Crypto Miner Marathon Digital Posts $192 Million in Net Losses in Q2

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

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

Marathon mined 707 bitcoins in the second quarter, down 44% from the previous quarter, due to power outages in Texas, as well as maintenance and weather-related issues affecting the power generation facility in Montana.

Marathon Digital’s share price closed at $14.43 on Monday – up about 1.8% on the day. The stock, which is down 56% year-to-date, has risen about 85% in the past month.

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

The company has hosting arrangements in place to reach its goal of 23.3 exahashes per second of computing power by the middle of next year, Thiel added.

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

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

Miners are down an average of 67% so far this year, with Stronghold Digital, down 80%, leading the decline.

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

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

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

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

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

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

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

Updated August 8, 2022 at 18.00 ET.

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