Q1 2024 Bakkt Holdings Inc Earnings Call

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Operator: Greetings and welcome to the Bakkt first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. The question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I'll now turn it over to Olivia Keevey, Senior Lead of Communications at Bakkt. Please go ahead.

Speaker Change: Greetings and welcome to the backed first quarter 2024 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded I'll now turn it over to Olivia TV senior.

Olivia TV: Our lead of communications it back. Please go ahead.

Olivia Keevey: Good afternoon, and thank you for joining us on BAK's first quarter earnings call. Today's presentation, including the separate earnings call presentation that can be found on our investor relations website at www.investors.bak.com, will contain certain forward-looking statements. These statements are based on management's current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially from those expressed or implied in such forward-looking statements. For a more complete discussion of forward-looking statements and the risks and uncertainties related to Bakkt's business, please refer to its filings with the Securities and Exchange Commission.

Speaker Change: Good afternoon, and thank you for joining us on box first quarter earnings call today's presentation, including a separate earnings call presentation that can be found on our investor Relations website at www Dot investors Dropbox dotcom will contain certain forward looking statements. These statements are based on management's current expectations.

Speaker Change: Subject to risks and uncertainties, which may cause actual results to differ materially from those expressed or implied in such forward looking statements for a more complete discussion on forward looking statements and the risks and uncertainties related to back business. Please refer to its filings with the Securities and Exchange Commission.

Olivia Keevey: During today's presentation, in addition to discussing results that are calculated in accordance with generally accepted accounting principles, we will refer to certain non-GAAP financial measures. For more information on this, the basis of presentation for our financial results, and our non-GAAP measures, please refer to our earnings release, which was filed this afternoon with the SEC. Joining me on today's call are Andy Main, Bakkt's Chief Executive Officer, and Karen Alexander, its Chief Financial Officer.

Speaker Change: During today's presentation. In addition to discussing results that are calculated in accordance with generally accepted accounting principles, we will refer to certain non-GAAP financial measures for more information on this the basis of presentation for our financial results and our non-GAAP measures. Please refer to our earnings release filed this afternoon. Joining me on today's call are.

Speaker Change: Andi mean box, Chief Executive Officer, and Karen Alexander Chief Financial Officer.

Olivia Keevey: After our prepared remarks, we will answer questions we received from our investors through the State Technologies Platform. After that, Andy and Karen will be available to answer questions from the analyst community. I'll now turn it over to Andy.

Speaker Change: Our prepared remarks, we will answer questions you received from our investors through the state technology platform after that Indian Carol will be available to answer questions from the analyst community I'll now turn it over to Andy.

Andy Main: Thank you, Olivia, and good afternoon, everyone. Thank you for joining us on the Bakkt Earnings Call. It's great to speak to you all again. I want to start today by recapping three key priorities that we laid out in detail on our last quarterly call and provide an update on the progress that we've already made in the first few months of the year against these goals. So beginning on slide four, as we outlined last quarter, we are laser focused on three key strategic priorities for the year ahead.

Andy: Thank you Olivia and good afternoon, everyone. Thank you for joining <unk> earnings call, it's great to speak to you all again.

Andy Main: First, growing our client network and deepening our existing client relationships. Secondly, expanding our product solutions and extending the Bakkt ecosystem. And third, realigning our costs and prudently managing expenses. So I'd like to provide a few highlights for each of our priorities.

Andy: I want to start today by recapping three key priorities that we laid out in detail.

Andy: Last quarter call.

Andy: I'll provide an update on the progress that we've already made in the first few months of the year against these goals.

Andy Main: On the client side, I've had the opportunity to speak with a number of our clients over the past few weeks. For both our loyalty and crypto businesses, our focus on being our clients, partnering growth, combined with their robust solutions and winning client experience is resonating well. On the product side, we've continued to enhance our trading and custody platform, which caters to both institutional and retail clients. This broad market positioning combined with the rigor we apply to the complexities of security and compliance in crypto allows us to serve a diverse range of clients. Our approach to the market is further enhanced by the trust clients have in us. This can be attributed to the discipline we apply to being a publicly traded crypto company under NYDFS regulated In terms of our expense realignment, we've also significantly reduced our operating expenses through company-wide measures. Notably, we conducted a reduction in force on May 2nd that will yield cost savings.

Andy: So beginning on slide four.

Andy: Last quarter, we are laser focused on three key strategic priorities in the year ahead.

Andy: First growing our client network and deepening our existing client relationships, secondly, expanding our product solutions and extending its about ecosystem.

Andy: And third realigning our costs and prudently managing expenses.

Andy Main: This is in addition to the year-over-year expense reduction of 16% that is reflected in the Q1 2024 action plan. Although challenging, these decisions are crucial as we navigate towards profitability and reallocate our strategic investments to growth areas. Overall, we believe these actions will strengthen our financial foundation as we move forward and optimize our goals to scale. Now, I'd like to turn to slide five to discuss our Q1 financial update and operational update. This update demonstrates the success of the team's efforts. Q1 revenue, net of crypto services revenue, crypto costs and execution, and clearing and brokerage fees, was at $17 million, up approximately 33% from Q1 last year.

Andy: So I'd like to provide a few highlights for each of our priorities.

Andy Main: These results were driven by robust crypto trading activity across our platform, with notional crypto volume up 94% compared to the same period last year. Further, OPEX, excluding crypto costs and execution, and clearing and brokerage fees decreased by 16% versus Q1 last year as a result of our cost restructuring initiatives over the past few quarters. The combination of higher revenues and driving down costs helped us improve our net loss by 53% year over year and our adjusted EBITDA loss by approximately 44% year over year.

Andy Main: On the operational side of things, I'd like to call out the progress we're making towards the MVP launch of our Electronics Communication Network, or ECN, an offering for institutional trading and custody. This will represent a significant milestone in expanding our client-based potential and tapping into new market opportunities. Additionally, our strategic partnerships with Unchained and Swan Bitcoin have enhanced our collaborative custody and trading efforts. Our assets under custody at the end of the first quarter grew to a record $1.1 billion.

Andy: On the client side I've had the opportunity to speak with a number of our clients over the past few weeks for.

Andy Main: And finally, our loyalty business is performing consistently well for some of the largest credit card programs in the USA and incentive programs in Canada. This business is benefiting from the changing and growing interest from consumers. And all things a lot of. Consumer trends driving the sector forward include maximizing the value of earned loyalty through a broad range of services and products as well as leveraging alternative currencies in the market given the broader macroeconomic pressures on the value of cash. We remain excited about the loyalty business and the growth opportunities it presents for Bakkt and our clients. Moving to slide six.

Andy: For both our loyalty and crypto businesses, our focus on being our clients' partner in growth.

Andy: Combined with our robust solutions and winning client experience is resonating well.

Andy: On the product side, we've continued to enhance our trading and custody platform.

<unk>, both institutional and retail clients.

Andy: This broad market positioning combined with the rigor we apply to the complexities of security and compliance and crypto.

Those of us to serve a diverse range of clients.

Andy: A repeal to the market is further enhanced by the trust clients hub in us.

Andy: This can be attributed to the discipline, we apply to being a publicly traded crypto company and our NY DFS regulated custody platform.

Andy: In terms of our expense realignment, we've also significantly reduced our operating expenses through company wide initiatives.

Andy: Notably we conducted a reduction in force on the second that will yield cost savings.

Andy: This is in addition to the year over year expense reduction of 16% that is reflected in the Q1 2024 actuals.

Andy: Although challenging these decisions are crucial as we navigate towards profitability.

Andy: We allocate our strategic investments to growth areas.

Andy: We believe these actions will strengthen our financial foundation.

Andy: As we move forward and optimize our goal is to scale.

Andy Main: As evidenced in our trading volumes in Q1, we've begun to see positive green shoots in the market, and the overall demand environment is improving, with more industry activity, higher coin prices, and overall higher retail trading volume. Bakkt is taking advantage of this trend, as we have experienced high volume driving through our platform. In Q1 2024, our notional traded volume was 324% higher than Q4 2023, while overall market activity was up 65%. In March 2024, volume on the Bakkt crypto platform hit an all-time high since we acquired it in April 2023 for $593 million. In April 2024, trading volume dipped slightly from March but was still 134% higher than the 2023 average.

Andy: Now I'd like to turn to slide five to discuss our Q1 financial update and operational updates.

Andy Main: Moving on to slide seven, we are upping the pace on right sizing our cost structure by intensifying our expense restructuring. Notably, on May 2nd, we completed a workforce reduction of 28 employees that will take effect during the second quarter as part of our broader expense restructuring initiative. The total restructuring plan, which also includes future closure of certain open roles and optimisation of BAK's contact center resources, is expected to reduce Bakkt's plant headcount by 20% at the end of 2024.

Andy: This update demonstrates the success of the team's efforts.

Andy Main: These actions are estimated to yield $13 million in cash savings on an annualized basis going forward, of which $7 million will be realized in 2024, excluding any one-time severance cost. This was not a decision taken lightly and was carefully planned so our team can continue executing on our key priorities and serving our clients effectively. This was in addition to the $9.5 billion lower year-over-year OPEX, excluding crypto costs and execution, and clearing and brokerage fees in Q1 2025. In addition to this headcount reduction, we will also continue to prioritize cost savings and look for ways to streamline our operations and cost structure, including reducing vendor and discretionary spending. Moving on to slide number eight.

Andy: Q1 revenue net of trip to services revenue cryptic costs and execution and clearing and brokerage fees was $17 million up approximately 33% from Q1 last year.

Andy: These results were driven by robust crypto trading activity.

Andy: Across our platform with notional volume up 94% compared to the same period last year.

Andy: Further opex, excluding crypto close in execution and clearing and brokerage fees decreased by 16% versus Q1 last year as a result of our cost restructuring initiatives over the past few quarters.

The combination of higher revenues and driving down costs helped us improve our net loss by 53% year over year.

Andy: And our adjusted EBITDA loss by approximately 44% year over year.

Andy: On the operational side of things I'd like to call out the progress, we're making towards the MVP launch of our electronics communication network or ECM.

Andy: Our offering for institutional trading and custody.

Andy: This will represent a significant milestone in expanding our client base potential and tapping into new market opportunities.

Andy: Additionally, our strategic partnerships with Unchained and sworn bitcoin have enhanced our collaborative custody and trading efforts.

Andy: Our assets under custody at the end of the first quarter grew to a record $1 1 billion.

Andy: And finally, our loyalty business is performing consistently well for some of the largest credit card programs in the USA.

Andy: And incentive programs in Canada.

Andy: This business is benefiting from the changing and growing interest from consumers and all the things loyalty.

Andy: Consumer trends driving this sector forwards include maximizing the value of earn loyalty points through a broad range of services and products as well as leveraging alternative currencies in the markets given the broader macroeconomic pressures on the value of cash.

Andy: We remain excited about the loyalty business and the growth opportunities it presents for bagged and our clients.

Andy: Moving to slide six.

Andy: Evidenced in our trading volumes in Q1, we began to see positive green shoots in the market and the overall demand environment improving.

Andy: With more industry activity higher corn prices and overall higher retail trading volume.

Andy: <unk> is taking advantage of this trend.

Andy: As we have experienced high volume driving through our platform.

Andy: In Q1, 2024, our notional traded volume was 324% higher than Q4 2023, while overall market activity was up 65%.

Andy: In March 2020 for volume on the bat Crypto platform hit an all time high since we acquired it in April 2023.

Andy: $593 million.

Andy: In April 2024 trading volume dipped slightly from March.

Andy: 134% higher than the 2023 average.

Andy: Moving on to slide seven we are upping the pace on right sizing our cost structure by intensifying our expense restructuring efforts.

Andy: Notably on May 2nd we completed a workforce reduction of 28 employees that will take effect during the second quarter as part of our broader expense restructuring initiatives.

Andy: The total restructuring plan, which also includes future closure of certain open roles and optimization of bags contact Center resources.

Andy: As expected to reduce box plant head count by 20% at the end of 2024.

Andy: These actions are estimated to yield $13 million in cash savings.

Andy: Annualized basis going forward of which $7 million will be realized in 2024.

Andy: Excluding any onetime severance costs.

Andy: This was not a decision taken lightly and was carefully planned. So our team can continue executing on our key priorities and serving our clients effectively.

Andy: This was in addition to the $9 $5 million lower year over year, Opex, excluding crypto costs and execution and clearing and brokerage fees in Q1, 'twenty 'twenty four.

Andy: In addition to this head count reduction we will also continue to prioritize cost savings and look for ways to streamline our operations and cost structure, including reducing vendor and discretionary spend.

Andy: Moving on to slide number eight.

Andy Main: I'd just like to say that the board appointed me as CEO to scale the business and guide it towards profitability. The performance required will be achieved by working at the intersections of process and people, platform and products, and with our partners. Using this framework, let's talk more about what the future holds for our business and what we have coming down the pipeline. So on slide nine, I'd like to dive into what we see as a massive untapped market.

Andy: To say that the board appointed me as CEO to scale, the business and guided towards profitability.

Andy: The performance required will be achieved by working at the intersections of process and people.

Andy: Platform and products and with our partners.

Andy: Using this framework, let's talk more about what the future holds for our business and what we have coming down the pipeline.

Andy: So on slide nine I'd like to dive into what we see is a massive untapped market.

Andy Main: The crypto trading industry has been built primarily for everyday retail investors who use a central limit order book trading structure. Meanwhile, institutional investors who are offering Bitcoin ETFs are increasingly finding that the retail central limit order book structure is not meeting their large-scale needs. Bakkt has designed a groundbreaking solution to uniquely appeal to the needs of institutional investors.

Andy: The crypto trading industry has been built primarily for everyday retail investors, who use essential limit order book trading structure lean.

Andy: Meanwhile, institutional investors, who are offering bitcoin etfs are increasingly finding that the retail central limit order book structure is not missing their large scale needs.

Andy: <unk> has designed a groundbreaking solution.

Andy: Uniquely appeal to the needs of institutional investors.

Andy: So moving on to slide number 10.

Andy Main: This is where our ECN, which we call BATx, comes in. Unlike a central limit order book, this platform will be a trading venue designed for institutional traders and market participants within our existing approved regulatory framework. We believe BakktX will be a differentiated, innovative platform to enable institutional crypto trading with high performance, low latency, and low cost. The platform is expected to be an industry first. The first foreign exchange style ECN in the digital asset space that will offer institutional clients a reliable and low cost trading experience.

Andy: This is for <unk>, which we called back X comes in.

Andy: Unlike a central limit order book this platform will be a trading venue designed for institutional traders and market participants within our existing approved regulatory footprint.

Andy: We believe back X will be a differentiated innovative platform to enable institutional crypto trading with high performance low latency and low costs.

Andy: Platform is expected to be an industry first the first foreign exchange style ECM in the digital asset space.

Andy: Offer institutional clients, a reliable and low cost trading experience.

Andy Main: The brokerage side of our business will be amongst the first clients. We believe this improvement in trading technology will strengthen our existing relationships and open the door to new clients that demand the most from their infrastructure providers. Second, when combined with our custody capabilities, we will shift from a pure custody provider to a partner that offers more complete solutions for our institutional clients. With the mature retail trading market, institutional investors are eager and ready for a trading venue tiller made for institutional requirements. And we believe this is the opportune time to launch an innovative market solution serving our targeted high-value sector. Moving on to page number 11.

The brokerage side of our business will be amongst the first clients.

Andy: We believe this improvement in trading technology will harden, our existing relationships and open the door to new clients of demands the most from their infrastructure providers.

Andy: Second when combined with our custody capabilities, we will shift from a pure custody provider to a partner the offers more complete solutions for institutional clients.

With a mature retail trading markets.

Andy: Institutional investors are eager and ready for a trading venue tailor made for institutional requirements and we believe this is the opportune time to launch innovative market solution, serving our targeted high value segments.

Andy: Moving on to page number 11.

Andy Main: Another key element in shaping Black's progression is the vitality of the ecosystem in which we operate. We have a strong marketplace of relationships that enhance our solutions and processes, which continues to evolve as we innovate our offering. As I mentioned, we have many high-value client segments, including brokerages, trading desks, asset managers, and crypto natives, in collaboration with our go-to-market technology provider. Our capabilities allow us to deepen liquidity for our clients and provide Enhanced Data in Pricing, Aggregation, and Analysis.

Andy: Another key element in shaping blacks progression is the vitality of the ecosystem in which we operate.

Andy: We have a strong marketplace of relationships to enhance our solutions and processes, which continues to evolve as we innovate our offerings.

As I mentioned, we have many high value client segments, including brokerages trading desks asset managers and crypto natives.

Andy: In collaboration with our go to market technology providers are capabilities allow us to deepen liquidity for our clients.

Andy: And enhanced data and pricing aggregation and analytics.

Andy Main: Our goal is to cultivate an ecosystem of solutions tailored to the needs of those diverse clients. The mission of the Bakkt ecosystem is to bring further value to our clients through comprehensive aggregation analytics. High Performance Execution, Robust Liquidity Supporting Tight Spread, and Secure Clearing and Settlement Processes Upholding the Integrity of Each Transaction and our New York Department of Financial Services Regulated Custody Services This integrated approach with our partners ensures that Bakkt stands out as the comprehensive ecosystem that empowers our client network to trade confidently and successfully. So, thank you for the time to allow me to share more about our current performance and further progress for 2024. Now I'll turn it over to Karen, who will speak to our financial

Andy: Our goal is to cultivate an ecosystem of solutions tailored to the needs of those diverse clients.

Andy: The mission of the <unk> ecosystem is to bring further value to our clients through comprehensive aggregation analytics.

Andy: High performance execution robust liquidity supporting tight spreads secure clearing and settlement processes upholding the integrity of each transaction.

Andy: And our New York Department of financial services regulated custody solution.

Andy: This integrated approach with our partners ensures the back stands out as the comprehensive ecosystem that empowers our client network to trade confidently and successfully.

Andy: So thank you for the time, allowing me to share more about our current performance and further progress for 2024.

Karen: Now I'll turn it over to Karen who will speak to our financial results.

Karen J. Alexander: Thanks, Andy. I will now walk you through our first quarter KPIs and financial results. A quick reminder that, in accordance with GAAP, we present crypto services revenue and crypto costs and execution, clearing, and brokerage fees on a gross basis since we are a principal in the crypto services we provide our customers. By contrast, we are an agent in the loyalty redemption services that we provide our loyalty customers.

Karen: Thanks, Andy I'll now walk you through our first quarter Kpis and financial results.

Karen: A quick reminder, that in accordance with GAAP, we present crypto services revenue.

Karen: Steel costs and execution clearing and brokerage.

Speaker Change: This basis once theory.

Speaker Change: This will provide our customers.

Speaker Change: Contrast, where an agent and the royalty production services that we're providing to customers.

Karen J. Alexander: So loyalty revenue is presented on a one-line net basis, crypto costs, and execution clearing and brokerage, which we'll refer to as Crypto Costs and ECB for the remainder of this call, Thrive Gross Crypto Services Revenue, and the difference between these two line items represents crypto trading's contribution to the market. Please see the notes section of our earnings presentation for additional detail on crypto services revenue and related. Starting on slide 13, we have our Q1 KPIs that we believe provide a snapshot of the health of the underlying trends that drive our business.

Speaker Change: To wrap up.

Speaker Change: But that basis.

Speaker Change: Cost and execution clearing and brokerage fees.

Speaker Change: The other part you asked crypto Carsten.

This call thrive crypto services revenue.

Speaker Change: Difference between these two line items represent.

Speaker Change: <unk> contribution to margin.

Speaker Change: Please see the notes section of our earnings presentation for additional detail.

Robert: This is Robert.

Speaker Change: Starting on slide 13, we have our key kpis that we believe provides a snapshot of the <unk>.

Brian: Thanks, Brian.

Karen J. Alexander: As a reminder, we have included Bakkt Crypto in the historical KPI figures on this slide for comparison purposes. We had 6.3 million crypto enabled accounts at the end of the first quarter, which reflects a steady increase over the past 12 months. Next, we have our transacting accounts, which we break out into crypto and loyalty.

As a reminder.

Brian: Back crept out.

Brian: With GPI figures on this slide.

Okay.

Brian: We had $6 3 million enabled accounts at the end of the first quarter, which reflects a steady increase over the past 12 months next.

Karen J. Alexander: There were 779,000 transacting accounts in the first quarter, of which 484,000 were for loyalty redemption, and 295,000 were crypto transactions. While the number of crypto transacting accounts declined year over year, we saw an approximately 235% increase in the notional amount per trade year over year. This led to a year-over-year increase in the notional traded volume for crypto, which we will cover next. Total notional traded volume was $1,041 million, of which $860 million was from crypto, and $181 million was related to loyalty redemption.

Brian: Next we have are transacting clients, which we break out into crypto inland port counts there were 779000.

Brian: <unk> thousand transacting accounts in the first quarter of which 484.

Brian: Royalty production and 295000, perfect our trades, while the number of crypto transacting accounts declined year over year, we saw an approximately 235% increase in the notional amount per trade year over year.

Brian: This led to a bigger increase in the notional traded volume for crept down what's for Buckeye partners.

Brian: Total notional traded volume was $141 million.

Brian: $860 million from quick down $181 million.

Okay Gotcha.

Karen J. Alexander: On this chart, we have also included the crypto industry's trading volumes, which is the orange. As depicted here, our crypto trading volumes were up 324% on a sequential basis, outperforming the overall industry, which was up only 65% sequentially. Meanwhile, loyalty redemption volume was down 6% year over year due to lower redemption activity in travel gift cards.

Brian: And this chart. We have also included the crypto industry trading volumes, which is the Orange line.

Brian: As depicted here, our crypto trading volumes were up 324% on a sequential basis outperforming the overall industry.

Brian: 65% sequentially.

Brian: Meanwhile, loyalty redemption volume was down 6% year over year due to lower redemption activity and traveling.

Karen J. Alexander: While overall volumes were down, we did have some benefit related to the mixed shift from lower margin products such as air travel to higher margin products such as hotels. At the end of Q1, our assets under custody increased 76% year-over-year to $1,233.2 million on higher coin prices. On slide 14, we show revenue for the company. Total revenue for the first quarter of 2024 was $854.6 million. Gross crypto services revenue for the quarter was $841.3 million.

Brian: Overall volumes were down we did have some benefit related to the mix shift from lower margin products, such as air travel to higher margin products such as Macau.

Brian: At the end of Q1, our assets under custody increased 76% year over year to $1233 $2 million and higher corn prices.

Brian: On Slide 14, we show revenue for the company total revenue for the first quarter of 2024 with $854 $6 million.

Andy: Services revenue for the quarter with 841 $3 million as Andy noted earlier, our Q1 'twenty four prescriptive notional traded volume increased 24% on a quarter over quarter basis.

Karen J. Alexander: As Andy noted earlier, our Q124 Gross Crypto Notional Traded Volume increased 324% on a quarter-over-quarter basis, outperforming the 65% quarter-over-quarter increase in the overall market Gross Crypto Notional Traded Volume. Our K124 traded volume was the strongest in March, where we saw particularly strong demand for certain means.

Andy: The 65% quarter over quarter increase in the overall market, Chris International trade volume.

Andy: Our Q1 'twenty four traded by amongst the strongest in March where we saw particularly strong demand for certain clients.

Karen J. Alexander: Net royalty revenues of $13.2 million increased 3% year over year. This was driven by a 20% year-over-year increase in subscription and service revenues to $6.6 million. Approximately half of the increase was driven by an adjustment to the remaining life of one of our service contracts, with the remaining increase driven by higher volume-based service revenues. Transaction revenues of $6.6 million were down 9% year over year, primarily due to lower redemption volume in travel and lower redemption margin in merchandise.

Andy: Net royalty revenues of $13 $2 million increased 3% year over year. This was driven by 20% year over year increase in subscription and service revenue to $6 $6 million.

Andy: Approximately half of the increase was driven by an adjustment to the main lines of one of our service contracts.

Andy: Remaining increase driven by higher volume based service.

Andy: Transaction revenues of $6 $6 million were down 9% year over year, primarily due to Barbara redemption volume in travel and lever, but that margin in merchandise.

Karen J. Alexander: Turning to slide 15, we have a slide comparing gross crypto services revenue to crypto costs and ECB. Gross capital services revenue of $841.3 million increased 322% sequentially and was impacted by improving industry-wide volume. CryptoCost and ECB were $837.6 million for the quarter. The difference between crypto services gross revenue and CryptoCost and ECB represents the net revenue contribution of retail crypto trading services.

Andy: Turning to slide 15, we have a slide comparing greatest crypto services revenue kept across crisp services revenue of $841 million increased 22% sequentially and was impacted by improving industry wide volume.

Constantly CB $837 $6 million for the quarter.

Andy: The difference between crypto services gross revenue.

Andy: ECB represents.

Andy: And the contribution of retail trading services.

Karen J. Alexander: On a percentage basis, the net revenue contribution for Q1-24 of $3.7 million is a take rate of approximately 44 basis points. This is lower than Bakk Crypto's take rate of 80 basis points in Q4'23 due to the adjustment of the legal pay revenue share agreement in Q3'23. As I've commented in prior quarters, we had expected the take rate to revert back to the pre-Q3'23 historical take rate of approximately 30 to 40 basis points prior to Q3'23 as legal pay activity levels increased.

Andy: On a percentage basis.

Andy: Net revenue contribution for Q1, 24, a $3 $7 million.

Take rate of approximately 44 basis points.

This is Laura backflip Theres take rate of 80 basis points in Q4 23.

Speaker Change: Thank you Jeff.

Speaker Change: Revenue share agreement in Q3 2003 at.

Speaker Change: At that commented in prior quarters, we had expected the take rate to revert back to the <unk> Q3, 'twenty three historical take rate of approximately 30 to 40 basis points prior to Q3, 'twenty three as with our productivity level.

Speaker Change: <unk>.

Karen J. Alexander: Turning to slide 16, we have total operating expense. Total expense for the first quarter of $886.4 million includes $837.6 million of crypto costs and ECB. These costs are driven by crypto trading.

Turning to slide 16, we have total operating expense total expense for the first quarter of $886 4 million.

Speaker Change: $837 $6 million of cryptic Austin ECB based.

Speaker Change: These costs are driven by crypto trading volumes <unk>.

Karen J. Alexander: SG&A expenses $7.8 million included a $900,000 marketing expense associated with a strategic marketing. Excluding this payment, SG&A expenses were roughly flat to Q123. Total compensation expense of $24.5 million declined 28% compared to the first quarter of 2023 due to lower headcount and a decrease in incentive bonuses and benefits. Note that the Q4-23 compensation expense included reversals of $6.5 million of incentive and non-cash compensation expenses to adjust those accruals to lower achievement of performance. Other expenses of $15.4 million included $6.1 million of non-recurring restructuring expenses.

Speaker Change: Expense of $7 $8 million includes a 900000 dollar marketing expense associated with a strategic marketing agreement.

Speaker Change: Excluding this payment SG&A expenses were roughly flat to Q1 'twenty three.

Speaker Change: Total compensation expense of $24 5 million declined 28% compared to the first quarter of 2023 due to lower head count and a decrease in incentive bonuses and benefit Q4, 'twenty three compensation expense included reversal of $6 $5 million.

Speaker Change: Incentive and non cash compensation expenses.

Speaker Change: Those accruals to lower achievement of performance targets.

Speaker Change: Other expenses.

Speaker Change: $4 million included $6 1 million of nonrecurring restructuring expenses.

Karen J. Alexander: Operating expenses, excluding crypto costs and ECB, and non-cash goodwill and tangible asset and long-lived asset impairment charges, were $48.8 million. This represents a decrease of 16% year over year. This improvement is primarily due to a reduction in total compensation and benefits and acquisition-related expenses and reflects our commitment to maintaining disciplined expense management. We're pleased with the continued progress we've been making in reducing your expense base through our disciplined approach to allocating capital.

Speaker Change: Operating expenses, excluding crypto caution ECB and noncash goodwill intangible assets and long lived asset impairment charges were $48 $8 million. This represents a decrease of 16% year over year.

This improvement is primarily due to a reduction in total compensation and benefits and acquisition related expenses and reflects our commitment to maintaining disciplined expense management.

Speaker Change: We're pleased with the continued progress we've been making in reducing our expense base through our disciplined approach towards allocating capital.

Karen J. Alexander: As Andy noted, this will remain a key focus for us as we look ahead to the remainder of the year, and we are committed to continuing this trend, as I will describe further when I address our updated outlook for 2024. On slide 17, we have our EBITDA and adjusted EBITDA for the first quarter of 2024. Adjusted EBITDA reflects adjustments for non-cash, restructuring, and acquisition-related items that impacted the period. EBITDA and Adjusted EBITDA for the quarter were losses of $22.0 million and $16.3 million, respectively.

Speaker Change: As Andy noted this will remain a key focus for us as we look ahead to the remainder of the year and we are committed to continuing this trend as I will describe further when I address our updated outlook for 2024.

Speaker Change: On slide 17, we have our EBITDA and adjusted EBITDA for the first quarter of 2024.

Speaker Change: Adjusted EBITDA reflects adjustments for noncash restructuring and acquisition related items that impacted the period.

Speaker Change: EBITDA and adjusted EBITDA for the quarter were losses of $22.01 billion.

Speaker Change: $10 $3 million respectively.

Karen J. Alexander: As Andy noted earlier, our adjusted EBITDA loss has narrowed significantly over the last 12 months, reflecting our expense management efforts. Turning to slide 18, we have our first quarter 2024 condensed financial. I've already covered revenue and operating expenses on the previous slides, so I'll just jump to the bottom line item. The net loss for the quarter was $21.3 million, which resulted in a diluted loss of $1.86 per share on an average diluted share base of 4.4 million shares.

Speaker Change: Andy noted earlier, our adjusted EBITDA losses narrowed significantly over the last 12 months, reflecting our expense management efforts.

Speaker Change: Turning to slide 18, we have our first quarter 2024, condensed financial statements I've already covered revenue and operating expenses on the previous slides. So I'll just jump to the bottom line items.

Speaker Change: Net loss for the quarter was $21 3 million, which resulted in a diluted loss of $1.86 per share on an average diluted share base of $4 4 million shares net loss allocated to the Noncontrolling interest in the operating company with $13 $1 million, resulting in an $8 $2 million.

Karen J. Alexander: The net loss allocated to the non-controlling interest in the operating company was $13.1 million, resulting in an $8.2 million loss attributable to Bakkt Holdings, Inc., for a net loss of $1.86 per share on an average basic share count of $4.4 million.

Speaker Change: Loss attributable to <unk> Holdings, Inc.

Speaker Change: Net loss of $1 86 per share and an average basic share count of four.

Speaker Change: One 4 million shares.

Karen J. Alexander: Following our recent capital raise, and after giving effect to our 1 to 25 reverse stock split that occurred on April 26, 2024, our total share count as of May 3 is $13.4 million. Following the capital raise, ICE still remains our largest shareholder, as they own 56% of our aggregate share. Note that their percent ownership is down due to new Class A share issuances and not due to the sale of shares by ICE.

Speaker Change: Following our recent capital raise and Africa, giving effect to our 125 reverse stock split that occurred on April 26 2024.

Speaker Change: Total share count as of May 3rd is $13 4 million shares.

Speaker Change: Following the capital raise I still remains our largest shareholder and stay at a 56% of our aggregate shares.

Speaker Change: That's our percent ownership is down to two new class a share issuances and that data the stainless shares my eyes.

Karen J. Alexander: Turning to slide 19, we have our condensed balance sheet as of March 31st, 2024. We ended the quarter with $74.6 million of cash, cash equivalents, and bail security available for bail. After giving effect to the Registered Direct Offering proceeds, our cash usage for the first quarter was $33.7 million. Our cash usage from quarter to quarter may include contractual payments where the timing is not always consistent, as well as normal operating expenses.

Speaker Change: Turning to slide 19, we have our condensed balance sheet as of March 31, 2024.

Speaker Change: The quarter was $74 $6 million of cash cash equivalents and available for sale securities.

Speaker Change: After giving effect to the registered direct offering proceeds our cash usage for the first quarter was $33 $7 million.

Speaker Change: Our cash usage from quarter to quarter may include contractual payments, where the timing is not always consistent as long as normal operating expenses.

Karen J. Alexander: Cash usage for the first quarter of 2024 included a $4.9 million increase in surety bond collateral and a $7.0 million transfer of available cash to restricted cash related to our purchasing card facility. Excluding some of these lumpier items, we are continuing to see improvements in our cash usage run rate from a lower operating expense base, which I will cover more in the guidance slide. Before moving on to our guidance, I would like to address the material weakness in our internal controls as noted in our 10-Q file this afternoon.

Speaker Change: For the first quarter 2024 included a $4 $9 million increased surety bond collateral and a 7.0 million transfer of available cash to restricted cash related to our purchasing card facility. Excluding some of these lumpier items, we are continuing to see improvements in our cash usage run rate.

Speaker Change: Lower operating expenses, which I will cover more on the guidance slide.

Speaker Change: Before moving on to our guidance I would like to address the material weakness in our internal controls as noted in our 10-Q filed this afternoon.

Karen J. Alexander: The issue stems from an error made by a Big Four third-party valuation specialist in the fair value measurement of our Class I and Class II warrants that were issued in the March Registered Direct Offering. Generally accepted accounting principles require us to recognize these warrants as liabilities and measure them at fair value every reporting period. The valuation of these warrants requires the use of a complex valuation model with a number of sensitive assumptions that must be made from the perspective of a market. This issue is solely related to our class one and class two warrants and is non-cash in nature.

Speaker Change: The issue stems from an error made by a big four third party valuation specialist.

Speaker Change: The fair value measurement of our class one last year was that were issued in the March registered direct offering.

Speaker Change: Generally accepted accounting principles require that we recognize is more answers liabilities and measure them at fair value every reporting period. The valuation of these warrants requires the use of of complex valuation models with a number of sort of step assumptions that must be made from the perspective of a market participant associate was solely related to our class one and class II.

Karen J. Alexander: We have resolved the valuation issue specific to our class one and class two warrants and the financial position and results of operations presented today and reported in our first quarter. We are actively addressing the identified material weakness in our internal controls to make sure such discrepancies are identified and managed more effectively in the future. Moving on to slide 20, we have updated our 2024 full-year outlook. Since our Q4'23 earnings release, we've had a few months of client activity and engagement metrics to fine-tune the wide range that we provided in March.

Speaker Change: Barnes and is noncash in nature, we have resolved the valuation issues specific to our class, one and class II warrants and the financial position and results of operations presented today and reported in our first quarter 10-Q.

Speaker Change: We are actively addressing the identified material weakness in our internal controls to make sure such discrepancies are identified and managed more effectively in the future.

Speaker Change: Moving on to Slide 20, we have updated our 2020 for full year outlook.

Speaker Change: Since our Q4 'twenty three earnings release, we've had a few months of client activity and engagement metrics to fine tune the wide range that we provided in March Accordingly, we are updating our expected outlook for 2024.

Karen J. Alexander: Accordingly, we are updating our expected outlook for 2024. We expect total revenues to be in the range of $3,002 million to $4,447 million. This range includes gross crypto revenue of $2,949 million to $4,390 million. There are several factors that influence that wide range.

Speaker Change: We expect total revenues to be in the range of 3000 $2 million to 4440 $7 million. This range includes grass crypto revenue.

2940, $9 million to 4000 $390 million.

Speaker Change: Several factors that influence that wide range.

Karen J. Alexander: First, we consider a range of potential trading engagement metrics based on observed trading engagement in Q1 2024, as well as longer-term historical trading engagement metrics, with the third quarter 2023 being a low point for both our platform as well as the broader market. As we mentioned earlier, we saw improved trading activity so far in the first quarter of 2024, with March volume being exceptionally strong. Our expected revenue range for the full year 2024 considers a reversion to 2023 engagement metrics at the low end of the range and steady improvement engagement metrics at the high end of the range. It does not assume that the exceptional trading volume we observed in March will continue for the rest of the year. Secondly, we have updated our range of possible scenarios for the activation of new clients currently in our pipeline.

Speaker Change: We consider a range of potential trading engagement metrics based on observed trading engagement with tier 124.

Speaker Change: Well its longer term historical trading engagement metrics with a third quarter 'twenty three being a low point for both our platform as well as the broader market.

Speaker Change: As we mentioned earlier, we saw improved trading activity. So far in the first quarter of 2024 with March volume being exceptionally strong.

Speaker Change: But the revenue range for the full year 2024 considers a reversion to 2023 engagement metrics at the low end of the range and steady improvement in engagement metrics at the high end of the range does not assume that the exceptional trading volume we observed in March will continue for the rest of it.

Speaker Change: Secondly, we have updated our range of possible scenarios for the activation of new clients currently in our pipeline.

Karen J. Alexander: The range of assumed timing and conversion rate of those pipeline opportunities is reflected in the range of expected gross crypto revenue in 2024. One metric we have considered is the increase in crypto-enabled accounts from new clients.

Speaker Change: The range of assumed timing and conversion rate of those pipeline opportunities is reflected in the range of expected gross kept their revenue in 2024.

Speaker Change: One metric we have considered is the increasingly crypto enabled accounts from new clients. We are expecting our crypto trading accounts to grow by approximately one three times with a significant portion of that growth coming from new clients.

Andy Main: We are expecting your crypto trading accounts to grow by approximately one to three times, with a significant portion of that growth coming from new clients. Based on our current view of pipeline and current client growth, we have reduced our expectation for crypto trading account growth relative to the guidance I provided in March, while maintaining the general expectation of continued growth in crypto trading accounts. Third, we continue to express the view that crypto coin pairs will be activated in the second half of 2024 to support high demand by international retail traders.

Based on our current view of pipeline and current client growth, we have reduced our expectation for crypto trading account growth relative to the guidance I provided in March while maintaining the general expectation of continued growth or if they're trading accounts.

Speaker Change: Third we continue to expect that crept up claim parents will be activated in the second half of 2024 to support high demand by international retail traders.

Andy Main: Finally, our expected gross crypto revenue range assumes the addition of institutional clients beginning in the second quarter of 2024, with a steady ramp-up in AUC from those clients in the second half of 2024. We have not adjusted our expectation for net loyalty revenue of $53 million to $57 million, consistent with the performance of that business in 2023. We expect crypto costs in the ECB of $2,934 million to $4,365 million, driven by the range of expected gross crypto revenue.

Speaker Change: Finally, our expected gross crypto revenue range assumes the addition of institutional clients beginning in the second quarter of 2024 with steady ramp up in AUC from those clients in the second half of 2024.

Speaker Change: We have not adjusted our expectation for net royalty revenue of $53 million to $57 million consistent.

Speaker Change: With the performance of that business in 2023.

Speaker Change: We expect crypto costs from ECB of 2930 $4 million to 4360 $5 million driven by the range of expected risk their revenue.

Andy Main: We expect total operating expenses of $155 million to $165 million, updated to reflect the May 2024 restructuring act. This guidance does not anticipate any acquisition or inorganic transaction expenses, like the acquisition expenses we incurred in 2023 related to the acquisition of Bakkt. The net of operating expenses and non-cash expenses represents our expected cash operating expenses for 2024. Estimated operating cash flow usage of $58 million to $72 million reflects both expected revenue and expense ranges that I have walked.

Speaker Change: We expect total operating expenses of $155 million to $165 million updated to reflect the may 2020 for restructuring actions. This guidance does not anticipate any acquisition or inorganic transaction expenses like the acquisition expenses, we incurred in 2023 related.

Speaker Change: To the acquisition of Bath cricket.

The net of operating expenses and noncash expenses represents our expected cash operating expenses for 2024.

Speaker Change: Expected operating cash flow usage of 58 million to $72 million for flexible expected revenue and expense ranges that I've walked through.

Andy Main: Free cash flow, which is a non-GAAP metric, is expected to be a usage of between $64 million and $78 million. We expect to end the year with $42 million to $57 million of available cash, cash equivalents, and available for sale securities. This range reflects both the $7 million cash savings from the May restructuring action as well as the $5 million reduction in the net revenue contribution from CryptoTruth. It also reflects our updated expectations for capital efficiencies driven from legal entity integration of our regulated entities, including a $9 million reduction of restricted cash as we eliminate duplicate surety bond requirements.

Speaker Change: Free cash flow, which is a non-GAAP metric is expected to be a usage of between 64 million to $78 million.

Speaker Change: We expect to end the year with $42 million typically $7 million of available cash cash equivalents and available for sale Securities. This range reflects both the $7 million cash savings from the restructuring actions as well as the 5 billion reduction in the net revenue contribution from crypto trading.

Speaker Change: It also reflects our updated expectations for capital efficiencies driven from legal entity integration of our regulated entities, including a $9 million reduction of restricted cash as we eliminate duplicate surety bond requirements.

Andy Main: We continue to believe we have sufficient cash to fund our operations in 2024. As you will note from this range, we expect our cash utilization to reduce over the course of 2024 as we achieve our revenue growth and expense reduction targets. I'll now pass it back to Andy for his closing remarks.

Speaker Change: We continue to believe we have sufficient cash to fund our operations in 2024 as you will note from this range, we expect our cash utilization to reduce over the course of 2024 as we achieve our revenue growth and expense reduction.

Andy: I'll now pass it back to Andy for his closing remarks.

Andy Main: Thank you Karen for taking us through the financials. Between our ongoing focus on providing a winning client experience, the strategic broadening of our product offering, and prudent management of our expenses, I believe we are positioned to scale and take advantage of a turning market. I look forward to sharing more about our progress in the months to come. Thank you everyone for your ongoing interest and buy. I will now turn it over to Olivia to manage the Q&A.

Andy: Thank you Karen for taking us through the financials.

Andy: Between our ongoing focus on providing the winning client experience.

Andy: The strategic broadening of our product offering.

Andy: Management of our expenses I believe we are positioned to scale and take advantage of it.

Andy: Turning markets.

Andy: I look forward to sharing more about our progress in the months to come.

Andy: Thank you everyone for your ongoing interest in mind.

Olivia TV: Now turning it over to Olivia to manage the Q&A.

Olivia Keevey: Thanks, Andy. Now, let's move over to questions from the investor community. Leading into our Q&A session, we'll start by answering the top questions from Say Technology, ranked by number. We have consolidated some of the questions that addressed similar themes. After that, we'll turn to live questions from the analysts. Our first question from the investor community comes from Syed H. and William I. Essentially the same question, but combined here for time. As the United States embarks on a new era of bitcoin and cryptocurrency advancement, how is Bakkt positioning itself at the forefront of this movement, particularly with the support of the intercontinental exchange, and ultimately restoring confidence to investors? Andy, can you share your perspective here?

Olivia TV: Thanks, Andy let's move over to questions from the Investor community meeting into our Q&A session will start by answering the top questions from state technology ranked by number of votes. We have consolidated some of the questions that address similar themes. After that we'll turn to live questions from the analyst community.

Olivia TV: Our first question from the Investor Community comes from site age and William High somewhat the same question, but combined here for time.

Speaker Change: The United States embarks on a new era of bitcoin and cryptocurrency advanced than I was back positioning itself at the forefront of this movement, particularly with the support of the Intercontinental exchange and ultimately restoring confidence to shareholders. Andy can you share your perspective here.

Andy Main: Thank you, Saeed and William, for your questions and for being fellow stockholders of Bakkt. Just like we mentioned, we are laser focused on our three key parts. Firstly, expanding our client network. Secondly, broadening our product offerings within the Bakkt ecosystem, primarily our anticipated institutional BakktX ECN offering. And thirdly, enhancing our cost management strategy. Having ICE in our corner for support has been a huge help, as we leverage their established infrastructure and market presence.

Speaker Change: Thank you Saeed and William for your question and being fellow stockholders of bad debts.

Andy: Just like you mentioned, we are laser focused on our three key priorities.

Andy: Firstly, expanding our client network.

Andy: Broadening our offerings within the <unk> ecosystem, primarily are anticipated institutional back ex <unk> offering.

Andy: And thirdly, enhancing our cost management strategies.

Andy: Having ice in a corner for support has been a huge help.

Andy: We leverage their established infrastructure and market presence.

Andy Main: We believe the support in implementing these priorities in due time will bring this company to the forefront of the ever-evolving crypto landscape. We're always looking ahead and pursuing ways to stay ahead of the curve and ultimately deliver value to our stockholders.

Andy: We believe the support and implementing these policies in due time, we will bring this company to the forefront of the ever evolving landscape.

Andy: We're always looking forward and pursuing ways to stay ahead of the curve and ultimately deliver value to our stockholders. Thank you.

Karen J. Alexander: The next question is from Jeffrey C. Jeffrey asks, why did you pursue the reverse split so quickly after shareholder approval when you had several months to regain good standing on the New York Stock Exchange? Karen, can you take this one?

Speaker Change: Next question is from Jeffrey Z. Jeffrey asks why did you pursue the reverse split so quickly after shareholder approval. When you had several months to regain good standing on the New York Stock Exchange Karen can you take this one.

Karen J. Alexander: Of course, our primary goal was to promptly address the compliance issues with the New York Stock Exchange's minimum price requirements, ensuring the stability and continued listing of our Acting quickly on the reverse split allowed us to minimize uncertainty for our investors and stabilize the market perception of Bakkt's financial health, including opening new doors for institutional investors who may have minimum price requirements for their investment. This action is part of a broader strategy to secure our company's financial foundation and improve our investor relations.

Karen: Of course, our primary goal was to properly address the compliance issues with the New York stock exchanges minimum price requirements, ensuring the stability and continued listing of our stock's acting quickly on the reverse split allowed us to minimize uncertainty for our investors and stabilize the market perception of <unk> financial health, including opening new.

Karen: Doors for institutional investors, who may have minimum price requirements for their investments.

Action as part of a broader strategy to secure a company's financial foundation and improve investor confidence.

Andy Main: The next question is from Working P. Working asks, has your company explored the possibility of collaborating with ICE to secure cryptocurrency custody business from the top four to five ETF providers? Additionally, what steps must FACT undertake to successfully acquire business in this sector? Andy, can you provide your thoughts here?

Speaker Change: Next question is from working P. Working how has your company explored the possibility of collaborating with ice to secure cryptocurrency custody business from the top four to five ETF providers. Additionally, what steps must back to undertake definitely acquire business in this sector and can you provide your thoughts here.

Andy Main: Thank you. Yes.

Thank you yes.

Andy Main: Indeed, we've been and will continue to leverage IC's established infrastructure and market presence. We aim to develop robust custody solutions that meet the complex needs of these institutional players. To successfully acquire business in the sector, we are focusing on enhancing our technological capabilities, ensuring compliance with regulatory standards, and building a product suite that aligns with the specific requirements of these large institutional clients. Our ongoing product development and strategic partnerships are geared towards creating a compelling value proposition in the institutional crypto markets and securing a large portion of the available market share.

Speaker Change: Indeed, we have been and will continue to leverage ice's established infrastructure and market presence.

Speaker Change: Aimed to develop robust customer solutions that meet the complex needs of these.

Speaker Change: Institutional players.

Speaker Change: To successfully acquire business and the sector, we are focusing on enhancing our technological capabilities, ensuring compliance with regulatory standards and building a product suite that aligns with the specific requirements of these large institutional clients.

Speaker Change: Our ongoing product development and strategic partnerships are geared towards creating a compelling value proposition in the us.

Speaker Change: <unk> markets and securing a large portion of the available market share.

Operator: And with that, I would now like to turn the call back over to the operator to open up the phone lines to take questions from the analyst community.

Speaker Change: And with that I would now like to turn the call back over to the operator to open up the phone lines to take questions from the analysts.

Operator: If you'd like to queue for a question, you can do so by pressing star one on your telephone keypad. If, for any reason, you'd like to cancel your question, please press star two. Again, to join the question queue, please press star one. We will pause here briefly as questions are registered. Our first question is from John Roy with Water Tower Research. Your line is now...

Speaker Change: If you'd like to queue for a question you can do so by pressing star one on your telephone keypad.

Speaker Change: Any reason you'd like to remove your question. Please press star two.

Speaker Change: To join the question queue. Please press star one we will pause here briefly as questions are registered.

Speaker Change: Our first question is from John Roy with water Tower research your.

Speaker Change: Your line is now open.

John Marc Andre Roy: Thank you. So Karen, this increase in the estimate for the end of the year cash. Yeah, you're going to, 42 to 47 million. Is that mainly savings in OPEX and expense management, or are there some non-OPEX factors that are going on?

John Marc Andre Roy: Thank you Karen.

John Marc Andre Roy: This increase.

John Marc Andre Roy: Increase in the estimate for the end of the year cash.

John Marc Andre Roy: You're going to.

Speaker Change: 42% to 40 $57 million is that mainly savings in the Opex expense management or is your son non opex factors that are going on.

Karen J. Alexander: Hi John. Thanks so much for the question. Obviously, as you can tell from Q1 so far, there are a lot of things going on with our available cash that are beyond just what we're seeing from operations with the ins and outs of what we have to hold as restricted cash. So thinking about where we are so far, as you mentioned, we ended the quarter with $74.6 million of available cash. If you think about the burn rate that's inherent in that number, after giving effect to the RDO, we burned about $33.7 million of cash during the quarter. But there are definitely some one-timers in there that I mentioned on the call.

Ken: Yes, hi, Ken Thanks, so much for the question obviously as you could tell from Q1, so far there's a lot of things going on with our available cash that are beyond just what we're seeing from operations.

Ken: With the ins and outs.

Karen J. Alexander: So if you think about the increases that we had to set aside for surety bond collateral and collateral for our purchasing card facility, that's over $10 million of that usage. So between the $74.6 million that we ended Q1 with, and then if I maybe take that down to roughly $49.5 million, which is the midpoint of my guidance range, that's a change of $25 million approximately, included in there, as I mentioned, is about $10 million of restricted cash release that we've built into the expectation of the cash balance, given the fact that we are now able to get some of the efficiencies from being able to integrate our regulated entities.

Ken: We have to hold as restricted cash.

Ken: Looking about where we are so far as.

Speaker Change: As he mentioned we ended the quarter with $74 6 million of available cash.

Speaker Change: Think about the birth rate that's inherent in that number.

Speaker Change: Get better.

Speaker Change: After giving effect to the RVO, we burned about $33 7 million of cash during the quarter.

But there is definitely some one timers in there that I had mentioned on the call. So if you think about the increases that we had to set aside for surety bond collateral and collateral for our purchasing card facility that's over $10 million of that usage. So I certainly do.

Speaker Change: Do not want to invest.

Speaker Change: Investors have the impression that that $33 $7 million is it can just be divided by three and that would be a monthly run rate.

Speaker Change: As you can see from the numbers our run rate is going to come down pretty significantly so between $74. Six that we ended Q4 with Q1 with and then if I, maybe take that down to roughly $49 5 million, which is the midpoint of my guidance range.

Speaker Change: That's a change of $25 million approximately.

Speaker Change: And there as I mentioned, it's about $10 million of.

Speaker Change: Restricted cash release that we've built into the expectation of the cash balance given the fact that when you are now able to get some of the efficiencies from being able to integrate our regulated entities. So when you factor that in it to something that looks more like a roughly 30.

Karen J. Alexander: So when you factor that in to something that looks more like a, you know, roughly $35 to $36 million cash utilization from operations for the rest of the year, that's more like a $4 million run rate on a monthly basis for the rest of the year. Keep in mind also, though, that our cash usage is not a straight line. So you could certainly see it in the first quarter, when we had more cash utilization.

Speaker Change: $536 million cash utilization from operations for the rest of the year, that's more like a 4 million dollar run rate.

Speaker Change: On slide basis for the for the rest of the year.

Speaker Change: Keep in mind also that with that our cash usage is not straight line. So you could certainly see it in the first quarter, where we had more cash utilization.

Karen J. Alexander: The $4 million is a simplified straight-line number. But what we'll see is it varies from quarter to quarter, which is why I wanted to give the end-of-year balance as a better indication of what we would utilize for the rest of the year. Great, that really does.

Speaker Change: The $4 million.

Speaker Change: It's a simplified straight line number, but we'll see as it.

Speaker Change: Very from quarter to quarter, which is why I wanted to give the end of year balance is a better indication of what anybody who lives for the rest of the year.

John Marc Andre Roy: Great. That really does kind of clear things up. Thanks, Karen.

Karen: Great that really does kind of clear things up thanks Karen.

Karen: Okay.

Trevor Ellis Williams: Our next question is from Trevor Williams with Jeffries. Your line is now open.

Speaker Change: Our next question is from Trevor Williams with Jefferies. Your line is now open.

Trevor Ellis Williams: Thanks. Hey, good afternoon. Andy, maybe a bigger picture question just on the regulatory backdrop of being in an election year. Maybe just give us a sense for kind of how you see the State of the Union on the regulatory side, how you're expecting things to evolve over the next 12, 24 months, and just how you guys are positioning the business for kind of a different range of outcomes on the regulatory front. Thank you.

Trevor Ellis Williams: Thanks, Hey, good afternoon, Andy maybe a bigger picture question just on the regulatory backdrop being in an election year, maybe just give us a sense for kind of how you see state of the union on the regulatory side, how you are expecting things to evolve over the next.

Trevor Ellis Williams: 12 to 24 months and just how you guys are positioning the business for kind of a different range of outcomes on the regulatory front. Thank you.

Andy Main: Yeah, Trevor. So thanks so much for the question. So Bakkt being a publicly traded crypto company, we are just extremely focused on the regulatory front, particularly with the NYDFS and certainly complying with the SEC regulations, and clearly with the election coming up, develop, and flourish. So that's very much the position we're taking as we go forward here. Terrific. Thank you, guys.

Trevor: Yes Trevor.

Trevor: So much for the question.

Operator: We have no further questions at this time, so I'll pass the call back to the management team for any closing remarks.

Trevor: So back being a publicly traded.

Trevor: Two company.

Trevor: We are just extremely focused on the regulatory front.

Trevor: Particularly with <unk>.

Trevor: The NY DFS, certainly complying to the SEC regulations.

Trevor: Clearly with the election coming up.

Trevor: We certainly are proceeding on the basis.

Trevor: The U S government certainly supports that.

Trevor: Current.

Trevor: Regulations.

And we'll be in a position to support additional licensees for entrants coming into this market.

Trevor: The buoyant on the fact that the government FCC particular will support its current cryptic positions to help this part of the economy develops and flourish. So thats very much the position were taking as we as we go forward here.

Speaker Change: Terrific. Thank you guys.

Speaker Change: We have no further questions at this time, so I'll pass the call back to the management team for any closing remarks.

Andy Main: Thank you everyone for attending our earnings call talk today. We look forward to connecting with you again soon.

Operator: That concludes today's call. Thank you all for your participation. You may now disconnect your lines.

Speaker Change: Thank you everyone for attending our earnings.

Speaker Change: We look forward to connecting with you again soon.

Speaker Change: That concludes today's call. Thank you all for your participation you may now disconnect your line.