site-level efficiency gains, and disciplined capital allocation. We have begun opportunistically monetizing Bitcoin from production to fund operating expenses and aim to limit reliance on our ATM to support growth initiatives, helping to mitigate shareholder dilution. As I spoke about last quarter, Bitcoin prices have consolidated within a range since Q2. With intermittent volatility, we view this as a healthy period of equilibrium characterized by institutional inflows into ETF balanced by long-term holder liquidation activity. Using Jordi Visser's IPO analogy, Bitcoin is going through an IPO where early investors in VCs are exiting, and institutional investors are coming in, forming a new base and foundation for growth. Meanwhile, broader macro trends, including rate cuts and expanding liquidity suggest improving conditions for risk assets. Regardless of short-term volatility, our long-term trajectory remains unchanged, building enduring value through energy ownership, operational excellence, and strategic execution. Finally, I want to provide an update on 2PIC. While we continue to recognize the long-term potential of 2-phase immersion, its practical broad application is still a few years out, and direct-to-chip cooling remains the preferred cooling methodology of data center operators and compute OEMs. We have exited near-term investments in 2-phase immersion to focus resources on opportunities with more immediate and higher return potential. In closing, MARA is evolving from a Bitcoin miner into a digital infrastructure leader, combining energy generation, Bitcoin mining, and AI compute under one scalable platform. Our guiding metric is simple, profit per megawatt hour. It measures how effectively we convert energy into value, whether in Bitcoin, AI inference, or grid stability. As we continue to execute, we believe the market will increasingly recognize the strength of this diversified model and the strategic importance of energy ownership in the digital economy. I want to thank our employees for their exceptional work this quarter and our shareholders for their continued support as we build MARA into the world's leading digital energy and infrastructure company. With that, I'll turn it over to Salman to review the financials.

Thank you, Fred. During the quarter, the global hashrate grew by roughly 20%, with the hashrate and network difficulty both hitting new all-time highs by the end of the quarter. Bitcoin's price remained relatively range-bound, trading between $104,000 to $124,000, closing the quarter with a modest $7,000 gain. It was one of the most competitive mining environments in recent times and a difficult backdrop for our performance this quarter. Despite this, Q3 was the highest revenue and exahash quarter in the company's history. Our focus on operational and financial discipline over the past year is reflected in the substantial growth of our compute capacity and Bitcoin holdings. Between Q3 2024 and 2025, our Bitcoin holdings expanded by over 98%, growing from approximately 27,000 to nearly 53,000 Bitcoin. Our energized hashrate also expanded, increasing 64% from 36.9 to 60.4 exahash per second. Bitcoin price appreciation resulted in approximately $4.3 billion or 256% increase year-over-year. While Fred spoke to our vision and strategy, our vertical integration and capital allocation strategy is reflected in our financial results. That balanced execution allowed us to expand our holdings and take advantage of favorable market conditions while maintaining liquidity and flexibility. We mined 2,144 Bitcoin and purchased an additional 2,257. The impact on our financials is evident in the results we achieved. Let's dig in. Revenues increased 92% to $252.4 million from $131.6 million in the third quarter of 2024. Bitcoin's average price increased 88% over that time period, which contributed $113.3 million. We mined an average of 23.3 BTC a day throughout Q3 compared to 22.5 BTC in Q3 of 2024, which resulted in 74 more Bitcoin mined this quarter. Our strategy to deploy exahash responsibly resulted in growth of our BTC mine despite a significant growth in global hashrate and the network difficulty level. We reported a net income of $123.1 million or $0.27 per diluted share last quarter compared to net loss of $124.8 million or negative $0.42 per diluted share in the third quarter of last year. We also booked a $343.1 million gain on digital assets, including Bitcoin receivable during the third quarter of 2025 reflecting the positive impact of the Bitcoin holdings on our balance sheet. Now let's talk about our cost structure. Our purchased energy cost of Bitcoin for the quarter was $39,235 and our daily cost per petahash per day improved 15% year-over-year, which we believe at scale is one of the lowest in the sector. This improvement is directly tied to our growing inventory of owned and operated sites, which now account for approximately 70% of our nameplate megawatt capacity. That transition supports our vertical integration strategy, but also pays dividends both financially and operationally. Since we do not control the price of Bitcoin we mine, minimizing the cost of inputs like energy is critical to the financial resilience and long-term success of the company. Next, I'll provide some insights into our Bitcoin holdings and digital asset management strategy. MARA is the second-largest corporate public holder of Bitcoin, and we seek to generate returns on our holdings as Bitcoin price appreciates. Our approach combines the potential for long-term Bitcoin appreciation with disciplined efforts to generate return while managing risk. Additionally, we have also used Bitcoin as collateral to borrow under lines of credit. As of September 30, 2025, we held a total of 52,850 Bitcoin, including 17,357 Bitcoin that were loaned, actively managed, and pledged as collateral. As such, approximately one-third of our total holdings were activated through our digital asset management strategy. In Q3, we issued $1.025 billion of zero-coupon convertible notes due 2032, extending our maturity profile and increasing balance sheet optionality. With additional liquidity, MARA gains strategic flexibility to act on opportunities, whether that's acquiring more Bitcoin, funding acquisitions, balance sheet management, or general corporate purposes. We have positioned MARA to act in response to market conditions in order to maximize long-term shareholder value. As of September 30, 2025, we held over $7 billion in liquid assets, giving us the flexibility to fund domestic growth and pursue international expansion. To streamline our communications starting in Q4, we will share our production on a quarterly basis. Investors can continue to monitor our monthly MARA Pool production in real time on the mempool. As we have stated previously, electrons are the new oil, and we are laying the groundwork for 2026 and beyond. We're executing on a pipeline of energy infrastructure projects, both in the U.S. and internationally, and we expect these investments to expand our capabilities while keeping costs low. With that, I'll turn it over to Reggie Smith from JPMorgan to begin our management interview.

I appreciate you including me in this call today. I have a significant announcement to make this morning. Could you help me understand how this morning's announcements compare to your previous strategy? What aspects are being emphasized or deemphasized? It would be helpful to discuss what you are prioritizing in the business and what is receiving less focus, especially considering the dynamic nature of the market compared to other Bitcoin miners. While others are mainly focused on Bitcoin mining or colocation, you seem to have more projects underway. Please elaborate on those differences.

Hey, guys. Is everything okay?

Yes. I didn't hear anything. Did you catch my question?

I apologize for the technical issue. I am now back on. Regarding the deal we announced, it focuses on accessing low-cost and reliable energy available around the clock, which is beneficial since we are the generator and can obtain energy at a very low cost. The pricing for the gas is among the lowest in the market. Additionally, this deal allows us the potential to increase our data center capacity by up to 1.5 gigawatts, offering us significant flexibility. Many of our Bitcoin mining sites are well-suited for inference AI, which we have discussed when referring to our work at Granbury and similar sites where we can combine inference AI with Bitcoin mining. Our partnership with MPLX opens up a wide range of opportunities, whether we pursue traditional high-performance computing or develop hybrid AI and Bitcoin mining facilities. This flexibility is essential, and we see owning and managing power as a crucial element for companies in the digital infrastructure sector. Spending trends indicate that, as mentioned by Sachin Ardell in a recent podcast, energy is becoming the limiting factor, not compute power. Therefore, securing energy access is paramount. We believe that long-term value creation in this field will largely stem from inference, while Bitcoin mining will play a critical role in balancing energy grids and providing a flexible load for AI, enabling it to expand into more locations. Moreover, we anticipate rapid advancements in technology within this sector. Just as in Bitcoin mining, where profitability hinges on cost per petahash, the same principle applies to AI businesses unless you are at the application level. This means owning the data and conducting AI analysis directly, particularly in healthcare. Hosting providers primarily offer low tokens, making cost per token critical when using their services. Relying on APIs from cloud providers can be prohibitively expensive for many enterprises, which are now seeking more affordable solutions. We are already seeing the emergence of ASIC-based solutions and open-source models that empower businesses to establish their own private clouds or utilize third-party services to derive AI value. A significant challenge for larger companies lies in their partnerships with colocation centers, where they avoid taking on debt. Instead, the financial burden rests on the joint venture or special purpose vehicle associated with that colocation site. These partners must invest heavily to construct and equip those facilities, and there is also the issue of technology becoming outdated. Over a decade-long lease, hardware upgrades become necessary, and those costs must be factored into operational expenses. I believe there is a risk that some of the $1.4 trillion in data center contracts signed by OpenAI might not be fully operational or revenue-generating in the next five years, as reported recently. Our strategy is more prudent and capital-efficient, as we are vertically integrated and can operate at the lowest cost per token, giving us a substantial edge in the market.

And Reggie, just a reminder, today we control approximately 2 gigawatts of capacity. This added capacity is incremental to that, taking us to close to 3.5 gigawatts over time.

Got it. Understood. Fred, I appreciate your insights. I was doing some calculations this morning regarding AI and HPC. You mentioned in your shareholder letter the costs of power and compute, drawing parallels between Bitcoin mining and HPC. I think the figures might be slightly off, but overall, I believe the comparison holds. In Bitcoin mining, the costs of power and the ASICs, when considered on an hourly depreciation basis, are roughly equal, about a 1:1 ratio. In contrast, for GPUs, that ratio is closer to 1 power to 10 GPUs, leading to a significantly higher depreciation charge. You spoke about ASICs and potentially reducing hardware costs. Am I thinking about this correctly? What are your observations on this, and how do you see the future role developing?

Consider this perspective. When Bitcoin mining began, we started with CPUs, then moved to GPUs, followed by FPGAs, and ultimately transitioned to ASICs. The compute power we can achieve per unit of energy has significantly improved. Now, we can perform far more calculations at a much lower energy cost. In our line of work, we depreciate our computing assets over a three-year period. If you're a hyperscaler entering into a ten or even fifteen-year agreement with a depreciation schedule of five years for the equipment, does that imply the need to replace those machines three times within that timeframe? Additionally, the ratio of GPUs to power is likely around 10:1. As we shift towards ASICs, the importance of power becomes even more pronounced. When evaluating the overall cost per token, the model cost must also be considered. With the presence of open-source models and energy-efficient, low-cost hardware in data centers that don’t require exorbitant investment, the economics begin to mirror those of Bitcoin mining over time.

Okay. Understood. Now, help me understand this. I wanted to understand or make sure I'm hearing you correctly. When you think about kind of the investment risk and the CapEx risk within this chain, obviously, you've got guys that are building data centers, you've got people that are buying like GPUs and hardware. And then you say, obviously, you got the model guys as well. But I guess your comments on kind of where the CapEx risk is greatest, are you suggesting that the people that are buying the machines are taking on the most risk? Or do you think there's still substantial risk in building big data centers? And I ask you that in the context of, I mean, you guys just, I guess, bought a few GPUs yourself. And so like help me square all of this together to understand kind of what your view is there.

Part of the question is whether you are operating as a bare metal provider, essentially offering hosting and GPUs. If you consider what Iron is doing, they are essentially a bare metal provider where someone has to install their software, but they're renting out GPU capacity. This type of service is referred to as GPU cloud. The operator typically finances the GPU purchases. In colocation situations, there are arrangements where the operator covers the costs for the GPUs, while in other cases, the space lessor provides the GPUs and takes on the role of purchaser and operator. If Microsoft were to contract with you simply for capacity, they would likely supply the GPUs themselves, assuming this would be the case, and assume the associated risks. There are various operational models at play in the market. Our approach with edge inference focuses on delivering inference AI, which doesn't rely on GPUs but rather on ASIC-based solutions. This represents a different model in terms of hardware costs; it is air-cooled rather than liquid-cooled, leading to significantly lower infrastructure expenses. You aren’t required to invest millions per megawatt to construct specialized cooling systems. All of this factors into the economic viability of our operations. Additionally, inference often occurs at smaller scales; you don't necessarily need vast 100-megawatt sites at this stage, as the demand for inference is still emerging. According to Gartner and other analysts, over the next 3 to 5 years, inference is projected to become the main driver of revenue and value in the AI sector. That is where we see our focus.

Understood. I'm going to skip around a little bit here. I wanted to talk about Exaion, and kind of loop it back into the broader discussion. But obviously, you guys announced that acquisition. Help me understand what they do today? And maybe talk about the scale of their operations. Like are they running data centers today? And if so, what's the size of those? Like what do they do exactly?

Exaion is currently a fully owned subsidiary of EDF that manages EDF's data centers, which support the nuclear fleet's operations. They handle both AI and traditional data centers across the EDF network, with four facilities in total—three in France and one in Canada. In the Canadian facility, they also utilize quantum technology for research purposes. Exaion has developed a suite of software solutions that facilitate data center operations, ensuring that data is stored in a completely private manner with full encryption, meaning they do not have access to the keys for this data. If a breach were to occur, the encrypted data would remain secure as customers hold the keys. This approach allows Exaion to provide private cloud solutions that prioritize security. The investment in Exaion grants us access to their experienced team and their already established Tier 3 and Tier 4 data centers, which are adept at handling sensitive information. They have a strong customer base and the necessary expertise, allowing us to leverage their skills and technology for global expansion.

Got it. So they're asset-like. They're more of a service layer, their engineers, their software, things like that. Like they don't actually own any data centers. It's really running that data center, securing data. Is that the right way?

Yes.

Understood. Okay. Is there a way to frame it, maybe early, their revenue run rate? And interestingly about that transaction, I think the first 64% of the transaction you bought them for $168 million. The next 11% will be at a much higher rate. Like what was the thinking there? Any opinions you can provide there?

I mean, I think you can think of how many times deals like this are structured. You're paying for a portion of the business based on where it is today. And then the growth opportunity for the existing investors is in executing on a plan to help grow the business. And therefore, you're going to pay a higher multiple for that. That's how you should think of it.

Understood. Okay. Now, I want to tie all this back. So the MPLX transaction, real quick on that. Does it require any like ERCOT approval? Let's say these guys have the natural gas. You guys would make the power plant or the generation assets and then the data center. But is anything needed from ERCOT? Any roadblocks there? And like how quickly could you have a data center up and kind of running?

Yes, you should view this as us initially constructing a gas-fired power generation station. We expect to acquire necessary air permits without much difficulty due to the current political environment. After the power plant is built, we will need to apply to connect to the grid and become a grid provider, which involves a regulatory process. In the meantime, we can produce energy and operate a data center behind the meter. ERCOT will become involved once we connect to the grid. It's important to highlight that our relationship with MPLX allows us to own and operate gas-fired power plants with low-cost gas while colocating large-scale data centers that have reliable 24/7 power in a desirable market. This arrangement gives us significant control to drive our growth efficiently and positions us well in the HPC AI market, creating numerous opportunities to generate value for our shareholders.

I agree. I've been thinking about this idea of like vertical integration, and I didn't know if it was going to be a power company acquiring data center capabilities or the other way around. So this is very interesting. If I could dig in a little bit more. So I think you talked about 400 megawatts of capacity to start. How should we think about like the minimum effective dose to kind of get started? So I don't know if you want to commit to 400 megawatts right off the bat. Is it 20 megawatts? And how quickly can something like this come together? And then I know it's early days, but we've heard estimates of up to $10 million per megawatt to build out a data center. Like what are you thinking about from that perspective as well?

You don't construct a power plant in 20-megawatt increments; instead, you build it to a specific size at each site. We have three sites, and we are likely to approach it in 100-megawatt increments initially, though there is the potential to expand these plants significantly. Regarding data centers, we have options to construct them as traditional Bitcoin mining centers, fully containerized, at approximately $1 million per megawatt, which includes hardware costs. If we consider an AI approach similar to our current inference AI operations, the infrastructure costs are comparable, although they could be slightly higher depending on the cooling technology we choose, such as direct-to-chip cooling versus air cooling. Utilizing direct-to-chip cooling will increase the infrastructure costs. However, we are not constructing buildings that take three years to complete; we are employing modular containerized solutions that provide us the flexibility to reconfigure a site as needed. I firmly believe that high-performing HPC-capable modular solutions will emerge in the market over the next 2 to 3 years, enabling deployment of sophisticated solutions similar to those found in advanced data centers for complex AI operations. It's important to note that very few customers globally require data centers on the scale needed by OpenAI, which demands substantial compute capacity due to the extensive data and solutions its models operate on. For context, look at DeepSeek and how it caused a stir in the market; they utilize a strategy of loading only the necessary model segments and data into memory for queries, drastically reducing the need for large-scale resources. I anticipate market efficiencies as models transition to open-source, with clients developing and training their own models to avoid sharing data with OpenAI. For instance, I recently spoke with the Head of Strategy for Aramco, who mentioned they do not store their seismic data in the cloud; instead, they build their own models. Similarly, Lockheed has opted for an on-prem solution with Google, as corporations are moving towards data sovereignty and private cloud setups, avoiding storage of data in public clouds like those from Meta, Amazon, or OpenAI. With roughly 70% of corporate data still on-premises, there's a clear reason for that. Inference is crucial for deriving insights from data, whether it's patient data in healthcare, manufacturing data in airplane production, or operational data in factories and power plants. Organizations prefer running these systems on-site to mitigate risks associated with system failures that could jeopardize their operations, especially if reliant on a cloud service provider. As such, there’s a real need to understand the limits of how much risk companies are willing to take by entrusting their critical assets to a third-party cloud. If they can manage model issues and lower costs in a near-prem or on-prem private environment, they will certainly pursue that route. I've had discussions with executives from major corporations in finance who are shifting their AI systems back from the cloud to more cost-effective near-prem or on-prem private solutions. Therefore, I believe it's crucial for analysts to engage more with the enterprises that are the actual users of these systems. These customers will determine the financial success of companies like OpenAI and Microsoft. It's essential to connect with those who will fund these initiatives, as building technology is futile without sufficient demand and utilization, much like the need for passenger traffic to keep railways operational.

And I want to make sure I'm hearing this right and connect these dots. I think you mentioned kind of a smaller kind of, I think, a 1 megawatt, what do you call it, I guess, kind of like a sample or a small micro data center, pilot site. If I'm hearing this right, are you saying that like that could become like the prototype for enterprises having their own on-premise like AI capabilities? Is that what you want to say?

Certainly. Think of it this way: take the example of oil drilling. There’s an exploration drill operating with seismic data, and consequently, there's a need to meticulously plan the drill profile for the operator. Oil companies have developed advanced AI models that typically run in a modular setup at the drilling site. These models collect real-time data from the drill and provide immediate instructions back to the drill operator. Now, consider a financial trading company where speed and latency are crucial. They prefer their systems to function on a local network rather than across a wider area, which can introduce delays. A mere 25-millisecond delay can result in lost profits on a trade. Looking into other sectors, such as defense, which is poised for significant growth in AI applications, or healthcare, manufacturing, and even the movie and television industry, we see that video and audio generation are the highest consumers of AI tokens. The cost per token is essential because generating a video clip of 5, 10, or 15 minutes demands a significantly higher number of tokens than simply asking a question to OpenAI. While the market often gets excited over large contracts, it is essential to focus on who will be using these technologies, their intended applications, their budget for this technology, and the expected pricing trends. To quote Wayne Gretzky, those in our business should aim to be proactive and anticipate future developments, rather than merely reacting to current trends. Many are promoting deals to boost their stock, but it’s crucial to understand what the industry will look like in five years.

That actually leads to my next question, Fred. So thinking about announcements and catalysts, like what should we look for from MARA to know that like this strategy is taking form and we can start to frame an economic story or a creation story around some of these initiatives? Like what are the milestones and announcements we should be looking for from you guys?

So here's what I think you should look for. Four years ago, I made a presentation at a conference where I said that Bitcoin miners are either going to become energy companies or be owned by energy companies. I think what you should look for is when large energy companies start signing partnership agreements with companies like us to monetize their energy assets at large scale. That will tell you that if that happens to be us, that they have chosen us to do it with because they feel we are the best option for them to maximize the value of the electrons that they produce. That's one step. The next step is as you start seeing customers using more and more inference AI and you see us reporting a greater and greater mix of inference AI in our data centers. And the real metric you should look for is what is our profit per megawatt hour that we talk about. It's not a GAAP measure, so it's not going to be reported that way. But you can think of it as an operational KPI where the profit we can generate from every megawatt hour of energy that we consume or produce is a data point that our investors will be able to see and that will directly correlate to our profitability and ability to have a cash-generating business.

Okay. And just to make sure, I apologize, this is a silly question. Are you looking to sign colocation clients or deals for this site in West Texas? Or are you considering putting your own machines in?

I'm not going to answer the question directly because I believe our competitors spend too much time listening to what I say and then trying to imitate it. So I will put it this way: it gives us maximum flexibility to decide what we want to do and with whom.

Got it. Okay. Because I want to bring it up because you mentioned signing a colocation as like a milestone and...

No, you see if I can operate inference AI and make money on it without signing a colocation facility that will give you a little bit more insight into what the business model might actually be. Because think about it, the best thing about our Bitcoin mining business is we don't have a customer. What's the hardest thing all these colocation deals have is they have to go find a customer.

Yes. People say I change my opinion when the facts change. This seems like a major shift for MARA. You bought GPUs in the last three months and you started to run them. What has changed your opinion or has your opinion changed? Strategically, it seems like the company is pivoting. What have you learned in the last couple of months or quarters that has driven this shift?

Yes, Reggie, I wish I could say I had a sudden realization, but we are simply executing the strategy we decided on over a year ago. We have chosen not to be completely transparent with the market about our plans as it gives our competitors insight into our operations, allowing them to replicate our approach. We prefer to control the timing of our communications. I have been discussing the importance of inference at the edge for a long time, and that is where we intend to make our presence felt in the market, and we are doing just that. We have also talked extensively about owning power and our commitment to running our business by controlling energy assets to ensure we are fully vertically integrated. We are following through on that. There is no change in our strategy or any pivot. We have been intentionally operating more like a start-up, ensuring that we have everything in place so that as the market becomes more aware of our activities, they witness a series of announcements that build their confidence in our commitment to the vision we established a year ago.

Yes. No, I'd say from where I sit and I think about all the pieces you guys have. There are a lot of pieces, and I'm not smart enough to figure out how to put it all together, but it seems like you guys have a lot of ways to kind of win here. I guess we just have to kind of sit back and wait for those announcements as they kind of come through. I know we've kind of spent a lot of time on this. I hope it wasn't a wasted time for people. Maybe we could shift gears a little bit and talk about your sovereign and foreign government initiatives and things that are going on there. Like one of the questions I have, as you think about this is like what do you think gives you guys a right to win in the sovereign compute kind of load management space versus competitors? Who's even competing with you there?

I think there are a couple of ways to view this. Most of our competitors enter a marketplace by collaborating with others or securing power through contracts. They often avoid engaging with the government, fearing that it might hinder their plans. This is particularly true in many parts of the Middle East. In contrast, we opted for a different approach. For instance, in the UAE, where we have been operating for a few years, we chose to directly partner with the government. We collaborated with ADQ and IHC to form a joint venture that focuses on balancing the grid in the UAE. This site is one of the most advanced liquid immersion technology facilities in the Middle East, surpassed only by our facility in Granbury. This has helped us establish a solid reputation for working effectively with government entities, adhering to regulations, and being a responsible grid participant. As we engage with countries like France, the U.K., Kenya, and Saudi Arabia, we are welcomed because we aim to enhance grid efficiency and effectiveness. Our goal is to maximize the value generated by every electron from their generators. We are committed to being a good grid participant, ensuring stability and facilitating the integration of new types of loads, such as AI data centers. Many view this as a time-consuming process, but I have been frequently traveling to meet with high-level government officials, and we have garnered considerable support. There are notable dynamics in Europe that present significant opportunities for us. The same holds true in Saudi Arabia and other regions. We believe that it is worthwhile to invest time into this process thoughtfully and carefully to achieve long-term success in those countries. By fostering positive relationships with governments, we position ourselves advantageously for future opportunities, leading them to approach us when they wish to expand their initiatives. This is the type of partnership we seek with governments, vendors, and end customers within the industry.

And it's funny, we haven't talked about Bitcoin mining at all. I know we're running short on time. Just an update there. Love to hear about the stuff that's happening at the wind farm and some of your flared gas initiatives. Maybe talk a bit about Auradine. And then I guess, your plans for growing hashrate here and how you think about that in the context of kind of where hashprice is and why it makes sense to continue to grow your hashrate at these levels?

Yes, I'll address this in a somewhat reverse order. More hashrate is coming online daily from various players, including well-capitalized private companies with significant financial resources aiming to become the largest Bitcoin miner globally. If we do not expand our hashrate, our share of the global hashrate will diminish, leading to a decrease in Bitcoin production. We believe it is our responsibility to increase hashrate not only in the United States but worldwide to ensure the security and diversity of the Bitcoin blockchain, preventing domination by a small group of companies. We plan to achieve this economically by utilizing low-cost power sources that we control, which relates to the MPLX deal and our operations at the wind farm in Texas, as well as our flare gas initiatives. By the end of this year, we will have doubled our flare gas capacity and will continue expanding that. The wind farm is fully operational from a data center perspective. We're actively seeking out more low-cost energy that we can allocate between Bitcoin mining and AI. We envision owning a significant amount of electricity and utilizing it in the most efficient way possible. Regarding Auradine, their new hydro model is competitive with offerings from Bitmain and other manufacturers. We're incorporating Auradine into our fleet but not exclusively, as we still employ various machines with unique characteristics suited to different environments. Over time, it is reasonable to expect that Auradine will become a larger part of our fleet due to their systems' exceptional capabilities, especially for load balancing in the context of the evolving regulatory environment in Texas, where utilities manage curtailment and power contexts. As more utilities seek these capabilities in grid-connected miners, Auradine is likely to capture additional market share. Furthermore, they have launched intriguing AI-related ventures such as One or Escape, which focuses on securing large language models and recently received positive feedback at the RSA conference, alongside ScaleUp, which develops ultra-high-speed cluster interconnect switch technology. This has proven to be a valuable investment for us, and we are continuously seeking similar investments to enhance our technology solutions over time.

I guess last one for me. You kind of talked about it earlier, but obviously, a lot of market cap, a lot of value has been created in the Bitcoin mining space amongst the publicly traded guys. I'd argue that you guys haven't received or gotten your share of that. Like what do you think the market is missing and hopefully will come to appreciate in the near term or medium term?

I think.

About that specifically.

Yes. I mean I think the key for us is the floor on the valuation of our stock is essentially the value of our Bitcoin holdings. And people don't put a lot of value on the Bitcoin mining infrastructure or the Bitcoin mining business per se. And I think as our business continues to evolve, especially with the energy generation story and as AI becomes a bigger piece of this and we generate more profit per megawatt hour consumed, we'll start getting more attention from people. And I think you'll start seeing people realizing really the benefit of what we're doing in our model, and we'll get more credit for that.

Reggie, just to add to that, the power capacity that we have secured through these transactions that puts us at the forefront. And here's the actual value flows with Bitcoin mining option value between AI-ready assets, our operational flexibility with integrated power, that's what's going to drive value for our stockholders from a long-term perspective.

Perfect. Congrats on the quarter.

Thanks, Reggie. We appreciate it. Most of the questions that we received from our retail shareholders have been answered. We're obviously running short on time. But thanks, everyone, for joining us 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]. Thanks very much, and enjoy the rest of the day.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.