MARA Holdings (Marathon Digital) 2026 Q3 Earnings Call

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 factor section of our latest 10-K and other SEC filings. We will also reference non-GAAP financial measures like Adjusted EBITDA, 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 designed to produce contracted returns and durable free cash flow with the 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 strengths, 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 Kearney, where permitting is well advanced, as has been disclosed in the news. We are still targeting two 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 timely 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 are excited to add a highly efficient natural gas plant to our portfolio that is currently authorized to sell 485 MW and expected to increase to the full 505 MW 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 contiguous 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 GW 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 GW of power capacity that has been classified as study load under ERCOT's Batch Zero process.

Today, we operate approximately 1 GW 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 GW. Exaion delivered early commercial proof this quarter, signing a four-year, $79 million GPU-as-a-service agreement with a U.S. customer under 100% take-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-backed 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 have strengthened our balance sheet and our position 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 has 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 once 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 timeframes 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 digital infrastructure in the U.S., 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 direct it to AI or HPC when those uses offer a greater risk-adjusted return. That foundation supports three complementary paths to deploy the platform. Mining generates near-term cash flow and keeps energized sites productive. AI and HPC campuses convert powered land into longer duration contracted infrastructure for hyperscalers and other large compute tenants. 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 co-exist 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 with 200 MW 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 at our wind farm in Hansford County, Texas, where prices can fall below zero and curtailment is common. From April through 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's 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 parts 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 collateral when this is the most efficient source of funding.