Yahoo Finance Marathon Digital Holdings, Inc. (NASDAQ:MARA) Q1 2024 Earnings Call Transcript
Marathon Digital Holdings, Inc. (NASDAQ:MARA) Q1 2024 Earnings Call Transcript May 9, 2024
Marathon Digital Holdings, Inc. misses on earnings expectations. Reported EPS is $0.00126 EPS, expectations were $0.02. Marathon Digital Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, ladies and gentlemen. Welcome to Marathon Digital Holdings' First Quarter 2024 Earnings Webcast and Conference Call. I would now like to turn the call over to your host, Robert Samuels, Vice President of Corporate Communications. Please go ahead.
Robert Samuels: Thank you operator. Good afternoon and welcome to Marathon Digital Holdings' first quarter 2024 earnings call. Thank you for joining us for our call today. With me on today's call are our Chairman and Chief Executive Officer, Fred Thiel; and our Chief Financial Officer, Salman Khan. Before we get started, I'd like to remind everyone that our prepared remarks may contain forward-looking statements and that we may make additional forward-looking statements during the question-and-answer session. These forward-looking statements are subject to risks and uncertainties and actual results may differ materially. When used in this call the words anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions as they relate to Marathon Digital Holdings are as such a forward-looking statements.
Please refer to our earnings release for a full reputation of our forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from those anticipated by Marathon at this time. Some of these risks and uncertainties are more fully described in Marathon's public filings with the U.S. Securities and Exchange Commission, which can be viewed at www.sec.gov and ir.mara.com. Finally, please note that on today's call we will refer to certain financial measures that were not prepared in accordance with Generally Accepted Accounting Principles in the United States, including adjusted EBITDA and non-GAAP total margin. Marathon believes these non-GAAP financial measures are important indicators of its operating performance, because they exclude certain items that are unrelated to and may not be indicative of its GAAP financial results.
Please refer to our company's periodic reports on Form 10-K and 10-Q and to our website for a full reconciliation of these non-GAAP performance measures to the most comparable GAAP financial measures. As usual, we'll begin today's call with prepared remarks from Fred and Salman, after their comments, we will be going through some of the more popular questions from our investors before transferring to a live Q&A with our covering analysts. And with that out of the way, I'm going to turn the call over to Fred to kick things off. Fred?
Fred Thiel: Thank you, Rob. The first quarter of 2024 was one of our most transformative to-date, we officially transitioned Marathon from being an asset-light Bitcoin miner, and laid a solid foundation on which we're building this organization into a globally diversified company that leverages digital assets compute to build a more sustainable and inclusive future. During the quarter, we significantly grew and improve the resilience of our portfolio of digital assets compute by acquiring and integrating our first fully-owned and operated Bitcoin mining sites. At the end of last year, our portfolio consisted of 584 megawatts of capacity, only 3%, of which we directly owned and operated. In less than four months, we initiated, negotiated, closed and integrated our first two acquisitions comprised of three sites, the first two being the sites in Granbury, Texas and Kearney, Nebraska, and the second being the site in Garden City, Texas, that is adjacent to a wind farm.
We purchased these assets for approximately 458,000 and 437,000 per megawatt, respectively, which is approximately half the cost of what some of our competitors have paid to build new sites. In Q1, we effectively doubled the size of our portfolio to 1.1 gigawatts of capacity, and we gained far more direct influence over our operations by taking direct ownership and operation control of 54% of the portfolio. We did this while generating significant savings for our shareholders relative to building sites the way our competitors have, and we quickly gained enough capacity to meet our near-term growth targets of 50 exahash by the end of this year. As we cost effectively laid this path to accelerate our scale and enhance our operational influence, we also launched our first products and services as an organization, each of which demonstrates our commitment to expanding and diversifying revenues by creating advanced technologies that transform digital infrastructure and diversify our revenue streams.
In February, we launched Slipstream, which is a direct Bitcoin transaction submission service that is designed to streamline confirmations of large or nonstandard Bitcoin transactions. In essence, it provides sophisticated users with a simple, transparent and trusted means of adding complex Bitcoin transactions to the blockchain, provided they adhere to Bitcoin's protocol, and it provides Marathon with an opportunity to increase revenue by capturing more transaction fees, which is particularly advantageous in a post-having environment. Although the service is only a few months old, it has already proven valuable -- last month, just before the having, we earned an additional 4.25 Bitcoin from Slipstream alone. MARA Pool, which powers Slipstream captured one block with 10 Bitcoin in transaction fees and another with 16, generating nearly 10% greater fees than FPPS pools at the time.
While these numbers are small relative to our overall production, Slipstream serves as a tangible example of the strategic importance of operating our own mining pool of being at scale and of deploying our proprietary technology stack. As a matter of fact, if you were to look at the [Indiscernible] for the past week and look at mining pools, you would see that Marathon's pool performed 40% above average. As we demonstrated in March, Slipstream was just the beginning. During the first quarter, we also brought our first products to market, all of which contribute to one of our key competitive advantages, our vertically integrated tech stack and provide us with an opportunity to diversify our revenue streams. These products include our industry-leading MARA Firmware, Controller Board and 2-Phase Immersion technology, which we call 2PIC.
We showcased each of these products at the Empower Conference in March and the reception was overwhelmingly positive. We already have paying customers for our Firmware and 2PIC as a pipeline that is in the tens of millions of dollars and growing. We're currently integrating 2PIC at some of our own sites, which is part of our strategy to optimize our performance by increasing uptime, improving efficiency, and reducing maintenance downtime and costs. For the market, our goal is to begin shipping these systems in volume to third-parties by the end of this year. While the quarter was highlighted by the significant expansion of our portfolio of digital assets compute and the launch of our first products and services geared towards transforming digital infrastructure, our Bitcoin production was negatively impacted throughout the first quarter by unexpected equipment failures, predominantly transformers that are third-party hosted sites, utility company transmission line maintenance, and the higher-than-anticipated weather-related curtailment across multiple sites.
However, I'm pleased to say that we have mitigated a number of these issues and are currently operating at a record high level of 27 exahash. While there will always be the potential for exogenous events that impact operations, we believe we can mitigate their impact over time as we continue to scale, standardize equipment, diversify globally, and build redundancies and leverage economies of scale that stem from owning and operating multiple sites around the world. In the meantime, we can always control how we respond to challenges and just as we always have, our team quickly began working on solutions that were within our control. We were able to immediately take advantage of the newly available capacity from our recent strategic acquisitions.
Once it became clear that the transformer issues at Ellendale were more complicated than originally believed, our team quickly began reallocating miners from this site to Garden City, where there was available capacity. We successfully moved 9,500 idle miners from Ellendale and simultaneously began energizing new machines to expand our capacity. Our ability to adapt, combined with the uptime improving across our sites, these challenges were resolved, enabled us to achieve an all-time high operating hashed of 27 exahash this month. The transformer issues that negatively impacted our ability to convert megawatts into terahash and therefore, Bitcoin have been challenging, but with our hash rate continuing to grow to record levels, we have clearly been able to work through the challenges and to execute.
And fortunately, the resilience we've built into our diversified portfolio, our ability to adapt to change -- and changing circumstances and our hurdle strategy allowed us to still capitalize on Bitcoin's positive momentum. Despite the operational challenges, we still produced record financial results during the first quarter. To unpack our financial results, I'm now going to turn the call over to Salmon, who will cover the results in more detail. Salman?
Salman Khan: Thank you, Fred and welcome, Rob to team MARA. As Fred mentioned, our Bitcoin production was negatively impacted in the first quarter by transformer and other issues. Despite these challenges, the positive momentum in Bitcoin price, our strategy to increase our Bitcoin holdings over time, and our team's consistent ability to execute helped us drive record financial results for the quarter. Let's dig into the details. We reported net income of $337 million or $1.26 per diluted share in the quarter. This was a 184% increase from net income of $119 million or $0.72 per diluted share in Q1 of last year. The increase in net income was primarily driven by favorable Bitcoin price, higher production, and fair market value of digital assets on our balance sheet.
Revenues increased 223% to a record $165 million from $51 million in the first quarter of 2023. With the average price of Bitcoin mined being 126% higher this quarter than the year ago period, the increase in revenue was primarily driven by a $77 million increase in the average price of Bitcoin mined. We produced an average of 30.9 Bitcoin each day during the quarter compared to 24.4 Bitcoin each day in the prior year period. These improvements in production also contributed approximately $10 million to our top line. As a result of closing the recent acquisitions, we are temporarily providing hosting services to existing hosted customers during the transition period. The revenue we generated from hosting revenues was $21 million, which was not present a year ago.
We expect this revenue to taper off in the coming quarters as we work with current tenants of the sites on their transition plans and use that space for our own growth. Our hosting and energy costs were $71 million compared to $33 million last year. In both time periods, the increase was primarily due to growth in our mining fleet and related costs. In the first quarter of 2024, global hash rate or network difficulty levels continue to increase. Average global hash rate has increased by more than approximately 86% since Q1 of 2023. That, combined with operational issues at our third-party hosted sites in Q1 of 2024 resulted in a higher cost per coin. Our non-GAAP cost of revenue without depreciation has improved 16% from $53.7 per petahash per day in Q1 of 2023 to $45.2 per petahash per day in Q1 of 2024.
As we realize synergies from our recently announced acquisitions, reenergized production at our third-party hosted sites, and spread the fixed cost over a larger 50 exahash capacity, we expect our marginal cost per coin to improve. Total cost of revenues, which includes depreciation and amortization $168 million compared to $151 million of last year. Depreciation and amortization was $78 million, a $60 million increase from the same quarter in the prior year. The change was predominantly the result of growing our energized hash rate from 11 exahash to 27.8 exahash and recent acquisition of two sites in Texas and Nebraska. Our non-GAAP total margin, excluding depreciation and amortization was $75 million this quarter compared to $18 million in the same quarter last year.
The change was predominantly related to higher Bitcoin prices, increased production, and increased operational efficiency. General and administrative expenses, excluding stock-based compensation, were $21 million compared with $11 million in the prior year period. This increase in expenses was primarily due to the increase in scale of the business. Headcount grew from 30 employees at the end of Q1 last year to 60 employees at the end of Q1 this year, which subsequently has increased to over 100 employees. As we thoughtfully grow our company, we continue to opportunistically add talent across the organization. Part of our treasury management strategy involved selling enough of the Bitcoin we produced to cover operating expenses and then hurdling the remainder on our balance sheet.
By employing this strategy, we have essentially been dollar cost averaging into Bitcoin at a discount for the past several years. With our cost to produce a coin significantly lower than the Bitcoin price, the dollar average strategy generally has been even more accretive for our stockholders. With the new accounting rules that require the measurement of crypto assets at fair value and with the Bitcoins price appreciating nearly 150% from the end of Q1 last year to the end of Q1 this year, this strategy has proven very effective for us. In Q1 of this year, we increased our Bitcoin holdings 15% from 5,126 to 7,320 Bitcoin. Because of the significant amount of Bitcoin we hold on our balance sheet, we recognized a gain on digital assets of $489 million during the first quarter of 2024.
Primarily due to this favorable value investment, our adjusted EBITDA increased 266% to $529 million from $145 million in the prior year period. A reminder that the fair value accounting reflects the changes in market value of Bitcoin that we hold on our balance sheet. In the current environment of Bitcoin price appreciation in recent quarters, we have continued to recognize gains through our income statement, reflecting the impact hurdle strategy has had on our financial statements. For example, every 10,000 change in Bitcoin price period-over-period can impact our adjusted EBITDA by approximately $170 million to $200 million. Digging more into our Bitcoin holdings and cash position, unrestricted cash and cash equivalents totaled $324 million, up from $125 million a year ago.
Also at March 31, we held approximately 7,320 bitcoin with a fair value of $1.2 billion on the balance sheet. Combined, our balance of cash and Bitcoin was approximately $1.6 billion as of March 31, 2024. We sold 730 Bitcoin during Q1, realizing cash proceeds of $45 million. These proceeds were utilized to fund operating expenses, including cost of revenues for energy hosting and other cash operating expenses and general administrative expenses. During the quarter, we raised $489 million from at-the-market equity sales, which we primarily intended to use for miners, acquisition of infrastructure, and for other general corporate purposes. We expect our future Bitcoin holdings will generally increase, but will fluctuate depending on operating and market conditions.
We intend to add to our Bitcoin holdings primarily through our production activities, and we will also continue to sell Bitcoin as a means of generating cash to fund monthly operating costs and general corporate purposes. As Fred mentioned, we have systematically deployed capital for accretive growth and strategic investments, which our teams have been able to integrate successfully in Q1 of this year. These acquisitions have not only been almost half the construction cost, but also have allowed us flexibility to move our miners from asset-light sites with operational issues as discussed above. If we are -- if we were to construct such sites on our own, it would have taken us more than a year to energize and likely cost twice the amount on a per megawatt basis, making these acquisitions highly accretive for our stockholders.
The acquisition of sites in Granbury, Texas; and Kearney, Nebraska have been accounted for as a business combination for FASB rules, and we have recognized the fair value of the assets acquired and liabilities assumed on our balance sheet. As a result, we also recognized goodwill of $30.9 million and intangible assets of $22 million, primarily related to customer relationships. We also accrued early termination expenses of $22 million as we terminated certain hosted customers subsequently. Another item worth highlighting is that Marathon was added to S&P SmallCap 600 Index. Just a reminder, the S&P SmallCap 600 tracks 600 U.S. companies with a market cap between $1 billion and $6.7 billion that have positive earnings over the most recent quarter and four quarters combined.
We are proud to be the first Bitcoin miner added to the S&P SmallCap Index. This inclusion is a testament to the consistently improving financial performance of our organization as we have scaled and implemented effective strategies to capitalize on market conditions. And that completes my update. I'll now turn it back over to Fred who will talk more about our future plans. Fred?
Fred Thiel: Thanks Salman. Over the past year, we've evolved from outsourcing our operations to third-party hosting providers to owning and operating sites, developing and marketing technology products and using waste and stranded power to generate energy and recycle heat. During Q1, we laid the foundation for Marathon to become a globally diversified company that leverages digital asset compute to build a more sustainable and inclusive future. And as we transition into the second quarter, we are reorganizing the internal structure of the business to better align with our growth opportunities, sharpen our strategic focus, bolster accountability. and maintain our speed and agility as we scale. Starting in the second quarter, Marathon will be restructured into a matrix organization consisting of three business units; utility-scale mining, technological innovations, and energy harvesting and supporting organizations such as Marcom, Finance, et cetera.
In my opening remarks, I spoke at length about the first two of these verticals. Utility-scale mining is our large-scale global digital asset mining operations. This vertical is what Marathon is primarily known for today, large-scale digital asset compute that's geared towards enhancing grid stability and the security of the world's preeminent blockchain ledger. Our technology division is focused on creating advanced technologies that transform digital infrastructure. This group has already launched its first series of products and going forward, its mission will be to deliver innovative hardware, software and services that maximize energy efficiency, improve performance, and unlock new opportunities for those who operate at the edge and for those who are building the foundation of the digital future.
In March at the Empower Conference, we demonstrated how the combination of MARA Firmware and 2PIC immersion enabled us to operate state-of-the-art digital asset miners at significantly higher performance levels with near minimal impact to energy efficiency. Using this solution enables digital asset miners to significantly increase the productivity of their digital mining assets, earn a higher return on the compute investment dollars, and reduce the total cost of operating sites. Our third vertical, which I did not discuss in my opening remarks, is energy harvesting. The mission of energy harvesting to support the energy transformation by converting environmentally-harmful waste energy, stranded clean energy, or otherwise underutilized sources of energy into economic value.
For now, it's perhaps easiest to think of this as the next evolution of Bitcoin mining, involving leveraging digital asset compute to convert waste into energy sequester methane and generate and reuse heat for industrial and commercial purposes. This last part is quite important as nearly 50% of total energy use is used for heat and a portion of that is low-grade heat, i.e., sub-50 degrees Celsius that can be provided by heat harvested from our digital asset compute system. This includes applications such as preheating materials and industrial processes, heating buildings and water for communities, and food production applications such as greenhouses and trim farms. We created these business units in response to the opportunities we saw in the market and how we believe this industry will evolve.
As you all know, the industry just underwent to Havy event, during which the block reward was reduced by 50%. As block rewards will continue to reduce by 50% every four years, it is critical to find new ways to leverage expertise and create value for others in order to maintain a position as a leader in the industry. And we believe that we can do so successfully, then we can not only mitigate the impact of Havy events but also excel. While utility scale mining is by far the most significant portion of our business today, we believe each of these businesses will contribute meaningfully to our organization over the coming years. Long-term, our goal is for 50% of our revenues to come from non-utility-scale mining. It will take time to reach that scale, but these new businesses are already showing progress.
We already have a pipeline valued at tens of millions of dollars for our technology products. Our pilot project in Utah, where we're capturing methane from landfill to power Bitcoin miners is our first energy harvesting project, and we expect to launch several others in the coming quarters. The demand for these verticals isn't just domestic, it's global, and we're chasing after it. In April, we announced that we appointed a new Managing Director to lead our expansion in Europe, Middle East, Africa, and parts of Asia. Since his appointment, our team has generated promising opportunities across the region from Finland in the North to Kenya and the South. While Marathon is already operating on three continents, our plan is to continue scaling our international business over coming years such that approximately 50% of our revenues come from overseas by 2028.
In the more immediate term, we're doubling down on our utility-scale mining business. We originally targeted to grow our operations to 35 or 37 exahash by the end of 2024 and 50 exahash by the end of 2025. However, with the expansion capacity gained from our recent acquisitions and the 45 exahash of additional compute available to us between current orders and options, we're now targeting 50 exahash by the end of this year. We already have 12 exahash of new miners arriving in early Q3 to take advantage of our acquired and expanded capacity with more coming to fill waiting capacity over the balance of this year. This represents a doubling of our compute capacity and further increases our energy efficiency, in under one year and will strongly extend our position as the leader in our industry.
While we will always be raising capital to continue growing our business, we currently have ample liquidity to fully fund the balance of our 50 exahash growth target this year. Q1 was a transformative quarter for Marathon, during which we battled against operational challenges to produce record financial results. We launched and began building the pipeline of our first product, and we doubled the size of our portfolio of digital asset compute. With 11 sites diversified across three continents and the road to 50 exahash clear ahead of us, we look forward to evolving into and excelling as a globally-diversified company that leverages digital asset compute to build a more sustainable and inclusive future for all. And with that, I'll turn it back to Rob for Q&A.
Rob?
A - Robert Samuels: Thanks, Fred. At this time, we are going to commence the Q&A section of today's call. We'll start by answering some of the most popular questions submitted by investors through our Q&A platform. So, our first question from Alexander Ren, who asks post Havy in what way does MARA a better position to stay profitable and grow compared to other mining companies. Fred, do you want to take that one?
Fred Thiel: Sure. So, a number of things. By acquiring sites in integrating, we lower our cost structure. So, essentially taking out the middleman who was the third-party hosting operator and take me out their margin, which, in some cases, can lower our cost by as much as 20%. Additionally, the diversification of our revenue streams, technologies such as slipstream, which enhance our ability to earn transaction fees over and above what normal FPPS pools earn provide us with abilities to in a lower Bitcoin block subsidy world, such as post-Havy generate generally greater revenues on a per block basis. So, we believe we're very well-positioned with our diversified revenue streams that we'll be developing over the coming years to be positioned to take advantage of whatever the market brings to us in the near and long-term.
Robert Samuels: Thanks. Our next question, and we had a couple of questions related to M&A, the Parminder asks, is MARA looking for a merger or planning to buy other miners in the short-term? Fred, do you want to take that one as well?
Fred Thiel: Well, we've already shown that we're acquiring hosting companies and the sites for capacity. Now to-date, these have been mostly sites where we have miners installed currently. So, it's a very easy integration. The challenge with integrating and acquiring miners that have their own fleet of miners is the age of miners that they have in their fleet. Most companies today are still transitioning to the latest state-of-the-art S21 class of machines and maybe running S19j Pros or even XPs. The challenge is, if we were to acquire a miner today and attribute any value to their fleet of existing machines, especially if their machines were S19j Pro or older, that wouldn't be a very smart idea. So, essentially, as we acquire miners, you'll tend to find that pricing will be very focused on the infrastructure value as opposed to the miners that are installed, unless, of course, they have state-of-the-art miners installed at which point you can value them at their replacement cost.
But I think typically, most publicly-traded miners have valuations, which exceed essentially the cost to rebuild that infrastructure and it comes down to a question of time to revenues. And what is it worth for you to acquire a miner that has capacity running and miners installed versus building it yourself? And how much extra do you want to pay for that time to market?
Robert Samuels: Thanks Fred. Our next question comes from [Indiscernible] Yu, who asks what's the status of your open ATM? And do you think this is the reason the MARA has not been tracking the price of Bitcoin. Salman, I think this one is for you.
Salman Khan: Thank you for asking the question, [Indiscernible]. In Q1, there was a general rotation out of miners and into the recently launched ETFs. We believe the top-performing miners will see price appreciation as the investors see the results. Similar to other industries like oil and gold, ETFs have their own position in the value chain while all and gold companies create value for their stockholders and generally track the commodity price with premium on top of the commodity price. In terms of the ATM as of March 31st, 2024, we have not accessed the new ATM. And subsequently, we raised about $200 million. As a reminder, the ATM gives us no cost of capital to invest in accretive acquisitions or grow the company as we continue to use Bitcoin to fund our operating costs and G&A.
Robert Samuels: Thanks, Salman. I think the next one is for you as well. Orlando CX, what's your current breakeven for Bitcoin. Do you want to take that one?
Salman Khan: Great question, Orlando. There seems to be a lot of diversity in the industry in terms of how the companies report their costs and where is it part and all that stuff. So it's a difficult question to answer in terms of apples-to-apples comparison. So, with that in mind, you -- typically, you could look at multiple ways. One is marginal cost of revenue without depreciation, which is cost of revenue minus depreciation, non-cash items. And that's one way of doing it. The other way of doing it is to look at cost per hash, which we believe is a better representation in this industry. So cost for Petahash, as we talked about previously in our prepared remarks, we have improved about 16%. And as we fully integrate these recently announced acquisitions, as Fred had mentioned, some of those acquisitions can save up to 20% on our costs.
All these costs will continue to show up in the future quarters as the synergies kick in and we integrate these acquisitions completely. As a reminder, our mining fleet remains the industry is one of the most efficient which will even get better and more efficient as we progress with time and we hit the 50 exahash as towards the end of the year. And that larger scale of exahash, it will allow us to spread the fixed cost across the larger pool, which on a unit basis, will make us even more efficient. Moreover, just a quick reminder, our G&A has or coin remains one of the lowest in the sector, and that shows how efficiently the company has operated historically.
Robert Samuels: Thanks Salman. Our next question comes from Tarik P who asks, what are your plans for increasing efficiency and reducing the recent downtime at several Bitcoin mining facilities. Fred?
Fred Thiel: Yes. Great question, Tarik. So, if you think about what happened in Q1, as I mentioned in my prior remarks, we had transformer issues at third-party hosted sites, and we had a utility line maintenance that was done that shut down one of our sites for a short period of time. And then we had weather events. All of these are exogenous factors. If you think about when you own and operate sites, you look to do things like standardized equipment across sites. So, you have standard operating procedures, you also have spare parts for everything you're doing. One of the challenges with the Ellendale site were transformer issues where some of the transformers that were installed could not operate at their stated spec. And so as those transformers started to fail, they had to be replaced and were modified.
And had we built that site, we most probably would not have used Chinese transformers, but rather transformative of higher quality that would operate within spec. So, again, over time, as more and more of the sites that we operate at come under our own control, I think we'll see uptime continue to tick up, and we'll see performance improve. When you think about just operating efficiencies, again, stripping out the third-party hosting provider dramatically impacts your cost because you're stripping out some of these built-in margin. And we also began deploying our immersion technology. The 2PIC immersion technology does a number of things. For one thing, it increases the -- essentially the lifespan of miners because these miners that traditionally would be air-cooled in many sites essentially have to be serviced every 30 days, they have to be clean, filters have to be changed, fans have to be replaced, and the mechanical load at the sites is higher.
Using 2 phase immersion, you don't have a lot of those issues. We have immersion systems that have run for months without having to be serviced at all. And so that reduces the overhead at the site, which reduces your operating cost, it makes you more efficient, increases uptime. And the other advantage with 2PIC immersion is that you become fairly immune from heat waves because at the end of the day, the liquid in this tank is boiling, which is that it's likely to be hotter in the tank than the ambient temperature would be. So that makes heat much less of an issue, especially in places like Texas and in UAE, for example. And if you look at our site in UAE, that site operates with 99.8% uptime. And this is in an environment where the ambient temperature is over 100 degrees and humidity is well into the 90% range.
So, I think that's a great example of how our sites operate more efficiently and more effectively when they're under our control.
Robert Samuels: Thanks, Fred. In the interest of time, I think we'll have to wrap up this section of the Q&A. And again, we really appreciate the questions and interest. I'm now going to turn the call back to our operator to open the line to questions from our covering analysts. Alicia, back to you.
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