Q4 2024 Bitcoin Depot Inc Earnings Call
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Kate: Good morning and welcome to Bitcoin Depot's fourth quarter and full year 2024 conference call. My name is Kate and I will be your operator today. Before this call Bitcoin Depot issued its financial results for the fourth quarter and full year that ended December 31st, 2024 in a press release.
Kate: A copy will be furnished in a report on Form 8K filed with a sect and will be available in an investor-relations section of the company's website.
Speaker Change: John is on today's call, our Bitcoin Depot CEO , Brandon Mintz, and COO, an interim CFO , Scott Buchanan. Following the remarks, we will open the call for questions. Before we begin, Cody Slach from Gateway Group will make a brief introductory statement.
Mr. Slach, please proceed.
Speaker Change: Thank you operator, good morning everyone. Before management begins our formal remarks, we would like to remind everyone that some statements we're making today may be considered forward looking statements under securities laws and involve a number of risks and uncertainties.
Speaker Change: As a result, we caution you that there are a few factors, many of which are beyond our control, which could cause actual results and events to differ materially from those described in the four-looking statements.
Speaker Change: for more detailed risks on certain deep-and-assumptions relating to our forward-looking statements. Please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission.
Speaker Change: We disclaimer any obligation or undertaking to update for the key statements to reflect circumstances or events that occur after the date before the key statements are made, except as required by law. We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and the reconciliation tables to applicable GAAP measures in our earnings release.
Carefully as you consider these metrics.
Speaker Change: We refer you to our filings with the Security and Exchange Commission for detailed disclosures and descriptions of our business, as well as uncertainties and other variable circumstances, including but not limited to risks and uncertainties identified under the caption, risk factors and our recent filings.
You may get Bitcoin depots
Speaker Change: Securities and Exchange Commission filings for free by visiting the SEC website at SEC.gov.
Speaker Change: I'd like to remind everyone, this call is being recorded and will be available for replay via link in the investor relations section of Bitcoin Depot's website.
Speaker Change: A supplemental earnings presentation highlighting our performance has also been made available on our IR website. Now I would like to turn the call over to bitcoin.deco's CEO , Brandon Mintz, Brandon.
Brandon Mintz: Thanks, Cody, and good morning, everyone. Thank you for pending our fourth-order conference call. I believe this call marks the pivotal moment for our business.
Speaker Change: I will start with three main points that Scott and I want to drive home on today's call.
Speaker Change: First, our kiosk growth and optimization plan are starting to show through in our financial results, and the tough comparisons and the wake of the California legislation are largely behind us.
Speaker Change: Q4-adjusted gross profit was up 18% year-over-year and adjusted evita was up 34%. These results should continue as this strategy unfolds.
Speaker Change: Second, our business model inherently throws off healthy cash flow, which gives us the optionality to drive various initiatives that we believe will create maximum shareholder value.
Speaker Change: Third, our growth plan coupled with our healthy cash flow generation is increasing the confidence we have in our business.
Speaker Change: As such, we are reintroducing our financial outlook, which displays continued strong quarter over quarter and year over year growth in our first quarter of this year, which Scott will cover later in the fall.
Speaker Change: Now I'd like to discuss some recent development across our business that support these three main takeaways.
Speaker Change: During the fourth quarter, we continued to focus on growing RTO networks, optimizing our existing fleet and building a robust pipeline of regional and national partners to enhance our footprint.
Speaker Change: We ended 2024 with approximately 8,457 active machines, surpassing our goals and reflecting our team's execution and vision to enhance Bitcoin's accessibility.
Speaker Change: We expect to see continued growth in our Chaos footprint to continue in 2025.
Now on to our BPM Rerotation Strategy.
Speaker Change: Today, 3,800 of our kiosks have been installed for less than one year.
Speaker Change: On average, we typically reach break even in four to five months on relocation expenses.
Speaker Change: We know the relocation strategy is working because we continue to see improved volumes that locations after they have been relocated.
Speaker Change: To highlight the value of our BTMs, we think that comparison to Bitcoin miners is helpful.
Speaker Change: Bitcoin mining revenue is highly correlated to the price of Bitcoin, whereas our BPMs have shown almost no correlation to the price of Bitcoin.
Speaker Change: Bitcoin miners have had a great year in 2024 as the Bitcoin price more than doubled.
Speaker Change: Even in 2024, with strong Bitcoin price appreciation, public Bitcoin mining companies roughly averaged a payback period of one to two years on an individual miner.
Speaker Change: However, our Bitcoin ACMs have typically seen payback periods of less than 8 months, regardless of Bitcoin price.
Speaker Change: Now, moving to our retail partnerships, we are excited to announce that we secured an early extension many months before the end of our term with our largest retail partner, Circle K. This adds roughly 12 months to our agreement with them in the US.
Speaker Change: Additionally, in January , we announced the deployment of 50 additional Bitcoin ATMs in partnership with a prominent convenience store operator with locations across the Texas Panhandle and nearby
Speaker Change: The expansion provides customers with convenient access to purchase Bitcoin and participate in the broader digital financial system.
Speaker Change: With this partnership, we're not only expanding our retail footprint in the Southwestern U.S., we're directly addressing the growing demand for convenience, crypto-affess.
Now, turning to our growth strategy.
Speaker Change: First, at International Extension, we have shipped over 300 TOS for our Australia launch. We are expecting to launch in Australia to commence in 2025 in our targeting additional countries with further expansion.
Speaker Change: Australia is fast becoming a global hotspot for Bitcoin adoption, ranking third worldwide in the number of Bitcoin ATMs.
Speaker Change: We believe the growing adoption of cryptocurrency will offer us an opportunity to establish a market-leading presence outside of North America.
Speaker Change: While it's still early, we are encouraged by the pace of retail opportunities we have identified in Australia.
Speaker Change: We are also evaluating the entrance into at least two additional countries in 2025.
Speaker Change: The kiosk remaining in our inventory could allow us to reach a fully installed fleet of roughly 10,000 kiosks
Speaker Change: and we are in regular dialogue with regulators to secure license to operate in the state.
Speaker Change: At this moment, we do not have any updates on the expected timeline for approval, but are hopeful this can happen in 2025.
Speaker Change: According to CoinATMRadar.com, there are still no physical BitcoinATMs in the state of New York.
Speaker Change: Looking ahead, we believe our business is well positioned to grow and drive shareholder value. Today, we are much more prepared to address our states might approach regulating our industry, and this gives us a greater influence when regulations may be drafted.
Speaker Change: Additionally, we are pleased to see our new administration's pro-cryptopolices beginning to emerge.
Speaker Change: We believe this positive momentum can be helpful for our business.
Speaker Change: To recap, we are encouraged by a recent momentum and remain well positioned to execute our strategic goals.
Speaker Change: Now I'll turn the forward over to our COO and interim CFO Scott Buchanan, who will provide more in-depth insights into our financial performance and business outlook. Scott?
Scott Buchanan: Thanks Brandon and good morning everyone. My focus today will be on our fourth quarter results and our outlook for 2025.
Scott Buchanan: Fourth quarter revenue was 136.8 million compared to the 148.4 million for last year's fourth quarter.
Scott Buchanan: The large part of the decline is driven by the impact of unfavorable legislation that was passed in California that went into effect in January of 2024.
Scott Buchanan: as well as regulatory changes in Connecticut, Vermont, and Minnesota that went into effect in Q2 and Q3 of 2024. Additionally, we relocated key asks here in the quarter to optimize our fleet for maximum profitability.
Scott Buchanan: Adjusted gross profit for the fourth quarter of 2024 increased 18% to 25.4 million compared to 21.6 million for the fourth quarter of 2023.
Scott Buchanan: Adjusted gross margin in the fourth quarter of 2024 increased 400 basis points to 18.6% compared to 14.5% in the fourth quarter of 2023. This margin increase was largely driven by optimizing your markup for maximum profitability and by relocating under-performing key-offs.
Scott Buchanan: Total operating expenses for the fourth quarter of 2024 declined 16% to 15 million compared with 17.8 million for the last year's fourth quarter.
Scott Buchanan: The improvement was attributable to lower professional services expenses and we anticipate that trend will continue over the coming quarters as we move farther away from the deep-back trend action and optimize expenses for life of the public company.
Scott Buchanan: We have saved multiple million dollars on an annual basis by reducing our cost related to our third-party legal cost and audit services. We have also seen our insurance cost decline 1.5 million as a result of reduced D&O operations.
Scott Buchanan: Gasnet income for the fourth quarter in 24 increased significantly to 5.4 million compared to a net loss of 1.7 million for the fourth quarter of 2023. The increase was due to lower depreciation and amortization and lower operating expenses in 2024.
Scott Buchanan: Adjusted EBITDA, a non-GAAP measure increased 34% to $12 million for the fourth quarter of 2024, compared to 9 million for the fourth quarter of 2023. This increase was primarily due to higher net income.
Scott Buchanan: Also as a reminder, as we deploy more kiosks, we increase to 6 costs. These deployments do not come with immediate revenue or even improvement, but they are expected to drive growth later in 2025 and in future years.
Scott Buchanan: Now turning to our balance sheet and cash flow. In June of last year, we announced our plans to allocate a portion of our cash reserves to Bitcoin. Since that time, we have continued to strengthen our position of the market through our Bitcoin Treasury strategy, recently increasing our holdings to 94 Bitcoin.
Scott Buchanan: This move reflects our confidence in Bitcoin's long-term potential as a financial asset and aligns with our commitment to supporting broader access and underscoring our long-standing belief in Bitcoin as a significant financial asset and store of value.
Scott Buchanan: Set at quarter end with $60.9 million, which includes finance leases and
Scott Buchanan: Of our total debt balance, 36 million is our term loan, which we are planning to pay down by at least $9 million in 2025.
Scott Buchanan: In addition, we are working to continue to improve our cash flow as more of our key ask transition from lease to own and as we continue to become an overall more efficient organization. As such, $8 million is the current balance on the key ask releases and we believe that this will fall to $3.5 million by the end of the year.
Scott Buchanan: As we think about our capital allocation strategy, we completed the paydown of our remaining preferred dividend to VTSS. Now that this is repaid, we will next hope with our attention on other ways of driving to your holder value, including playing down our term loan or potential dividends as we did not expect significant cat-backs in 2025.
Brandon Mintz: Now it's turning to our outlook. As Brandon mentioned, given the improved visibility we have in their business, we are reinstating our financial guidance.
Brandon Mintz: Q1 2025 is also a very strong start as we continue to see growth for our relocation strategy. We anticipate Q1 revenues to be between 151 million and 154 million which would represent growth of between 9 and 11 percent compared to Q1 2024.
Brandon Mintz: We're projecting adjusted EBITDA for Q1 2025 to be between 12 million and 14 million which would represent growth of over 200% compared to Q1 of 2024.
Brandon Mintz: We would anticipate a similar revenue seasonality trend with significantly higher revenue in Q2 than Q1 and Q4.
Brandon Mintz: We remain committed to additional operational enhancements to drive profitable growth going forward, including improving vendor pricing, lowering professional services cost, and optimizing customer markets. We are focused on optimizing the business for profitability and positive cash flow ahead. With that, we are now happy to take your questions. Operator?
Speaker Change: At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. We will pause for ages a moment to compile the Q&A
Brandon Mintz: Your first question comes from the line of Mike Colonnese with HSC Wainwright. Please go ahead.
Speaker Change: Good morning guys, I think it's taken my questions. First for me, curious how you guys are thinking about growth for the overall global Bitcoin ATM market in 2025 here, and then how growth should look within that context for Bitcoin Depot. I saw the overall industry grew by about 5% last year as it relates to growth in a number of P out, so be again good to get your views on market growth trends.
Brandon Mintz: and Mike. It's Brandon. Thanks for joining today. On the growth related to overall global Bitcoin ATM market, I don't think it's going to be...
That's significant.
Brandon Mintz: 2025, compared to 2024. Maybe you'll see similar trends, we believe Australia will continue to see growth. And that's a good thing for us. We want to be...
Brandon Mintz: The player grilling, not necessarily have a lot more competitive Bitcoin ATMs out there.
Brandon Mintz: Typically, if we place our machines in areas with lower competition, we see increased revenues. So I think a lot of Steve...
Brandon Mintz: Over the past year, so I've been struggling to keep up with new regulation and just the competitiveness in the industry now with larger players that have such an established brand and very sophisticated employees and means of doing business.
. . . . .
Speaker Change: Yes, a nice segue onto my next session, which is around the regulatory environment. So, Brandon or Scott DeGrens, your perspective on the whole regulatory backdrop here in the US for the industry, especially under the new administration, which is obviously pro crypto, but we also did see the CryptoATM for Prevention Act introduced just last month, which seems like it could present potentially some headwinds to your business if enacted, so you could get your views here.
Brandon Mintz: Yeah, we do believe the new administration will be very friendly.
Brandon Mintz: to crypto the whole, of course, and our own industry. We're not very worried about that potential piece of legislation that you're talking about, I think.
Brandon Mintz: with the new administration, something that had negatively impact our industries, less likely to be passed into law.
Great. Thank you for taking the questions, Brandon.
Thanks, bye. Bye.
Mike Randall: Your next question comes from the line of Mike Grondahl with Northland Securities. Please go ahead.
Hey, thanks, guys! Um...
The 1600 kiosk you have in inventory.
Does that include the 300 in Australia?
Mike Randall: and how do you think those 1600 kind of get put to work in 2025? What is kind of a rough level of expectations?
Mike Randall: Yes, Mike, that would include Australia, Kiosk, and Venturi as well and
Mike Randall: Really, the way to kind of look at it is 10,000 machines is roughly what we could get to if we installed.
Mike Randall: Everything we could. There's always a few hundred machines moving around from location to location, maybe being refurbished or repaired, etc. So
Mike Randall: We actually have more than 1,600 in inventory, but there's always a machine moving around. And the second part of your question was what again?
Mike Randall: Just sort of, what should we think of as a goal? You know, you had 84, 57 at year and 24. Do you think you can get it?
$10,000 by year-end, $25,000, you know, $9,000 like
How do we kind of model that growth?
Mike Randall: Well, we do think we'll be, some point throughout the year, the highest installed fleet that we've had. In Australia, things look very positive.
Mike Randall: that being such a fast growing market that could accelerate the growth as well. So I would say look out for updates.
Mike Randall: related to Australia. If we're expanding there, then likely we'll reach a higher number in terms of a total installed fleet than just the U.S. or U.S. and Canada.
Got it. And then...
Um, Kiosk.
Intransit, if you will.
Mike Randall: You know, post-California, I know 1Q was really busy, 2Q was busy, 3Q was busy
Mike Randall: Did you do a lot of moving around of Kiosk in Q4? I'm just trying to figure out, did that finally slow down if you could give us some color there that would be helpful?
Mike Randall: Throughout the year, we remained steady on the removals and therefore the revotations. We didn't remove everything from California, for example.
Mike Randall: in the first couple quarters of the year. We were trying to see if we could influence.
Mike Randall: The bill that ultimately was passed into law there to be changed, we still believe that there's hope to get it changed and we're actively working on it, but unfortunately in 2024 we did not
Mike Randall: and so once we got towards the end of the year we made a bigger push to relocate a larger number of those machines from California since we were kind of holding on to them for a while to see what happened.
Mike Randall: So that played into the relocation as a whole quite a bit and we just continue to be aggressive and
Mike Randall: Removing machines because we see such a quick payback time of four to five months on the relocation expenses so we think it's just going to be a part of this business model moving forward.
Speaker Change: and then you know the gross margin 18.6% took a nice step up from kind of the 16% level earlier in the year. What's driving that?
Speaker Change: Well, it's a combination of things, just continuing to optimize the spread charge at the machine to find the sweet spot and...
Speaker Change: In addition to that, we had some armored expenses decline as we were able to renegotiate some contracts throughout the year.
Speaker Change: and also lastly, our rents on average per machine have been declining as well, so we're saving money on the rent cost, and we're continuing to try and...
Speaker Change: You know, get the rent to be as low as possible.
Speaker Change: to be able to still get as many machines out as possible at these stores.
Got it. And then just lastly, on OPEX.
Speaker Change: Did you guys say that that $15 million is about the right run rate going forward?
Yeah, I don't think we'll, yeah, hey, Mike, we're sorry.
Speaker Change: Yeah, Mike. So we do expect that to be roughly the run rate going forward. We think we can come down a little bit more as we keep getting some of these more frivolous lawsuits behind us. So we can reduce some legal cost. I think it'll come down a little bit even as we keep scaling the number of guests to the fleet, but I don't think it'll come down materially from where we are now. [inaudible]
Mike Randall: Fair, fair. Okay, we'll great job on that too. Um, thanks guys.
Thanks, Mike.
Speaker Change: Your next question comes from the line of file gotched. Would it be a Riley securities? Please go ahead.
Hey, thank you. My first question is on International Expansion, right?
Speaker Change: How long will it take to get to, to kind of break even at a country level in Australia?
Speaker Change: Is that a consideration? And will you actually burn cash getting started there for a year or two? And my next question is, is this more, you know, this is development-wise?
Speaker Change: Are you doing anything to increase the velocity of usage? Why don't you have a partnership with CircleKey where you can buy Bitcoin at CircleKey and then use the app on your phone to like, check out at the point of sale.
Speaker Change: or by gas it's okay with Bitcoin, and that would help them piece of velocity and usage of a thing. So you're talking those two topics.
Speaker Change: Yeah, hey, how this is Scott. Thanks for the question. So the first one on international expansion, I mean, yeah, we definitely will part and cash initially in these international markets just as we deploy a bunch of key up so they ramp up in performance just like we see in the US when key up for brand new. They're not instantly profitable and on month one you got to do the installations and everything which will cost money. [inaudible]
Speaker Change: and then we'll see profitability after a couple of months. But when we think about Australia on the scale of the overall business, right? Even the 300 key apps we've shipped there so far, it's relatively small. And so it won't be too much cash that will be reduced as we start that expansion process.
Speaker Change: Yeah, and then your second question on kind of Circle K and using the app to spend Bitcoin at Circle K, I mean
Speaker Change: and you can do that already with Bitcoin. There's a lot of difference.
Speaker Change: Card Services out there where you can link cards to your Bitcoin wallets and spend the Bitcoin anywhere. So we don't really think that's just our core value proposition of helping people spend the Bitcoin. We're more focused on ways that people can use our key up as a vehicle to load cash into the crypto ecosystem or potentially other services.
Speaker Change: So we think our core value is a cash on ramp and helping provide services to the underbank, not so much in ways that people can spend Bitcoin.
Okay.
and so...
Speaker Change: It looks like Toyota is going to ramp and that's kind of what your guy into but like you know can you give us a call on maybe you know what person of your of your of your install base has kind of been in a good spot and you know for more than 24 months. [inaudible]
Speaker Change: and it's very productive. Can you share with us some of the KPIs of your top 10 or 20% of machines that are like...
Speaker Change: Haven't removed it a while, so we kind of know what
Speaker Change: Well-positioned kiosk looks like. And the reason why I'm asking that is is that you can put a kiosk into a new store and it starts out in the deerland goes to something over time.
Speaker Change: but it also can go to something over time because it's it's kind of like
Speaker Change: A novelty, it's like people see us there for a few months, six months in and then maybe get some repeat bar, repeat customers But really the metal is like really seeing a kiosk has been in one place for several years and it's doing X and you know what kind of machine you have doing that and kind of what are they doing?
Speaker Change: Yeah, it's a good question. I don't have all those baths on top of my head or in front of me. Bye. Yeah.
Speaker Change: So what we've kind of highlighted is the number we've provided right is the number that are less than year old because those are the ones we expect to continue ramping. So obviously the delta or the difference of that percentage from 100 is the amount that are over a year. I don't know the percentage over 24 months off the top by head, but
Speaker Change: It would be a good portion of the ones that aren't less than a year because we don't typically remove kiosks that are over a year old, we're typically removing them between months, six, and twelve, so you'd be safe to assume that the ones that aren't under a year, most of those will be over two years.
It's for the volume averages on those.
Speaker Change: I don't know what I'll stop my hat again. We have to pull the data and check it, but we use these strong performance from those kiosks that have been installed for...
Speaker Change: for multiple years, and that's why we're so aggressive in relocating kiosks because we know if we do find a good spot, the performance for those that play in the location for a long time are generally really strong.
Speaker Change: Before going to the next question, again if you would like to ask a question, press star one on your telephone keypad. Your next question comes from the line of bat McCann with a noble capital market, please go ahead.
Pat McCann: Hey, thanks for taking my questions. My first question has to do with the regulatory environment. I know that although the
Pat McCann: the administration, the presidential administration is friendly to crypto, ultimately on a state by state basis, that's an important factor as well of course. I'm just wondering what are you seeing as far as trickle down effect from the federal administration to the individual states. Is there any. [inaudible]
Pat McCann: Are there any positive developments in, let's say, the bluer states where you might expect tighter regulation on crypto, any thoughts there?
Hey Pat, this is Scott. Thanks for the question.
Speaker Change: So, like Brandon said, and like you mentioned, we do think federally there's positive momentum and more favorability for the crypto space and Bitcoin ACM specifically even, which is great. That's obviously the biggest concern is some federal legislation that negatively impacts the business.
Speaker Change: at the state level, it's very different state to state. We have seen some positive movement with the federal position on things.
Speaker Change: but there's still challenges in certain blue states, right? And so-
Speaker Change: We try and make sure we can explain our business effectively to legislators so that they understand what we do and the protections we provide for consumers, so that we don't get blindsided by something like California. But it's really hard to say exactly what happens on each state level. It's not all guided federally, like he said.
Speaker Change: What we can do is just stay on top of it with lobbyists and make sure we explain our business well to these different legislators.
Speaker Change: Thanks, and then my other question has to do with uses of capital and you guys have mentioned the prospect of a dividend, but I think Brandon also mentioned the...
Speaker Change: Some of the challenges of some of your competitors, I was wondering are there any M&A opportunities? Is that a potential use of some of the cash that you might consider? Any thoughts there?
Brandon Mintz: Hey, Pat, it's Brandon. I'll take that one. On the M&A operative communities, we're always having conversations with potential targets and just getting to know more and more competitors, not only in the U.S., but across the world where we may be interested in expanding to.
What we typically see is...
They are not understanding, you know, kind of our...
Brandon Mintz: Art Value in terms of market cap and relation to theirs. Right now I don't know what the multiple simple is, but it's typically been around two times.
Brandon Mintz: Evid dollars and going to one of these competitors and trying to buy them for less than that can be difficult but what we've also been seeing is as we continue to buy kiosks for reduced prices like the purchase we made around
Brandon Mintz: They need to have more and more of something strategic to us for it to make sense because when we run the numbers.
We, it makes more sense to grow organically. Now, internationally, I think there's more likelihood of...
Brandon Mintz: An acquisition versus in the US at the moment, just because they have something potentially
Strategic. Maybe they have...
Brandon Mintz: a license that we don't have to operate or maybe they have a big retailer that they sign that would be difficult and take a long time for us to get into.
Brandon Mintz: So I would say, you know, we're not expecting a lot of M&A activity, but...
Brandon Mintz: If we do find something interesting, it would probably be pretty strategic to us versus just boosting our financial profile.
Brandon Mintz: I will turn the call back over to Brandon Mintz for closing remarks.
Brandon Mintz: Thanks everyone for joining the call today. We look forward to continuing to show strong results in Q1 and we'll talk to you guys next time.