MARA Holdings, Inc. (MARA) Earnings Call Transcript

Greetings. Welcome to the MARA's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Robert Samuels, VP of Investor Relations. Thank you, Robert. You may begin.

Thank you, operator, and good afternoon, everyone, and welcome to MARA's Third Quarter Fiscal Year 2026 Earnings Call. Thanks 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, please see the Risk Factors section of our latest 10-K and other SEC filings. We will also reference non-GAAP financial measures like adjusted EBITDA and 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 prepared remarks from Fred and Salman. After their comments, we will open the call to Q&A. I'm going to turn the call over to Fred to get things started. Fred?

Good afternoon, everyone, and thank you for joining us. The third quarter marked an important shift for MARA. Over the past several years, we've assembled a difficult-to-replicate portfolio of powered assets, strategic partnerships operating infrastructure and technical capabilities. We have made good progress continuing the transformation of MARA into a business design to produce contracted returns and durable free cash flow with a simple goal of maximizing the value of every megawatt we control. The market is becoming more selective about how AI infrastructure is financed and delivered. Tenants, lenders and investors want more than a position in an interconnection queue, they want near-term power, a suitable site, the right development partner, creditworthy tenants and a credible path to completion. Those requirements go directly to MARA's strength. And in the third quarter, we put them to work, expanding our power position, advancing tenant discussions and strengthening our capital flexibility. Regarding tenants, we have made great progress and discussions are in very advanced stages. Our engineering and operations teams have hosted prospective tenants across nearly all of our sites, including Hannibal adjacent to Long Ridge. And we feel particularly proud of the development team's progress at Carney, where permitting is well advanced as has been disclosed in the news. We are still targeting 2 lease signings before year-end. And although market conditions are fluid, that timing could move into next year. We are continuing to advance power, permitting, site and financing work required to support those agreements and ensure time with delivery. In regards to Power, at Long Ridge, we recently received FERC approval, which was the last remaining material contingency, and we expect to complete the acquisition over the next few weeks, subject to customary closing conditions. We're excited to add a highly efficient natural gas plant to our portfolio that is currently authorized to sell 485 megawatts and expected to increase to the full 505 gigawatt nameplate capacity in the first half of 2027. Long Ridge will not only immediately strengthen our financial profile with contracted cash flows from power generation, but also provides us over 1,600 [indiscernible] acres with access to power, water, fiber and rail, supporting a premier data center campus. Together with our existing bitcoin mining operations at the site, we will have over 1 gigawatt of total potential capacity. We look forward to completing the transaction and beginning the next phase of Long Ridge's development as part of our strategy. We also secured rights to a site in Matagorda County, Texas, with access to up to 2 gigawatts of power capacity that has been classified as study load under ERCOT's batch 0 process. Today, we operate approximately 1 gigawatt across U.S. and international markets. Subject to the closing of Long Ridge and the energization of Matagorda. We expect that portfolio to reach over 4 gigawatts. Exaion delivered early commercial proof this quarter, signing a 4-year $79 million chief use service agreement with a U.S. customer under 100% pick-or-pay terms. Exaion has built a pipeline of over $3 billion in total contract value, with approximately $1 billion of that targeted for delivery by the end of 2027. These are indications of demand and are not yet contracted or committed. However, we view this as an early indication of demand for the broader model Exaion is building as part of MARA's broader strategy. Regarding our balance sheet, after the quarter ended, we sold bitcoin to repay $750 million of bitcoin back debt, releasing 18,750 bitcoin that had been pledged as collateral. Together with the 1.4 billion or 37% of total debt reduced since the beginning of the year, we've strengthened our balance sheet and are positioned for our next period of growth. We will continue to manage our bitcoin holdings liquidity and debt obligations against market conditions and the expected return on potential uses of capital, including AI infrastructure opportunities. These milestones matter because investors are paying closer attention to the pace of AI adoption, higher financing costs and the credit structures behind the individual projects. Those factors affect the timing and economics of development but they do not change the underlying need for power ready infrastructure. What we hear from prospective tenants is consistent. Demand remains strong for companies that have a credible path to power and delivery. Since the election, there's been a significant uptick in demand for our sites, which we believe provides opportunities for pricing power. This is also true for some locations in our portfolio that 1 would have been viewed as peripheral, including parts of our international portfolio. That demand is important because it validates the platform we have spent years building. Our platform was built through bitcoin mining, running a large mining fleet requires power procurement, modular deployment, infrastructure optimization and real-time load management. Those are the same capabilities required to operate a broader digital infrastructure platform, especially as modular data centers are being considered for innovative solutions that shorten delivery time frames and reduce build costs as was seen in the bitcoin mining industry. We believe MARA is one of the largest operators of modular bitcoin mining and digital infrastructure in the United States, and we intend to apply that experience as we transition towards AI HPC. Bitcoin remains our operating foundation and a flexible way to monetize power while we develop higher-value infrastructure opportunities. That foundation gives us optionality. We can keep each megawatt in bitcoin mining or directed to AI or HPC when those uses offer a greater adjusted return. That foundation supports 3 complementary paths to deploy the platform. Mining generates near-term cash flow and keeps Energize sites productive. AI and HPC campuses convert powered land into longer duration contracted infrastructure for hyperscalers and other large compute tenants. And modular data centers can bring compute online faster, where a small or faster deployment makes sense. The right solution will depend on the customer, the site and the return profile. Conventional and modular solutions can coexist across the portfolio. Once the first phase of a campus is complete, the hardest work on land interconnection, permitting and core infrastructure is behind us. A tenant may begin the 200 megawatts and ultimately require 400, 600 or more, allowing us to increase the value of the site without starting over somewhere else. Large campuses can also support a mix of hyperscalers, AI cloud providers and enterprise workloads which can improve utilization and reduce dependence on any single deployment. Our proposition is built around speed, certainty and reliability. Speed comes from controlling sites with power already available or on a credible path to availability. Certainty comes from combining power, land, permitting, development and financing into a project that can be underwritten. Reliability comes from years of designing, owning and operating large-scale compute infrastructure, together with strategic partners like Starwood. Exaion takes MARA above the infrastructure layer. It provides private cloud infrastructure, open weight model orchestration and inference as a service for customers who need greater control over their data, infrastructure and jurisdiction. Those needs are especially important for governments, regulated industries and enterprises in Europe and other markets where sovereignty and security shape technological decisions. We are commercializing Vertebrai our flexible energy compute platform built on years of power-intensive operating experience. It dynamically directs power as supply and demand change, a model we first proved our wind farm in Hansford County, Texas, where prices can fall below 0 and curtailment is coming. From April to September 2026, we estimate that Vertebrai helped our Texas wind farm cut curtailment by more than half. Without Vertebrai an estimated 46% of potential wind generation would have been curtailed by using on-site computing to absorb power that otherwise would have gone unused. Vertebrai reduced that figure to 22%, putting more of the farm generation to productive use and creating an additional source of revenue. With Vertebrai now live, we are focused on bringing this capability to additional power producers and also data center developers. We have been deliberate about the projects we pursue. The first wave of AI infrastructure saw aggressive pricing rising rates and uncertain delivery schedules put pressure on project economics. That experience reinforced our focus on contracts that can be financed, built and operated at acceptable risk-adjusted returns. We are focused on the quality and durability of each opportunity, not growth for its own sake. That discipline also guides capital allocation. We manage cash, bitcoin, debt and access to capital as part of a single balance sheet. Bitcoin can be held as a strategic asset monetized when the return on another use case is more attractive or used as a collateral when this is the most efficient source of funding. As Salman will discuss in just a minute, bitcoin has been a differentiating tool for capital management. After quarter end, our Board of Directors authorized the stock repurchase program of up to $500 million of our common stock. This does not mean that we will not continue to invest in high-return projects. However, with current market conditions, we believe having an open stock repurchase program provides the company with an additional tool to possibly increase shareholder value. The authorization reflects the Board and management's confidence in MARA's long-term strategy and the significant opportunities that lay ahead. Our direct spending will remain focused on site control predevelopment work and selected project equity where the expected return warrants it. The Starwood model reduces the amount of corporate equity required for qualifying development while our liquidity gives us flexibility to pursue opportunities without compromising the balance sheet. Our focus is on converting power and sites into tenant leases, bringing projects online and making the earnings potential of this platform visible in our results. Bitcoin built the foundation, our power portfolio broadened the opportunity. Our partnerships expand the ways we can capture value from each megawatt. Our responsibility now is to execute with discipline and demonstrate the returns these assets can produce. With that, I'll turn the call over to Salman to walk through the financial results. Salman?

Thank you, Fred. And good afternoon, everyone. The significant activities defined Q3 for MARA. First, after quarter end, we received FERC approval for our Long Ridge acquisition, which we expect to close in the next few weeks. Long Ridge is one of the region's most efficient combined cycle natural gas plants currently operating at 485 megawatts and is expected to reach 505 megawatts in the first half of 2027. Approximately 70% of its output is hedged under long-term contracts, which provides MARA a unique and diversified EBITDA value proposition compared to our peers. Historically, Long Ridge has recognized over $140 million in annualized adjusted EBITDA as previously disclosed. Second, we continue to strengthen our balance sheet deleveraging by reducing $1.4 billion or 37% of total debt since the beginning of the year. During the quarter, we borrowed $750 million, a lateralized with bitcoin to fund the Long Ridge acquisition and subsequent to quarter end, fully repaid the loans taking advantage of Bitcoin's significant price increase. In August, we borrowed against Bitcoin while it was trading around $64,000, an and after quarter end, sold 13,597 bitcoin at an average price of approximately 81,039, generating more than $1.1 billion in proceeds. Disciplined and patient execution enabled us to capture an estimated net benefit of $170 million. Third, we advanced our power portfolio in Matagorda. We hold the rights to develop a site of more than 1,200 acres that ERCOT classified as study blow in bad geo process. We expect the site to provide up to 2 gigawatts of grid connected capacity. We also strengthened that deal itself. During the quarter, we amended the purchase agreement and revised certain milestones to reduce our near-term cash commitment. As a reminder, [ Mardi ] not made payments upfront to enter into this transaction. and we will not incur additional costs to the seller until a milestone progress is made. Since quarter end, our Board has authorized a discretionary share repurchase program up to $500 million of our common stock. In the current environment, we are always looking to deploy our capital where it can earn the highest and best return and at times, define mean repurchasing our shares. While markets have declined, bitcoin has remained resilient, and our balance sheet gives us the flexibility to act on those opportunities when they arise. We have spent years building a differentiated portfolio, spending power, land and compute. And we remain focused on turning that foundation into contracted returns and durable free cash flow, as Fred mentioned earlier. We will remain disciplined in how we allocate capital, deploying it where we believe it can create the greatest value for our shareholders. During the quarter, we continued to streamline operations and eliminate redundant functions, aligning our cost base with the business we are building. This is the product of patient deliberate work by our teams and I want to thank the MARA team for that. With that context, let me turn to Q3 financial results followed by liquidity and capital allocation. Average bitcoin prices stayed below last year's levels, though they strengthened over the course of the quarter. Despite the price environment, we reduced debt, advanced the acquisition of Long Ridge and Matagorda and kept our cost base in check, positioning us well for the years ahead as a digital infrastructure company. Revenue for the third quarter of 2026 totaled $164.2 million versus $252.4 million in the prior year period, a decrease of $88.2 million. Bitcoin mining revenue accounted for $83.1 million of that decrease. Average bitcoin price decreased 37%, lowering revenue by $94.8 million, partially offset by an $11.7 million benefit from higher production. We mined 2,247 bitcoin this quarter or 24.4 per day, approximately 103 more than the prior year period. We won 644 blocks, up 2% year-over-year and down 7% quarter-over-quarter. Year-to-date, we have mined 6,916 bitcoin. We delivered energized cash rate of 71.2 hashrate per second and an increase of 18% from 6.4% in Q3 of 2025, driven primarily by improvements in minor efficiency. Our share of available mining rewards was 5.4%, up from 5% in Q3 of 2025. Net income was $632.1 million or $1.28 per diluted share compared to $123.1 million or $0.27 per diluted share in the prior year period. This includes an unrealized noncash fair value gain on digital assets of approximately $885.3 million, reflecting the improvement in bitcoin price during the quarter. Adjusted EBITDA for the quarter, which includes that fair value gain, increased to $857.7 million, up 117% from $395.6 million, in the prior year period. Our cost for petahash per day improved 2% year-over-year to [indiscernible] from [ 31.3% ] in Q3 of 2025. Over the past 8 quarters, it has improved by 20%. We believe that remains among the lowest at scale in our sector. Our cost per kilowatt hour remain 4 of our own sites for our own sites in Q3 of 2026. Purchase energy costs for bitcoin at those sites was $39,674, up from 39,235 orders in Q3 of 2025, while production increased 10% over the same period. Third-party hosting and other energy costs, which primarily consist of colocation services at third-party hosted sites were $71.5 million compared to $75.7 million in Q3 of 2025. The $4.2 million decrease was primarily driven by lower listing costs, partially offset by higher energy consumption at certain hosted sites. Looking ahead, our most significant third-party hosting arrangements, which represent approximately 29% of our total energy capacity begin to expire in the third quarter of 2027 and are expected to fully conclude by the first quarter of 2028. As they expire, we expect to eliminate third-party listing costs and improve our cost per kilowatt hour over time. General and administrative expenses were $75.8 million, down from $85.3 million a year ago. The 11% decrease primarily reflects a $9.8 million reduction in stock-based compensation expense, partially offset by operating costs of our recently acquired majority-owned subsidiary. Exaion and administrative costs supporting our expanded footprint. Turning to the balance sheet and liquidity. We ended the quarter with $946.5 million in cash and cash equivalents. And approximately $3.8 billion in combined cash at bitcoin. Our bitcoin holdings totaled 34,012 at quarter end, valued at approximately $2.8 billion. At a spot price of [ $83,556 ]. Of that total, approximately 57% or 9,260 bitcoin was loaned or place as collateral. This quarter end, our loan repayment has significantly reduced our total loan or pledge bitcoin to less than 5% of our BTC holdings. The combination of our cash and bitcoin holdings gives us the liquidity to meet our obligations, including the convertible outputs while we keep investing in our operations. Power remains the foundation of our strategy. We have assembled a 1 gigawatt portfolio of owned and operated sites with a clear path to over 4 gigawatts. We have secured the foundation of MARA's digital infrastructure transformation. With power, partners and capital in place, we are executing our strategy to deliver long-term shareholder value. With that, I'll turn it back over to Fred.

Thank you, Salman. As Salman discussed, our financial results and capital actions reinforce the approach we have described today. We are balancing liquidity, leverage and dilution while directing capital towards uses that can create the greatest value from our infrastructure. The opportunity is bigger than simply monetizing a megawatt -- it's about increasing the value we capture from that megawatt as we move from power to infrastructure to compute and where it makes sense to integrated cloud services. With that, I will turn the call over to the operator to open it up for questions.

[Operator Instructions] Our first question comes from Paul Golding with Macquarie Asset Management.

But I appreciate the opportunity to ask around all the progress and congrats on the progress made so far. I wanted to ask on Long Ridge initially, as we think about the expansion opportunity there, if you could give some color around maybe emissions permitting backdrop or any other regulatory considerations that should factor in as we think about the recent election? And then I have a follow-up.

I think as we look at that particular project, obviously, it's already emitting. And if anything, the utilities want us to continue to deliver as much power as we can to the grid, which is something we're committed to. As you know, the majority of the power output of the plant is committed by long-term contractual obligations. And it's one of the reasons we actually found this plan so attractive. It's low cost of operations and the committed revenues make it a great cash flowing asset for us. And the land was very complementary to the Hannibal fight that we already have. So we have 200 megawatts via grid connection at Hannibal, the ability to put as behind the meter, which is something that, from a permitting perspective, the team has been working on for quite some time already, anticipating the closing of the deal and then additional capacity through both expansions of plant and additional grid capacity. So that site could reach a total potential of somewhere around 1 gigawatt. So we don't foresee any real regulatory issues there. It's a former aluminum smelter plant site where the data center will be built. And we believe that based on everything we know today, there shouldn't be any real permitting delays for the site.

And if I could pivot to Exaion, congrats on the new GPU as a service deal. I wanted to ask around some of the back of the envelope on the $1 billion of demand lining up with the 30 megawatts, I think that was in the press release shareholder letter. If we do some back of the envelope math there, it kind of pencils out to a pretty competitive mid-30s millions per megawatt of ARR, just quick back of the envelope math. Is the pricing environment that you're describing really pushing through in the form of GPU as a service rental rates per GPU hour. Is this a function of shorter dated contracts or longer-dated contracts? How should we think about the discussions that are underway and how the pricing strength factors into that?

Sure. Yes. So obviously, the shortage of capacity in the U.S. has forced -- many prospective customers to look elsewhere for power. One of the benefits of operating in France, especially at Exaion is its close relationship to EDF in France is a country with lots of power availability. Exaion already has data centers with capacity. This specific contract, the initial 1 is quite small compared to the demand that we've been receiving. The contract term being a little over 4 years is fairly average, I think, in the market right now for this type of service. And the pricing is quite good. If you look at the demand curves, there are obviously some customers who want to run virarubin. There's some customers who weren't happy running prior generation. GPUs. And we believe that in the current environment, if you look at the pricing dynamics, the delivery time frames, the risks of being an early mover with virarubin, using, for example, as in this contract case, B-300 makes all the sense in the world from a financial term because the margins are really attractive when you do it with that type of technology. Exaion has this additional benefit that they have been operating for years a kind of deprecated infrastructure architecture, where they can use GPUs for model building and then deprecate them to inference and then deprecate them to rendering. So 1 of Exaion's products and platforms is something called Exaion Studio, which is a rendering platform using GPUs that companies doing advanced media solutions used for rendering, BD graphics, for example, for things. As an example, you look at the graphics that you would see at the sphere, for example, in Las Vegas, those types of graphics. So real-time rending for those types of events, as well as rendering that would be used in films and other applications like that. So you can take a GPU and dramatically extend its life across a series of customers. And so what Exaion has built is essentially an orchestration platform that lets you do just GPU rental or more involved orchestration across model selection inference as a service, although we have the full private cloud as well as this type of rendering services we've talked about. So it's a great way to extend the life of infrastructure, and it allows us to move all the way from powered land, if you would, all the way to the private cloud.

Got it. So the pricing is indicative of how far the stack Exaion is going as well.

Yes. Exactly.

Our next question comes from Michael Donovan with Compass Point.

Fred, with currently advanced in predevelopment and the conditional use permit in hand, what are the remaining steps to signing a lease there? Are the open items primarily related to power, permitting or project economics?

Let's -- to not kind of go into the NPI world. Let's just say that the issues have nothing to do with anything really on our side. It's simply -- some things on the customer side that just need to be dotted Ts crossed. As soon as they finalize [indiscernible] that, definitely will move forward. And generally speaking, that's what we're seeing across the portfolio. It's -- there has been a rush to get things done. And then at the last minute, there are ways these conditions where the delay is incurred on the customer side typically on the tenant side. Since the election, we've seen a kind of surge, if you would have ether tenants that would normally not have looked, as I mentioned in my comments, that some of our peripheral sites are now saying, listen, if you have power availability. Just let me come in. I think we're also seeing tenants -- prospective tenants being very open to solutions that are a little bit more innovative that will allow them to deliver faster. And then I think the other thing that we're really seeing is -- and this is feedback we're getting from hyperscaler for example, is they are spending an inordinate amount of time dealing with delays caused by first time developers. And this is one of the reasons why we believe the Starwood partnership is so important, and is so critical, especially hyperscalers who have worked with Starwood before. They know what they're getting when they work with Starwood and through Starwood Us, whereas when they work with one of our peers potentially, is the first time of doing this, there is uncertainty. And while many of them may have been attracted by his time lines, they're now realizing that a promise doesn't necessarily resolve itself in delivery and in service on schedule. And so a lot of time is being consumed at the tenant side was dealing with deals that have now gotten kind of delayed or our stock due to development constraints and other things. So I'm very optimistic about the fact that by having waited and not jumped in from the very beginning. Some of you may have recalled, but some of our early comments were very much about if we go in and build the types of data centers that people were talking about 18 months, 2 years ago, we said hyperscaler won't work for a denier. Well, I think hyperscalers have learned their lessons or are learning them now. And we're starting to see a different quality of conversation happening, and we think having been patient will pay off in the long run fourth.

Understood. You've talked about applying your [ modo ] deployment experience to AI infrastructure. How you think about the design and development with MARA and Starwood develop a standardized solution? Or would you expect to work with third-party providers even designed such as NVIDIA's DSX spot?

Yes. I mean, it really depends on the tenant, right? It's -- we are not in the build-it-once business. We are in the business of finding a lease for the tenant who has a very specific requirement as to what they want and who is willing to put their money, if you would, behind them. The technology that they want to deploy. So if they want to deploy NVIDIA's modular solution or any of the other various solutions be powered by people. We are more than willing to deploy that for them, but it's their risk if they're ones driving the decision. We think there are a lot of very attractive solutions. But I think the key is not just in the design of the modular solution. But how do you build a site for and how do you operate a site for it? We operate 250 megawatts of containerized solutions in the UAE that are based on liquid immersion that are -- when they were built in 2023, state-of-the-art and still operate amazingly. We have a very large salons, 1 of the largest containerized sites in the U.S., in Texas. And we have learned a lot over the years in how to do this. And it's the operations of these sites that is just as important as the technology behind the container, the racking the cooling, et cetera.

Our next question comes from Chris Brendler with Rosenblatt.

I apologize if I missed this 1 in testing, but have you updated us on Matagorda and what the election results potentially mean there? I think it's like a like there's incentives in the contract, whether you don't have to pay anything until they get approval, but how does the change in government there affect that outlook?

Chris, yes, it doesn't change anything in the contract. We did this deal very specifically to mitigate risk. And it has been proven that the way we did this was the right way to do it. So at this point, we have no real obligations until batch 0 fully approved. And that's when the obligation start. If you look between Governor [ Abbott's ] audit requirements and kind of the environment today, more than likely batch 0 approval or study load will get you power at about the same time, if you look at the time frames. And so -- as you know, the new Governor of Texas has said the projects that have been approved are going to move forward. We believe that Texas as a state will continue to be very cooperative with the industry though they will want to ensure that consumers aren't being harmed, et cetera. And we look forward to working together with the communities in Texas to move this forward. But Matagorda is an amazing site. It's very close to a nuclear power plant. It already has all the high-voltage infrastructure coming into the site. It's in a great market for power pricing even to the extent that we can mine bitcoin there profitably. So it is a great site for us. We're very excited, and we believe that as we go through this process. It will become a great campus for us.