Q4 2024 Bakkt Holdings Inc Earnings Call
Unknown Executive: and the risks and uncertainties related to Bakkt's business, please refer to its filings with the Securities and Exchange Commission, including the Daniel Report on Form 10-K. 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.
Tax business. Please refer to its filings with the Securities and Exchange Commission, including its annual report on Form 10-K.
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.
Unknown Executive: 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.
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.
Cody: Thank you, and I'll now turn the call over to Andy. Thank you, Cody. And hello, everyone.
Andy: Thank you and I'll now turn the call over to Andy.
Andy: Thank you Cody and Hello, everyone.
Cody: Thanks for joining Bakkt's fourth quarter and full year 2024 earnings call. It's great to connect with you all again.
Speaker Change: Thanks for joining banks fourth quarter and full year 2020 earnings call.
Andy: It's great to connect with you all again.
Andy Main: With me today is Karen Alexander, our Chief Financial Officer.
Speaker Change: With me today is current Alexander <unk>, our Chief Financial Officer.
Andy Main: To lead us off, we at Bakkt are undertaking a strategic transformation to a crypto future focus. and to become a pure play crypto infrastructure company.
Speaker Change: Davita. So we are back are undertaking a strategic transformation to a crypto future focus.
Speaker Change: And to become a pure play crypto infrastructure company.
Andy Main: To begin that transformation, I'm thrilled to announce that Akshay Neheta, the CEO and founder of Distributed Technologies Research, or DTR, a cutting-edge financial technology company on a mission to build the next generation of global payments. and I will be co-CEOs of Bakkt starting on March 21st, 2025. In connection with Axie joining the company, he has brought to the table a new commercial partnership that, subject to applicable regulatory approvals, will tie Bakkt and DTR together to allow Bakkt to enter the cross-border stablecoin payments industry. actually is a seasoned veteran in fintech payments and cutting edge tech investment.
Speaker Change: To begin the transformation I'm thrilled to announce the actually in the head to the CEO and founder of distributed technologies research or <unk>.
Speaker Change: Cutting edge financial Technology company on a mission to build the next generation of global payments and <unk>.
Speaker Change: I will be co Ceos of bag, starting on March 21, 2025.
Speaker Change: In connection with Oxy, joining the company. He has brought to the table a new commercial partnership that subject to applicable regulatory approvals will tie back in detail together to ally bank to enter the cross border stable coin payments industry.
Speaker Change: Actually is a seasoned veteran in fintech payments and cutting edge tech investments with a vision to simplify financial transactions through the creation of the advanced Google payments infrastructure.
Andy Main: but the vision to simplify financial transactions through the creation of advanced global payments infrastructure. He brings over 20 years of experience with an integrate understanding of blockchain, financial markets and payment systems. Previously, he held senior executive roles at SoftBank, where he spearheaded numerous technology investments. Prior to that, he led the propriety trading business at Deutsche Bank.
Speaker Change: He brings over 20 years of experience with an integral understanding of block chain financial markets and payment systems.
Speaker Change: Previously he held senior executive roles at Softbank career, he spearheaded numerous technology investments.
Speaker Change: Prior to that he led the proprietary trading business at Deutsche Bank.
Andy Main: We are thrilled to welcome Akshay to the team. for a context on why you believe this commercial agreement has the potential to be a pivotal addition. In 2024, we witnessed a breakout moment for stable processing over $5 trillion in adjusted volume across nearly 200 million accounts, according to Pantera Capital. With the recent US administration support for strengthening the dollar's role in global trade through stablecoin. We're aiming to position ourselves at the forefront of this multi-trillion dollar opportunity. Through this commercial partnership, once we complete the applicable regulatory approval process, we will integrate a powerful, ready-to-scale and tested stablecoin payments infrastructure stack.
Speaker Change: We are thrilled to welcome <unk> to the team.
Speaker Change: For context on why do you believe that the commercial agreement has the potential to be a pivotal addition.
Speaker Change: In 2024, we witnessed a breakout moment for stable coins.
Speaker Change: Assessing over five trillion dollars and.
Speaker Change: Adjusted volume across nearly 200 million accounts according to Pantera capital.
Speaker Change: With the recent U S administration support for strengthening that dollars rule in global trade through stable coins were aiming to position ourselves at the forefront of this multi trillion dollar opportunity.
Speaker Change: Through this commercial partnership once we complete the applicable regulatory approval process, we will integrate a powerful ready to scale and tested stable coin payments infrastructure stack.
Andy Main: By combining DTR's cutting edge stablecoin infrastructure with Bakkt's regulated high performance trading platform, we'll enable customers to seamlessly on-ramp into crypto and then move within the Bakkt technology stack into the rapidly growing payments ecosystem. This integration is expected to create a uniquely powerful offering for our clients. allowing us to build PDP payment capabilities on a global scale by expanding into additional financial services such as treasury management and payroll solutions. Our clients will benefit from a versatile storefront, addressing both their crypto trading and everyday payment needs. Another important piece of this partnership is a put call option whereby Bakkt will have the right to buy DTR or DTR may obligate Bakkt to buy DTR.
Speaker Change: By combining <unk> cutting edge stable coin infrastructure with box regulated high performance trading platform will enable customers to seamlessly on round trip tool and then move within that band technology stack into the rapidly growing payments ecosystem.
Speaker Change: This integration is expected to create a uniquely powerful offering for our clients.
Speaker Change: Allowing us to build PDP payment capabilities on a global scale.
Speaker Change: By expanding into additional financial services, such as Treasury management and payroll solutions.
Speaker Change: Our clients will benefit from a versatile storefront.
Speaker Change: Dressing booster, our crypto trading and everyday payment needs.
Speaker Change: Another important piece of this partnership is a call option whereby back we'll have the right to buy <unk> or.
Speaker Change: Our DTI obligate back to by DDR.
Andy Main: within a price range upon the satisfaction of certain milestones. The commercial agreement is designed to leverage our combined infrastructure to create a global payments network once we clear the applicable regulatory approval. As a US regulated public traded company with rigorous financial and security oversight, we offer institutions a safe and trusted environment for responsible crypto trading and payments processing. We believe the differentiation resulting from our partnership with DTR will open up a scalable revenue model opportunity in the multi-trillion global payment space. expanding our obtainable markets, while delivering a comprehensive suite of crypto and stablecoin native solutions for our institutional client base.
Speaker Change: Within our price range upon the satisfaction of certain milestones.
Speaker Change: The commercial agreement is designed to leverage our combined infrastructure to create a global payments network once we clear the applicable regulatory approvals.
Speaker Change: As a U S regulated publicly traded company with rigorous financial and security oversight, we offer institutions, a safe and trusted environment for responsible crypto trading and payments processing.
Speaker Change: We believe the differentiation, resulting from our partnership with BTR will open up a scalable revenue modal opportunity and the multi trillion global payments space <unk>.
Speaker Change: Expanding our obtainable markets, while delivering a comprehensive suite of crypto and stable coin native solutions for our institutional client base.
Andy Main: Our commitment to regulatory compliance and security positions us uniquely in this rapidly evolving market.
Speaker Change: Eric commitment to regulatory compliance and security positions us uniquely in this rapidly evolving market.
Andy Main: For more information on this commercial agreement, please refer to the press release distributed earlier today.
Speaker Change: For more information on this commercial agreement please refer to the press release distributed earlier today.
Andy Main: To further advance our transformation to become a pure play crypto infrastructure company.
Speaker Change: To further advance our transformation to become a pure play crypto infrastructure company.
Andy Main: On Monday this week, we reached a definitive agreement to sell Backtrust Company, our qualified custodian subsidiary, to Intercontinental Exchange. Additionally, we are exploring strategic alternatives for our loyalty business. These decisions represent the next stage in our initiative to focus on our core competitive advantages in crypto brokerage and institutional trading services. The digital asset custody landscape has undergone significant changes in the recent year, marked by increased competition, margin compression, and evolving regulatory requirements. Notably, the repeal of the SEC SAB 121 has removed a major barrier for banks to enter the crypto custody space. intensifying the competitive landscape.
Speaker Change: On Monday. This week, we reached a definitive agreement to sell Bank Trust company are qualified custodian subsidiary.
Speaker Change: Intercontinental exchange.
Speaker Change: Additionally, we are exploring strategic alternatives for our loyalty business.
Speaker Change: These decisions represent the next stage in our initiative to focus on our core competitive advantages and crypto brokerage and institutional trading services.
Speaker Change: The digital asset custody landscape has undergone significant changes in the recent year.
Speaker Change: Marked by increased competition margin compression and evolving regulatory requirements, notably the repeal of the SEC sub one to one has removed a major barrier for banks to enter the crypto custody space.
Speaker Change: Intensifying the competitive landscape.
Andy Main: By divesting that trust, we will be better able to concentrate our resources on areas where we believe we have competitive advantages to drive growth. This move allows us to streamline our operations and further improve our cost structure. We expect the sale to reduce the expenses by additional $3.8 million annually and free up approximately $3 million in capital that is currently held for regulatory reserves. Allowing us to reinvest in our core crypto business and fuel our growth initiative. Importantly, I want to emphasise that this transaction does not impact the custody solutions we provide to our partners and clients.
Speaker Change: By divesting, but trust, we will be better able to concentrate our resources on areas, where we believe we have competitive advantages to drive growth.
Speaker Change: This move allows us to streamline our operations and further improve our cost structure.
Speaker Change: We expect the sale to reduce the operating expenses by additional $3 $8 million annually.
Speaker Change: And free up approximately $3 million in capital. There is currently held for regulatory reserves.
Speaker Change: Loving us to reinvest in our core crypto business and fuel our growth initiatives.
Speaker Change: Importantly, I want to emphasize that this transaction does not impact the cashless solutions, we provide to our partners and clients.
Andy Main: We have built a robust network of registrable custody providers that will continue to support our customers asset safekeeping needs. For our brokerage clients, we expect it will remain business as usual without interruption as we finalise the bank trust sale.
Speaker Change: We have built a robust network of.
Speaker Change: Retro custody providers that will continue to support our customers asset safekeeping needs.
Speaker Change: For our brokerage clients, we expect it will remain business as usual without interruption as we finalize with bags cross sale.
Andy Main: As we move forward to a pure play crypto focused future. Our business model focuses on supporting clients throughout their entire life cycle in the crypto ecosystem.
Speaker Change: As we move forward to a pure play critical focus future.
Speaker Change: Our business model focuses on supporting clients throughout their entire lifecycle in the crypto ecosystem.
Andy Main: We will concentrate on three key priorities. First, expanding and deepening client relationships by supporting new entrants with our Bakkt crypto services platform. And once we have obtained the applicable regulatory approvals, extending into the stablecoin payments market through our commercial partnership with DTR. Second, increasing our commercial and operational effectiveness to drive profitability by streamlining processes and optimizing our infrastructure. And third, maintaining our best-in-class risk and compliance foundation while exploring strategic growth opportunities through partnerships with overseas exchanges and disciplined capital allocation to accelerate our product roadmap.
Speaker Change: We will concentrate on three key priorities.
Speaker Change: First expanding and deepening client relationships by supporting new entrants with their bat except to services platform.
Speaker Change: And once we have obtained the applicable regulatory approvals extending into the stable coin payments market through our commercial partnership with BTR.
Speaker Change: Second increasing our commercial and operational effectiveness to drive profitability by streamlining processes and optimizing our infrastructure and.
Speaker Change: And third maintaining our best in class risk and compliance Foundation.
Speaker Change: Exploring strategic growth opportunities through partnerships with overseas exchanges and disciplined capital allocation to accelerate our product roadmap.
Andy Main: These strategic moves were the result of a thorough review process where we evaluated our business portfolio to determine how to most effectively allocate resources and position back for long-term success. We continue to remain focused on capitalising on the significant market opportunity we believe is before us, especially as we deepen our focus on crypto's future. Turning to our Q4 performance, as we anticipated on our last call, the positive momentum in crypto trading volumes that began in November continued through the end of the year. This was driven by a dramatic positive shift in crypto environment following the U.S.
Speaker Change: These strategic moves were the result of a thorough review process, where we evaluated our business portfolio to determine how to most effectively allocate resources and position <unk> for long term success.
Speaker Change: We continue to remain focused on capitalizing on the significant market opportunity. We believe is before us, especially as we deepened our focus on cryptos future.
Speaker Change: Turning to our Q4 performance as we anticipated on our last call.
Speaker Change: The positive momentum in crypto trading volumes that begun in November.
Speaker Change: <unk> through the end of the year.
Speaker Change: This was driven by a dramatic positive shift encrypted environment following the U S presidential election.
Andy Main: presidential election. In the fourth quarter, we saw significant growth in all our KPIs in our crypto business, such as notional trading volume, transacting accounts and revenue. Our monthly notional trading volume achieved record highs in November and finished the year strong in December, bringing our fourth quarter total trading volumes to 1.78 billion. This was a 465% improvement sequentially, outpacing the market by 360%. Year over year, trading volumes grew 778%, outpacing the market by 600%. This strong traction in our crypto business helped drive strong revenue growth and helped us to further close quarterly net loss. For the quarter, total revenues net of crypto costs, execution, clearing and brokerage fees increased 6.6% year over year to $17.8 million.
Speaker Change: Okay.
In the fourth quarter, we saw significant growth in all our kpis and our crypto business.
Speaker Change: As notional trading volume transacting accounts and revenue.
Speaker Change: Our monthly notional trading volume achieved record highs in November.
Speaker Change: And finished the year strong in December, bringing our fourth quarter total trading volumes to 178 billion.
Speaker Change: This was a 465% improvement sequentially outpacing the market by 360%.
Speaker Change: Year over year trading volumes grew 778%.
Speaker Change: Facing the market by 600%.
Speaker Change: This strong traction in our crypto business helped drive strong revenue growth and help us to further clues quarterly net loss.
Speaker Change: For the quarter total revenues net of crypto costs execution clearing and brokerage fees increased six 6% year over year to $17 8 million.
Andy Main: Total operating expenses, excluding crypto costs and execution, clearing and brokerage fees, decreased 69% year over year to 29.5%. Net loss improved 48.7% year over year to $40.4 million. Adjusted EBITDA lawsuit. measured in non-GAAP improved 66.3% year-over-year to 6.4 million. For the full year, the total revenues, net of crypto costs, execution, clearing and brokerage. increased 8.8% to $63 million. Total operating expenses, excluding crypto costs and execution, clearing and brokerage fees, decreased 45.4% to $155.9 million. Net loss improved 54.2% to 103.4%. Adjusted EBITDA loss non-GAAP improved 31.6% to $64.2 million.
Speaker Change: Total operating expenses, excluding trip to cost and execution clearing and brokerage fees decreased 69% year over year to $29 5 million.
Speaker Change: Net loss improved 48, 7% year over year to $40 4 million.
Speaker Change: Adjusted EBITDA loss.
Speaker Change: Measured in non-GAAP.
Speaker Change: Route 66, 3% year over year to $6 4 million.
Speaker Change: For the full year total revenues net of crypto costs execution clearing and brokerage fees increased eight 8% to $63 million.
Speaker Change: Total operating expenses, excluding crypto costs and execution clearing and brokerage fees decreased 45, 4% to $155 9 million.
Speaker Change: Net loss improved to 54, 2% to $103 4 million.
Adjusted EBITDA lost non-GAAP.
Speaker Change: Improved 31, 6% to $64 2 million.
Andy Main: From an operational standpoint, in 2024, we form BAKX, principally in connection with our planned launch of an institutionally focused trading platform known as an Electronic Communications Network, or ECN, and Advanced Trading Infrastructure. Through our license with Crossover Technologies, we've implemented their propriety matching technology that allows for smart order routing and trade matching. Currently, BakktX order matching technology is being utilized by our in-house, retail-facing, principal brokerage, Bakkt Crypto Solutions. to offer U.S. clients and their customers more competitive crypto asset pricing with greater efficiency, reliability, and scalability.
Speaker Change: From an operational standpoint in 2024, we formed back X principally in connection with our planned launch of an institutionally focused trading platform.
Speaker Change: <unk> is an electronic communications network, our ECM and advanced trading infrastructure.
Speaker Change: Through our license with crossover technologies, we've implemented that their proprietary matching technology.
Speaker Change: For smart order routing and trade matching.
Speaker Change: Currently back X order matching technology is being utilized by our in house retail facing principal brokerage that trip to solutions to offer U S clients and their customers more competitive trip to asset pricing with greater efficiency really.
Speaker Change: Liability and scalability we.
Andy Main: We are also in the process of adding service offerings to BakktX that will facilitate direct institutional integration, enabling leading global crypto institutions to access highly competitive and customizable liquidity for their retail facing markets.
Speaker Change: We're also in the process of adding service offerings to back X that will facilitate direct institutional integration, enabling leading global institutions to access highly competitive and customizable liquidity for their retail facing markets.
Andy Main: Bitex is currently operational in the US, in all states except New York, where it remains subject to regulatory approval. We believe this deployment enabled us to effectively handle the recent surge in trading volumes, while maintaining 100% uptrend. Given the immediate opportunities to support the rapidly expanding U.S. retail crypto market and Bakkt XE's proven capability to service that market, we paused our efforts to integrate a third party, central counterparty, clearing partner, or other risk management solutions. while continuing to develop service offerings that will facilitate direct institutional integration with highly competitive and customisable liquidity options.
Speaker Change: <unk> is currently operational in the U S. In all states, except New York.
Speaker Change: <unk> subject to regulatory approval.
Speaker Change: We believe this deployment enabled us to effectively handle the recent surge in trading volumes, while maintaining 100% uptime.
Speaker Change: Given the immediate opportunities to support the rapidly expanding U S retail crypto market.
Speaker Change: But ex these problem capability to several submarkets, we paused our efforts to integrate a third party central counterparty.
Speaker Change: Clearing partner or other risk management solutions.
Speaker Change: While continuing to develop service offerings that will facilitate direct institutional integration with highly competitive and customizable liquidity options.
Andy Main: Another significant contributor to our exceptional notional volume performance was the strategic addition of new supported coins. In Q3, we introduced nine new coins, followed by three more in Q4. And most recently we listed President Trump's native token in Q1 of this year. Our team actively monitors market trends and identifies promising tokens to stay ahead of the curve. By continuously expanding our offerings and providing users with access to the most sought after coins, we aim to maintain high levels of engagement and attract new users to our platform.
Speaker Change: Another significant contributor to our exceptional notional volume performance was the strategic addition of new supported coins.
Speaker Change: In Q3, we introduced nine new coins, followed by three more in Q4 and most recently, we listed President Trump's native token in Q1 of this year.
Speaker Change: Our team actively monitors market trends and identifies promising tokens to stay ahead of the curve.
Speaker Change: By continuously expanding our offerings and providing users with access to the most sought after coins, we aim to maintain high levels of engagement and attract new users to our platform.
Andy Main: I want to address an important client. We have received notification from Webull that they will not be renewing their existing contract effective middle of June 2025. As their business has scaled and evolved, they're modifying our contract to run more of their own infrastructure and operations.
Speaker Change: I want to address an important client update.
Speaker Change: We have received notification from Weibo.
Speaker Change: Not be renewing their existing contract.
Speaker Change: <unk> Middle of June 2025.
Speaker Change: As their business has scaled and evolved theyre modifying our contract to run more of their own infrastructure and operations.
Andy Main: This transition aligns with the client lifecycle approach I outlined earlier, where clients may scale beyond from our comprehensive brokerage solution. as they mature, potentially shifting to our direct institutional offerings and liquidity services. We will represent approximately 74% of our crypto revenues for 2024. However, we continue to have a very strong relationship with Weboo. We are working closely with their team to ensure a smooth transition for their brokerage infrastructure. And we are exploring alternative ways to continue to work together as their business scale.
Speaker Change: This transaction aligns with the client lifecycle approach I outlined earlier for our clients may scale beyond from our comprehensive brokerage solutions as they mature potentially shifting to our direct institutional offerings and liquidity services.
Speaker Change: We bill represented approximately 74% of our crypto revenues for 2024.
Speaker Change: However, we continue to have a very strong relationship with repo we.
Speaker Change: We are working closely with their team to ensure a smooth transition for the brokerage infrastructure and we are exploring alternative ways to continue to work together as their business scales.
Andy Main: Well, this change will impact our revenue in the short term. It reinforces the importance of our strategic initiatives that I discussed earlier as we continue to support WeVote's strategy.
Speaker Change: While this change will impact our revenue in the short term.
Speaker Change: It reinforces the importance of our strategic initiatives that I discussed earlier as we continue to support <unk> strategy.
Unknown Executive: Turning now to page six.
Speaker Change: Turning now to page six I'd.
Andy Main: I'd like to review our 24 strategic priorities and how we executed on them. First, expanding our client base and strengthening our partnership. was a core focus throughout the year. We formed relationships with a diverse set of companies that enhance our capabilities and our core crypto brokerage and institutional trading by providing complementary strengths such as advanced trading infrastructure and high performance matching These relationships are setting a strong foundation for our business. and help position banks as a player in the crypto market.
Speaker Change: I'd like to review, our 24 strategic priorities and how we executed on them.
Speaker Change: First expanding our client base and strengthening our partnerships with our core focus throughout the year.
Speaker Change: We formed relationships with a diverse set of companies that enhance our capabilities and our core crypto brokerage and institutional trading by providing complementary strengths such as advanced trading infrastructure and high performance matching engines.
Speaker Change: These relationships are setting a strong foundation for our business and help position <unk> as a player in the crypto markets.
Andy Main: Our second strategic priority was to broaden our suite of products and services to better serve our clients of all we need. Throughout 2024, we made significant enhancements to our ecosystem. Expanded Supported Digital Asset. Introduced advanced order type. and Incorporated Algorithmic Trading Tools and Smart Order Rights. We also made targeted investments in retail focused. adding support for 15 new coins on our crypto world reach platform. We will continue to strategically add new products and features that we believe can drive incremental volume and revenue.
Speaker Change: Our second strategic priority was to broaden our suite of products and services to better serve our clients' evolving needs.
Speaker Change: Throughout 2024, we made significant enhancements to our ecosystem.
Speaker Change: Expanded support of digital assets.
Speaker Change: Introduced advanced order types.
Speaker Change: And in corrugated algorithmic trading tools and smart order routing.
Speaker Change: We also made targeted investments in retail focused offerings, adding support for 15, new coins under a crypto brokerage platform.
Speaker Change: We will continue to strategically add new products and features that we believe can drive incremental volume and revenue.
Andy Main: Finally, we focused on continuously improving our cost structure and operational efficiency. I'm pleased to report that this is an area where we made significant strides over the course of the year. We streamlined operations across the organization, which led to operating expenses decreasing by 65.8% year over year on a run rate basis as of Q4. and establishing a leaner and more efficient business. As we look ahead, we remain committed to running our business in a disciplined manner, and we'll continue to look for opportunities to save on costs and drive profitability as we guide ourselves into a focused future in the crypto ecosystem.
Speaker Change: Finally, we focused on continuously improving our cost structure and operational efficiency.
Speaker Change: I am pleased to report that this is an area, where we made significant strides over the course of the year.
Speaker Change: We streamlined operations across the organization, which have led to operating expenses decreasing by 65, 8% year over year on a run rate basis as of Q4.
Speaker Change: Stab wishing a leaner and more efficient business.
Speaker Change: Yeah.
Speaker Change: As we look ahead, we remain committed to running our business in a disciplined manner and we'll continue to look for opportunities to save on costs and drive profitability as we guide ourselves.
Speaker Change: <unk> future in the ecosystem.
Andy Main: I'd like to thank the team for their focus and commitment in a dynamic year as we position Bakkt for the future.
Speaker Change: I'd like to thank the team for their focus and commitment and a dynamic here as we position but for the future.
Andy Main: Moving to slide seven. I want to highlight the favorable macro conditions for the crypto industry as we enter 2025. The year 2024 was remarkable for crypto adoption and sentiment, with positive catalysts and tailwinds converging. Bitcoin and other major coins reached new all-time highs, driven by surging institutional adoption and anticipation of a more crypto-friendly regulatory environment under the new US administration. These price increases have reignited retail interest. and Mainstream Media Coverage.
Speaker Change: Moving to slide seven.
Speaker Change: I want to highlight the favorable macro conditions for the industry as we enter 2025.
Speaker Change: The year 2024 was remarkable for crypto adoption and sentiment.
Speaker Change: With positive catalysts and <unk> converging.
Speaker Change: Bitcoin and other major coins reached new all time highs driven by surging institutional adoption and anticipation of a more crypto friendly regulatory environment under the new U S administration.
Speaker Change: These price increases have reignited retail interest.
Speaker Change: And mainstream media coverage.
Andy Main: The election of pro crypto President Donald Trump marked a watershed moment for the industry. Since taking office, he has taken significant steps to provide regulatory clarity and support innovation, including repealing SAB 121, which seemingly had the effect of discouraging banks from offering crypto services. and establishing a strategic national digital assets stockpile to hold digital assets.
Speaker Change: The election of Procryptic, President Donald Trump marked a watershed moment for the industry.
Speaker Change: Since taking office he has taken significant steps to provide regulatory clarity and support innovation, including repealing SAB a one to one.
Speaker Change: Which seemingly had the effect of discouraging banks from offering trip to services.
Speaker Change: And establishing a strategic national digital ASIC stockpile to hold the digital assets.
Andy Main: The SEC's formation of a dedicated crypto task force, led by Commissioner Hester Pierce. signals a major shift forward towards developing a comprehensive regulatory framework. We look forward to working with the task force to shape the future of crypto regulation.
Speaker Change: The SEC formation of a dedicated trip to task force led by Commissioner Hester peers.
Signals, a major shift forward towards developing a comprehensive regulatory framework.
Speaker Change: We look forward to working with the task force to shape the future of trip to regulation.
Andy Main: Another notable development was the launch of President Trump's native token, TRUMPF, currently available on our platform, demonstrating the administration's commitment to embracing crypto. As we look ahead in this favorable environment, we remain focused on our strategy to bring the most cutting edge digital asset trading solutions to clients throughout their entire crypto journey and reinvent ourselves with a crypto future focus. This approach aligns with the increased institutional adoption and renewed retail interest we're seeing in the market. Our client lifecycle model enables us to support businesses from their initial market entry with our comprehensive DCS platform through the evolution with solutions like Bakktex to institutional trading services as they mature.
Speaker Change: Another notable development was the launch of President Trump's native token Trump's currently available on our platform demonstrating the administration's commitment to embracing trip tool.
Speaker Change: As we look ahead in this favorable environment, we remain focused on our strategy to bring the most cutting edge digital asset trading solutions to clients throughout their entire crypto journey and reinvent ourselves with a trip to future focus.
Speaker Change: This approach aligns with the increased institutional adoption and renewed retail interest we're seeing in the market.
Speaker Change: Our client lifecycle model enables us to support businesses from their initial market entry with our comprehensive Dcs platform through evolution with solutions like biotechs to institutional trading services as they mature.
Andy Main: We continue to pursue bringing some of the biggest crypto market makers onto our platform, improving liquidity and driving additional demand. Partnership discussions are ongoing, our volumes have improved, and our strategic focus on supporting clients throughout their entire life cycle is positioning us well to capitalize on the current crypto-friendly regulatory environment.
Speaker Change: We continue to pursue bringing some of the biggest chip to market makers onto our platform improving liquidity and driving additional demand.
Speaker Change: Partnership discussions are ongoing.
Speaker Change: <unk> have improved and our strategic focus on supporting clients throughout their entire lifecycle is positioning us well to capitalize on the current crypto friendly regulatory environment.
Andy Main: With that, on slide eight, I'd like to outline our three key strategic priorities for 2025. as we accelerate our transformation into a pure play crypto leader. First, we aim to expand and deepen our client relationships throughout their entire life cycle in the crypto ecosystem. By supporting clients from market entry through maturity, we strive to capture opportunities at every stage of development. We'll focus on supporting new entrants with a comprehensive backed crypto services platform offering streamlined trading solutions for evolving businesses. and providing institutional trading and liquidity services for established players. With our commercial partnership with DTR, we expect to expand beyond traditional crypto trading solutions into the stablecoin payments market.
Speaker Change: With that on slide eight I'd like to outline our three key strategic priorities for 2025.
Speaker Change: As we accelerate our transformation into a pure play crypto leader.
Speaker Change: First we aim to expand and deepen our client relationships.
Speaker Change: Their entire lifecycle in the crypto ecosystem.
Speaker Change: By supporting clients from market entry through maturity, we strive to capture opportunities at every stage of development.
Speaker Change: We will focus on supporting new entrants with a comprehensive back crypto services platform offering streamline trading solutions for evolving businesses.
Speaker Change: And providing institutional trading and liquidity services or established players.
Speaker Change: With our commercial partnership with ETR, we expect to expand beyond traditional crypto trading solutions into the stable coin payments market.
Andy Main: significantly increasing our addressable market to include the cross-border payments ecosystem.
Speaker Change: Significantly increasing our addressable market to include the cross border payments ecosystem.
Andy Main: Second, we plan to increase our commercial and operational effectiveness to drive profitability. We are committed to streamlining client acquisition, onboarding, solutioning. and Revenue Realization Processes to increase our trading margin. As clients mature beyond our comprehensive brokerage solutions to our institutional trading platforms, we can capture higher margin opportunities with reduced operational requirements. Our operational infrastructure is being optimized to efficiently handle increasing transaction volumes, while maintaining a seamless experience for our clients.
Speaker Change: Second we plan to increase our commercial and operational effectiveness to drive profitability.
Speaker Change: We are committed to streamlining client acquisition.
Speaker Change: Boarding solutions.
Speaker Change: And revenue realization processes to increase our trading margins.
Speaker Change: Lets clients mature beyond our comprehensive brokerage solutions to our institutional trading platforms.
Speaker Change: We can capture higher margin opportunities with reduced operational requirements.
Speaker Change: Our operational infrastructure has been optimized to efficiently handle increasing transaction volumes, while maintaining a seamless experience for our clients.
Andy Main: We believe the divestiture of back trust. and exploration of strategic alternatives for our loyalty program will further reduce our operating expenses and streamline our business model. We believe the operational efficiencies from our commercial partnership with DTR will enhance our ability to deliver innovative solutions. positioning as well to drive operating leverage as we work to continue to grow our revenue.
Speaker Change: We believe the divestiture of that trust in.
Speaker Change: In exploration of strategic alternatives for our loyalty program will further reduce our operating expenses and streamline our business model.
Speaker Change: We believe the operational efficiencies from our commercial partnership with BTR will enhance our ability to deliver innovative solutions.
Speaker Change: Positioning us well to drive operating leverage as we work to continue to grow our revenues.
Andy Main: Third, we will maintain our best-in-class risk and compliance foundation while exploring strategic growth opportunities. As a trusted partner to our clients, we understand the critical importance of robust risk and compliance frameworks in the evolving crypto regulatory landscape. The complementary regulatory expertise from both Bakkt and DTR will create a powerful foundation for our expansion in both domestic and international markets. We will continue to explore partnerships with overseas crypto exchanges looking to enter the US market compliantly. leveraging our regulated infrastructure to help them navigate the complex landscape.
Speaker Change: Third we will maintain our best in class risk and compliance Foundation.
Speaker Change: While exploring strategic growth opportunities.
Speaker Change: As a trusted partner to our clients, we understand the critical importance of robust risk and compliance frameworks and the evolving crypto regulatory landscape.
Speaker Change: The complementary regulatory expertise from both bat and PTR will create a powerful foundation for our expansion in both domestic and international markets.
Speaker Change: We will continue to explore partnerships with overseas crypto exchanges looking to enter the U S market compliant Lee.
Speaker Change: Leveraging our regulated infrastructure to help them navigate the complex landscape.
Andy Main: The company will maintain a disciplined approach to capital allocation, focusing on high return organic investments and opportunistic M&A that we believe will accelerate our product roadmap and add complementary capabilities to our strategy, particularly in the areas of trading technology and payment infrastructure. Underlying these strategic priorities is our commitment to building culture that is client focused. commercially driven yet risk smart and agile in execution. By aligning our crypto driven future focus organisation around these values, we believe we are well positioned to achieve our objectives and aim to deliver long term value to our client and shareholder.
Speaker Change: The company will maintain a disciplined approach to capital allocation focusing on high return organic investments and opportunistic M&A that we believe will accelerate our product roadmap.
Speaker Change: <unk> add complementary capabilities to our strategy, particularly in the areas of trading technology and payments infrastructure.
Speaker Change: Underlying these strategic priorities is our commitment to build a culture that is client focused commercially driven yet risk smart.
Giles: Hi, Giles and execution.
Giles: By aligning our crypto driven future focused organization around these values.
Giles: We believe we are well positioned to achieve our objectives.
Giles: And aim to deliver long term value to our clients and shareholders.
Andy Main: I'd like to thank you for your time. It's been a pleasure to update you on BAT from both a high level financial and operational perspective.
Giles: I'd like to thank you for your time has been a pleasure to update you on <unk> from both a high level financial and operational perspective.
Karen Alexander: I will now hand it over to our CFO, Karen, for a deeper dive into the numbers. Karen. Thank you, Andy. I'll now walk you through our fourth quarter KPIs and financial results. As a reminder, in accordance with GAAP, we present crypto services revenue and crypto costs and execution clearing and brokerage fees on a gross 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, loyalty revenue is presented on a one line net base.
Giles: I will now hand, it over to our CFO Karen for a deeper dive into the numbers currently.
Karen: Thank you Andy I'll now walk you through our fourth quarter financial results as a reminder, in accordance with GAAP.
Giles: The services revenue.
Giles: Cost and execution clearing and brokerage fees on a gross basis as they are at principal.
Giles: I will provide our customers.
Giles: Contract, we are in Asia and in the landscape protection services. They provide are loyalty estimate therefore royalty revenue.
Giles: On a bottom line basis.
Karen Alexander: Starting on slide 10, we have our Q4 KPIs, which provide a snapshot of the underlying trends driving our business. We ended the fourth quarter with 6.7 million crypto enabled accounts, reflecting steady growth over the past 12 months, and a slightly larger increase from Q3 to Q4, partially due to a migration onto our platform from customers at our partner, Swan, in December of last year. Next, we have our transacting accounts, broken down between crypto and loyalty accounts. There were 974,429 transacting accounts in the fourth quarter, of which 556,176 accounts were related to loyalty redemption. and 418,253 were related to crypto trading.
Giles: Starting on slide 10, we have our Q4, kpis, which provide a snapshot of the underlying trend what's driving it.
Giles: We ended the fourth quarter.
Kevin Merle: Kevin Merle crept down in April.
Kevin Merle: Our platform's steady growth over the past 12 months.
Kevin Merle: The increase from Q3 Q4, partially due to our migration onto our platform for our customers at our partners in this.
Kevin Merle: Last year.
Kevin Merle: Next we have are transacting accounts broken down between crept Atlanta accounts, there were 974429 transacting accounts in the fourth quarter.
Kevin Merle: 536176 accounts related to royalty of accomplishing.
Kevin Merle: 418000 in Q3.
Kevin Merle: Three were related to craft that grading.
Karen Alexander: Similar to crypto-enabled accounts, one of the key drivers for the substantial increase in trading volume from Q3 to Q4 was the successful migration of customers from our partner, Swan, to our platform. In December, we witnessed a significant spike in activity, with 50,000 customers finalizing their migration to Bakkt. We believe this influx of new users was a good indicator of the trust and confidence that SWAN has in our platform. As Andy mentioned earlier, we saw a significant increase in our fourth quarter notional crypto volumes after the election of President Trump and experienced a record breaking quarter for crypto volumes.
Kevin Merle: Similar to cut their enabled accounts one of the key drivers for the substantial increase in trading volume.
Kevin Merle: Q4 was the successful migration of customers from our personal one to our platform in December witnessed a significant spike in activity.
Kevin Merle: <unk> thousand customers finalizing their migration to bat.
Kevin Merle: We believe that the influx of me either.
Speaker Change: A good indicator of the trust and confidence that smart has on our platform.
Andy: As Andy mentioned earlier.
Speaker Change: I think an increase in our fourth quarter national kept up volumes after the election of President Trump and experienced a record breaking quarter.
Karen Alexander: Our total notional volume for the quarter was $1.99 billion, with $1.78 billion from crypto and $216 million attributable to loyalty reduction. In crypto, we outpace the market both sequentially and year over year. and our loyalty redemption volume increased 33.8% sequentially.
Andy: Our total national volume for the quarter was $1 billion bump.
Andy: Seven $8 billion from crypto and $216 million attributable to loyalty redemption.
Andy: We outpaced the market.
Andy: Italy in Europe, and here and there.
Andy: Our loyalty redemption volume increased 33, 8% sequentially.
Karen Alexander: We hope to see this trend continue as market sentiment for crypto continues to improve, and the regulatory environment affects more crypto-friendly policy.
Andy: We hope to see this trend continue with market sentiment receptor continues to improve.
Andy: Regulatory environment spark crept up on their policies.
Karen Alexander: Lastly, assets under custody at our custodian partners for our brokerage business reached $2.3 billion, up 145.2% from the previous quarter of $938.7 million and up 228.1% year over year, driven by higher coin prices. On slide 11, we show our total revenue broken out between our crypto and loyalty products. Total revenue for the fourth quarter of 2024 was $1.8 billion, up 447.3% sequentially and 737.9% year-over-year. Gross crypto services revenue for the quarter was $1.8 billion, up 464.7% sequentially and 795.3% year-over-year. This growth reflects the improved market sentiment for crypto that we saw in the fourth quarter.
Andy: Lastly assets under custody and our Cat study and partners for our brokerage business reached <unk> 8 billion.
Andy: Right.
Andy: 145, 2% from the previous quarter.
Andy: Okay.
Andy: $8 7 million.
228, 1% year over year.
Andy: And by higher claim prices.
Andy: On Slide 11, we show our total revenue broken out between our crypto on loyalty products.
Andy: Revenue for the fourth quarter of 2024 hours of $1 $8 billion or four.
Andy: 447, 3% sequentially and 737, 9% year over year growth kept that services revenue for the quarter was $1 $8 billion.
Andy: <unk> hundred 64, 7% sequentially and 795, 3% year over year.
Andy: That's great that reflects the improved market sentiment prescriptive episodic fourth quarter.
Karen Alexander: crypto services revenue, net of crypto costs and execution clearing and brokerage fees totaled $6.6 million, reflecting a 407.7% increase sequentially, and a 288.2% increase year over year. It's important to note that the smaller increase year over year was primarily due to Bakkt benefiting from a temporarily higher take rate resulting from the one-time adjustment to the revenue share agreement with Webull in the third and fourth quarters of 2023. As Andy mentioned earlier, Webull has notified us that they will not be renewing their existing contract when it ends mid-June 2024. In 2024, Webull was $2.56 billion of our gross crypto services revenue.
Andy: Crypto services revenue now have kept their cost and execution clearing and brokerage fees totaled $6 $6 million, reflecting a 407, 7% increase sequentially.
Andy: 288, 2% increase year over year.
Andy: It's important to note that the small increase year over year, primarily due to back benefiting from a temporarily higher take rate, resulting from a onetime adjustment to the revenue share agreement with Paypal in the third and fourth quarters of 2020.
Andy: Great.
Andy: As Andy mentioned earlier.
Andy: Has notified us that they will not be renewing their existing contract.
Andy: Net change.
Andy: In 2020 for Weibo is $2.56 billion of aircrafts that services revenue.
Karen Alexander: Net loyalty revenues were $11.1 million, down 8.3% sequentially, and 26.5% year-over-year. Of this amount, loyalty transaction revenues contributed $6.8 million, while subscription and services revenues were $4.3 million. The year-over-year decline was primarily related to reduced volume-based service revenue, partially offset by increased transaction volume.
Natalie: Natalie I'll say revenues were $11 million down eight 8% sequentially and 26, 5% year over year.
Natalie: This amount royalty transaction revenues contributed $6 $8 million, while subscription and services revenue.
Natalie: $8 million a year.
Natalie: The decline was primarily related some of it is volume based service revenue, partially offset by increased transaction volume.
Karen Alexander: Moving to slide 12, total operating expenses for the quarter was $1.81 billion, including $1.78 billion of crypto costs and execution clearing and brokerage. The increase in these variable costs was in line with a strong growth in crypto trading value. SG&A expenses for $4.7 million, down 44.7% sequentially and 59.8% year over year, driven by a reduction in insurance costs and marketing and promotion. Total compensation expense was $15.2 million, down 6.2% from last year, primarily due to lower salaries, wages and benefits from our restructuring efforts in 2024.
Natalie: Moving to slide 12, total operating expenses for the quarter was $1.81 billion, adding $1.78 billion of crypto costs and execution bearing and brokerage fees.
Natalie: And these variable costs was in line with the strong pricing.
Natalie: Volume.
Natalie: SG&A expenses were $4 $7 million down 44, 7% sequentially and 59, 8% year over year, driven by a reduction in insurance costs and marketing information.
Natalie: Total compensation expense of $13 million.
Natalie: <unk>, 2% from last year, primarily due to lower salaries wages and benefits from our restructuring efforts in 2024.
Karen Alexander: Turning to slide 13, we present our Condensed Profit and Loss Net loss for the quarter was $40.4 million, improving 48.7% year over year. $21.2 million was attributable to the non-controlling interest in the operating company and $19.2 million attributable to Bakkt Holdings, resulting in a loss of $2.95 per share on an average share base of 6.5 million shares for both BASIC and Duluth.
Natalie: Turning to slide 13, we present, our condensed profit and loss statement net loss for the quarter was $44 million.
Natalie: 48, 7% year over year.
Natalie: $21 million was attributable to the Noncontrolling interest in the operating company and $19 $2 million attributable to backhaul things.
Natalie: Resulting in a loss of $2 95 per share and an average share base of $6 5 million shares for both basic and diluted.
Karen Alexander: And on slide 14, we have our full year 2024 condensed profit and loss data. Net loss for the year was $103.4 million, improving 54.2% year over year. $56.8 million was attributable to the non-controlling interest in the operating company, and $46.7 million attributable to Bakkt Holdings resulted in a loss of $7.97 per share on an average share base of 5.9 million shares for both basic and diluted.
Natalie: And on Slide 14, we have our full year 2020 for condensate profit and loss statements.
Natalie: Net loss for the year with $103 $4 million.
Natalie: <unk> 34 per cent everywhere.
Natalie: The $6 $8 million was attributable to the Noncontrolling interest in the operating company and $46 $7 million to check that of all the backlog that's offsetting any loss of $7 97.
Natalie: Sure on an average share base of $5 9 million shares for both basic and diluted.
Karen Alexander: On slide 15, we have our adjusted EBITDA for the fourth quarter of 2024. Adjusted EBITDA reflects assumptions for certain non-cash restructuring and acquisition related items that impact the period. Adjusted EBITDA for the fourth quarter of 2024 was a loss of $6.4 million. The year-over-year improvement in adjusted EBITDA loss, which narrowed by $12.6 million, or 66.3%, was primarily due to the overall decrease in compensation and benefits expense in marketing.
Natalie: On slide 15, we have our adjusted EBITDA for the fourth quarter of 2024, adjusted EBITDA reflects assumptions for certain noncash restructuring and acquisition related items that impact the period.
Natalie: Adjusted EBITDA for the fourth quarter of 2024.
Natalie: Loss of $6 $5 million.
Natalie: The European airports.
Natalie: Adjusted EBITDA loss, which narrowed by $12 $6 million or $66.
Natalie: This is <unk>.
Natalie: Due to their property price and compensation and benefits expense and marketing.
Karen Alexander: On slide 16, we have our condensed balance sheet as of December 31st, 2020. We ended the quarter with $39.0 million of cash and cash equivalents and $24.9 million in restricted cash. Cash and cash equivalents increased by $3.3 million in Q4, and we utilized $7.1 million of available cash in the fourth quarter, including $700,000 for restructuring expenses.
Natalie: On slide 16, we have our condensed balance sheet as of December 31st 2024.
Natalie: We ended the quarter with 39.
Natalie: Our cash and cash equivalents.
Natalie: $4 $9 million in restricted cash cash and cash equivalents increased by $3 3 million in Q.
Natalie: Q4, and we utilized $7 million of available cash in the fourth quarter, including $700000 restructuring expenses.
Karen Alexander: Moving on to our outlook on slide 17. Moving forward, we're amending our outlook process to only provide guidance on a quarterly basis, which aligns to industry standards given the volatile nature of crypto. All of the following are estimated values and do not include any estimated revenues or expenses from the newly announced commercial partnership with DTR. For Q1, we anticipate total revenues to be in the range of $1.03 billion and $1.28 billion, comprised of gross capital revenues of $1.02 billion to $1.27 billion, and net loyalty revenues of $8.5 to $9.9 million.
Natalie: Moving on track will kind of slide 17, moving forward. We're amending our outlet process may provide guidance on a quarterly basis, which aligns to industry standards given the volatile nature.
Natalie: Also following our estimated values and do not include any estimated properties our expenses from the newly announced commercial partnership with <unk>.
Natalie: For Q1, we anticipate total revenue to be in the range.
Natalie: One theory of $3 billion and.
Natalie: Two $8 million.
Natalie: <unk> gross cut their revenue one point inherent 2 billion kilowatt to $2 $7 billion in net royalty revenues at eight five to nine $9 million.
Karen Alexander: We expect crypto costs and execution clearing and brokerage fees for ECB to be $1.02 billion to $1.27 billion in line with our gross crypto revenue estimates and expect to end the quarter with $22 million to $26 million in available cash and cash Our projected ending cash balance includes a potential first time draw of up to $5 million from the ICE line of credit by the end of March to support working capital requirements and does not include sale consideration or released capital from the divestiture of custody. We intend to minimize our utilization of the ICE credit line, using it only as a short term bridge to address immediate capital needs when needed.
Natalie: We expect pick up cost and execution clearing and brokerage fees for ACD to be one point guarantee billion to $1 $7 billion in line with our great script out revenue estimates and expect to end the quarter by 22 million to $26 million in available cash and cash equivalents.
Natalie: Our projected ending cash balance and create the potential for time draw of up to $5 million from the ice line of credit at the end of March to support working capital requirements and does not include a sale consideration are released capital from the divestiture of custody.
Natalie: We intend to minimize our utilization.
Natalie: Lang using it only as a short term bridge to address immediate capital needs when needed.
Unknown Executive: Thank you, everyone.
Speaker Change: Thank you everyone that concludes the prepared remarks section of the Q4 earnings call I'll now pass it back to Katie for closing.
Unknown Executive: That concludes the prepared remarks section of the Q424 earnings call.
Cody: I'll now pass it back to Cody for closing. Thank you, Karen, Andy, and everyone for attending our earnings call. We look forward to connecting with you again soon.
Speaker Change: Karen Andy and everyone for attending our earnings call.
Speaker Change: We look forward to connecting with you again soon.
Unknown Executive: This concludes today's conference call. Thank you for your participation. You may now disconnect your line.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect your line.
Speaker Change: [music].