Q2 2024 Bakkt Holdings Inc Earnings Call

August 14, 2024

Operator: [inaudible] I love you, I love you, I love you, I love you. [inaudible] Thank you all for your patience. The Bakkt 2Q24 earnings call will begin shortly. During today's call, there will be a Q&A session. To register a question, it's a star followed by one.

Operator: Thank you all for your patience. The Back to You 24 earnings call will begin shortly. During today's call, there will be a Q&A session to register a question.

Speaker Change: Thank you all for your patience. The BACS 2Q24 earnings call will begin shortly. During today's call, there will be a Q&A session. To register a question, it's star followed by one. To withdraw your question, it's star followed by two.

Operator: It's staff followed by one to withdraw your question.

Operator: It's staff followed by two greetings and welcome to the back 2nd 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.

Operator: To withdraw your question, it's a star followed by two. [music] Greetings and welcome to the Bakkt second quarter 2024 earnings conference call. At this time, all participants are in a listen only mode.

Speaker Change: Greetings and welcome to the BACT second quarter 2024 earnings conference call. At this time all participants are in a listen-only mode.

Operator: A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I will now turn over to Olivia Keavey, Senior Lead of Communications at Bakkt.

Speaker Change: A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I will now turn over to Olivia Keavey, Senior Lead of Communications at Bakkt. Please go ahead.

Olivia Keavey: I will now turn over to Olivia Keavey, Senior Leader of Communications at Backs. Please go ahead.

Olivia Keavey: Good morning, and thank you for joining back 2nd quarter earnings call. Joining me on today's call are Andy Main, back Chief Executive Officer, Ray Kamrath, Chief Commercial Officer for crypto business, and Karen Alexander, Chief Financial Officer. Andy will provide a high-level overview of key 2 results, the current cryptocurrency macro landscape, and our operational progress during the quarter. Ray will provide an update on strategic initiatives and partnerships, and Karen will cover back detailed financial results.

Olivia Keavey: Good morning, and thank you for joining Bakkt's second quarter earnings call. Joining me on today's call are Andy Main, Bakkt's Chief Executive Officer, Ray Kamrath, Chief Commercial Officer for our crypto business, and Karen Alexander, Chief Financial Officer. Andy will provide a high-level overview of Q2 results, the current cryptocurrency macro landscape, and our operational progress during the quarter. Ray will provide an update on Strategic Initiatives and Partnerships, and Karen will discuss the detailed financial results.

Speaker Change: Andy will provide a high-level overview of Q2 results, the current cryptocurrency macro landscape, and our operational progress during the quarter. Ray will provide an update on strategic initiatives and partnerships, and Karen will cover BAC's detailed financial results.

Olivia Keavey: After the prepared remarks, we will answer questions we received from our investors through the state technology platform and any questions from the analyst community.

Olivia Keavey: After the prepared remarks, we will answer questions we received from our investors through the State Technologies Platform and any questions from the analyst community. As a reminder, today's earnings call includes a separate supplemental presentation that can be found on our Investor Relations website at www.investors.bakkt.com. During today's call, we may make 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.

Speaker Change: After the prepared remarks, we will answer questions we received from our investors through the state technologies platform and any questions from the analyst community.

Olivia Keavey: As a reminder, today's earnings call includes a separate supplemental presentation that can be found at our Investor Relations website at www.investors.back.com. During today's call, we may make 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.

Speaker Change: As a reminder, today's earnings call includes a separate supplemental presentation that can be found at our investor relations website at www.investors.back.com. During today's call, we may make certain forward-looking statements.

Olivia Keavey: For a more complete discussion of forward-looking statements and the risk and uncertainties related to backed business, please refer to its filings with the Securities and Exchange Commission. In addition, in addition to discussing results that are calculated in accordance with generally accepted accounting principles, we also make reference to certain non-GAAP financial measures.

Speaker Change: 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.

Olivia Keavey: For a more complete discussion on forward-looking statements and the risks and uncertainties related to backs business, please refer to its filing, Security and Exchange Commission. Further, in addition to discussing results that are calculated in accordance with generally accepted accounting principles, we also make reference to certain non-GAAP financial measures. For more detailed information on our non-GAAP financial disclosure, please refer to our earnings release, which can be found on our Investor Relations website.

Speaker Change: For a more complete discussion on forward-looking statements and the risks and uncertainties related to Bakkt's business, please refer to its filings with the Securities and Exchange Commission.

Operator: Thank you all for your patience. The back to you 24 earnings call will begin shortly. During today's call there will be a Q&A session to register a question. It's staff followed by one to withdraw your question.

Speaker Change: Further, in addition to discussing results that are calculated in accordance with generally accepted accounting principles, we also make reference to certain non-GAAP financial measures.

Operator: It's staff followed by two Greetings and welcome to the back 2nd 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.

Olivia Keavey: For more detailed information on our non-GAAP financial disclosures, please refer to our earnings release, which can be found on our Investor Relations website. Thanks, and I'll now turn the call over to Andy. Thank you, Olivia, and good morning, everyone.

Speaker Change: For more detailed information on our non-GAAP financial disclosures, please refer to our earnings release, which can be found on our Investor Relations website. Thanks, and I'll now turn the call over to Andy.

Olivia Keavey: Thanks, and I'll turn the call over to Andy.

Andy Main: Thank you, Olivia, and good morning, everyone. Thank you for joining back, Second Quarter, 2024 earnings call. It's great to speak to you all again. I'd like to start today by providing a high-level overview of our business performance, then dive into specific updates from our crypto and loyalty businesses. As we cover strategic initiatives and partnerships, I'm delighted that Ray Kamrath, our Chief Commercial Officer, is with us today. Ray is going to provide an update on some significant news for our crypto business. Turning to page three of our presentation, let's start with the highlights of our Q2 financial performance.

Andy Main: Thank you for joining BAK's second quarter 2024 earnings call. It's great to speak to you all again. I'd like to start today by providing a high-level overview of our business performance, then dive into specific updates from our crypto and loyalty businesses. As we cover strategic initiatives and partnerships, I'm delighted that Ray Kamrath, our Chief Commercial Officer, is with us today. Ray's going to provide an update on some significant news for our crypto. Turning to page 3 of our presentation, let's start with highlights of our Q2 financial performance.

Andy: Thank you, Olivia, and good morning, everyone. Thank you for joining Bakkt's second quarter 2024 earnings call. It's great to speak to you all again. I'd like to start today by providing a high-level overview of our business performance.

Andy: Then dive into specific updates from our crypto and loyalty businesses.

Andy: As we cover strategic initiatives and partnerships, I'm delighted that Ray Kamrath, our Chief Commercial Officer, is with us today.

Ray Kamrath: Ray's going to provide an update on some significant news for our crypto business.

Ray Kamrath: Turning to page 3 of our presentation, let's start with highlights of our Q2 financial performance.

Andy Main: Q2 crypto and loyalty services revenue net of crypto costs and execution and clearing and brokerage fees was $14.8 million, up approximately 9% from Q2 last year, but down 13% sequentially. Of this $14.8 million, $12.8 million came from our loyalty business, which improved 4% year-over-year and decreased 3% sequentially. The remaining $2 million was generated from crypto services revenue, which increased 35% year over year but declined 46% sequentially. This was due to the downward trend in prices and notional crypto volume that followed the significant spike in March after the Bitcoin spot ETF approval, which had driven broader institutional.

Andy Main: Q2 crypto and loyalty services revenue, net of crypto costs and execution, and clearing and brokerage fees was 14.8 million, up approximately 9% from Q2 last year, but down 13% sequentially. Of this 14.8 million, 12.8 million came from our loyalty business, which improved 4% year by year and decreased 3% sequentially. The remaining 2 million was generated from crypto services revenue, which increased 35% year by year but declined 46% sequentially. This was due to the downward trend in prices and notional crypto volume that followed the significant spike in March after the bit calling spot ETF approval, which had driven broader institutional interest.

Speaker Change: Q2 crypto and loyalty services revenue net of crypto costs and execution and clearing and brokerage fees was 14.8 million up approximately 9% from Q2 last year but down 13% sequentially.

Speaker Change: Of this $14.8 million, $12.8 million came from our loyalty business, which improved 4% year over year and decreased 3% sequentially.

Speaker Change: The remaining two million was generated from crypto services revenue which increased 35% year-over-year but declined 46% sequentially.

Speaker Change: This was due to the downward trend in prices and notional crypto volume that followed the significant spike in March after the Bitcoin spot ETF approval, which had driven broader institutional interest.

Andy Main: Up next, excluding crypto costs and execution and clearing and brokerage fees, were 36.8 million, down approximately 43% year by year and 25% sequentially as a result of our Q1 cost restructuring initiatives. Year by year revenue growth and significantly lower costs improved our net loss by 30% year by year and adjusted even a loss by approximately 27% year over year. Diving into our crypto business, let's start with our assets under custody. At the end of the second quarter, our assets under custody stood at 975 million, down from 1.233 billion at the end of Q1, but up significantly from 660 million in the same quarter last year.

Andy Main: OPEX, excluding crypto costs and execution and clearing and brokerage fees, was 36.8 million, down approximately 43% year over year and 25% sequentially as a result of our Q1 cost restructuring initiative. Year-over-year revenue growth and significantly lower costs improved our net loss by 30% year-over-year and our adjusted EBITDA loss by approximately 27% year-over-year, diving into our crypto business. Let's start with our assets under custody. At the end of the second quarter, their assets under custody stood at 975 million, down from 1.233 billion at the end of Q1, but up significantly from 660 million in the same quarter. This was driven by stronger trading volumes across the entire market, including our platform.

Speaker Change: OPEX excluding crypto costs and execution and clearing and brokerage fees were $36.8 million down approximately 43% year-over-year and 25% sequentially as a result of our Q1 cost restructuring initiatives.

Olivia Keavey: I will now turn over to Olivia Keavey, senior leader of communications at backs. Please go ahead.

Olivia Keavey: Good morning and thank you for joining back 2nd quarter earnings call. Joining me on today's call are Andy Main, back chief executive officer, Ray Kamrath, chief commercial officer for crypto business and Karen Alexander, chief financial officer. Andy will provide a high level overview of key 2 results, the current cryptocurrency macro landscape and our operational progress during the quarter. Ray will provide an update on strategic initiatives and partnerships and Karen will cover back detailed financial results.

Speaker Change: Year-over-year revenue growth and significantly lower costs improved our net loss by 30% year-over-year and our adjusted EBITDA loss by approximately 27% year-over-year.

Speaker Change: Diving into our crypto business, let's start with our assets under custody.

Speaker Change: At the end of the second quarter, our assets under custody stood at $975 million, down from $1.233 billion at the end of Q1, but up significantly from $660 million in the same quarter last year.

Olivia Keavey: After the prepared remarks, we will answer questions we received from our investors through the state technology platform and any questions from the analyst community. As a reminder, today's earnings call includes a separate supplemental presentation that can be found at our investor relations website at www.investors.back.com. During today's call, we may make 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.

Andy Main: This was driven by stronger trading volumes across the entire market, including our platform.

Speaker Change: This was driven by stronger trading volumes across the entire market, including our platform.

Andy Main: I'd also like to touch on some of the major changes in the regulatory landscape since our last call that we believe will provide kill wins for our industry in the second half and beyond. On July 22nd, the SEC gave final approval for the spot Ethereum exchange credit funds or ETF. This approval is yet another positive indication of the improving regulatory landscapes and bipartisan support for our industry. Similar to the Bitcoin-Spot ETF earlier in the year, we believe approval of the ETH-Spot ETF provides further clarity and will likely act as another catalyst for continued mainstream adoption and investment going forward.

Andy Main: I'd also like to touch on some of the major changes in the regulatory landscape since our last call that we believe will provide tailwinds for our industry in the second half and beyond. On July 22nd, the SEC gave final approval to the Spot Ethereum Exchange Traded Funds, or ETI.

Speaker Change: I'd also like to touch on some of the major changes in the regulatory landscape since our last call that we believe will provide tailwinds for our industry in the second half and beyond.

Olivia Keavey: For a more complete discussion on forward looking statements and the risk and uncertainties related to backs business, please refer to its filing, security and exchange commission. Further, in addition to discussing results that are calculated in accordance with generally accepted accounting principles, we also make reference to certain non-gap financial measures. For more detailed information on our non-gap financial disclosure, please refer to our earnings release, which can be found on our investor relations website.

Speaker Change: On July 22nd, the SEC gave final approval for the SPOT Ethereum Exchange Traded Funds, or ETFs.

Andy Main: This approval is yet another positive indication of the improving regulatory landscape and bipartisan support for our industry. Similar to the Bitcoin spot ETS earlier in the year. We believe approval of the ETH spot ETF provides further clarity and will likely act as another catalyst for continued mainstream adoption and investment going forward. With these regulatory advancements in mind, we remain extremely confident in our overall strategic direction to advance our institutional offerings and remain laser focused on scaling strategic partnerships, which I will cover next.

Speaker Change: This approval is yet another positive indication of the improving regulatory landscape and bipartisan support for our industry.

Speaker Change: Similar to the Bitcoin spot ETF earlier in the year,

Speaker Change: We believe approval of the ETH spot ETF provides further clarity and will likely act as another catalyst for continued mainstream adoption and investment going forward.

Olivia Keavey: Thanks, and I'll turn the call over to Andy.

Andy Main: Thank you, Olivia, and good morning, everyone. Thank you for joining back, second quarter, 2024 earnings call. It's great to speak to you all again.

Andy Main: With these regulatory advancements in mind, we remain extremely confident in our overall strategic direction to advance our institutional offerings and remain laser-focused on scaling strategic partnerships, which I will cover next. In terms of our crypto business operations, we continue to double down on our commitment to expand our institutional crypto business. And here's a few highlights. In June, back X, our electronic communications network executed its first trade between back crypto solutions and DV Chain, the first of many new liquidity providers that were working to add to the platform. This milestone demonstrates our ability to bring offers rapidly to market and, in this case, offering seamless, efficient crypto trading solutions.

Speaker Change: With these regulatory advancements in mind, we remain extremely confident in our overall strategic direction to advance our institutional offerings and remain laser focused on scaling strategic partnerships, which I will cover next.

Andy Main: I'd like to start today by providing a high-level overview of our business performance, then dive into specific updates from our crypto and loyalty businesses. As we cover strategic initiatives and partnerships, I'm delighted that Ray Kamrath, our chief commercial officer, is with us today. Ray is going to provide an update on some significant news for our crypto business. Turning to page three of our presentation, let's start with the highlights of our Q2 financial performance.

Andy Main: In terms of our trip to business operations, we continue to double down on our commitment to expand our institutional business, and here's a few highlights. In June, Back X, our electronic communications network, executed its first trade between Back crypto solutions and DVChase, the first of many new liquidity providers that we're working to add to the plot. This milestone demonstrates our ability to bring offers rapidly to market and, in this case, offer seamless, efficient crypto trading.

Speaker Change: in terms of our crypto business operations.

Speaker Change: We continue to double down on our commitment to expand our institutional crypto business.

Speaker Change: And here's a few highlights.

Speaker Change: In June , BakktX, our electronic communications network, executed its first trade between Bakkt CryptoSolutions and dbChain.

Andy Main: Q2 crypto and loyalty services revenue, net of crypto costs and execution, and clearing and brokerage fees was 14.8 million up approximately 9% from Q2 last year, but down 13% sequentially. Of this 14.8 million, 12.8 million came from our loyalty business, which improved 4% year by year and decreased 3% sequentially. The remaining 2 million was generated from crypto services revenue, which increased 35% year by year, but declined 46% sequentially. This was due to the downward trend in prices and notional crypto volume that followed the significant spike in March after the bit calling spot ETF approval, which had driven broader institutional interest.

Speaker Change: the first of many new liquidity providers that we're working to add to the platform.

Speaker Change: This milestone demonstrates our ability to bring offers rapidly to market and in this case offering seamless, efficient crypto trading solutions.

Andy Main: Additionally, we recently announced that we significantly enhanced our back X institutional capabilities with a licensing agreement with Crossover Markets. This collaboration powers back X with crossovers' high-performance tech, providing institutional and professional traders with sub-10 microseconds matching latency, customizable and tailored liquidity streams, and significantly lower trading costs than incumbent crypto brokers and exchanges. Back X will be available to back liquidity providers and a group of early adopters in the coming months. Users will benefit from back's prioritization of risk management, reliability, and compliance alongside capital markets-friendly workflows for digital assets trading.

Andy Main: Additionally, we recently announced that we significantly enhanced our BATx institutional capability with a licensing agreement that's close to record. This collaboration powers Bakkt X. Crossovers High-Performance Tech, providing institutional and professional trainers with sub-10 microsecond matching latency, customisable and tailored liquidity, and significantly lower trading costs than incumbent crypto brokers and exchanges. BakktX will be available to Bakkt's liquidity providers and a group of early adopters in the coming months.

Speaker Change: Additionally, we recently announced that we significantly enhanced our BATx institutional capabilities with a licensing agreement with Crossover Markets.

Speaker Change: This collaboration powers BACT-X with Crossover's high-performance tech, providing institutional and professional traders with sub-10-microsecond matching latency, customizable and tailored liquidity streams.

Speaker Change: and significantly lower trading costs than incumbent crypto brokers and exchanges.

Andy Main: Up next, excluding crypto costs and execution and clearing and brokerage fees were 36.8 million down approximately 43% year by year and 25% sequentially as a result of our Q1 cost restructuring initiatives. Year by year revenue growth and significantly lower costs improved our net loss by 30% year by year and adjusted even a loss by approximately 27% year over year.

Speaker Change: BakktX will be available to Bakkt liquidity proprietors and a group of early adopters in the coming months.

Andy Main: Users will benefit from Bakkt's prioritization of risk management, reliability, and compliance, alongside capital market-strengthening workflows for digital assets trade. We will share more regarding the expected launch date in the very near future. At the end of May, we appointed Ray Kamrath as Bakkt's Chief Commercial Officer for our CryptoBit. I'm now delighted to introduce you to Ray.

Speaker Change: Users will benefit from Bakkt's prioritization of risk management, reliability and compliance.

Speaker Change: alongside capital markets friendly workflows for digital assets trading.

Andy Main: We will share more regarding the expected launch date in the very near future.

Speaker Change: We will share more regarding the expected launch date in the very near future.

Andy Main: At the end of May, we appointed Ray Kamrath as back's Chief Commercial Officer for our crypto business. I'm now delighted to introduce you to Ray. Ray is a Wall Street veteran with 30 years of experience in capital markets, where he served as global head of foreign exchange and prime brokerage at Jefferies and managing director and foreign exchange sales and global electronic trading at Goldman Sachs. We are extremely delighted to have some of Ray's caliber to help us scale our crypto business. With that, I'm happy to hand it over to Ray to share what we've accomplished recently in the market in terms of our strategic initiatives and partnerships.

Ray Kamrath: At the end of May, we appointed Ray Kamrath as BAC's Chief Commercial Officer for our crypto business.

Andy Main: Diving into our crypto business, let's start with our assets under custody. At the end of the second quarter, our assets under custody stood at 975 million down from 1.233 billion at the end of Q1, but up significantly from 660 million in the same quarter last year. This was driven by stronger trading volumes across the entire market, including our platform.

Andy Main: Ray is a Wall Street veteran with 30 years of experience in capital marketing, where he served as Global Head of Foreign Exchange and Prime Brokerage at Jefferies and Managing Director of Foreign Exchange Sales and Global Electronic Trading at Goldman Sachs. We are extremely delighted to have someone of Ray's caliber to help us scale it. With that, I'm happy to hand it over to Ray to share what we've accomplished recently in the market in terms of our strategic initiatives and partnerships. Thanks, Andy.

Ray Kamrath: I'm now delighted to introduce you to Ray. Ray is a Wall Street veteran with 30 years of experience in capital markets, where he served as Global Head of Foreign Exchange and Prime Brokerage at Jefferies.

Ray Kamrath: and Managing Director in Foreign Exchange, Sales and Global Electronic Trading at Goldman Sachs.

Speaker Change: We are extremely delighted to have someone of raised caliber to help us scale our crypto business.

Speaker Change: With that, I'm happy to hand it over to Ray to share what we've accomplished recently in the market in terms of our strategic initiatives and partnerships.

Ray Kamrath: Thanks, Andy. Turning to slide four, as we've discussed in prior earnings calls, we are laser-focused on building the backed ecosystem. I'm excited to share that we've continued to execute on that mission and are creating marketplace partnerships to make us stand out as an industry leader. This leadership is demonstrated by our prioritization of regulatory compliance and our comprehensive crypto solutions ecosystem.

Ray Kamrath: Turning to slide 4. As we've discussed in prior earnings calls, we are laser focused on building the supported ecosystem. I'm excited to share that we've continued to execute on that mission and are creating marketplace partnerships to make us stand out as an industry leader. This leadership is demonstrated by our prioritization of regulatory compliance and our comprehensive crypto solutions ecosystem. For institutions, we're building out our solutions back decks, and this is where I'd like to tell you about our significant news.

Ray Kamrath: Thanks, Andy.

Ray Kamrath: Turning to slide four, as we've discussed in prior earnings calls, we are laser focused on building the backed ecosystem. I'm excited to share that we've continued to execute on that mission and are creating marketplace partnerships to make us stand out as an industry leader.

Ray Kamrath: This leadership is demonstrated by our prioritization of regulatory compliance in our comprehensive crypto solutions ecosystem.

Ray Kamrath: For institutions, we're building out our solutions back decks, and this is where I'd like to tell you about our significant news. To scale back decks on August 11th, we entered into a letter of intent with Hidden Road signaling our mutual intent that Hidden Road will provide platform services, including real-time risk management and back office functionality to the forthcoming back decks electronic communications network, the ECN. Hidden Road is an important player in credit intermediation, providing prime brokerage and clearing solutions in FX, listed derivatives, OTC swaps, digital assets, and soon fixed income. When agreed, we expect this will enhance our ability to minimize counterparty and credit risk for institutional clients using back decks through Hidden Road's real-time risk management platform.

Ray Kamrath: For institutions, we're building out our solutions back decks and this is where I'd like to tell you about our significant news.

Ray Kamrath: To scale Bakdex, on August 11th, we entered into a letter of intent with Hidden Road, signaling our mutual intent that Hidden Road will provide platform services, including real-time risk management and back-office functionality to the forthcoming Bakdex Electronic Communications Network, the ECN. Hidden Road is an important player in credit intermediation, providing prime brokerage and clearing solutions in FX.

Speaker Change: To scale back Dex.

Speaker Change: On August 11th, we entered into a letter of intent with Hidden Road, signaling our mutual intent.

Andy Main: With these regulatory advancements in mind, we remain extremely confident in our overall strategic direction to advance our institutional offerings and remain laser-focused on scaling strategic partnerships, which I will cover next. In terms of our crypto business operations, we continue to double down on our commitment to expand our institutional crypto business. And here's a few highlights. In June, back X, our electronic communications network executed its first trade between back crypto solutions and DV chain, the first of many new liquidity providers that were working to add to the platform.

Speaker Change: that Hidden Road will provide platform services, including real-time risk management and back office functionality to the forthcoming BACDEX, Electronic Communication Network, the ECN.

Speaker Change: Hidden Road is an important player in credit intermediation, providing prime brokerage and clearing solutions in FX, listed derivatives, OTC swaps, digital assets, and soon, fixed income.

Ray Kamrath: Listed Derivatives, OTC Swaps, Digital Assets, and Soon Fixed Income. When agreed, we expect this will enhance our ability to minimize counterparty and credit risk for institutional clients using BakktX through Hidden Roads' real-time risk management platform. We believe that backed partnering with Hidden Road and Crossover Markets is a winning combination. Our customers will benefit from Crossover's high performance technology with sub-10 microsecond matching latency

Speaker Change: When agreed, we expect this will enhance our ability to minimize counterparty and credit risk for institutional clients using BakktX through Hidden Road's real-time risk management platform.

Ray Kamrath: We believe that backed partnering with Hidden Road and crossover markets is a winning combination. Our customers will benefit from crossovers high performance technology with sub 10 microsecond matching latency, high order throughput capability, customizable and tailored liquidity streams, and low trading costs. This is matched with Hidden Road's enablement of a quicker, wider distribution channel for institutional market participants while introducing new operational risk management and capital efficiencies. This is all powered by backed unwavering commitment to security and compliance as well as deep network of liquidity relationships and understanding of institutional liquidity requirements in the digital asset marketplace.

Andy Main: This milestone demonstrates our ability to bring offers rapidly to market and in this case, offering seamless, efficient crypto trading solutions. Additionally, we recently announced that we significantly enhanced our back X institutional capabilities with a licensing agreement with crossover markets. This collaboration powers back X with crossovers' high-performance tech, providing institutional and professional traders with sub-10 microseconds matching latency, customizable and tailored liquidity streams, and significantly lower trading costs than incumbent crypto brokers and exchanges.

Speaker Change: We believe that Bakkt, partnering with Hidden Road and Crossover Markets, is a winning combination.

Speaker Change: Our customers will benefit from Crossover's high-performance technology with sub-10 microsecond matching latency, high order throughput capability, customizable and tailored liquidity streams, and low trading costs.

Ray Kamrath: High Order Through Put Capability, customizable and tailored liquidity streams, and low trading costs. This is matched with Hidden Road's enablement of a quicker, wider distribution channel for institutional market participants, while introducing new operational risk management and capital efficiency. This is all powered by Bakkt's unwavering commitment to security and compliance, as well as our deep network of liquidity relationships and understanding of institutional liquidity requirements in the digital asset marketplace. We are positioning ourselves as an ideal partner for institutions seeking a professional, high-performance trading venue. On the client side, our relationship with partner blockchain.com has recently grown. Just this month, we expanded our services together into New York, helping them reach a wider audience in all 50 states.

Speaker Change: This is matched with Hidden Roads' enablement of a quicker, wider distribution channel for institutional market participants while introducing new operational risk management and capital efficiencies.

BAC: This is all powered by BAC's unwavering commitment to security and compliance, as well as our deep network of liquidity relationships and understanding of institutional liquidity requirements in the digital asset marketplace.

Andy Main: Back X will be available to back liquidity providers and a group of early adopters in the coming months. Users will benefit from back's prioritization of risk management, reliability and compliance alongside capital markets friendly workflows for digital assets trading. We will share more regarding the expected launch date in the very near future.

Ray Kamrath: We are positioning ourselves as an ideal partner for institutions seeking a professional high-performance trading venue.

BAC: We are positioning ourselves as an ideal partner for institutions seeking a professional, high-performance trading venue.

Ray Kamrath: On the client side, our relationship with partner Blockchain.com recently grew. Just this month, we expanded our services together into New York, helping them reach a wider audience in all 50 states. This expansion demonstrates our commitment to providing top peer services and being our clients' partner in growth. These strategic alliances enhance our competitive advantage, positioning us to better serve our diverse client base and drive future growth.

Speaker Change: On the client side, our relationship with partner blockchain.com recently grew. Just this month, we expanded our services together into New York, helping them reach a wider audience in all 50 states.

Andy Main: This expansion demonstrates our commitment to providing top-tier services and being our clients' partner in growth. These strategic alliances enhance our competitive advantage, positioning us to better serve our diverse client base and drive future growth. I'll now turn it back over to Andy, who will discuss our international strategy. Thank you, Ray.

Andy Main: At the end of May, we appointed Ray Kamrath as back's chief commercial officer for our crypto business.

Speaker Change: This expansion demonstrates our commitment to providing top-tier services and being our clients' partner in growth.

Ray Kamrath: I'm now delighted to introduce you to Ray. Ray is a Wall Street veteran with 30 years of experience in capital markets, where he served as global head of foreign exchange and prime brokerage at Jeffries and managing director and foreign exchange sales and global electronic trading at Goldman Sachs. We are extremely delighted to have some of Ray's caliber to help us scale our crypto business.

Speaker Change: These strategic alliances enhance our competitive advantage, positioning us to better serve our diverse client base and drive future growth.

Ray Kamrath: I'll now turn it back over to Andy, who will discuss our international strategy.

Speaker Change: I'll now turn it back over to Andy, who will discuss our international strategy.

Andy Main: Thank you, Ray. Turning to slide five, I'd like to give an update on our international strategy. We are seeing growing interest from non-USB's companies looking to establish a presence in the USA. As such, we are shifting our strategy to provide these clients with the necessary infrastructure and regulatory support to enter the US market seamlessly. We are among a select few with a bit license and field rails in all US states to support business. This positions us well to capitalize on evolving market dynamics to drive future growth. Karam will discuss how this affects our guidance, and we believe this change will yield a higher ROI for us and our clients.

Andy Main: Turning to slide five, I'd like to give an update on our international strategy. We are seeing growing interest from non-US based companies looking to establish a presence in the U.S. As such, we are shifting our strategy to provide these clients with the necessary infrastructure and regulatory support to enter the U.S. market seamlessly. We are among a select few with a bit license and theatre rails in all US states to support their business.

Andy: Thank you, Ray.

Andy: Turning to slide 5, I'd like to give an update on our international strategy.

Ray Kamrath: With that, I'm happy to hand it over to Ray to share what we've accomplished recently in the market in terms of our strategic initiatives and partnerships. Thanks, Andy. Turning to slide four, as we've discussed in prior earnings calls, we are laser focused on building the backed ecosystem. I'm excited to share that we've continued to execute on that mission and are creating marketplace partnerships to make us stand out as an industry leader.

Andy: We are seeing growing interest from non-US based companies looking to establish a presence in the USA.

Andy: As such, we are shifting our strategy to provide these clients with the necessary infrastructure and regulatory support to enter the U.S. market seamlessly.

Andy: We are among a select few with a BitLicense and Fiat rails in all US states to support their business.

Andy Main: This positions us well to capitalize on evolving market dynamics to drive future growth. Karen will discuss how this affects our guidance, and we believe... This change will yield a higher ROI for us. Turning to slide six.

Ray Kamrath: This leadership is demonstrated by our prioritization of regulatory compliance and our comprehensive crypto solutions ecosystem. For institutions, we're building out our solutions back decks and this is where I'd like to tell you about our significant news. To scale back decks on August 11th, we entered into a letter of intent with Hidden Road signaling our mutual intent that Hidden Road will provide platform services, including real-time risk management and back office functionality to the forthcoming back decks electronic communications network, the ECN.

Andy: This positions us well to capitalize on evolving market dynamics to drive future growth.

Andy: Karen will discuss how this affects our guidance and we believe this change will yield a higher ROI for us and our clients.

Andy Main: Turning to slide six, I'd like to dive into our loyalty business. As a reminder, we leverage our deep expertise in loyalty solutions to cater to major credit card and incentive programs in North America. If you wish to take a closer look at it yourself, our recent updates to the corporate website have boosted the brand visibility of back loyalty, so I encourage you to take a look. Our loyalty business continues to perform, with our sales volume numbers at 341.2 million year to date. Looking on track to hit our full-year forecast. Our loyalty business operates at scale as demonstrated by our consuming facing rewards to our friends attracting over 7 million visitors to date.

Andy Main: I'd like to dive into our loyalty program. As a reminder, we leverage our deep expertise and robust solution to cater to major credit card and incentive programs in North America. If you wish to take a closer look at it yourself,

Andy: Turning to slide 6.

Karen: I'd like to dive into our loyalty business.

Karen: As a reminder, we leverage our deep expertise in Wealthy Solutions.

Karen: to cater to major credit card and incentive programs in North America.

Andy Main: A recent update to the corporate website has boosted the brand visibility of Backload [inaudible] So I encourage you to take a look. Our loyalty business continues to perform, with our sales volume numbers at $341.2 million year to date, looking on track to hit our full year for. Our loyalty business operates at scale, as demonstrated by our Consuming Facing Rewards storefronts, attracting over 7 million visitors to date. It also operates with excellent performance, with a 12% conversion rate. To add some context and comparison to travel and reach your website,

Speaker Change: If you wish to take a closer look at it yourself, our recent updates to the corporate website have boosted the brand visibility of Bakkt Loyalty, so I encourage you to take a look.

Ray Kamrath: Hidden Road is an important player in credit intermediation, providing prime brokerage and clearing solutions in FX, listed derivatives, OTC swaps, digital assets, and soon fixed income. When agreed, we expect this will enhance our ability to minimize counterparty and credit risk for institutional clients using back decks through Hidden Road's real-time risk management platform. We believe that backed partnering with Hidden Road and crossover markets is a winning combination. Our customers will benefit from crossovers high performance technology with sub 10 microsecond matching latency, high order throughput capability, customizable and tailored liquidity streams, and low trading costs.

Speaker Change: Our loyalty business continues to perform with our sales volume numbers at 341.2 million year-to-date.

Speaker Change: working on trying to hit our full year forecast.

Speaker Change: Our loyalty business operates at scale as demonstrated by our consuming facing reward storefronts attracting over 7 million visitors to date.

Andy Main: It also operates with excellent performance, with a 12% conversion rate. To add some context and comparison to travel and retail websites, a conversion rate of 2% puts you among the top 20% in the industry. A rate between 3% to 4% puts you in the top 10%. With back loyalty achieving a 12% conversion rate, this underscores and demonstrates back exceptional performance in conversing customers to purchase. Our loyalty business is poised for growth by taking advantage of consumer needs who want to maximize the value of earned loyalty points through various services and products, as well as valuing loyalty points as an alternative currency given broader macroeconomic pressures on cash value.

Speaker Change: It also operates with excellent performance with a 12% conversion rate.

Speaker Change: To add some context, in comparison to travel and retail websites,

Andy Main: A Conversion Rate of 2% puts you among the top 20% in the industry. A rate between 3-4% puts you in the top 10%, with Bakkt Loyalty achieving a 12% conversion rate. This underscores and demonstrates Bakkt's exceptional performance in converting customers. Our lofty business is points for growth. By taking advantage of consumer needs, we want to maximize the value of earned loyalty points through various services and products, as well as value loyalty points as an alternative currency given broader macroeconomic pressures on cash values.

Speaker Change: a conversion rate of 2%.

Speaker Change: puts you among the top 20% in the industry.

Speaker Change: A rate between 3-4% puts you in the top 10%.

Ray Kamrath: This is matched with Hidden Road's enablement of a quicker wider distribution channel for institutional market participants while introducing new operational risk management and capital efficiencies. This is all powered by backed unwavering commitment to security and compliance as well as deep network of liquidity relationships and understanding of institutional liquidity requirements in the digital asset marketplace. We are positioning ourselves as an ideal partner for institutions seeking a professional high performance trading venue.

Speaker Change: With Bakkt Loyalty achieving a 12% conversion rate, this underscores and demonstrates Bakkt's exceptional performance in converting customers to purchase.

Speaker Change: Our loyalty business is Poised for Growth.

Speaker Change: By taking advantage of consumer needs, we want to maximize the value of earned loyalty points through various services and products, as well as valuing loyalty points as an alternative currency given broader macroeconomic pressures on cash value.

Andy Main: We remain excited about the loyalty business and the growth opportunities it presents for back and our clients. We continue to invest in back loyalty. For example, we recently refreshed our loyalty program, offering higher quality benefits to our customers and improving delivery times, customer support, and retention for managing costs effectively. We invested in transitioning our technology to a leading cloud provider, which has consequently enhanced operational efficiency, security, and customer insights. We also invested in recertifying PCI and SOC 2 standards and improved mobile device management security to further strengthen our operational stability and client trust. Finally, investments in product enhancements, including our switch to a holistic travel platform and expanded Apple storefront offerings, expect to increase our market competitiveness and profitability.

Andy Main: We remain excited about the loyalty business and the growth opportunities it presents for Bakkt and our clients. We continue to invest in backlogs. For example, we recently refreshed our loyalty program, offering higher quality benefits to our customers and improving delivery times, customer support, and retention for managing costs.

Ray Kamrath: On the client side, our relationship with partner blockchain.com recently grew. Just this month, we expanded our services together into New York, helping them reach a wider audience in all 50 states. This expansion demonstrates our commitment to providing top peer services and being our clients' partner in growth. These strategic alliances enhance our competitive advantage, positioning us to better serve our diverse client base and drive future growth.

Speaker Change: We remain excited about the loyalty business and the growth opportunities it presents for Bakkt and our clients.

Speaker Change: We continue to invest in Bakkt Loyalty. For example, we recently refreshed our loyalty program, offering higher quality benefits to our customers and improving delivery times, customer support, and retention while managing costs effectively.

Andy Main: We invested in transitioning our technology to a leading cloud provider, which has consequently enhanced operational efficiency, security, and customer insight. We also invested in recertifying PCI and SOP2 standards and improved mobile device management security, to further strengthen our operational stability and client relationships. Finally, investments in product enhancements, including our switch to a holistic travel platform and expanded Apple storefront. We expect to increase our market competitiveness and profitability. On the expense side, we have reduced our direct expenses, leading to a significant improvement, which we expect to demonstrate in the second half. Overall, Bakkt Loyalty Solutions is on track to deliver within the given guidance range of $53 million to $57 million in revenue for 2020. Turning to page seven, and to wrap up.

Speaker Change: We invested in transitioning our technology to a leading cloud provider.

Ray Kamrath: I'll now turn it back over to Andy who will discuss our international strategy. Thank you, Ray.

Speaker Change: which has consequently enhanced operational efficiency, security and customer insights.

Speaker Change: We also invested in recertifying PCI and SOP2 standards and improved mobile device management security.

Andy Main: Turning to slide five, I'd like to give an update on our international strategy. We are seeing growing interest from non-USB's companies looking to establish a presence in the USA. As such, we are shifting our strategy to provide these clients with the necessary infrastructure and regulatory support to enter the US market seamlessly. We are among a select few with a bit license and field rails in all US states to support Business. This positions us well to capitalize on evolving market dynamics to drive future growth.

Speaker Change: to further strengthen our operational stability and client trust.

Speaker Change: Finally, investments and product enhancements including our switch to a holistic travel platform and expanded Apple storefront offerings

Speaker Change: expect to increase our market competitiveness and profitability.

Andy Main: On the expense side, we have reduced our direct expenses, leading to significant improvements, which we expect to demonstrate in the second half. of the year. Overall, back loyalty solutions as I'm trapped to deliver within the given guidance range of 53 million to 57 million in revenue for 2024.

Speaker Change: On the expense side, we have reduced our direct expenses, leading to significant improvements, which we expect to demonstrate in the second half of the year.

Speaker Change: Overall, back loyalty solutions, as I'm trapped to deliver, with the given guidance range of 53 million to 57 million in revenue for 2024.

Karen Alexander: Karam will discuss how this affects our guidance, and we believe this change will yield a higher ROI for us and our clients.

Andy Main: Turning to page 7 and to wrap up, we continue to make solid progress across the entire business for our 2024 strategic priorities. We've laid out these priorities in prior earnings calls. As you have heard today, we are growing our client network and deepening our existing client relationships. Secondly, we are expanding our product solutions and extending the back ecosystem. And third, we are realigning our costs and presently managing expenses. We will continue to be laser-focused on our three priorities. Through the second quarter, we have reduced operating expenses and enhanced capital efficiencies from the integration of our regulated entities.

Andy Main: We continue to make solid progress across the entire business for our 2024 strategic pride. We've laid out these priorities in prior earnings calls. As you have heard today, we are growing our client network and deepening our existing client relationships. Secondly, we are expanding our product solutions and extending the Bakkt ecosystem. And third, we are realigning our costs and prudently managing them. We will continue to be laser focused on our three priorities.

Andy Main: Turning to slide six, I'd like to dive into our loyalty business. As a reminder, we leverage our deep expertise in loyalty solutions to cater to major credit card and incentive programs in North America. If you wish to take a closer look at it yourself, our recent updates to the corporate website have boosted the brand visibility of back loyalty, so I encourage you to take a look. Our loyalty business continues to perform with our sales volume numbers at 341.2 million year to date.

Speaker Change: Turning to page 7, and to wrap up.

Speaker Change: We continue to make solid progress across the entire business for our 2024 strategic priorities.

Speaker Change: We've laid out these priorities in prior earnings calls.

Speaker Change: As you have heard today, we are growing our client network and deepening our existing client relationships.

Speaker Change: Secondly, we are expanding our product solutions and extending the Bakkt ecosystem. And third, we are realigning our costs and prudently managing expenses.

Speaker Change: We will continue to be laser focused on our three priorities.

Andy Main: Looking on track to hit our full year forecast. Our loyalty business operates at scale as demonstrated by our consuming facing rewards to our friends attracting over 7 million visitors to date. It also operates with excellent performance with a 12% conversion rate. To add some context and comparison to travel and retail websites, a conversion rate of 2% puts you among the top 20% in the industry. A rate between 3 to 4% puts you in the top 10%.

Andy Main: Through the second quarter, we have reduced operating expenses and enhanced capital efficiencies from the integration of our regulated entities. Moving forward, we anticipate further improvements in our cash per [inaudible] as we execute our strategic initiatives and lapse some of the one-time restructuring co-op. We haven't included any of these new business lines in our current guidance.

Speaker Change: Through the second quarter, we have reduced operating expenses and enhanced capital efficiencies from the integration of our regulated entities.

Andy Main: Moving forward, we anticipate further improvements in our cash burn as we execute our strategic initiatives and lap some of the one-time restructuring costs. We haven't included any of these new business lines in our current guidance, but certainly we aim to improve overall company ROI with these new ventures. In conclusion, we are confident that our strategic focus on broadening our client network, expanding our product and solution offerings, and improving cost structures will drive us towards sustainable growth and profitability. We are well positioned to capitalize on the growing market and deliver value to our shareholders.

Speaker Change: Moving forward, we anticipate further improvements in our cash burn.

Speaker Change: as we execute our strategic initiatives.

Speaker Change: and lapsed some of the one-time restructuring costs.

Speaker Change: We haven't included any of these new business lines in our current guidance, but certainly we aim to improve overall company ROI with these new ventures.

Andy Main: But certainly, we aim to improve overall company ROI with these new ventures. In conclusion, we are confident that our strategic focus on broadening our client network, expanding our product and solution offerings, and improving Costrugs will drive us towards sustainable growth and profitability. We are well positioned to capitalize on the growing market and deliver value to our shareholders. I want to express my gratitude to our dedicated team for their hard work and commitment, which are driving our success and positioning us back as a leader in the retail and institutional crypto industry, as well as our loyalty. Thank you for your continued support. I'll now turn over to Karen to walk us through the financials. Karen

Andy Main: With back loyalty achieving a 12% conversion rate, this underscores and demonstrates back exceptional performance in conversing customers to purchase. Our loyalty business is poised for growth by taking advantage of consumer needs who want to maximize the value of earned loyalty points through various services and products, as well as valuing loyalty points as an alternative currency given broader macro economic pressures on cash value. We remain excited about the loyalty business and the growth opportunities it presents for back and our clients.

Speaker Change: In conclusion, we are confident that our strategic focus on broadening our client network

Speaker Change: Expanding our product and solution offerings and improving cost structures will drive us towards sustainable growth and profitability.

Speaker Change: We are well positioned to capitalize on the growing market and deliver value to our shareholders.

Andy Main: I want to express my gratitude to our dedicated team for their hard work and commitment, which are driving our success and positioning back as a leader in the retail and institutional crypto markets as well as the low-to industry. Thank you for your continued support.

Speaker Change: I want to express my gratitude to our dedicated team for their hard work and commitment.

Speaker Change: which are driving our success and positioning back as a leader in the retail and institutional crypto markets.

Speaker Change: as well as the loyalty industry.

Karen Alexander: I'll now turn over to Karn to walk us through the financials.

Andy Main: We continue to invest in back loyalty. For example, we recently refreshed our loyalty program offering higher quality benefits to our customers and improving delivery times, customer support and retention for managing costs effectively. We invested in transitioning our technology to a leading cloud provider which has consequently enhanced operational efficiency, security and customer insights. We also invested in recertifying PCI and SOC2 standards and improved mobile device management security to further strengthen our operational stability and client trust.

Speaker Change: Thank you for your continued support. I'll now turn over to Karin to walk us through the financials. Karin?

Karen Alexander: Karn? Thanks, Sandy. I'll now walk you through our second quarter KPIs and financial results. A quicker reminder that, in accordance with GAP, we present crypto services revenue and crypto costs and execution, clearing and brokerage fees on a growth basis, as we are a principal in the crypto services we provide our customers. By contrast, we are an agent in the loyalty redemption services we provide our loyalty customers. Therefore, our loyalty revenue is presented on a one-line net basis. Starting on slide 9, we have our Q2 KPIs, which provide a snapshot of the underlying trends driving our business.

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

Karin: Thanks, Andy. I'll now walk you through our second quarter KPIs and financial results.

Karin: A quick reminder that, in accordance with GAAP, we present crypto services revenue in crypto cost and execution clearing and brokerage fees on a gross basis, as we are a principal in the crypto services we provide our customers.

Karin: By contrast, we are an agent in the loyalty redemption services we provide our loyalty customers. Therefore, our loyalty revenue is presented on a one-line, net basis.

Karen Alexander: Therefore, loyalty revenue is presented on a one-line net basis. Starting on Slide 9, we have our Q2 KPIs, which provide a snapshot of the underlying trends driving our business. We ended the second quarter with $6.4 million in crypto-enabled accounts, reflecting a significant increase over the past 12 months. This underscores the increasing adoption and trust in our platform.

Karin: Starting on slide 9, we have our Q2 KPIs, which provide a snapshot of the underlying trends driving our business.

Karen Alexander: We ended the second quarter with 6.4 million of crypto-enabled accounts, reflecting a steady increase over the past 12 months. This underscores the increasing adoption and trust in our platform. Next, we have our transacting accounts broken down into crypto and loyalty accounts. There were 719,281 transacting accounts in the second quarter, of which 461,000 were for loyalty redemption, and 258,000 were for crypto trade. Total national traded volume was $672 million, with $494 million attributable to crypto and $178 million to loyalty revolutions. Crypto-national traded volume was down 42% sequentially but was up 48% year-over-year. As it's undercrested, they were down $175 million, down from the previous quarter high of $1,233 million, driven by a settling of crypto prices compared to March 2020 for highs.

Andy Main: Finally, investments in product enhancements, including our switch to a holistic travel platform and expanded Apple storefront offerings, expect to increase our market competitiveness and profitability. On the expense side, we have reduced our direct expenses leading to significant improvements, which we expect to demonstrate in the second half, of the year. Overall, back loyalty solutions as I'm trapped to deliver within the given guidance range of 53 million to 57 million in revenue for 2024.

Karin: We ended the second quarter with 6.4 million of crypto-enabled accounts, reflecting a steady increase over the past 12 months. This growth underscores the increasing adoption and trust in our platform.

Karen Alexander: Next, we have our transacting accounts broken down into crypto and loyalty. There were 719,281 transacting accounts in the second quarter, of which 461,000 were for loyalty redemption, and 258,000 were for crypto trade. Total notional trade volume was $672 million, with $494 million attributable to crypto and $178 million to loyalty redemption. Crypto-National traded volume was down 42% sequentially, but it was up 48% year over year. Assets under custody were $975 million, down from the previous quarter high of $1,233 million, driven by a settling of crypto prices compared to March 2024 highs.

Karin: Next we have our transacting accounts broken down into crypto and loyalty accounts.

Karin: There were 719,281 transacting accounts in the second quarter, of which 461,000 were for loyalty redemption and 258,000 were for crypto trades.

Karin: Total notional traded volume was 672 million dollars with 494 million dollars attributable to crypto and 178 million dollars to loyalty redemptions.

Andy Main: Turning to page 7 and to wrap up, we continue to make solid progress across the entire business for our 2024 strategic priorities. We've laid out these priorities in prior earnings calls. As you have heard today, we are growing our client network and deepening our existing client relationships. Secondly, we are expanding our product solutions and extending the back ecosystem. And third, we are realigning our costs, and presently managing expenses. We will continue to be laser focused on our three priorities.

Karin: Crypto-National Trader volume was down 42% sequentially, but was up 48% year-over-year.

Karin: Assets under custody were $975 million, down from the previous quarter high of $1,233 million, driven by a settling of crypto prices compared to March 2024 highs.

Karen Alexander: On slide 10, we show our total revenue broken out between our crypto and loyalty products. Total revenue for the second quarter of 2024 was $510 million. Gross crypto services revenue for the quarter was $497 million, an increase of 48% from the same quarter last year. This growth trended with the overall market as overall crypto interest has increased since last year. Our net loyalty revenues were $12.8 million, up 4% year-over-year, driven by a $1.1 million increase in subscription and services revenue, partially offset by a $700,000 reduction in transaction revenue. Approximately half of the increase in subscription and service revenue was driven by an adjustment to the remaining life of one of our service contracts.

Karen Alexander: On slide 10, we show our total revenue broken out between our crypto and loyalty products. Total revenue for the second quarter of 2024 was $510 million. Gross crypto services revenue for the quarter was $497 million, an increase of 48% from the same quarter last year. This growth trended with the overall market, as overall crypto interest has increased since last year. Our net loyalty revenues were $12.8 million, up 4% year over year, driven by a $1.1 million increase in subscription and services revenue, partially offset by a $700,000 reduction in transaction revenue.

Karin: On slide 10, we show our total revenue broken out between our crypto and loyalty products.

Andy Main: Through the second quarter, we have reduced operating expenses and enhanced capital efficiencies from the integration of our regulated entities. Moving forward, we anticipate further improvements in our cash burn as we execute our strategic initiatives and lap some of the one-time restructuring costs. We haven't included any of these new business lines in our current guidance, but certainly we aim to improve overall company ROI with these new ventures.

Karin: Total revenue for the second quarter of 2024 was $510 million.

Karin: Gross crypto services revenue for the quarter was 497 million dollars, an increase of 48% from the same quarter last year. This growth trended with the overall market, as overall crypto interest has increased since last year.

Karin: Our net loyalty revenues were $12.8 million.

Karin: a 4% year-over-year, driven by a $1.1 million increase in subscription and services revenue.

Karin: partially offset by a $700,000 reduction in transaction revenue. Approximately half of the increase in subscription and service revenue was driven by an adjustment to the remaining life of one of our service contracts.

Andy Main: In conclusion, we are confident that our strategic focus on broadening our client network, expanding our product and solution offerings, and improving cost structures will drive us towards sustainable growth and profitability. We are well positioned to capitalize on the growing market and deliver value to our shareholders. I want to express my gratitude to our dedicated team for their hard work and commitment, which are driving our success and positioning back as a leader in the retail and institutional crypto markets as well as the low-to industry.

Karen Alexander: Moving on to slide 11, we have our total operating expenses. Total expenses for the quarter were $531.9 million, including $495.1 million of crypto costs in ECB driven by trading volumes. SG&A expenses were $5.5 million, down 29.5% from Q1 2024, reflecting our ongoing efforts to maintain a disciplined expense structure. Total compensation expense was $22.4 million, a 17% decrease compared to the second quarter of 2023 due to lower head count in a decrease in incentive bonuses and benefits. This reflects our commitment to maintaining a disciplined expense management. On slide 12, we have our EBITDA and adjusted EBITDA for the second quarter of 2024.

Karen Alexander: Approximately half of the increase in subscription and service revenue was driven by an adjustment to the remaining life of one of our service contracts. Moving on to slide 11, we have our total operating expenses. Total expenses for the quarter were $531.9 million, including $495.1 million of crypto costs in ECB, driven by trading volumes. SG&A expenses were $5.5 million, down 29.5% from Q1 2024, reflecting our ongoing efforts to maintain a disciplined expense structure. Total compensation expense was $22.4 million, a 17% decrease compared to the second quarter of 2023 due to lower headcount and a decrease in incentive bonuses and benefits.

Karin: Moving on to slide 11, we have our total operating expenses.

Karin: Total expenses for the quarter were $531.9 million, including $495.1 million of crypto costs in ECB driven by trading volumes.

Speaker Change: SG&A expenses were $5.5 million, down 29.5% from Q1 2024, reflecting our ongoing efforts to maintain a disciplined expense structure.

Andy Main: Thank you for your continued support.

Speaker Change: Total compensation expense was $22.4 million, a 17% decrease compared to the second quarter of 2023 due to lower headcount and a decrease in incentive bonuses and benefits. This reflects our commitment to maintaining a disciplined expense management.

Karen Alexander: I'll now turn over to Karn to walk us through the financials. Karn? Thanks, Sandy.

Karen Alexander: I'll now walk you through our second quarter KPIs and financial results. A quicker reminder that in accordance with GAP, we present crypto services revenue and crypto costs and execution clearing and brokerage fees on a growth basis, as we are a principal in the crypto services we provide our customers. By contrast, we are an agent in the loyalty redemption services we provide our loyalty customers. Therefore, our loyalty revenue is presented on a one-line net basis.

Karen Alexander: This reflects our commitment to maintaining a disciplined expense management. On slide 12, we have our EBITDA and adjusted EBITDA for the second quarter of 2024. Adjusted EBITDA reflects adjustments for non-cash, restructuring, and acquisition-related items at impacted periods. EBITDA and Adjusted EBITDA for the quarter were losses of $36.6 million and $17.9 million, respectively. Adjusted EBITDA losses for the three months ended June 30, 2024, decreased by $6.6 million, or 26.9%, as compared to the three months ended June 30, 2023.

Speaker Change: On slide 12, we have our EBITDA and adjusted EBITDA for the second quarter of 2024.

Karen Alexander: Adjusted EBITDA reflects adjustments for nine cash, restructuring, and acquisition-related items that impacted the period. EBITDA and adjusted EBITDA for the quarter were losses of $36.6 million and $17.9 million, respectively. Adjusted EBITDA loss for the three months ended June 30, 2024, decreased by $6.6 million, or 26.9%, as compared to the three months ended June 30, 2023. The decreased loss was primarily due to the contribution of increased revenues, a $4.7 million decrease in compensation and benefits expense, and a $2.1 million decrease in selling general administrative expenses.

Speaker Change: Adjusted EBITDA reflects adjustments for non-cash restructuring and acquisition related items that impacted period. EBITDA and adjusted EBITDA for the quarter were losses of $36.6 million dollars and $17.9 million dollars respectively.

Karen Alexander: Starting on slide 9, we have our Q2 KPIs, which provide a snapshot of the underlying trends driving our business. We ended the second quarter with 6.4 million of crypto-enabled accounts, reflecting a steady increase over the past 12 months. This underscores the increasing adoption and trust in our platform. Next, we have our transacting accounts broken down into crypto and loyalty accounts. There were 719,281 transacting accounts in the second quarter of which 461,000 were for loyalty redemption in 258,000 were for crypto trade.

Speaker Change: adjusted EBITDA loss for the three months ended June 30, 2024, decreased by $6.6 million, or 26.9%, as compared to the three months ended June 30, 2023.

Karen Alexander: The decreased loss was primarily due to the contribution of increased revenues, a $4.7 million decrease in compensation and benefits expense, and a $2.1 million decrease in selling general and administrative expenses. Turning to slide 13, we present our Condensed Profit and Loss Statement. The net loss for the quarter was $35.5 million, of which $19.1 million was allocated to the non-controlling interest in the operating company and $16.4 million was attributed to Bakkt Holdings, resulting in a diluted loss of $2.67 per share and an average diluted share base of 6.2 million shares for both basic and diluted.

Speaker Change: The decreased loss was primarily due to the contribution of increased revenues, a $4.7 million decrease in compensation and benefits expense, and a $2.1 million decrease in selling general and administrative expenses.

Karen Alexander: Turning to slide 13, we present our condensed profit and loss statement. Net loss for the quarter was $35.5 million, of which $19.1 million was allocated to the non-controlling interest in the operating company, and $16.4 million is attributed to the back holding, resulting in a diluted loss of $2.67 per share, and an average diluted share base of 6.2 million shares for both basic and diluted.

Speaker Change: Turning to slide 13, we present our Condensed Profit and Loss Statement.

Karen Alexander: Total National Traded Volume was $672 million, with $494 million attributable to crypto and $178 million to loyalty revolutions. Crypto-National Traded Volume was down 42% sequentially but was up 48% year-over-year. As it's undercrested, they were down $175 million, down from the previous quarter high of $1,233 million driven by a settling of crypto prices compared to March 2020 for highs.

Speaker Change: Net loss for the quarter was $35.5 million, of which $19.1 million was allocated to the non-controlling interest in the operating company, and $16.4 million was attributed to backholding.

Speaker Change: resulting in a diluted loss of $2.67 per share on an average diluted share base of 6.2 million shares for both basic and diluted.

Karen Alexander: On slide 14, we have our condensed balance sheet as of Jan 30, 2024. We ended the quarter with $60.7 million in cash equivalence and available-for-sale securities. After consideration of $7.4 million of net proceeds from the second funding of the registered direct offering proceeds in April and $10 million of restricted cash reductions driven by surety bond collateral releases. We utilize $31.3 million of our cash cash equivalence and available for sale securities in the second quarter of 2024. Included in the utilization with $3.1 million of severance payments and $1.1 million for litigation settlement, as well as approximately $7 million of working capital utilization related to loyalty business that we anticipate to reverse in Q3.

Karen Alexander: On slide 14, we have our condensed balance sheet as of June 30, 2024. We ended the quarter with $60.7 million in cash, cash equivalents, and available for sale security. After consideration of $7.4 million of net proceeds from the second funding of the Registered Direct Offering proceeds in April and $10 million of restricted cash reductions driven by surety bond and collaborative releases, we utilize $31.3 million of our cash, cash equivalents, and available for sale securities in the second quarter of 2024.

Speaker Change: On slide 14, we have our condensed balance sheet as of June 30, 2024. We ended the quarter with $60.7 million in cash, cash equivalents, and available-for-sale securities.

Karen Alexander: On slide 10, we show our total revenue broken out between our crypto and loyalty products. Total revenue for the second quarter of 2024 was $510 million. Gross crypto services revenue for the quarter was $497 million in increase of 48% from the same quarter last year. This growth trended with the overall market as overall crypto interest has increased since last year. Our net loyalty revenues were $12.8 million, up 4% year-over-year, driven by a $1.1 million increase in subscription and services revenue, partially offset by $700,000 reduction in transaction revenue. Approximately half of the increase in subscription and service revenue was driven by an adjustment to the remaining life of one of our service contracts.

Speaker Change: After consideration of $7.4 million of net proceeds from the second funding of the Registered Direct Offering proceeds in April, and $10 million of restricted cash reductions driven by surety bond collateral releases,

Speaker Change: We utilize $31.3 million of our cash, cash equivalents, and available-for-sale securities in the second quarter of 2024.

Karen Alexander: Included in this utilization was $3.1 million of severance payments and $1.1 million for litigation settlement, as well as approximately $7 million of working capital utilization related to loyalty business that we anticipate to reverse in Q3. Excluding some of these lumpier items, we are continuing to see improvements in our cash utilization run rate from a lower operating expense base, which we will cover more in the guidance. Additionally, we disclosed in our 10-Q file this morning that we have entered into a line of credit agreement with Intercontinental Exchange Inc., our former parent company, and our largest shareholder.

Speaker Change: Included in this utilization was $3.1 million of severance payments and $1.1 million for litigation settlement, as well as approximately $7 million of working capital utilization related to loyalty business,

Karen Alexander: Excluding some of these lumpier items, we are continuing to see improvements in our cash utilization run rate from a lower operating expense base, which we will cover more in the guidance slide.

Speaker Change: that we anticipate to reverse in Q3.

Speaker Change: Excluding some of these lumpier items, we are continuing to see improvements in our cash utilization run rate from a lower operating expense base, which we will cover more in the guidance slide.

Karen Alexander: Moving on to slide 11, we have our total operating expenses. Total expenses for the quarter were $531.9 million, including $495.1 million of crypto costs in ECB driven by a trading volumes. SG&A expenses were $5.5 million, down 29.5% from Q1 2024, reflecting our ongoing efforts to maintain a disciplined expense structure. Total compensation expense was $22.4 million, a 17% decrease compared to the second quarter of 2023 due to lower head count in a decrease in incentive bonuses and benefits. This reflects our commitment to maintaining a disciplined expense management.

Karen Alexander: Additionally, we discussed in our 10-Q about this morning that we have entered into a line of credit agreement with the Intercontinental Exchange Incorporated, our former parent company and our largest shareholder. This agreement provides access to up to $40 million of additional cash during Plan 25 and will serve as an additional liquidity source to our current cash position, enabling us to continue focusing on near-term growth opportunities and delivering for our clients.

Speaker Change: Additionally, we disclosed in our 10Q valve this morning that we have entered into a line of credit agreement with the Intercontinental Exchange Incorporated, our former parent company and our largest shareholder.

Karen Alexander: This agreement provides access to up to $40 million of additional cash during 2025 and will serve as an additional liquidity source to our current cash position, enabling us to continue focusing on near-term growth opportunities and delivering for our clients. Moving on to slide 15.

Speaker Change: This agreement provides access to up to $40 million of additional cash during 2025 and will serve as an additional liquidity source to our current cash position, enabling us to continue focusing on near-term growth opportunities and delivering for our clients.

Karen Alexander: Moving on to slide 15, we have updated our 2024 full-year outlook. We have fine-tuned our expectations for 2024 revenue based on observed engagement metrics and updates to our go-to-market strategy. We have not adjusted our expectations for net loyalty revenues of $53 million to $57 million, consistent with the performance of that business in 2023. We have adjusted our expected growth crypto revenue range to $2,515 million to $2,770 million and the associated crypto cost in ECB to $2,505 million to $2,750 million. When crypto costs in ECB are deducted from the expected growth crypto revenue, this implies a net revenue contribution from crypto creating of $10 to $15 million as compared to the $15 to $25 million range guided in May.

Karen Alexander: We have updated our 2024 full-year outlook and fine-tuned our expectations for 2024 revenue based on observed engagement metrics and updates to our go-to-market strategy. We have not adjusted our expectation for net loyalty revenues of $53 million to $57 million, consistent with the performance of that business in 2020. However, we have adjusted our expected gross crypto revenue range to $2,515 million to $2,770 million and the associated crypto costs and ECB to $2,505 million to $2,755 million.

Speaker Change: Moving on to slide 15. We have updated our 2024 full-year outlook.

Speaker Change: We have fine-tuned our expectations for 2024 revenue based on observed engagement metrics and updates to our go-to-market strategy.

Karen Alexander: On slide 12, we have our EBITDA and adjusted EBITDA for the second quarter of 2024. Adjusted EBITDA reflects adjustments for nine cash, restructuring, and acquisition related items that impacted period. EBITDA and adjusted EBITDA for the quarter were losses of $36.6 million in 17.9 million dollars respectively. Adjusted EBITDA loss for the three months ended June 30, 2024 decreased by $6.6 million or 26.9% as compared to the three months ended June 30, 2023. The decreased loss was primarily due to the contribution of increased revenues, a $4.7 million decrease in compensation and benefits expense and a $2.1 million decrease in selling general administrative expenses.

Speaker Change: We have not adjusted our expectations for net loyalty revenues of $53 million to $57 million, consistent with the performance of that business in 2023.

Speaker Change: We have adjusted our expected gross crypto revenue range to $2,515 million to $2,770 million.

Speaker Change: and the associated crypto costs in ECB to $2,505 million to $2,755 million.

Karen Alexander: When crypto costs in ECB are deducted from the expected gross crypto revenue, this implies a net revenue contribution from crypto trading of $10 to $15 million, as compared to the $15 to $25 million range guided in May. This guidance does not include any revenue projections from Bakkt.

Speaker Change: When crypto costs in ECB are deducted from the expected gross crypto revenue, this implies a net revenue contribution from crypto trading of $10-15 million, as compared to the $15-25 million range guided in May.

Karen Alexander: This guidance does not include any revenue projections from BACX. There are several factors that drive the adjustment of our expected net revenue contribution from crypto creating. First, we continue to consider a range of potential trading engagement metrics based on observed trading engagement in Q2 2024. Our expected revenue range for the full-year 2024 considers an expectation that engagement metrics will continue at the levels observed in June 2024. Secondly, we have updated the range of possible scenarios for the activation of new clients currently in our pipeline. We have lowered our expectation for new client activations as we pivot our international strategy from a land and expand strategy to one of the enabling non-US crypto to establish U.S.

Speaker Change: This guidance does not include any revenue projections from BASC-X.

Karen Alexander: There are several factors that drive the adjustment of our expected net revenue contribution from crypto trading. First, we continue to consider a range of potential trading engagement metrics based on observed trading engagement in Q2 2024. Our expected revenue range for the full year 2024 considers an expectation that engagement metrics will continue at the levels observed in June 2024. Secondly, we have updated the range of possible scenarios for the activation of new clients currently in our pipeline.

Karen Alexander: Turning to slide 13, we present our condensed profit and loss statement. Net loss for the quarter was $35.5 million of which 19.1 million dollars was allocated to the non-controlling interest in the operating company, and $16.4 million is attributed to the back holding, resulting in a diluted loss of $2.67 per share, and an average diluted share base of $6.2 million shares for both basic and diluted.

Speaker Change: There are several factors that drive the adjustment of our expected net revenue contribution from crypto trading.

Speaker Change: First.

Speaker Change: We continue to consider a range of potential trading engagement metrics based on observed trading engagement in Q2, 2024. Our expected revenue range for the full year 2024 considers an expectation that engagement metrics will continue at the levels observed in June , 2024.

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

Karen Alexander: On slide 14, we have our condensed balance sheet as of Jan 30, 2024. We ended the quarter with $60.7 million in cash equivalence and available for sale securities. After consideration of $7.4 million of net proceeds from the second funding of the registered direct offering proceeds in April and $10 million of restricted cash reductions driven by surety bond collateral releases. We utilize $31.3 million of our cash cash equivalence and available for sale securities in the second quarter of 2024.

Karen Alexander: We have lowered our expectation for new client activations as we pivot our international strategy from a land and expand strategy to one of enabling non-US crypto natives to establish US market presence. Based on our current view of pipeline and current client growth, we have also reduced our expectation for crypto trading account growth relative to the guidance I provided in May. We expect total operating expenses of $157 million to $162 million. We have reduced the upper end of our expected total operating expense range as we continue to see the execution of our expense reduction initiative. Similar to the May guidance, the guidance does not anticipate any acquisition or inorganic transaction expenses.

Speaker Change: We have lowered our expectation for new client activations as we pivot our international strategy from a land and expand strategy to one of enabling non-US crypto natives to establish US market presence.

Karen Alexander: market process. 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 May. We expect total operating expenses of $137 million to $162 million. We have reduced the upper end of our expected total operating expense range as we continue to see execution of our expense reduction. Similar to the May guidance, this guidance does not anticipate any acquisition or inorganic transaction expenses, like the acquisition expenses we incurred in 2023 related to the acquisition of the back crypto. The net of our operating expenses and non-cash expenses represent our expected cash operating expenses for 2024.

Speaker Change: 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 May.

Speaker Change: We expect total operating expenses of $157 million to $162 million.

Speaker Change: We have reduced the upper end of our expected total operating expense range as we continue to see execution of our expense reduction initiatives.

Karen Alexander: Included in the utilization with $3.1 million of severance payments and $1.1 million for litigation settlement, as well as approximately $7 million of working capital utilization related to loyalty business that we anticipate to reverse in Q3. Excluding some of these lumpier items, we are continuing to see improvements in our cash utilization run rate from a lower operating expense base, which we will cover more in the guidance slide.

Speaker Change: Similar to the May guidance, this guidance does not anticipate any acquisition or inorganic transaction expenses like the acquisition expenses we incurred in 2023 related to the acquisition of Bath Crypto.

Karen Alexander: Like the acquisition expenses we incurred in 2023, we're latest to the acquisition of. The net of our operating expenses and non-cash expenses represents our expected cash operating expenses for 2024. Estimated operating cash usage of 72 million to $79 million for a flexible, expected revenue and expense ranges that I have lost through. The low end of the expected operating cash flow usage range has increased relative to the guidance that was provided in May due to the reduction in the net revenue contribution from crypto. Free cash flow, which is a non-GAAP metric, is expected to be a usage between $79 million and $86 million.

Speaker Change: The net of our operating expenses and non-cash expenses represent our expected cash operating expenses for 2024.

Karen Alexander: Expected operating cash usage of $72 million to $79 million reflects both expected revenue and expense ranges that I have lost through. The low end of the expected operating cash releases range has increased relative to the guidance that provided in May due to the reduction in the net revenue contribution from crypto. Free cash flow, which is a non-GAAP metric, is expected to be a usage between $79 million to $86 million. We expect to end the year with $35 million to $42 million of available cash, cash equivalents, and available-for-sale securities. The upper end of our forecasted end-of-year balance decreased in line with our update expectations for crypto revenue.

Speaker Change: Expected operating cash flow usage of $72 million to $79 million reflects both expected revenue and expense ranges that I have walked through.

Karen Alexander: Additionally, we discussed in our 10Q about this morning that we have entered into a line of credit agreement with the Intercontinental Exchange Incorporated, our former parent company and our largest shareholder. This agreement provides access to up to $40 million of additional cash during Plan 25 and will serve as an additional liquidity source to our current cash position, enabling us to continue focusing on near-term growth opportunities and delivering for our clients.

Speaker Change: The low end of the expected operating cashflow usage range has increased relative to the guidance I provided in May due to the reduction in the net revenue contribution from crypto.

Speaker Change: Free cash flow, which is a non-GAAP metric, is expected to be a usage between $79 million to $86 million.

Karen Alexander: We expect to end the year with $35 million to $42 million of available cash, cash equivalents, and available for sale security. The upper end of our forecasted end-of-year balance decreased in line with our updated expectations for crypto revenue. We continue to believe that 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.

Speaker Change: We expect to end the year with $35 million to $42 million of available cash, cash equivalents, and available-for-sale securities.

Speaker Change: The upper end of our forecasted end-of-year balance decreased in line with our updated expectations for crypto revenue.

Karen Alexander: We continue to believe that 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. While our cash utilization is subject to timing differences on a monthly basis, our expectation for end-of-year available cash equivalents and available-for-sale securities implies an average monthly cash utilization for approximately $3.0 million to $4.3 million a month. This expectation assumes that the approximately $7 million of loyalty working capital utilization that we observed at June 30, 2024, does not re-occur at December 31, 2024.

Speaker Change: We continue to believe that we have sufficient cash to fund our operations in 2024.

Speaker Change: 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.

Karen Alexander: When crypto costs in ECB are deducted from the expected growth crypto revenue, this implies a net revenue contribution from crypto creating of $10 to $15 million as compared to the $15 to $25 million range guided in May.

Karen Alexander: While our cash utilization is subject to timing differences on a monthly basis, our expectation for end-of-year available cash, cash equivalents, and available-for-sale securities implies an average monthly cash utilization of approximately $3.0 million to $4.3 million a month.

Speaker Change: while our cash utilization is subject to timing differences on a monthly basis.

Speaker Change: Our expectation for end-of-year available cash, cash equivalents, and available-for-sale securities implies an average monthly cash utilization for approximately $3.0 million to $4.3 million a month.

Olivia Keavey: This expectation assumes that the approximately $7 million of loyalty working capital utilization that we observed at June 30, 2024, does not reoccur at December 31, 2024. Thanks, everyone. I'll now pass it back to Olivia for the Q&A section. Thanks, Karen.

Speaker Change: This expectation assumes that the approximately $7 million of loyalty working capital utilization that we observed at June 30, 2024, does not reoccur at December 31, 2024.

Operator: Thanks, everyone. That concludes the prepared remarks section of YouTube 24-hour earnings call.

Speaker Change: Thanks, everyone. That concludes the prepared remarks section of our Q24 earnings call. I'll now pass it back to Olivia for the Q&A section.

Olivia Keavey: I'll now pass it back to Olivia for the Q&A section. Thanks, Karen. Next, we'll move over to a couple of questions from the investor community. After that, we'll turn to live questions from the analyst community.

Olivia Keavey: Next, we'll move over to a couple of questions from the investor community. After that, we'll turn to live questions from the analyst community. Our first question from the investor community comes from Syed H. When do you expect to reach profitability? Please provide a realistic time frame and provide the actions you will take to achieve it.

Olivia Keavey: Thanks, Karen. Next, we'll move over to a couple of questions from the investor community.

CYDH: Our first question from the investor community comes from CYDH. When do you expect to reach profitability? Please provide a realistic timeframe and provide the actions you will take to achieve this? How will backpack help in achieving profitability sooner?

Andy Main: How will BACtAC help in achieving profitability sooner? Andy, can you share your perspective here? Thank you, Syed, for your question and for being a fellow stockholder of Bakkt. We do anticipate reaching profitability, but cannot give specific timelines and guidance beyond what we already provided on the call. It is largely contingent on the successful execution of our strategic priorities, which we remain laser focused on, expanding our client network, broadening our product offerings, particularly our BATX ECN, new partnerships we have in place and in our pipeline, and enhancing our cost management strategy. Back-end ex works a crucial role here as it's designed to enhance our institutional offerings, providing a high-performance trading venue with lower costs and faster executions.

Olivia Keavey: After that, we'll turn to live questions from the analyst community.

Andy Main: This platform will attract more institutional clients and drive higher volumes and revenues, which are key to achieving our profitability goals. Next question from Matthew M. and Jagjit S., which is on the topic of staff splits. How do you plan on maintaining investor appetite for long-term investors after the loss in overall value from the one to 25 stock split? Furthermore, why was the decision made to perform a stock split of that severity made? Are you planning on splitting the stock again? Karen, can you take this one?

Olivia Keavey: Our first question from the investor community comes from Syed H. When do you expect to reach profitability? Please provide a realistic timeframe and provide the actions you will take to achieve this.

Andy Main: Andy, can you share your perspective here? Thank you, CYDH, for your question and being a fellow stockholder of Bag. We do anticipate reaching profitability, but cannot give specific timelines and guidance beyond what we already provided on the call. It is largely contingent on the successful execution of our strategic priorities, which we remain laser-focused on. expanding our client network, broadening our product offerings, particularly our back ex ECN, and new partnerships we have in place and in our pipeline, and enhancing our cost management strategies. Of these, back ex plays a crucial role here as it's designed to enhance our institutional offerings, providing a high performance trading venue with lower costs and faster execution times.

Olivia Keavey: How will BAKT Act help in achieving profitability sooner? Andy, can you share your perspective here?

Andy: Thank you, Syed, for your question and to being a fellow stockholder of Bakkt.

Karen Alexander: We have lowered our expectation for new client activations as we pivot our international strategy from a land and expand strategy to one of the enabling non-US crypto to establish U.S, market process. 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 May.

Speaker Change: We do anticipate reaching profitability, but cannot give specific timelines and guidance beyond what we already provided on the call.

Speaker Change: It is largely contingent on the successful execution of our strategic priorities, which we remain laser focused on.

Speaker Change: expanding our client network, broadening our product offerings, particularly our BATx ECN, new partnerships we have in place and in our pipeline, and enhancing our cost management strategies.

Karen Alexander: We expect total operating expenses of $137 million to $162 million. We have reduced the upper end of our expected total operating expense range as we continue to see execution of our expense reduction. Similar to the May guidance, this guidance does not anticipate any acquisition or inorganic transaction expenses like the acquisition expenses we incurred in 2023 related to the acquisition of the back crypto. The net of our operating expenses and non-cash expenses represent our expected cash operating expenses for 2024.

Speaker Change: Of these, BakktX plays a crucial role here as it's designed to enhance our institutional offerings, providing a high-performance trading venue with lower costs and faster execution times.

Andy Main: This platform will attract more institutional clients and drive higher volumes and revenues, which are key to achieving our profitability goals.

Speaker Change: This platform will attract more institutional clients and drive higher volumes and revenues, which are key to achieving our profitability goals.

Matthew M.: Next question from Matthew M. and Judge G. S., which is on the topic of staff's list. How do you plan on maintaining investor appetite for long-term investors after the loss of an overall value from the one to 25 stocks? Furthermore, why was the decision made to perform a stock split of that severity? Are you planning on splitting the stock again?

Speaker Change: Next question from Matthew M. and Jagjit S. which is on the topic of staff splits.

Karen: How do you plan on maintaining investor appetite for long-term investors after the loss in overall value from the 1 to 25 stock split? Furthermore, why was the decision made to perform a stock split of that severity? Are you planning on splitting the stock again? Karen, can you take this one?

Karen Alexander: Karen, can you take this one? Certainly. Our decision to execute the one to 25 stocks was primarily driven by the need to meet the nice minimum price requirements and maintain our stock listing. This action was crucial to ensure the stability and credibility of our stock in the market. It has allowed us to attract institutional investors who have minimum price thresholds for their investments.

Karen Alexander: Certainly, our decision to execute the 1 to 25 stock split was primarily driven by the need to meet the NYSE's minimum price requirements and maintain our stock list. This action was crucial to ensure the stability and credibility of our stock in the market. It has allowed us to attract institutional investors who have minimum price thresholds for their investments. It's important to clarify that stock splits or reverse stock splits, like the one we conducted, do not change the underlying value of the company or the value of our company's shares. Fundamentally, a stock split changes the number of shares you own, but it also adjusts the price per share proportionately.

Karen: Certainly. Our decision to execute the 1 to 25 stock split was primarily driven by the need to meet the NYSE's minimum price requirements and maintain our stock listing.

Karen Alexander: We expect to end the year with $35 million to $42 million of available cash cash equivalents and available for sale securities. The upper end of our forecasted end-of-year balance decreased in line with our update expectations for crypto revenue. We continue to believe that 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.

Karen: This action was crucial to ensure the stability and credibility of our stock in the market. It has allowed us to attract institutional investors who have minimum price thresholds for their investments.

Karen Alexander: It's important to clarify that stock splits or worst stock split, like the one we conducted, does not change the underlying value of the company or the value of our company shares. Fundamentally, a stock split changes the number of shares you own, but it also adjusts the price per share proportionately. The total value of your investment remains the same. While we understand that this move might have been challenging to long-term investors, it was necessary to protect and enhance the long-term value of that.

Karen: It's important to clarify that stock splits or reverse stock split, like the one we conducted, does not change the underlying value of the company or the value of our company's shares.

Karen: Fundamentally, a stock split changes the number of shares you own, but it also adjusts the price per share proportionately. The total value of your investment remains the same.

Karen Alexander: While our cash utilization is subject to timing differences on a monthly basis, our expectation for end-of-year available cash equivalents and available for sale securities implies an average monthly cash utilization for approximately $3.0 million to $4.3 million a month. This expectation assumes that the approximately $7 million of loyalty working capital utilization that we observed at June 30, 2024 does not re-occur at December 31, 2024.

Karen: While we understand that this move might have been challenging to long-term investors,

Karen: It was necessary to protect and enhance the long-term value of BAC.

Karen Alexander: At this time, we have no plans for another reverse stock split. Instead, our focus is on driving growth and increasing our stocks in intrinsic value through strong operational performance and strategic initiatives.

Karen: At this time, we have no plans for another reverse stock split. Instead, our focus is on driving growth and increasing our stock's intrinsic value through strong operational performance and strategic initiatives.

Operator: Thanks, and with that, I would now like to turn the call back over to the operator to open up the phone line to see questions from the analyst community. Thank you. If you wish to ask a question on today's call, please press star followed by one on your telephone keypad. If you want to withdraw your question, then it's star followed by two.

Karen Alexander: The total value of your investment remains the same. While we understand that this move might have been challenging to long-term investors, it was necessary to protect and enhance the long-term value of Bakkt. At this time, we have no plans for another reverse stock split. Instead, our focus is on driving growth and increasing our stock's intrinsic value through strong operational performance and strategic initiatives. Thanks. And with that, I would now like to turn the call back over to the operator to open up the phone line to take questions from the analyst community. Thank you. If you wish to ask a question on today's call, please press star followed by one on your telephone keypad. If you want to withdraw your question, then it's a star followed by two.

Speaker Change: Thanks, and with that, I would now like to turn the call back over to the operator to open up the phone line to take questions from the analyst community.

Karen Alexander: Thanks, everyone.

Operator: That concludes the prepared remarks section of YouTube 24-hour earnings call.

Speaker Change: Thank you. If you wish to ask a question on today's call please press star followed by one on your telephone keypad. If you want to withdraw your question then it's star followed by two.

Olivia Keavey: I'll now pass it back to Olivia for the Q&A section. Thanks, Karen. Next, we'll move over to a couple of questions from the investor community.

Trevor Williams: Our first question today comes from Trevor Williams from Jeffries. Your line is now open. Please go ahead.

Operator: Our first question today comes from Trevor Williams from Jeffreys. Your line is now open, please go ahead. Hi, this is Spencer James on behalf of Trevor. Hey, Andy. Hey, Karen.

Speaker Change: Our first question today comes from Trevor Williams from Jeffreys. Your line is now open, please go ahead.

Operator: After that, we'll turn to live questions from the analyst community.

Spencer James: Hi, this is Spencer James on for Trevor. Andy, hey, Karen. And Ray, nice to meet you. Welcome aboard.

Andy Main: Our first question from the investor community comes from CYDH. When do you expect to reach profitability? Please provide a realistic timeframe and provide the actions you will take to achieve this? How will backpack help in achieving profitability sooner?

Speaker Change: Hi, this is Spencer James on for Trevor. Hey Andy, hey Karen, and Ray, nice to meet you. Welcome aboard.

Spencer James: And Ray, nice to meet you. Welcome aboard. I wanted to ask about BakktX, could you provide more color on how customer conversations are progressing, and maybe comments on which customer segments BakktX will be best positioned to address at launch in the coming months? Yes, super question. Thanks for asking. Seeing that Ray's on, Ray, why don't you take up?

Ray Kamrath: I wanted to ask on back to X. Could you provide more color on how customer conversations are progressing and maybe comments on which customer segments back to X will be best positioned to address at launch in coming months? Yes, super question. Thanks for asking. See that Ray's on.

Speaker Change: I wanted to ask on BACT-X, could you provide more color on how customer conversations are progressing and maybe comments on which customer segments BACT-X will be best positioned to address at launch in coming months?

Andy Main: Andy, can you share your perspective here? Thank you, CYDH, for your question and being a fellow stockholder of bag. We do anticipate reaching profitability but cannot give specific timelines and guidance beyond what we already provided on the call. It is largely contingent on the successful execution of our strategic priorities, which we remain laser-focused on, expanding our client network, broadening our product offerings, particularly our back ex ECN, and new partnerships we have in place and in our pipeline, and enhancing our cost management strategies.

Ray Kamrath: Ray, why don't you take that one? Sure. Thank you for the question. The industry in the United States has, there's considerable demand for institutional market participants. seeking high performance low cost trading experiences. Right now, most of the trading venues in the United States are geared more towards retail. And back next is a institutional focus trading venue that is geared towards that. So with that in mind, the market structure, which is more of an ECN and less of a central central than an order book, is particularly attractive to institutional investors. And we're seeing a high demand in our pre-sales efforts and our conversations with clients.

Speaker Change: Yes, super question. Thanks for asking. Seeing that Ray's on, Ray, why don't you take that one?

Ray Kamrath: Sure. Thank you for the question. The industry in the United States has there's considerable demand for institutional market participants seeking high-performance, low-cost trading experiences. Right now, most of the trading venues in the United States are geared more towards retail, and Backdeck is an institutional-focused trading venue that is geared towards that. So, with that in mind, The Market Structure, which is more of an ECM and less of a center than an owner book, is particularly attractive to institutional investors, and we're seeing a high demand in our pre-sales efforts and our conversations with clients.

Ray: Sure, thank you for the question.

Ray: and the industry in the United States.

Ray: has, there's considerable demand for institutional market participants.

Speaker Change: seeking high-performance

Speaker Change: low-cost trading experiences. Right now most of the trading venues

Speaker Change: in the United States.

Andy Main: Of these back ex plays a crucial role here as it's designed to enhance our institutional offerings, providing a high performance trading venue with lower costs and faster execution times. This platform will attract more institutional clients and drive higher volumes and revenues, which are key to achieving our profitability goals.

Speaker Change: are geared more towards retail. And BACdeX is a institutional focused trading venue that is geared towards that. So with that in mind,

Speaker Change: The market structure, which is more of an ECM and less of a central limit order book, is particularly attractive to institutional investors, and we're seeing a high demand in our pre-sales efforts and our conversations with clients.

Karen Alexander: Next question from Matthew M, and Judge G. S., which is on the topic of staff's list. How do you plan on maintaining investor appetite for long-term investors after the loss of an overall value from the one to 25 stocks? Furthermore, why was the decision made to perform a stock split of that severity? Are you planning on splitting the stock again?

Spencer James: Thank you for taking the question.

Ray Kamrath: Thank you for taking the question to appreciate it. Oh, you will have me. We have no further questions in the queue today, so I'll hand back over to the management team for closing remarks. Thank you, everyone, for attending our earnings call this morning. We look forward to connecting with you again soon. That includes today's call. You may now disconnect your lines. Thanks for watching!

Spencer James: Appreciate it.

Speaker Change: Thank you for taking the question. I appreciate it.

Operator: We have no further questions in the key today.

Speaker Change: Oh, you're welcome. We have many.

Andy Main: So I hand back over to the management team for closing remarks. Thank you, everyone, for attending our earnings call this morning. We look forward to connecting with you again soon.

Speaker Change: Thank you everyone for attending our earnings call this morning. We look forward to connecting with you again soon.

Operator: That concludes today's call.

Operator: You may now disconnect your line.

Speaker Change: That concludes today's call. You may now disconnect your line.

Speaker Change: [inaudible]

Speaker Change: Thank you for your time, and I'll see you next time.

Speaker Change: [inaudible]

Operator: Thanks, and with that, I would now like to turn the call back over to the operator to open up the phone line to see questions from the analyst community. Thank you.

Operator: If you wish to ask a question on today's call, please press star followed by one on your telephone keypad. If you want to withdraw your question, then it's star followed by two.

Spencer James: Our first question today comes from Trevor Williams from Jeffries. Your line is now open. Please go ahead. Hi, this is Spencer James on for Trevor. Andy, hey, Karen. And Ray, nice to meet you. Welcome aboard. I wanted to ask on back to X.

Ray Kamrath: Could you provide more color on how customer conversations are progressing and maybe comments on which customer segments back to X will be best positioned to address at launch in coming months? Yes, super question. Thanks for asking. See that Ray's on. Ray, why don't you take that one? Sure. Thank you for the question. The industry in the United States has, there's considerable demand for institutional market participants, seeking high performance low cost trading experiences.

Ray Kamrath: Right now, most of the trading venues in the United States are geared more towards retail. And back next is a institutional focus trading venue that is geared towards that. So with that in mind, the the market structure, which is more of an ECN and less of a central central than an order book is particularly attractive to institutional investors. And we're seeing a high demand in our pre-sales efforts and our conversations with clients. Thank you for taking the question. Appreciate it. We have no further questions in the key today.

Operator: So I hand back over to the management team for closing remarks. Thank you everyone for attending our earnings call this morning. We look forward to connecting with you again soon. That concludes today's call.

Operator: You may now disconnect your line.

Q2 2024 Bakkt Holdings Inc Earnings Call

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