Press Release: Bakkt Reports First Quarter 2024 Results

Dow Jones05-16

Bakkt Reports First Quarter 2024 Results

$854.6 million total revenues including gross crypto revenues and net loyalty revenues

Strong client crypto trading activity with notional traded volume up 324% quarter-over-quarter

$48.8 million operating expenses excluding crypto costs, execution, clearing and brokerage fees, down 16% year-over-year

Updated full year 2024 outlook to reflect recently implemented strategic reduction in force and restructuring which is expected to reduce operating expenses by $13 million(1) on an annual basis

ALPHARETTA, Ga.--(BUSINESS WIRE)--May 15, 2024-- 

Bakkt Holdings, Inc. ("Bakkt" or the "Company") (NYSE: BKKT) announced its financial and operational results for the quarter ended March 31, 2024.

CEO Comments:

"We made solid progress on our key priorities in the first quarter driven by robust crypto trading activity across our platforms and the successful execution of the next phase of our cost restructuring initiative. We managed to significantly reduce our net loss by approximately 53% from same quarter last year, and anticipate further reduction in our adjusted EBITDA loss from the restructuring executed in May," said Andy Main, President and Chief Executive Officer of Bakkt. "Our team has also been working tirelessly this quarter towards the future launch of our own Electronic Consumer Network ("ECN"), BakktX, an institutional crypto trading venue, which will represent a significant milestone in expanding our client base potential and tapping into new market opportunities. We're making great progress accelerating our operational and growth initiatives, and I look forward to sharing more soon. Additionally, our strategic partnerships with Unchained and Swan Bitcoin have enhanced our collaborative custody and trading efforts. Looking ahead, we are dedicated to maintaining this momentum and further optimizing our business execution to efficiently scale our business as we work to achieve profitability and deliver value to our stockholders."

Key Performance Indicators (including historical Bakkt Crypto data):

   --  Crypto enabled accounts grew to 6.3 million, up 9% YoY. 
 
   --  Transacting accounts decreased 34% year-over-year to 779,000, due to 
      lower loyalty redemption and active crypto trading accounts. 
 
   --  Notional traded volume increased 64% year-over-year to $1,041 million, 
      primarily due to strong crypto trading volume partially offset by lower 
      loyalty redemption activity in travel and gift cards. 
 
   --  Assets under custody increased 76% year-over-year to $1,233 million, 
      due to higher coin prices. 

First Quarter 2024 Financial Highlights (unaudited):

   --  Total revenues of $854.6 million reflect a significant increase in 
      gross crypto services revenues driven by the acquisition of Bakkt Crypto. 
      Net loyalty revenues of $13.2 million increased 4% year-over-year driven 
      by higher service revenue. 
 
   --  Total operating expenses of $886.4 million reflect a significant 
      increase in crypto costs and execution, clearing and brokerage fees 
      driven by our acquisition of Bakkt Crypto. 
 
   --  Total operating expenses excluding crypto costs and execution, clearing 
      and brokerage fees decreased 16% to $48.8 million. First quarter expenses 
      included $6.1 million of non-recurring restructuring expenses. 
 
   --  Operating loss of $31.8 million improved 30% year-over-year primarily 
      due to a reduction in compensation and benefit costs. 
 
   --  Net loss improved 53% year-over-year to $21.3 million. 
 
   --  Adjusted EBITDA loss (non-GAAP) improved 44% year-over-year to $16.3 
      million, primarily due to a reduction in compensation and benefits 
      costs. 

First quarter 2024 results include Bakkt Crypto (f/k/a Apex Crypto, LLC), acquired on April 1, 2023. In accordance with GAAP, crypto services revenue and crypto costs and execution, clearing and brokerage fees are presented on a gross basis as the Company is a principal in those transactions.

 
                                                                    Increase/ 
$ in millions                                       1Q24     1Q23   (decrease) 
-----------------------------------------------  -------  -------  ----------- 
Total revenues                                    $854.6    $13.2         N.M. 
   Crypto costs and execution, clearing and 
    brokerage fees                                 837.6      0.4         N.M. 
   Operating expenses, excluding crypto costs 
    and execution, clearing and brokerage fees      48.8     58.3        (16%) 
                                                 -------  -------  ----------- 
   Total operating expenses                        886.4     58.7        1411% 
                                                 -------  -------  ----------- 
Operating loss                                    (31.8)   (45.4)        (30%) 
Net loss                                          (21.3)   (44.9)        (53%) 
Adjusted EBITDA loss (non-GAAP)                  $(16.3)  $(28.9)        (44%) 
-----------------------------------------------  -------  -------  ----------- 
Note: "N.M" denotes Not Meaningful 
 

On April 29, 2024, following approval by our stockholders and Board of Directors, we effected a reverse stock split (the "Reverse Stock Split") of our Class A Common Stock, par value $0.0001 per share ("Class A Common Stock"), and Class V Common Stock, par value $0.0001 per share, at a ratio of 1-for-25. Our Class A Common Stock began trading on a reverse-split adjusted basis on the New York Stock Exchange (the "NYSE") as of the open of trading on April 29, 2024 under the same symbol, "BKKT". In accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 505 Equity, changes in the capital structure of a public reporting entity due to a reverse stock split occurring after the balance sheet date, but before the release of the financial statements, should be given retroactive effect. As such, the Reverse Stock Split has been retroactively applied to all figures throughout this document (unless otherwise noted).

Recent Operational Highlights:

   --  Corporate restructuring -- On May 2, completed severance of 28 
      employees that will take effect in the second quarter as part of Bakkt's 
      broader expense restructuring initiative. The restructuring plan, which 
      also includes closure of open roles and optimization of Bakkt's call 
      center resources will reduce Bakkt's planned headcount by 20% at the end 
      of 2024 and is expected to generate approximately $7 million cash savings 
      in 2024 and represent an annualized cash savings of approximately $13 
      million. 
 
   --  Partnership update -- Established partnerships with Unchained and Swan 
      Bitcoin, increasing the Company's collaborative efforts in custody and 
      trading ability across the United States. 
 
   --  Institutional ECN trading venue, BakktX -- Progressed towards launching 
      its own ECN, BakktX, a trading venue designed for institutional traders 
      and market participants who require high performance, low latency, and 
      deep liquidity. This platform will be the first known foreign exchange 
      style ECN in the digital asset space and aims to offer institutional 
      clients a reliable and low-cost trading experience. 

Updated 2024 Guidance:(2)

   --  Full year 2024 revenues expected to be $3,002 million - $4,447 million; 
      includes gross crypto revenues of $2,949 million - $4,390 million and net 
      loyalty revenues of $53 million - $57 million. 
 
   --  Full year 2024 crypto costs expected to be $2,934 million - $4,365 
      million, in line with gross crypto revenues. 
 
   --  Full year 2024 total operating expenses excluding crypto costs, 
      execution, clearing and brokerage fees and goodwill, intangible and 
      long-lived assets impairments expected to be $155 million - $165 
      million. 
 
   --  Full year 2024 net cash used in operating activities expected to be 
      ($58 million) -- ($72 million). 
 
   --  Full year 2024 free cash flow usage (non-GAAP) expected to be ($64 
      million) -- ($78 million). 
 
   --  End of year available cash, cash equivalents and available-for-sale 
      securities of $42 million - $57 million. 

1. $13 million represents annualized savings from Bakkt's completed expense restructuring initiative excluding a one-time restructuring charge of $0.8 - $1.0 million. The restructuring includes the severance of 28 employees as filed in a Form 8-K on May 2, 2024 as well as closure of open roles and optimization of call center resources, among others.

2. Given under the following updated key assumptions: Gross Crypto Revenue, Crypto Costs and ECB - Increased revenue contribution from existing clients/accounts based on observed retail trading engagement metrics, offset by lower contribution from new clients; 1x -- 3x increase in crypto trading accounts vs. Q4'23; Activation of crypto coin pairs in 2H24 to support international retail trading demand; Addition of institutional clients with steady ramp-up in assets under custody in 2H'24; Crypto costs and ECB in line with gross crypto revenue. Operating expenses - Comp expense savings from restructuring offset by increased non-cash compensation and restructuring charges. End of year cash, cash equivalents and AFS securities - Integration of regulated entities beginning March 2024 including $5mm additional release of surety bond restricted cash collateral, $7mm cash savings from restructuring actions partially offset by $5mm reduction in net contribution from crypto trading.

Webcast and Conference Call Information

Bakkt will host a conference call at 5:00 PM ET, May 15, 2024. The earnings conference call will be webcast live here and archived on the investor relations section of Bakkt's corporate website under the 'Events & Presentations' section, along with any related earnings materials.

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May 15, 2024 16:15 ET (20:15 GMT)

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