Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our Consolidated Financial Statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this MD&A or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. Please review Part I, Item 1A. “Risk Factors” of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following MD&A.
BUSINESS OVERVIEW
MARA is a vertically integrated energy and digital infrastructure company that leverages high-intensity compute, such as bitcoin mining, to monetize underutilized energy assets and optimize power management. As of December 31, 2024, our total energy portfolio consisted of approximately 1.7 gigawatts (“GW”) of capacity with 16 data centers deployed across North America, the Middle East, Europe, and Latin America. We believe we are the world’s largest publicly traded bitcoin mining company, with the majority of our production in the United States.
Historically, we were focused on establishing MARA as the largest and most efficient bitcoin miner. As of December 31, 2024, we operated approximately 400,000 bitcoin mining ASICs, capable of producing 53.2 EH/s with an efficiency of 19.2 joules per terahash, which is among the most efficient in the industry.
In 2024, we began our strategic transformation into a vertically integrated energy and digital infrastructure company to provide services and products, such as load management and immersion cooling systems, to data center operators and the energy sector. To support this transformation, we secured 300% more energy capacity, expanding our total energy portfolio from approximately 0.5 GW to approximately 1.7 GW, while increasing our owned data center portfolio capacity from nearly zero at the beginning of 2024 to approximately 70% to date. As part of this initiative, we secured approximately 1.2 GW of nameplate capacity across the United States.
In 2024, we adopted a full HODL strategy, retaining all bitcoin mined in our operations or opportunistically purchased in the open market using available cash and proceeds from private offerings of an aggregate principal amount of $2.2 billion of 2024 Convertible Notes. Using available cash and proceeds from the 2024 Convertible Notes, we purchased 22,065 bitcoin at an average price of $87,205 per bitcoin in 2024. As of December 31, 2024, we held approximately 44,893 bitcoin, of which 10,374 were loaned or collateralized.
In 2025, we expect to remain the dominant player in bitcoin mining while expanding our footprint in energy generation and investing in research and development to establish our presence in AI and adjacent markets, creating additional revenue opportunit ies over the long term. We believe the AI industry is shifting towards inference computing, which requires distributed, low-latency, and energy-efficient infrastructure. To support this shift, we are developing modular at the edge infrastructure solutions, including next-generation two-phase immersion cooling (“2PIC”) systems designed to improve efficiency and sustainability. We are also exploring power management solutions, including load balancing, to provide services to the variable energy demands of AI inference workloads. We intend to continue vertically integrating and further reduce energy costs.
HIGHLIGHTS
2024 was a transformative year for MARA, as we more than doubled our exahash, significantly enhancing our mining capabilities and reinforcing our position as a leader in the bitcoin mining space. Historically, we utilized an asset-light strategy to significantly grow our market share. In 2024, we strategically transitioned into a vertically integrated energy and digital infrastructure company by acquiring five data centers which we own and operate, increasing our percentage of owned capacity to approximately 70%. This is a critical step toward achieving greater operational control and efficiency.
Additionally, we strengthened our bitcoin holdings through both mining activities and strategic use of convertible debt, further enhancing our financial position. As we continue to scale, our goal is for MARA to be recognized
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primarily as an energy and digital infrastructure company, transforming every available stranded electron into digital gold – bitcoin – while unlocking new value for our stakeholders in the evolving energy and digital asset landscape.
Acquisitions
• Granbury, TX and Kearney, NE : In January 2024, we acquired two operational bitcoin mining sites totaling 390 MW of nameplate capacity. We believe our state-of-the-art 290 MW nameplate capacity data center in Granbury is one of the largest containerized liquid immersion-cooled sites worldwide. Since acquiring the site, profitability at the site has nearly doubled, we grew our hashrate to 12.1 EH/s in December 2024 and cost per petahash improved 45% during the year to 29.8. In addition, we have made significant investments in the local community and continue to be a strategic partner.
• Garden City, TX : In April 2024, we acquired an operational bitcoin mining site with 132 megawatts of operational capacity and 200 MW of nameplate capacity.
• Hannibal, Hopedale, and Findlay, OH : In November 2024, we acquired two operational data centers with 222 MW of interconnect-approved capacity. In addition to the acquired data centers, we began developing a 150 MW greenfield operational data center in Findlay, Ohio.
• Hansford County, TX : In February 2025, we acquired a wind farm with 240 MW of interconnection capacity and 114 MW of nameplate wind capacity.
Digital Assets
• Bitcoin Halving : On April 19, 2024, a halving event occurred on the Bitcoin network. The halving event reduced the block subsidy by half from 6.25 to 3.125 bitcoin per block. Transaction fees, which together with the block subsidy, comprise the block reward for successfully solving a block, are not directly impacted by the halving.
• Kaspa Mining : During the second quarter of 2024, we announced our Kaspa mining operations, and have continued to utilize Kaspa sales proceeds to fund operations, thereby enabling us to hold a larger amount of bitcoin.
• Line of Credit : In October 2024, we secured a $200.0 million line of credit, collateralized by a portion of our bitcoin holdings. We used the funds for general corporate purposes. As of December 31, 2024, approximately 2,997 bitcoin remained collateralized in connection with the line of credit.
• Bitcoin Lending Arrangements : Throughout the fourth quarter of 2024, we entered into lending arrangements with various counterparties to generate yield from our loaned bitcoin. As of December 31, 2024, a total of 7,377 bitcoin, or approximately $688.7 million, has been loaned to counterparties.
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Bitcoin HODL and Acquisition Strategy
During 2024, we adopted a HODL strategy, retaining all bitcoin mined in our operations or opportunistically purchased in the open market using available cash and proceeds from private offerings of an aggregate principal amount of $2.2 billion of 2024 Convertible Notes in private offerings. Using available cash and proceeds from the 2024 Convertible Notes, we purchased 22,065 bitcoin at an average price of $87,205 per bitcoin in 2024.
The following table presents our bitcoin digital asset holdings (including loaned and collateralized bitcoin) and the fair value per coin:
Quantity
Fair Value per bitcoin
December 31, 2024 44,893 $ 93,354
September 30, 2024 26,747 63,301
June 30, 2024 18,488 62,668
March 31, 2024 17,320 71,289
December 31, 2023 15,126 42,288
Low Cost Strategy
We aim not only to own and operate our infrastructure, but also energy generation assets. To achieve this, we will continue to identify potential sites where we can generate low cost energy. By owning energy assets, we can optimize how power is consumed, stored, and distributed. This allows us to better serve data centers, AI operators, and energy markets. We can co-locate with them, balance their load, and generate revenue to offset costs in ways that grid-reliant miners simply cannot. We have spent the last several months methodically executing a plan to build infrastructure that is not just about mining bitcoin, but about being the lowest-cost producer in an environment where efficiency and adaptability are paramount.
• We launched a 25 MW micro data center initiative at wellheads in Texas and North Dakota, converting excess flared gas into power for our operations. These sites reduce our reliance on grid power and provide us with the lowest cost per bitcoin of our currently operational sites.
• The wind farm in Hansford County, Texas will utilize prior-generation ASIC mining hardware to provide an avenue for the hardware to continue operating profitably beyond its normal lifecycle.
• In Finland, we deployed two pilot projects to recycle heat from our operations, providing heat to communities with a total population of approximately 80,000 residents. These sites offset our production costs through heat sales while reducing the local communities’ reliance on high carbon emitting biomass and delivering renewable and more affordable heating to communities.
TRENDS AND UNCERTAINTIES IMPACTING OUR BUSINESS AND INDUSTRY
Bitcoin Value
Our revenues are generally comprised of block rewards earned in bitcoin as a result of successfully solving blocks, and transaction fees earned for verifying transactions in support of the blockchain. After the halving event of April 2024, the current reward for each solved block is equal to 3.125 bitcoin plus transaction fees. The impacts of halving on our results of operations and financial condition may be exacerbated by changes in the market value of bitcoin, which has historically been subject to significant volatility. For example, as of December 31, 2024, the price of a bitcoin was $93,354, compared to $42,288 as of December 31, 2023. We held approximately 44,893 bitcoin, including loaned and collateralized bitcoin, on our Consolidated Balance Sheets with a carrying value of approximately $4.2 billion as of December 31, 2024, which value may be materially impacted as the market value of bitcoin fluctuates. Management believes, given our recent investments, coupled with our relative position and liquidity, we are well-positioned to execute on our long-term growth strategy.
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Mining Rig Capacity, Efficiency, and Hashrate
In response to an increased demand for bitcoin, we anticipate additional mining operators entering the market and existing competitors scaling their operations, which will grow the blockchain’s network hashrate and difficulty associated with solving a block. As the overall hashrate and difficulty of the Bitcoin network increases, we will need to continue growing our hashrate and remain competitive. During 2024, we mined 9,430 bitcoin, a decrease of 3,422 bitcoin, or 27%, over the prior year period. As of December 31, 2024, we operated approximately 400,000 mining rigs globally, with energized hashrate approximately 53.2 exahashes per second. To stay competitive, we remain focused on strategically deploying additional mining rigs and scaling our operations, while managing our fleet as it ages along the obsolescence curve. In addition, we continuously evaluate strategic opportunities to support our growth strategy, and seek to enhance operational efficiencies by utilizing efficient mining rigs and securing contracts with price protection clauses.
Energy Cost
Energy cost is the most significant cost driver for mining and represented 40.8%, as a percentage of our owned mining revenues for the year ended December 31, 2024. This excludes energy costs from third party hosted sites.
Energy cost can be highly volatile and sensitive to geopolitical events and weather conditions, such as winter storms and earthquakes, which impact supply and demand for power regionally. All of our owned mining sites and our hosted miners are subject to variable prices and market rate fluctuations with respect to wholesale energy costs. Such costs are governed by various power purchase agreements, and energy prices can change hour to hour and by location. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with a goal of increasing profitability and energy efficiency. When such events occur, we may curtail our operations to avoid using power at increased rates. Although we do not directly receive compensation for curtailment, the dispatchable load of our bitcoin mining operations helps balance the grid and provides electricity to communities when in need. The average price for direct energy we paid in our owned facilities for the year ended December 31, 2024 was $0.04 per KWh.
NON-GAAP FINANCIAL MEASURES
In order to provide a more comprehensive understanding of the information used by our management team in financial and operational decision-making, we supplement our Consolidated Financial Statements that have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) with the non-GAAP financial measures of adjusted EBITDA and total margin excluding depreciation and amortization.
We define adjusted EBITDA as (a) GAAP net income plus (b) adjustments to add back the impacts of (1) interest, (2) income taxes, (3) depreciation and amortization and (4) adjustments for non-cash and/or non-recurring items which currently include (i) stock compensation expense, (ii) change in fair value of derivative instrument, (iii) early termination expenses and other, (iv) net gain from extinguishment of debt. We define total margin excluding depreciation and amortization as (a) GAAP total margin less (b) depreciation and amortization.
Management uses adjusted EBITDA and total margin excluding depreciation and amortization, along with the supplemental information provided herein, as a means of understanding, managing and evaluating business performance and to help inform operating decision-making. We rely primarily on our Consolidated Financial Statements to understand, manage and evaluate our financial performance and uses non-GAAP financial measures only supplementally.
We believe that adjusted EBITDA and total margin excluding depreciation and amortization are useful measures to us and to our investors because they exclude certain financial, capital structure and non-cash items that we do not believe directly reflect our core operations and may not be indicative of our recurring operations, in part because they may vary widely across time and within our industry independent of the performance of our core operations. We believe that excluding these items enables us to more effectively evaluate our performance period-over-period and relative to our competitors.
Adjusted EBITDA and total margin excluding depreciation and amortization are not recognized measurements under GAAP. When analyzing our operating results, investors should use them in addition to, but not as an
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alternative for, the most directly comparable financial results calculated and presented in accordance with GAAP. Because our calculation of these non-GAAP financial measures may differ from other companies, our presentation of these measures may not be comparable to similarly titled measures of other companies.
Certain prior period information has been reclassified to conform to the current period presentation.
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RESULTS OF OPERATIONS
In accordance with Item 303 of Regulation S-K, we have excluded the discussion of 2022 results in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as this discussion can be found in our Annual Report on Form 10-K filed on February 28, 2024, as amended by Amendment No.1 filed on May 24, 2024.
The following table sets forth items derived from our Consolidated Statements of Operations for the years ended December 31, 2024 and 2023:
Year Ended December 31,
Favorable
(dollars in thousands)
2024 2023 (Unfavorable)
Revenues
Mining $ 624,740 $ 387,508 $ 237,232
Hosting services 31,638 — 31,638
Total revenues 656,378 387,508 268,870
Costs and expenses
Cost of revenues
Mining (381,642) (223,338) (158,304)
Hosting services (30,403) — (30,403)
Depreciation and amortization (403,706) (179,513) (224,193)
Total cost of revenues (815,751) (402,851) (412,900)
Operating expenses
General and administrative expenses (272,078) (92,418) (179,660)
Change in fair value of digital assets 813,814 331,484 482,330
Change in fair value of derivative instrument
(2,043) — (2,043)
Research and development
(13,229) (2,812) (10,417)
Early termination expenses
(38,061) — (38,061)
Amortization of intangible assets (22,919) — (22,919)
Total operating expenses 465,484 236,254 229,230
Operating income
306,111 220,911 85,200
Change in fair value of digital assets - receivable, net
299,796 — 299,796
Gain on investments
4,236 — 4,236
Loss on hedge instruments
(580) (17,421) 16,841
Equity in net earnings of unconsolidated affiliate (1,505) (617) (888)
Net gain from extinguishment of debt
13,121 82,267 (69,146)
Interest income 16,711 2,809 13,902
Interest expense (12,996) (10,350) (2,646)
Other non-operating loss
(8,391) — (8,391)
Income before income taxes
616,503 277,599 338,904
Income tax expense
(75,495) (16,426) (59,069)
Net income
$ 541,008 $ 261,173 $ 279,835
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Supplemental information:
bitcoin (“BTC”) production during the period, in whole BTC (1)
9,430 12,852 (3,422)
Average bitcoin per day, in whole BTC 25.8 35.2 (9.4)
General and administrative expenses excluding stock-based compensation (in thousands)
$ (114,436) $ (59,774) $ (54,662)
Energized Hashrate (Exahashes per second) - at end of period (2)
53.2 24.7 28.5
Direct Energy Cost per bitcoin (3)
$ 28,801 $ — $ 28,801
Cash Cost per kilowatt per hour (“KWh”) (4)
0.039 — 0.039
Cost per Petahash per day (5)
$ 38.6 $ 46.4 $ 7.8
BTC Yield (6)
62.4 % (22.1) % 84.4 %
Average cost of BTC mined (7)
$ 41,908 $ 17,530 $ 24,377
Average cost of BTC purchased (7)
$ 87,205 N/A N/A
Share of available miner rewards 4.1 % 3.6 % 0.5 %
Number of blocks won 2,132 1,725 407
Transaction fees as a percentage of total 6.2 % 7.7 % (1.5) %
Reconciliation to Adjusted EBITDA:
Net income
$ 541,008 $ 261,173 $ 279,835
Interest expense (income), net
(3,715) 7,541 (11,256)
Income tax expense
75,495 16,426 59,069
Depreciation and amortization (8)
438,995 181,590 257,405
EBITDA 1,051,783 466,730 585,053
Stock compensation expense
157,642 32,644 124,998
Change in fair value of derivative instrument 2,043 — 2,043
Early termination expenses and other (9)
33,825 — 33,825
Net gain from extinguishment of debt
(13,121) (82,267) 69,146
Adjusted EBITDA $ 1,232,172 $ 417,107 $ 815,065
Reconciliation to Total margin excluding depreciation and amortization:
Total revenues
$ 656,378 $ 387,508 $ 268,870
Total cost of revenues
(815,751) (402,851) (412,900)
Total margin (159,373) (15,343) (144,030)
Less: Cost of revenues - depreciation and amortization
403,706 179,513 224,193
Total margin excluding depreciation and amortization:
Mining 243,098 164,170 78,928
Hosting services 1,235 — 1,235
Total margin excluding depreciation and amortization $ 244,333 $ 164,170 $ 80,163
(1) Includes 382 and 112 bitcoin representing our share of the equity method investee, the ADGM entity, for the year ended December 31, 2024 and 2023, respectively.
(2) We define Energized Hashrate as the total hashrate that could theoretically be generated if all mining rigs that have been operational are currently in operation and running at 100% of manufacturers’ specifications. We use this metric as an indicator of progress in bringing mining rigs online. We believe this metric is a useful indicator of potential bitcoin production. However, metrics cannot be tied directly to any production level expected to be actually achieved as (a) there may be delays in the energization of hashrate (b) we cannot predict when operational mining rigs may be offline for any reason, including curtailment or machine failure and (c) we cannot predict Global Hashrate (and therefore our share of the Global Hashrate), which has a significant impact on our ability to generate bitcoin in any given period.
(3) Direct Energy Cost per bitcoin is calculated as the amounts paid to utility companies for power consumed divided by the quantity of bitcoin produced during the period related to our owned mining operations.
(4) Cost per KWh is calculated using the amounts paid to utility companies for power consumed divided by the KWh consumed. Prior to 2024, the Company operated an asset-light strategy and did not own mining facilities.
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(5) Cost per Petahash per day is calculated using mining cost of revenues, excluding depreciation and amortization, divided by the daily average operational hashrate online during the period, excluding our share of the hashrate for the equity method investee, the ADGM Entity, by a factor of 1,000.
(6) BTC Yield is a key performance indicator that represents the percentage change period-to-period of the ratio between our bitcoin holdings and our Assumed Fully Diluted Shares Outstanding. Assumed Fully Diluted Shares Outstanding refers to the aggregate of our actual shares of common stock outstanding as of the end of the applicable period plus all additional shares that would result from the assumed conversion of all outstanding convertible notes, exercise of all outstanding warrants and settlement of all outstanding restricted stock units and performance-based restricted stock units.
(7) Average cost of BTC mined is calculated using the bitcoin mining cost of revenues, excluding depreciation and amortization, divided by the bitcoin production, excluding our share of the bitcoin produced for the equity method investee, the ADGM entity. Average cost of BTC produced is calculated using the total cost of bitcoin purchased divided by the total bitcoin purchased.
(8) Includes approximately $12.4 million and $2.1 million of depreciation and amortization from our share in the results of our equity method investee, the ADGM entity, reported in “Equity in net earnings of unconsolidated affiliate” for the year ended December 31, 2024 and 2023, respectively, on the Consolidated Statements of Operations.
(9) Early termination expenses represent amounts recognized as the cost to early terminate data center hosting agreements in addition to the gain on investments during the period.
Revenues : We generated revenues of $656.4 million for the year ended December 31, 2024, compared to $387.5 million in the prior year period. The $268.9 million or approximately 69% increase in revenues was primarily driven by a $326.7 million increase in the average price of bitcoin mined, which was partially offset by a $111.3 million decrease in bitcoin production due to the April 2024 halving, and the inclusion of $31.6 million in revenues generated from providing hosting services as a result of acquisitions during 2024. The average price of bitcoin mined was 120% higher than the average price of bitcoin mined in the prior year period and average daily bitcoin production was 25.8 bitcoin in the current year period compared with 35.2 in the prior year period. We produced 3,422 less bitcoin for the year ended December 31, 2024 compared to the prior year period primarily due to the halving event in April 2024, increase in global hashrate and the impact of unexpected equipment failures at third-party operated sites and transmission line maintenance during the second and third quarters of 2024, partially offset by an increase in our share of the network hashrate.
Cost of revenues – mining during the year ended December 31, 2024 totaled $381.6 million compared to $223.3 million in the prior year period. The $158.3 million or approximately 71% increase was primarily driven by the growth in our hashrate from the deployment and energization of mining rigs compared to the prior year period. Partially offsetting the increase was the impact of unexpected equipment failures and transmission line maintenance, which resulted in downtime that reduced hosting and energy costs. We believe Cost per Petahash per day to be a key metric to evaluate our operating costs. Our Cost per Petahash per day improved to $38.6 from $46.4, or approximately 17%, in the year ended December 31, 2024 when compared to the prior year period, primarily due to strategic acquisitions with more efficient cost structures and deployment of more efficient miners. Our Direct Energy Cost per bitcoin for owned mining sites was $28,801.
Cost of revenues – hosting services during the year ended December 31, 2024 totaled $30.4 million which includes cost of power and other hosting related operating costs to provide hosting services as a result of the GC Data Center Acquisition and the Arkon Acquisition. As of December 31, 2024, we exited a majority of our hosting facilities to strategically focus on our owned mining business.
Cost of revenues – depreciation and amortization during the year ended December 31, 2024 totaled $403.7 million compared to $179.5 million in the prior year period. The $224.2 million or approximately 125% increase was primarily due to the deployment of mining rigs since the prior year period, the acquisitions of GC Data Center Acquisition, the Garden City Acquisition and the Arkon Acquisition and overall increased scale of the business.
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Total margin excluding impact of depreciation and amortization for the year ended December 31, 2024 was $244.3 million compared to $164.2 million for the prior year period. The following table summarizes the factors that impacted the increase in total margin excluding impact of depreciation and amortization for the year ended December 31, 2024 compared to the prior year period.
Revenue: (in thousands)
● Higher average price of bitcoin produced and other revenue $ 348,512
● Lower amount of bitcoin produced (111,280)
● Third-party hosting 31,638
Cost of revenue – energy, hosting and other:
● Higher costs due to growth in hashrate (232,559)
● Decrease in hash costs and other costs 74,255
● Third-party hosting (30,403)
Total margin excluding depreciation and amortization
$ 80,163
General and administrative expenses : General and administrative expenses were $272.1 million for the year ended December 31, 2024, compared to $92.4 million in the prior year period, an increase of $179.7 million or approximately 194%. General and administrative expenses excluding stock-based compensation was $114.4 million in the current year period compared to $59.8 million in the prior year period. The $54.7 million or approximately 91% increase in expenses was primarily due to the increased scale of the business and our strategic shift to an asset-heavy strategy, including payroll and benefits, professional fees, facility and equipment repair and maintenance expenses, and other third-party costs associated with growth in the business. The increase in stock-based compensation of $32.6 million in the prior year period to $157.6 million in the current year was primarily due to (1) restricted stock unit awards related to 2023 performance awarded and partially expensed in 2024, (2) 2024 performance-based restricted stock units awarded and partially expensed in 2024, (3) an accounting charge related to the modification of our peer index to consist exclusively of publicly traded bitcoin mining companies and (4) threefold increase in our headcount from 48 to 152 due to growth and a pivot towards an asset-heavy strategy. As such, 2024 stock-based compensation expense reflects the impact of two annual grant awards.
Change in fair value of digital assets : We recognized a gain on digital assets of $813.8 million, compared to a gain of $331.5 million in the prior year period. The $482.3 million or approximately 146% increase was primarily related to the increase in bitcoin price from $42,288 to $93,354 from December 31, 2023 to December 31, 2024, respectively and the underlying digital assets held at the respective dates. As of December 31, 2024, we had 44,893 bitcoin, an increase of 197% compared to the prior year period, primarily due to the 22,065 bitcoin purchased throughout the year ended 2024. We view bitcoin on our Consolidated Balance Sheets as an important treasury reserve asset and expect to continue to invest in the future.
Change in fair value of derivative instrument : We acquired a commodity swap contract as a result of our acquisition of GC Data Center Acquisition. The commodity swap contract hedges price variability in electricity purchases and expires on December 31, 2027. The commodity swap contract meets the definition of a derivative instrument and is remeasured at fair value each reporting period with changes recognized on the Consolidated Statements of Operations. The fair value of this derivative decreased for the year ended December 31, 2024, primarily due to unfavorable movement in electricity forward curve prices during the current year period.
Research and development: Research and development expenses were $13.2 million for the year ended December 31, 2024 compared to $2.8 million in the prior year period. These expenses consisted primarily of contractor costs, supplies, personnel, and related expenses for our mining and technology businesses.
Early termination expenses : On January 30, 2024, we entered into a termination and transition agreement (“Agreement”) with the operator, US Bitcoin Corp (“USBTC”), of the two sites from the January 12, 2024, acquisition of GC Data Center Acquisition. MARA and USBTC agreed to terminate the acquired operating agreement for a termination fee of $19.6 million, net of deposit refund. In addition, during the year ended December 31, 2024, we terminated the remaining hosting agreements with customers from the GC Data Center Acquisition, and recognized early termination expenses of $18.4 million, to expand self-mining capacity.
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Amortization of intangible assets: During the year ended December 31, 2024, we fully amortized the customer relationships acquired in the GC Data Center Acquisition for $22.0 million, due to our strategic decision to exit hosting services business and termination of customer relationships. There was no amortization expense of intangible assets in the prior year period.
Change in fair value of digital assets - receivable, net: During the year ended December 31, 2024, we entered into four separate lending agreements with various counterparties and collateralized a portion of our bitcoin holdings in connection with a line of credit. We recognized a gain on digital assets - receivables, net of $299.8 million for the year ended December 31, 2024. There were no such activities in the prior year period.
Gain on investments: During the year ended December 31, 2024, we purchased additional shares in Auradine, Inc. (“Auradine”) preferred stock and recorded a gain on investments of $5.2 million to adjust the carrying amount of our investment. Additionally, during the year ended December 31, 2024 we wrote-down a previous SAFE investment for a loss of $1.0 million.
Net gain from extinguishment of debt: During the year ended December 31, 2024, in connection with the issuance of the June 2031 Notes and March 2030 Notes, we entered into agreements to repurchase approximately $263.2 million principal amount of the December 2026 Notes and as a result, recorded a gain of $13.1 million. In the prior year period, we entered into agreements with certain holders of December 2026 Notes to exchange an aggregate $416.8 million principal amount of December 2026 Notes for 31,722,417 shares of our common stock and recorded a gain in the amount of $82.6 million.
Loss on hedge instruments: Loss on hedge instruments during the year ended December 31, 2024, was $0.6 million compared to $17.4 million in the prior year period for losses related to bitcoin hedging activities. The decrease was due to a larger loss in the prior period related to the increase in the fair value of the sold call portion of the collar as a result of the significant increase in the fair value of bitcoin. These modified collars protect against the downside price risk of bitcoin while retaining some upside exposure. There were various outstanding bitcoin hedging transactions as of the year ended December 31, 2024 and 2023.
Equity in net earnings of unconsolidated affiliate: During the year ended December 31, 2024, we recorded our share of net losses for our 20% interest in the ADGM Entity in the amount of $1.5 million, compared to $0.6 million in the prior year period. Our share of the ADGM Entity’s operating results included earnings from the production of 382 bitcoin, a $4.1 million impairment of property and equipment and approximately $12.4 million of depreciation and amortization during the year ended December 31, 2024, whereas in the prior year period, our share of ADGM Entity’s operating results included earnings from production of 112 bitcoin and approximately $2.1 million of depreciation and amortization.
Interest income : Interest income was $16.7 million for the year ended December 31, 2024 compared to $2.8 million in the prior year period. The $13.9 million increase was primarily due to the higher average balance of cash and cash equivalents and interest earned on loaned bitcoin in the current year period.
Interest expense : Interest expense was $13.0 million for the year ended December 31, 2024 compared to $10.4 million in the prior year period. The $2.6 million or approximately 26% increase was a result of the exchange of $416.8 million aggregate principal amount of the December 2026 Notes for shares of our common stock in September 2023 and the issuance of the 2024 Convertible Notes during the year ended December 31, 2024.
Other non-operating loss: During the year, we launched a program to generate additional return by loaning bitcoin and collateralized a portion of our bitcoin holdings to secure a line of credit. We recorded a corresponding allowance for credit loss of $8.4 million, for the bitcoin loaned and collateralized during the year ended December 31, 2024. There were no such activities in the prior year period.
Income tax benefit (expense) : We recorded income tax expense of $75.5 million for the year ended December 31, 2024 compared to an income tax expense of $16.4 million in the prior year period. The $75.5 million income tax expense primarily arises from the release of the valuation allowance on deferred tax assets, driven by the increase in bitcoin’s fair value and positive forecasts for its future value.
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Net income : We recorded net income of $541.0 million for the year ended December 31, 2024 compared to net income of $261.2 million in the prior year period. The $279.8 million increase in net income was primarily driven by a $85.2 million increase in operating income and a $299.8 million change in fair value of digital assets - receivable, net, partially offset by a $69.1 million decrease in net gain from the extinguishment of debt and a $59.1 million income tax expense in the current period compared to the prior year period.
Adjusted EBITDA : Adjusted EBITDA was $1.2 billion for the year ended December 31, 2024 compared to adjusted EBITDA of $417.1 million in the prior year period. The $815.1 million increase was primarily due to an $80.2 million margin improvement from higher average bitcoin price mined at a lower Cost per Petahash per day and a $782.1 million increase in the change in fair value of digital assets, partially offset by an $54.7 million increase in general and administrative excluding stock-based compensation.
FINANCIAL CONDITION AND LIQUIDITY
The following table presents a summary of our cash flow activity for the years ended December 31, 2024 and 2023:
For the Year Ended December 31,
(in thousands) 2024 2023
Net cash used in operating activities
$ (677,022) $ (315,651)
Net cash (used in) provided by investing activities
(3,229,059) 4,595
Net cash provided by financing activities
3,952,539 555,864
Net increase in cash, cash equivalents and restricted cash
46,458 244,808
Cash, cash equivalents and restricted cash — beginning of period 357,313 112,505
Cash, cash equivalents and restricted cash — end of period $ 403,771 $ 357,313
Cash flows for the year ended December 31, 2024: Cash, cash equivalents and restricted cash totaled $403.8 million at December 31, 2024, an increase of $46.5 million from December 31, 2023.
Cash flows from operating activities resulted in a use of funds of $677.0 million, as net income, adjusted for non-cash and non-operating items, in the amount of $121.6 million was more than offset by the use of cash of $798.6 million from changes in operating assets and liabilities. When we produce and hold bitcoin on our Consolidated Balance Sheets, we exclude such produced and held bitcoin from our operating cash flows. If we monetize bitcoin in the future, those proceeds are reported as cash flows from investing activities. Changes in cash flows from operating assets and liabilities were driven by a use of funds associated with changes in digital assets of $624.7 million due to the non-cash adjustment for bitcoin mining revenues and deposits of $189.6 million resulting from increased deposits associated with hosting agreements and a surety bond.
Cash flows from investing activities resulted in a use of funds of $3.2 billion, primarily resulting from the use of funds for advances to vendors of $817.3 million, purchase of digital assets of $1.9 billion from the issuance of 2024 Convertible Notes, payment for the acquisition of businesses of $335.6 million as we increased our percentage of owned capacity to approximately 70%, acquiring 812 MW of nameplate capacity throughout the year ended December 31, 2024, capital expenditures of $250.8 million, partially offset by proceeds from the sale of digital assets of $152.3 million.
Cash flows from financing activities resulted in a source of cash of $4.0 billion, primarily from the periodic issuance of common stock under our 2024 ATM of $1.9 billion, the issuance of the 2024 Convertible Notes of $2.2 billion, net of issuance costs, partially offset by the repayment of $247.3 million of the December 2026 Notes.
Cash flows for the year ended December 31, 2023: Cash and cash equivalents totaled $357.3 million at December 31, 2023, an increase of $244.8 million from December 31, 2022.
Bitcoin holdings as of December 31, 2024: At December 31, 2024, we held a total of 44,893 bitcoin, including loaned and collateralized bitcoin, on our Consolidated Balance Sheets with a total fair value of $4.2 billion. The fair value of a single bitcoin was approximately $93,354 at December 31, 2024.
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Approximately 7,377 of our total bitcoin holdings were loaned to third parties to generate additional return and 2,997 bitcoin were utilized as collateral for borrowings. Loaned and collateralized bitcoin are classified as “Digital asset - receivables, net” on the Consolidated Balance Sheets with a carrying value of $960.1 million.
The remaining 34,519 of unrestricted bitcoin were classified as long-term digital assets, as part of our strategy to hold bitcoin on the Consolidated Balance Sheets with a fair value of $3.2 billion. Our holdings as of December 31, 2024 excluded 51 bitcoin held by our equity method investee, pending dividend to us.
We expect that our future bitcoin holdings will generally increase but will fluctuate from time to time, both in number of bitcoin held and fair value in U.S. dollars, depending upon operating and market conditions. We intend to add to our bitcoin holdings primarily through our production activities and from time to time purchases. During the year ended December 31, 2024, we purchased 22,065 bitcoin for $1.9 billion. We purchased bitcoin from cash on hand and from the proceeds from the issuances of the 2024 Convertible Notes throughout the year, as part of our strategy to hold bitcoin and not sell for the foreseeable future. As a result of our adoption of the aforementioned strategy, we anticipate funding our operating and investing activities principally from available cash and cash equivalents and from our financing activities.
Kaspa holdings as of December 31, 2024: In 2023, we began evaluating Kaspa as a potential way to diversify our revenue while continuing to utilize our current infrastructure and expertise in digital asset compute. At December 31, 2024, we held approximately $4.3 million, or 34,817,098 Kaspa coins, on our Consolidated Balance Sheets. During the year ended December 31, 2024, we incurred significantly less cost to produce Kaspa compared to bitcoin, which helps pay for our expenses and allows us to hold a larger amount of bitcoin on our Consolidated Balance Sheets.
At-the-Market Offering Programs and Proceeds: As of December 31, 2024, we sold 93,411,158 shares of common stock for an aggregate purchase price of $1.9 billion, net of commission and offering expenses of $47.5 million, pursuant to our at-the-market offerings.
Liquidity and Capital Resources: Cash and cash equivalents, excluding restricted cash, totaled $391.8 million and the fair value of digital asset holdings, including loaned and collateralized bitcoin, was $4.2 billion at December 31, 2024. The combined value of cash and cash equivalents, excluding restricted cash, and digital assets, including loaned and collateralized bitcoin, totaled nearly $4.6 billion as of December 31, 2024.
During 2024, our primary sources of liquidity and capital resources were proceeds from convertible notes issuances, sales under our ATM, sales of digital assets, lending facilities and available cash and cash equivalents. During the year ended December 31, 2024, we significantly reduced our reliance solely on ATM. Our ATM usage represented 43% of our cash needs, compared to 97% in the prior year period. We expect as commercial banks open up our sector due to abolishment of Staff Accounting Bulletin (“SAB”) 121, as rescinded by SAB 122, that we will have expanded access to traditional financing, such as debt financing, project financing and other capital.
While we classify our digital assets and digital asset receivables as long-term, consistent with the announced HODL strategy, both asset types are readily convertible to cash, and therefore considered a liquid resource.
We expect to have sufficient liquidity, including cash on hand and access to public capital markets, to support ongoing operations in the next 12 months and beyond. We will continue to seek to fund our business activities, and especially our growth opportunities, through the public capital markets, primarily through periodic equity issuances using our at-the-market facilities.
The risks to our liquidity outlook would include events that materially diminish our access to capital markets and/or the value of our bitcoin holdings and production capabilities, including:
• Failure to effectively execute our growth strategies;
• Declines in bitcoin prices and/or production, as well as impacts from bitcoin halving events, which would impact both the value of our bitcoin holdings and our ongoing profitability;
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• Significant increases in electricity costs if these cost increases were not accompanied by increases in the price of bitcoin, as this would also reduce profitability; and
• Deteriorating macroeconomic conditions, including the impacts of inflation and increased interest rates, as well as instability in the banking system.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
We contract with service providers for hosting our equipment and operational support in data centers where our equipment is deployed. Under these arrangements, we expect to pay at a minimum approximately (i) $471.3 million in total payments during the calendar years 2025 through 2027, and (ii) $9.9 million in total payments during the calendar years 2028 through 2029. Under certain of these arrangements, we are required to pay variable pass-through power and service fees in addition to these estimated minimum amounts.
We have purchase agreements to purchase miners and other mining equipment for a total purchase price of $962.7 million. As of December 31, 2024, we have made installment payments totaling $823.5 million. We expect to make periodic payments in accordance with the payment schedule with the final payment expected to occur during 2025.
Assuming the remaining outstanding 1.0% Convertible Senior Notes due 2026 (the “December 2026 Notes”) and the 2024 Convertible Notes (collectively, the “Convertible Notes”) are not converted into common stock, repurchased or redeemed prior to maturity, (i) annual interest payments of approximately $0.7 million in each calendar year from 2025 through 2026 in connection with the December 2026 Notes and annual interest payments of approximately $6.4 million in each calendar year from 2025 through 2031 in connection with the 2.125% Convertible Senior Notes due 2031 and (ii) principal for each of the Convertible Notes upon maturity, for a total of $2.3 billion, will be payable under the terms of the Convertible Notes. Refer to Note 17 – Debt in the notes to our Consolidated Financial Statements included in this Annual Report for further information.
We have operating and finance lease obligations related to land and office buildings. We expect to make payments of $1.9 million and $0.2 million related to operating and finance leases, respectively, in 2025 and $32.3 million and $89.6 million related to operating and finance leases, respectively, thereafter. Refer to Note 18 – Leases in the notes to our Consolidated Financial Statements included in this Annual Report, for further information.
On October 15, 2024, we announced securing a $200.0 million line of credit, collateralized by approximately 2,997 of our bitcoin holdings. We used the funds for general corporate purposes. As of October 17, 2024, the facility was fully utilized.
CRITICAL ACCOUNTING ESTIMATES
The following accounting estimates relate to the significant areas involving management’s judgments and estimates in the preparation of our financial statements, and are those that it believes are the most critical to aid the understanding and evaluation of this management discussion and analysis:
• Digital assets - receivable, net
• Long-lived assets
• Income taxes
• Assets acquired and liabilities assumed in a business combination
• Goodwill impairment
• Loss contingencies
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Digital assets - receivable, net
When we loan digital assets to a third-party entity, we first evaluate whether to derecognize such digital assets based on an evaluation of relevant control and asset derecognition considerations that include whether:
• We have transferred present rights to the economic benefits associated with the digital asset for a different right to receive digital assets in the future;
• We cannot sell, pledge, loan, or otherwise use the lent digital assets while the loan is outstanding, as those rights have been transferred to the borrower;
• Inherent in the realization of the economic benefits associated with the digital asset receivable is exposure to credit risk of the third-party entity; and
• The third-party entity that holds the digital assets can deploy those assets at its discretion for the duration of the lending arrangement and bears the risk of loss or theft of those assets, and otherwise has the ability to direct the use of the assets transferred.
If we conclude derecognition is appropriate, we derecognize the loaned digital assets that we no longer control and recognizes a right to receive back in the future such loaned digital assets.
In accordance with ASU 2023-08, digital asset receivable is recorded at the fair value of the underlying digital assets. Throughout the period that the digital asset receivable is outstanding, the receivable will be measured at fair value of the underlying loaned digital asset with changes recorded in other non-operating income (loss) in current period earnings.
At loan commencement and throughout the loan period, we consider and account for the credit risk of the borrower using the principles in Topic 326 – Financial Instruments - Credit Losses (“Topic 326”) to measure any credit impairment. The digital asset receivable is presented net of any allowance for credit losses. We utilize the probability of default (“PD”) loss given default (“LGD”) approach to estimating the allowance for credit loss (“ACL”) at origination and subsequent reporting periods. In order to apply the PD LGD approach, management considers the lifetime of the digital asset receivable, the reasonable and supportable forecast period, and the PD LGD. We use each instrument’s life of loan period for estimating current expected credit losses, unadjusted by any prepayment risk as any risk would be immaterial to either the repayment in kind or the accrued loan fee receivable.
Long-Lived Assets
We have long-lived assets that consist primarily of property and equipment stated at cost, net of accumulated depreciation and impairment, as applicable. The depreciation charge is calculated on a straight-line basis and depends on the estimated useful lives of each type of asset and, in certain circumstances, estimates of fair values and residual values. Our property and equipment is primarily composed of digital asset mining rigs, which are largely homogeneous and have approximately the same useful lives. Accordingly, we utilize the group method of depreciation for our digital asset mining rigs. We update the estimated useful lives of our asset group of digital asset mining rigs periodically as information on the operations of the mining rigs indicate changes are required. We assess and adjust the estimated useful lives of our mining rigs when there are indicators that the productivity of the mining assets is higher or lower than the assigned estimated useful lives.
Management reviews our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of their carrying amount to the undiscounted future cash flows expected to be generated thereby. If such assets are not recoverable based on that test, impairment is recorded in the amount by which the carrying amount of the assets exceeds their fair value as determined in accordance with Accounting Standard Codification (“ASC”) 820.
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Income Taxes
The primary objectives of accounting for income taxes are to recognize the amount of income taxes payable or refundable for the current year, and to recognize deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns. We account for income taxes in accordance with ASC 740 - Income Taxes , using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based on enacted tax rates and are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities and for operating losses and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Management must make assumptions, judgments and estimates to determine our income tax benefit or expense and deferred tax assets and liabilities. We recognize tax positions when they are more likely than not of being sustained. Recognized tax positions are measured at the largest amount of benefit greater than 50% likely of being realized. Each period, we evaluate tax positions and adjust related tax assets and liabilities in light of changing facts and circumstances.
Assets Acquired and Liabilities Assumed in a Business Combination
We account for business combinations under the acquisition method of accounting in accordance with ASC 805 - Business Combinations , by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, measured at the acquisition date fair value. The determination of fair value involves assumptions, estimates and judgments. Any purchase consideration in excess of the estimated fair values of net assets acquired is recorded as goodwill.
Goodwill Impairment
Goodwill is not subject to amortization, and instead, assessed for impairment annually, or more frequently when events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount in accordance with ASC 350.
Loss Contingencies
In the ordinary course of business, we may be involved in legal proceedings, claims and governmental and/or regulatory reviews. Management periodically reviews estimates of potential costs to be incurred by us in connection with the adjudication or settlement, if any, of these matters. These estimates are developed, as applicable in consultation with outside counsel, and are based on an analysis of potential outcomes. In accordance with ASC 450, Contingencies , loss contingencies are accrued if, in the opinion of management, an adverse outcome is probable and such financial outcome can be reasonably estimated. The accruals may change in the future due to new developments in each matter or changes in our litigation strategy. It is possible that future results for any particular quarter or annual period may be materially affected by changes in our estimates or outcomes relating to these matters.
Given the uncertain nature of litigation generally, we are not able in all cases to estimate the amount or range of loss that could result from an unfavorable outcome of the litigation to which we are a party. In view of these uncertainties, we could incur charges in excess of any currently established accruals and, to the extent available, liability insurance. In the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on our consolidated results of operations, financial condition and/or consolidated cash flows. From time to time, we may challenge unfavorable outcomes and obtain surety bonds in connection therewith, and our exposure under such surety bonds will depend on the outcome of our challenge. We have in the past used, and may in the future use, borrowings under our master lending agreements or other financing sources to post such surety bonds, collateralized by bitcoin. If the price of bitcoin drops substantially, we may face a margin call on our borrowings under the master lending agreements, which would require us to provide additional collateral to avoid liquidation by lenders of pledged bitcoin to cover amounts owing.
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RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2 – Summary of Significant Accounting Policies to our Consolidated Financial Statements for a discussion of recent accounting standards and pronouncements.