Q1 2025 Bakkt Holdings Inc Earnings Call
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Unknown Executive: Greetings and welcome to the Bakkt first quarter 2025 earnings conference call. At this time, all participants are in a listen only mode. As a reminder, this conference call is being recorded.
Speaker Change: Greetings and welcome to the back to first quarter 2025 earnings Conference call. At this time, all participants are in a listen only mode.
As a reminder, this conference call is being recorded.
Cody Fletcher: I'll now turn it over to Cody Fletcher, investor relations advisor at Bakkt. Please go ahead.
Speaker Change: I will turn it over to Cody Fletcher Investor Relations adviser impact. Please go ahead.
Cody Fletcher: Hello everyone, and thank you for joining Bakkt's first quarter 2025 earnings call. Before we get started, I'd like to remind everyone that today's earnings call includes a separate supplemental presentation that can be found at our investor relations website at www.investors.bakkt.com. During today's call, we will make certain forward looking statements, including statements regarding our cooperation agreement with DTR, the proposed commercial agreement with DTR expected by Q3 2025, and the anticipated integration of DTR stablecoin and AI payment infrastructure with Bax regulated platform.
Speaker Change: Hello, everyone and thank you for joining <unk> first quarter 2025 earnings call.
Speaker Change: Before we get started I'd like to remind everyone that today's earnings call include a separate supplemental presentation that can be found in our investor Relations website.
Speaker Change: Www dot investors got backed dot com.
Speaker Change: During today's call, we will make certain forward looking statements, including statements regarding our cooperation agreement with GTR.
Speaker Change: The proposed commercial agreement with ETR expected by Q3 2025.
Speaker Change: Anticipated integration of GTR stable coin and AI payment infrastructure with tax regulated platform.
Cody Fletcher: We'll also discuss our strategic transformation to a pure play crypto infrastructure company, including the divestiture of our custody business to ICE, including expected timelines and ongoing discussions regarding our loyalty business, as well as expectations regarding the stable coin payments market, regulatory environment, and our product roadmap. 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: We will also discuss our strategic transformation to a pure play crypto infrastructure company.
Speaker Change: The divestiture of our custody business to ice, including the expected timelines and ongoing discussions regarding our loyalty business as well as expectations regarding the staple quaint payments market regulatory environment and our product roadmap.
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.
Cody Fletcher: For additional information regarding forward-looking statements and risk factors, please refer to our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q for the first quarter of 2025. 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 disclosures, please refer to our earnings release, which can be found on our Investor Relations website.
Speaker Change: For additional information regarding forward looking statements and risk factors. Please refer to our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q for the first quarter of 2025.
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: 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.
Andrew Main: Thank you, and I'll now turn the call over to Andrew. Thank you, Cody. And hello, everyone. Thanks for joining Bakkt's first quarter 2025 earnings call. And it's great to connect with you all again.
Andy: And I will now turn the call over to Andy.
Andy: Thank you Cody and Hello, everyone. Thanks for joining banks first quarter 2025 earnings call and it's great to connect with you all again.
Andrew Main: With me today is Karen Alexander, our Chief Financial Officer, and I am excited to introduce Akshay Mehta, founder of Distributed Technologies Research, or DTR, who officially joined BAKK as co-CEO on March 21st. Starting with our Q1 performance, we navigated a slower crypto market following the post-election rally of late 2024, with our total transaction volume reaching $1.06 billion for the quarter. This represents a 40% sequential decline from our strong Q4 results and a 23% below the broader market.
With me today is current Alexander <unk>, our Chief Financial Officer.
Hector Thunder: And I am excited to introduce actually in the Hector Thunder of distributed technologies research, our GTR, who officially joined back as co CEO on March 21st.
Hector Thunder: Starting with our Q1 performance, we navigated a slew of crypto market. Following the post election rally of late 2024, with our total transaction volume, reaching one point.
Hector Thunder: 6 billion for the quarter.
Hector Thunder: This represents a 40% sequential decline from a strong Q4 results and a 23% below the broader markets.
Andrew Main: On a year-over-year basis, our performance reflects a more positive story. with volumes growing 23%, outpacing the growth of her broader market benchmark. This achievement is particularly meaningful, considering we are comparing against a period that included March 2024's significant activity and price surge driven by Bitcoin ETF purchases, and the meme coin rally we saw from Sheep and Doge. Despite softer market conditions, this volume represents substantial progress for BAKKT as we continue to grow our market presence. We believe these metrics demonstrate our platform's resilience. While we adjust to current market dynamics, we believe our year-over-year performance relative to the industry demonstrates the strengths of our value proposition and expanding customer base.
Hector Thunder: On a year over year basis, our performance reflects a more positive story.
Hector Thunder: With volumes growing 23% outpacing the growth of our broader market benchmark.
Hector Thunder: This achievement is particularly meaningful considering that we are comparing against a period to the included March 2020 fours significant activity and price search driven by between ETF purchases and the MIM coin rally you still from sheep and dose.
Hector Thunder: Despite softer market conditions. This volume represents substantial progress through batch.
Hector Thunder: We continue to grow our market presence.
Hector Thunder: We believe these metrics demonstrate our platform's resilience.
Hector Thunder: How do we adjust to current market dynamics, we believe our year over year performance relative to the industry demonstrates the strengths of our value proposition and expanding customer base.
Hector Thunder: Yeah.
Andrew Main: For the quarter, total revenues net of crypto costs, execution, clearing and brokerage fees decreased 25.9% year over year to $12.6 million. Total operating expenses, excluding crypto costs and execution, clearing and brokerage fees, decreased 36.3% year over year to $31.1 million. Net income improved 176.5% year over year from a loss to a profit of $16.2 million. Adjusted EBITDA loss, non-GAAP, improved 11% year over year to $14.5 million.
Hector Thunder: For the quarter.
Hector Thunder: Total revenues net of Cryptococcosis execution, clearing and brokerage fees decreased 25, 9% year over year to $12 6 million.
Hector Thunder: Total operating expenses, excluding accepted cost and execution clearing and brokerage fees decreased 36, 3% year over year to $31 1 million.
Hector Thunder: Net income improved 176, 5% year over year from a loss to a profit of $16 2 million.
Hector Thunder: Adjusted EBITDA loss, non-GAAP improved 11% year over year to $14 5 million.
Andrew Main: From an operational standpoint, we are making progress on our transformation to a pure play crypto infrastructure company. The sale of Bakktrust company to Intercontinental Exchange is expected to close on or about May 15. And as mentioned on our previous earnings call, we continue to explore strategic alternatives for our loyalty business and are in discussions with potential buyers. We believe this represents the best path forward, eliminating ongoing operational losses while focusing our resources on higher growth and higher margin opportunities. These initiatives reflect our sharpened focus on core crypto infrastructure. We are deepening our strength in crypto trading and expect to expand into stablecoin payments ecosystem through our planned collaboration with DTR.
Hector Thunder: From an operational standpoint, we are making progress on our transformation to a pure play cooked to infrastructure company.
Hector Thunder: The sale of Bank Trust company to Intercontinental Exchange is expected to close on May 15th.
Hector Thunder: And as mentioned on our previous earnings call.
Hector Thunder: We continue to explore strategic alternatives for our loyalty business and are in discussions with potential buyers.
Hector Thunder: We believe this represents the best path forwards eliminating.
Hector Thunder: Eliminating ongoing operational losses, while focusing our resources on higher growth and higher margin opportunities.
Hector Thunder: These initiatives reflect our sharpened focus on core critical infrastructure.
Hector Thunder: We are deepening our strength in kids with trading and expect to expand into stable coin payment's ecosystem through our planned collaboration with BTR.
Hector Thunder: Steps that we believe will accelerate our evolution and position us to capture more potential opportunity in the digital asset space.
Andrew Main: Steps that we believe will accelerate our evolution and position us to capture more potential opportunity in the digital assets space.
Andrew Main: As Akshay will describe in more detail shortly, we remain committed to disciplined expense management. With our cooperation agreement with DTR signed, and the negotiation of a commercial agreement and integration with DTR underway, we are taking a bottom up rather than top down approach to operational efficiency, methodically evaluating each aspect of our business to identify opportunities for improvement, while preserving our ability to capture growth. We believe this granular approach will help ensure that we are making strategic decisions about resource allocation without compromising our competitive position.
Hector Thunder: It actually will describe in more detail shortly we remain committed to disciplined expense management.
Hector Thunder: With our cooperation agreement with <unk> signed.
Hector Thunder: And the negotiation of a commercial agreement and integration with DT are underway.
Hector Thunder: We are taking a bottom up rather than top down approach to operational efficiency.
Hector Thunder: Methodically evaluating each aspect of our business to identify opportunities for improvements, while preserving our ability to capture growth.
Hector Thunder: We believe this granular approach will help ensure that we are making strategic decisions about resource allocation without compromising our competitive positioning.
Andrew Main: During this period of refinement, we are suspending our practice of providing quarterly guidance as we work to finalise the definitive commercial agreement with DTR and complete our optimisation review.
Hector Thunder: During this period of refinements, we are suspending our practice of providing quarterly guidance as we work to finalize the definitive commercial agreement with <unk> and complete our optimization review.
Andrew Main: Lastly, we have brought on key hires who are seasoned leaders in crypto and payment.
Hector Thunder: Lastly, we have brought on key hires who are seasoned leaders and crypto and payments.
Andrew Main: Phillip Lord, President of Bakkt International, and Ankeek Khemka, Chief Product Officer for Bakkt. actually will explain a little more about their backgrounds and how they bring tangible value to the table. with our sharpened strategic focus.
Phillippe: Phillippe, Lord President of <unk> International.
Speaker Change: And Keith Kimco, Chief product officer for bat.
Speaker Change: She will explain a little more about their backgrounds and heavy bring tangible value to the table.
Speaker Change: With our sharpened our strategic focus.
Andrew Main: I want to take a moment to articulate our vision for BAPT's future. through our cooperation agreement and pending commercial agreement with DTR. Bakkt intends to power how businesses and consumers interact with digital payments. We are transforming to be not just a crypto trading platform, but an essential infrastructure layer for the future of finance. The regulatory tailwinds we are experiencing have created unprecedented opportunities in crypto trading. Stablecoin Related Payments and Infrastructure, and Egentic Commerce.
Speaker Change: I wanted to take a moment to articulate our vision for <unk> future.
Speaker Change: Through our cooperation agreement and pending commercial agreement with GTR.
Speaker Change: <unk> intends to power businesses and consumers interact with digital payments.
Speaker Change: We are transforming to be not just a crypto trading platform, but an essential infrastructure layer for the future of finance.
The regulation of retail wins, we're experiencing have created unprecedented opportunities encrypted trading stable coin related payments infrastructure and Gentex commerce.
Speaker Change: We believe that this favorable environment, coupled with our combination of regulated infrastructure and cutting edge technology positions us at the forefront of a multi trillion dollar transformation and global financial services.
Andrew Main: We believe that this favorable environment, coupled with our combination of regulated infrastructure and cutting-edge technology, positions us at the forefront of a multi-trillion dollar transformation in global financial services.
Akshay Mehta: I'd now like to hand over to Akshay Nihitta to share more about DTR and our partnership. Thank you, Andy. And thank you, everyone, for joining us today.
Speaker Change: I'd now like to hand over to actually in the headset.
Speaker Change: Sure motorboat, GTR and our partnerships actually.
Speaker Change: Thank you Randy and thank you everyone for joining us today I would like to preface my remarks by saying how optimistic I am for the future of back at this pivotal time as the standard of costs, that's transforming backed into our prime gateway for programmable money.
Akshay Mehta: I would like to preface my remarks by saying how optimistic I am for the future of Bakkt at this pivotal time, as we stand at the cusp of transforming Bakkt into a prime gateway for programmable money. By leveraging our position as a regulated publicly traded entity, with comprehensive license coverage across the U.S., a SOC 2 compliant tech stack, robust liquidity solutions, and brokerage-in-a-box capabilities, I believe Bakkt has a strong foundation to capture the significant opportunities ahead. In addition, I believe Bakkt's highly sophisticated and trusted infrastructure and regulatory moat gives us a competitive opportunity to leverage DTR's stablecoin and AI payments technology, allowing us to enter the global payments and remittance ecosystem.
Speaker Change: By leveraging our position as a regulated publicly traded entity with comprehensive license coverage across the U S. A sox compliant deck stack robust liquidity solutions and brokerage unit box capabilities. I believe backed has a strong foundation to capture the significant opportunities ahead.
Speaker Change: In addition, I believe bax highly sophisticated and trusted infrastructure and regulatory moat gives us a competitive opportunity to leverage <unk> stable coin in AIP, and <unk> technology, allowing us to enter the global payments and remittance ecosystems. Most excitingly, we believe that they expected integration of DTA.
Akshay Mehta: Most excitingly, we believe that the expected integration of DTR's APIs for agentic global payments will harness the power of AI to create intelligent programmable money solutions that transform how businesses and consumers interact with digital assets in their daily transactions.
Speaker Change: AP is for agenda global payments will harness the power of AI to create intelligent programmable money solutions that transform how businesses and consumers interact with digital assets in their daily transactions.
Akshay Mehta: This collaboration aims to transform Bakkt into a pure play crypto infrastructure company by combining complimentary Bakkt's established regulatory framework and trading capabilities provide the secure foundation essential for institutional adoption and consumer trust. The plan DPR integration will introduce innovative technology that enables seamless movement of money by bridging national payment rails and currencies with stable. We believe that this will result in a powerful convergence of regulated innovation between traditional and decentralized finance and will create an agentic infrastructure well suited for supporting the next generation of digital commerce at a global scale.
Speaker Change: This collaboration aims to transform backed into a pure play crypto infrastructure company by combining complementary strengths.
Speaker Change: <unk> established regulatory framework and trading capabilities provide a secure foundation essential for institution of adoption and consumer Trust.
Speaker Change: <unk> integration with introduce innovative technology that enables seamless movement of money by bridging national payment rails and currencies, but stable client.
Speaker Change: We believe that this will result in a powerful convergence of regulated innovation between traditional and decentralized finance and will create an agenda infrastructure well suited for supporting the next generation of digitally almost at a global scale now.
Akshay Mehta: Now let me walk you through our go to market strategy and implementation timeline. While the commercial agreement is not yet complete, there will be engineering work to integrate DTR into Bakkt and finalize our ability to secure API enabled fiat rails in the U.S. This timeline reflects our expectations for a clear phased approach to bring our combined capabilities to the U.S.
Speaker Change: Now, let me walk you through our go to market strategy and implementation timeline, while the commercial agreement is not yet complete that would be engineering work.
Speaker Change: To integrate DDR into backed and finalize our ability to secure epi enables fiat rails in the U S. This timeline reflects our expectations for a clear phased approach to bring our combined capabilities to the U S market.
Akshay Mehta: The foundation of this partnership will be a comprehensive commercial agreement between Bakkt and DTR, which we expect to complete by Q3 of this year. Significantly, the collaboration agreement already executed by Bakkt and DTR included an option for Bakkt to acquire DTR, creating a potential path to full integration of our complementary technologies and teams. Following the execution of the commercial agreement, we expect to move into the integration phase, connecting DTR and Bakkt systems across three critical dimensions, risk and compliance frameworks, USD fiat rears, and our payments products. We believe this technical integration will create the infrastructure backbone necessary to deliver our enhanced offering.
Speaker Change: Foundation of this partnership will be a comprehensive commercial agreement between Bacton, DDR, which we expect to complete by Q3 of this year.
Speaker Change: <unk> the collaboration agreement already executed buyback than DDR included an option for back to acquired ETR, creating a potential back as full integration of our complementary technologies and teams. Following the execution of the commercial agreement, we expect to move into the integration phase connect.
Speaker Change: DDR and back systems across three critical dimensions risk and compliance frameworks USB C address in our payments product suite. We believe this technical integration will create the infrastructure backbone necessary to deliver our enhanced offering.
Akshay Mehta: By Q3 2025, we expect to begin product launch for our early access premium part. These early adopters will be key strategic clients that can provide valuable feedback and validation. As we refine our offering, we believe this careful testing phase will help ensure that we execute successfully. One thing to note, timing of the initial launch will depend on Bakkt securing a reliable and efficient API enabled FIAT rail in the U S and those efforts are already actively underway.
Speaker Change: By Q3, 2025, we expect to begin product launch for our early access premium partners.
Speaker Change: These early adopters will be key strategic clients that can provide valuable feedback and validation as we refine our offerings. We believe the scaffold testing phase will help ensure that we execute successfully.
Speaker Change: One thing to note timing of the initial launch will depend on backed securing a reliable and efficient API enabled <unk> in the U S.
Speaker Change: And those efforts are already actively underway.
Akshay Mehta: By the end of Q3, we anticipate a market-wide launch extending our integrated offering to the broader market. We believe the STAYS rollout strategy balances speed to market with client experience to ensure we capitalize on immediate opportunities while also building for sustainable long-term success.
Speaker Change: By the end of Q3, we anticipate a market wide launch extending our integrated offering to the broader marketplace.
Speaker Change: We believe this phase rollout strategy balances speed to market with client experience to ensure we capitalize on immediate opportunities. While also building for sustainable long term success.
Akshay Mehta: As we focus the company to capitalize on becoming a gateway to programmable finance, I want to highlight the three key pillars of Bakkt's transformation. As Andy mentioned before, we believe the pending divestiture of our custody business and our ongoing discussions for divesting our loyalty business will streamline Bakkt to concentrate on its core strengths. In parallel, we expect to implement comprehensive cost reduction initiatives and optimize the efficiency of our organizational structure and technology stack. We believe these initiatives will strengthen our strategic priorities as we emerge as a more entrepreneurial company with scaled trading systems, strengthened leadership, and enhanced capabilities in stable coins payments and agentic AI technology.
Speaker Change: As we focus the company to capitalize on becoming a gateway to programmable finance I want to highlight the three key pillars of Bax transformation.
Speaker Change: As Andy mentioned before we believe the pending divestiture of our custody business.
Speaker Change: And our ongoing discussions for divesting our loyalty business.
Speaker Change: We'll streamline back to concentrate on its core strengths in parallel we expect to implement comprehensive cost reduction initiatives.
Speaker Change: And optimize the efficiency of our organizational structure and technology stack. We believe these initiatives will strengthen our strategic priorities as we emerge as a more entrepreneurial company with scale trading systems strengthened leadership and enhanced capabilities and stable going statements and agenda.
Speaker Change: <unk> AI technology.
Akshay Mehta: I am excited to introduce these two exceptional leaders to our executive team. They bring world class experience to accelerate our strategic transformation. Philip Lord joins us as President of Bakkt International, leveraging his significant growth experience across global platforms. leadership at crypto payments platform UBIT and extensive involvement in the DeFi space for over 10 years. And Ankit Khemka comes aboard as Chief Product Officer, bringing his expertise in scaling hyper growth tech companies like Revolut and his proven track record in product innovation across international markets. Both executives bring invaluable expertise in crypto payments and global expansion that will be instrumental as we integrate DTR capabilities and expand our footprint in the programmable money ecosystem.
Speaker Change: I'm excited to introduce these two exceptional leaders to our executive team they bring world class experience to accelerate our strategic transformation.
Speaker Change: Phillippe, Lord joins us as president of Baxter International leveraging his significant growth experience.
Speaker Change: Cross global platforms leadership at crypto payments platform, albeit an extensive involvement in the <unk> space for over 10 years.
Speaker Change: And get came car comes aboard as Chief product officer, bringing his expertise and scaling hypo growth tech companies like revolute and his proven track record in <unk>.
Speaker Change: Product innovation across international markets, both executives bring invaluable expertise in crypto payments and global expansion.
Speaker Change: It will be instrumental as we integrate ddr's capabilities and expand our footprint in the programmable money ecosystem.
Akshay Mehta: Now I'd like to shift our focus to the transformative potential of our collaboration where we believe BAKK's regulated infrastructure and DTR's cutting-edge stablecoin and AR technology, when integrated, will create a powerful combination that has the potential to help redefine digital payments globally. Let me highlight the transformative capabilities we believe DTR will bring to enhance Mac's ecosystem. We expect the DTR technology will integrate frictionless global payments infrastructure with BAC's trusted regulatory framework. DTR's user centric intent driven architecture works invisibly behind existing interfaces, allowing customers to continue using familiar wallet and messaging systems without disruption. We believe DTR's lightning fast settlement technology will revolutionize transaction processing, delivering instant FX conversions, while maintaining the regulatory guardrails essential in today's environment.
Speaker Change: Now I'd like to shift our focus to their transformation potential of our collaboration where we believe bax regulated infrastructure and ddr's cutting edge stable coin in AI technology, when integrated will create a powerful combination that has the potential to help redefine digital payments globally.
Speaker Change: Let me highlight the transformation capabilities, we believe DDR will bring to enhance the <unk> ecosystem. We expect the DDR technology will integrate frictionless global payments infrastructure with BACS trusted regulatory framework deal.
Speaker Change: <unk> user centric intent driven architecture works invisibly behind existing interfaces, allowing customers to continue using familiar wallet and messaging systems without disruption. We believe DDR is lightning fast settlement technology will revolutionize transaction processing delivering instant FX conversions, while maintaining the regulatory guardrail Sn.
Speaker Change: In today's environment.
Akshay Mehta: DTR's extensive ION network, which is anticipated to span more than 90 countries by Q3 2025, will include relationships with local banking partners worldwide, solving the complex puzzle of cross-border payments and regulatory requirements. All of this will operate within a comprehensive security and compliance framework that will incorporate industry-leading KYC AML protocols. We anticipate that this powerful combination will create a seamless bridge between TradFi and next generation digital payments, bringing institutional grade infrastructure to power the future of programmable money. We believe the payment landscape is on the cusp of a massive transformation with stablecoins emerging as a key catalyst.
Speaker Change: <unk> extensive ion network, which is anticipated to spend more than 90 countries. By Q3 2025 will include relationships with local banking partners worldwide solving the complex puzzle of cross border payments and regulatory requirements. All of this will operate within a comprehensive security and compliance framework.
Speaker Change: Work that will incorporate industry, leading <unk> IC ml protocols.
Speaker Change: We anticipate that this powerful combination will create a seamless bridge between <unk> and next generation digital payments, bringing institutional grade infrastructure to power the future of programmable money.
Speaker Change: We believe the payment landscape is on the cusp of a massive transformation, but stable coin is emerging as a key catalyst the numbers highlight the enormous opportunity in front of US Cross border payments reached 195 trillion in 2024 and are projected to hit 320 trillion by 2000.
Akshay Mehta: The numbers highlight the enormous opportunity in front of us. Cross-border payments reached $195 trillion in 2024 and are projected to hit $320 trillion by 2032, according to FXC Intelligence. Today, stablecoins command just 3% of this payments market at $5.85 trillion, but industry projections indicate this share will surge to 20% of $64 trillion by 2032. A remarkable growth trajectory driven by three factors. One, consumer demand is intensifying for faster, cheaper, and more trustworthy payment solutions, which stablecoins deliver through instant settlement, lower validation-based fees, and blockchain transparency. Two, the regulatory environment is increasingly favorable with the Stable Act moving through Congress, major institutional players reportedly exploring stablecoin issuance, and three, the U.S.
Speaker Change: Really do according to <unk> intelligence today stable going to command just 3% of this payments market at 585 trillion, but industry projections indicate the share was <unk> 20 per cent of 64 trillion by 2030 to remarket.
Speaker Change: A remarkable growth trajectory driven by three factors one consumer demand is intensifying for faster cheaper and more trustworthy payment solutions with stable coins delivered through instant settlement lower validation base fees and blockchain transparency to the regulatory environment is increasingly favorable with the stable.
Speaker Change: Moving through Congress major institutional players reportedly exploring stable coin issuance and three the U S positioning itself to become the crypto capital of the World. We believe this convergence of market size technological capabilities and regulatory tailwind will create an unprecedented opportunity for back in <unk>.
Akshay Mehta: positioning itself to become the crypto capital of the world. We believe this convergence of market size, technological capabilities, and regulatory tailwinds will create an unprecedented opportunity for Bakkt and DTR when integrated to capture significant market share in this rapidly evolving ecosystem.
Speaker Change: When integrated to capture significant market share in this rapidly evolving ecosystem.
Akshay Mehta: What you're seeing here is a planned architectural blueprint of our technology stack where BAK's regulated infrastructure will serve as the essential bridge between traditional and decentralized financial assistance. On the left, we connect seamlessly with PratFi's established payment rails, fiat currencies, and institutional infrastructure, while on the right, we plan to extend into the innovative on-chain ecosystems through AI agents, stablecoins, and plug-and-play APIs and chatbots. We believe this unified approach will eliminate many of the traditional barriers between these worlds, creating a financial system that will combine the regulatory compliance and stability of finance with the programmability, transparency, and efficiency of blockchain technology.
Speaker Change: What youre seeing here is the plan architectural blueprint of our technology stack buybacks regulated infrastructure will serve as the essential bridge between traditional and decentralized financial assistance.
Speaker Change: On the left we connect seamlessly with <unk> established payment rails, Fiat currencies and institutional infrastructure, while on the right. We plan to extend into the innovative on Jane ecosystems through AI agent stable coins and plug and play Apis and chat bots. We believe this unified approach will eliminate.
Speaker Change: Many of the traditional barriers between these was creating a financial system that will combine the regulatory compliance and stability of traditional finance with the programmability transparency and efficiency of blockchain technology.
Akshay Mehta: By facilitating this convergence, we aim not just to enhance existing financial services, but to enable entirely new capabilities that neither ecosystem could achieve independently. Through this expected integration, we will create a frictionless, programmable, and fully auditable payment ecosystem that reimagines how transactions are initiated and completed. The process will begin with agent triggers where AI will be able to intelligently initiate transactions based on predetermined conditions or real-time needs with enhanced functionalities through our combined payments infrastructure. Critical to the system is the Customer Approval Checkpoint, which will ensure that despite AI initiation, humans maintain control through verification requirements, preventing scenarios where the AI could autonomously execute transactions uncontrollably.
Speaker Change: By facilitating this convergence, we aim not just to enhance existing financial services, but to enable entirely new capabilities that neither ecosystem could achieve independently.
Speaker Change: Through this expected integration, we will create a frictionless programmable and fully auditable payment ecosystem that re imagines how transactions are initiated and completed the process would begin with agent triggers better AI will be able to intelligently initiate transactions based on predetermined conditions, our real time needs with <unk>.
Speaker Change: <unk> functionality through our combined payments infrastructure.
Speaker Change: Critical to this system as the customer approval checkpoint, which will ensure that despite AI initiation humans maintain control to verification requirements preventing scenarios there.
Speaker Change: I could autonomous the execute transactions uncontrollably, we believe this balance between automation and human governance will be essential for compliance and responsible deployment backs rails will provide the secure processing layer leveraging regulated infrastructure to ensure every transaction meet compliance requirements, while maintaining the highest security.
Akshay Mehta: We believe this balance between automation and human governance will be essential for compliance and responsible deployment. Bakkt's Rails will provide the secure processing layer, leveraging regulated infrastructure to ensure every transaction meets compliance requirements while maintaining the highest security standards throughout the payment journey. The final component, Global Settlement, will deliver instant completion across borders, currencies, and financial systems. eliminating the days long settlement times typical in traditional cross-border transactions. Together, these four components aim to create a payments ecosystem that will combine AI efficiency with human oversight, fraud prevention, and regulatory compliance with technological innovation, while dramatically reducing friction in global com.
Speaker Change: Throughout the payments journey.
Speaker Change: The final component global settlement will deliver instant completion across borders currencies and financial systems, eliminating the days long settlement times typical and traditional cross border transactions.
Speaker Change: Together these four components aimed to create a payments ecosystem that will combine AI efficiency with human oversight fraud prevention and regulatory compliance with technological innovation, while dramatically, reducing friction and global commerce.
Akshay Mehta: The following products you'll see on this roadmap represent DTR's current capabilities that will be integrated into Bakkt's offering following the expected signing of our commercial agreement estimated by Q3 2025. With technical integration and testing already underway, which we believe will ensure we are prepared for our expected launch with premium partners in Q3 2025, followed by expected market wide launch targeted for the end of Q3 2025. While previously noted, the timing of the initial launch is contingent on Bakkt securing reliable and efficient API enabled FIAT rails in the US, a process that is actively underway today.
Speaker Change: The following products, you'll see on this roadmap represent ddr's current capabilities are to be integrated into BACS offering following the expected signing of a commercial agreement estimated by Q3 2025 with technical integration and testing already underway, which we believe will ensure we are prepared.
Speaker Change: For I expected launch with premium partners in Q3, 2025, followed by our expected market wide launch targeted for the end of Q3 2025, while previously noted the timing of the initial launch is contingent on back securing reliable and efficient API enabled Fiat rails in the U S. A process that is actively underway.
Speaker Change: Today.
Akshay Mehta: Bakkt Checkout will represent our gateway solution for merchants to seamlessly integrate stablecoin payments into their existing commerce infrastructure. We expect that this product will enable merchants to accept stablecoin payments with real-time confirmation. Significantly lower fees compared to traditional payment processors and instant settlement directly into fiat currency in over 46 countries. We will design the solution so that implementation is remarkably straightforward. Merchants simply add crypto as a payment option to their checkout page and our system will handle all the complexity of blockchain transactions, currency conversions and regulatory compliance behind the scenes. As you can see from the illustrative interface on the right, we have designed the customer experience to be intuitive and familiar, such that paying with stablecoins is as simple for the consumer as any traditional payment method while delivering significant efficiency.
Speaker Change: Bat checkout will represent our gateway solution for merchants to seamlessly integrate stable coin payments into their existing commerce infrastructure. We expect that this product will enable merchants to accept stable coin payments with a real time confirmation.
Speaker Change: Significantly lower fees compared to traditional payment processor and instant settlement directly into Fiat currency and over 46 countries. We will design. The solution. So that implementation is remarkably straightforward merchants simply add crypto as a payment option to their checkout page and our system will handle all the complexity of blockchain transactions.
Speaker Change: Currency conversions and regulatory compliance behind the scene.
Speaker Change: As you can see from the illustrative interface on the right. We have designed the customer experience to be intuitive and familiar such that being with stable coins is as simple for the consumer as any traditional payment methods, while delivering significant efficiencies.
Akshay Mehta: Bakkt Agent will be our white-labeled AI-powered plugin that will transform any messaging interface with just a few lines of code into a programmable money box. We expect that this solution will deliver a native experience that uses existing app interfaces, eliminating the need for users to download new wallets or learn complex crypto flows. The core functionality will enable chat-based transfers where users can send, receive, and convert funds through natural interactions like voice commands, text messages, or even images. The intended result will be seamless global money movement, permitting transfers of both fiat and stablecoins worldwide through the familiar conversational interfaces people already use.
Speaker Change: Back agent will be a white label AI powered logging that will transform any messaging interface with just a few lines of code into a programmable moneybox. We expect that this solution will deliver a native experience that uses existing app interfaces, eliminating the need for users to download new wallets are long complex crypto flows the.
Speaker Change: <unk> functionality will enable the chat based transfers or users can send receive and convert funds to natural interactions like voice commands text messages or even images.
Speaker Change: Intended result will be seamless global money movement permitting transfers are both Fiat and stable coins worldwide through the familiar conversational interfaces people already use our design will ensure that developers can quickly integrate this powerful functionality into their existing applications with minimal technical overhead dramatically reducing <unk>.
Akshay Mehta: Our design will ensure that developers can quickly integrate this powerful functionality into their existing applications with minimal technical overhead, dramatically reducing time to market for advanced payment capabilities.
Speaker Change: Two market for advanced payment capabilities.
Akshay Mehta: Thank you for your time today as we have outlined our vision for the future of Bakkt in the world of programmable money. Looking forward, as we continue to further strengthen the leadership team, launch new products, and sign up new customers and partnerships, I believe that we are poised to accelerate sustainable growth, thereby unlocking significant value for Bakkt's customers and shareholders.
Speaker Change: Thank you for your time today as we have outlined our vision for the future of backed in the world of programmable money looking forward as we continue to further strengthen the leadership team launched new products and sign up new customers and partnerships I believe that we are poised to accelerate sustainable growth, thereby unlocking significant value for.
Karen: Backs customers and shareholders now I'll pass the call to Karen for her review of <unk> financials for the first quarter.
Karen Alexander: Now I'll pass the call to Karen for her review of Bakkt's financials for the first quarter.
Karen Alexander: Thank you, Ashi. I will now walk you through Bakkt's first quarter KPIs and financials. 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 basis. Starting on slide 20, I'll walk you through our Q1 KPIs, which provide insight into the underlying trends driving our business.
Karen: Thank you Akshay I will now walk you through box first quarter financial results.
Karen: Admiral Minder in accordance with GAAP.
Karen: So this is revenue and crypto coin and execution clearing and brokerage team.
Speaker Change: Spaces at Leerink principle in the clinic.
Karen: This will provide our customers.
Speaker Change: By contrast, we are an agent in the loyalty redemptions.
Karen: Customer loyalty revenue anyway.
Speaker Change: Yes.
Starting on slide 20, I'll walk you through our Q1, kpis, which provide insight into the underlying trends driving our business.
Karen Alexander: We concluded the first quarter with 6.8 million crypto-enabled accounts. demonstrating continued steady growth over the past 12 months, despite the broader market volatility. Regarding transacting accounts, we recorded a total of 777,349 active accounts in the first quarter, segmented into 377,679 loyalty redemption accounts, and 399,765 crypto trading accounts. While this represents a sequential decline from Q4 2024, it aligns with the broader crypto market's cooling period, following the exceptional activity we experienced in the fourth quarter, driven by post-election optimism. The year-over-year comparison is relatively flat. As Andy highlighted earlier, our notional volumes reflected the market's moderation after last quarter's record-breaking performance.
Speaker Change: We concluded the first quarter was $6 8 million crypto enabled accounts.
Speaker Change: Demonstrating continued steady growth.
Speaker Change: Despite the broader market volatility.
Speaker Change: Regarding transacting accounts, we have recorded a total.
Speaker Change: 77 three.
Speaker Change: 349.
Speaker Change: In the first quarter segmented into 377.
Speaker Change: 679 loyalty redemption accounts and 399.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: This represents a sequential decline from Q4 2024.
Speaker Change: Just a broader crypto markets cooling period.
Speaker Change: The exceptional activity, we experienced in the fourth quarter, Kevin site selection.
Speaker Change: Hey, everybody your comparison.
Speaker Change: Wow.
Speaker Change: As Andy highlighted earlier, our national volumes reflected the market moderation after last quarters record breaking performance.
Karen Alexander: Total notional volume PQ1 reached $1.21 billion. comprising $1.06 billion from crypto trading and $153 million from loyalty redemptions. Our crypto volumes underperform market benchmarks on a sequential basis that outpace the market on a year over year comparison, demonstrating our resilience over longer time. Loyalty Redemption volumes declined both sequentially and yearly. Finally, assets under custody at our custodian partners for our brokerage business totaled $1,873,000,000 a quarter. This represents an 18.7% decrease from the previous quarter, but a 52.5% increase year over year, with movements primarily driven by fluctuations in underlying crypto asset prices, rather than significant changes in customer holdings.
Speaker Change: Total National Bank in Q1, which one.
Speaker Change: Q1 billion dollars.
Speaker Change: I think $1.6 billion from that trading and $153 million.
Speaker Change: Sure.
Speaker Change: Your body and you perform market benchmark.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: On a year over year comparison, demonstrating our Brazilian separate longer timeframes.
Speaker Change: But that was some volume decline.
Speaker Change: And year over year.
Speaker Change: Finally assets under custody at our custodian partners for our brokerage business.
Speaker Change: $1 billion.
Speaker Change: $73 million at quarter end, representing 18, 7% decrease.
Speaker Change: This quarter okay.
Speaker Change: 52, 5% increase year over year.
Speaker Change: That's primarily driven by fluctuations in underlying crypto asset prices rather than significant changes in customer holdings.
Karen Alexander: On slide 21, we show our total revenue broken out between crypto and royalty profits. Total revenue for the first quarter of 2025 was $1.08 billion, up 25.8% year over year, and then 40.2% sequentially. Gross crypto services revenue for the quarter was $1.07 billion, up 27.7% year over year, and down 40.3% sequentially. As noted earlier, the sequential decline in gross crypto services revenue reflects the market's moderation after a record-breaking performance in the fourth quarter of 2024, while year-over-year increase demonstrates the improved market sentiment that we have seen in crypto since the fourth quarter of 2024. Crypto services revenue, net of crypto costs, and execution clearing and brokerage fees, or ECB, totaled $3.5 million, reflecting a 5.4% decrease year-over-year and a 47.8% decrease sequentially.
Speaker Change: On slide 21 please.
Speaker Change: Total revenue broken out between biopsy products talking about now for the first quarter of 2020 with one point Elliot.
Speaker Change: At 25, 8% year over year.
Speaker Change: At 42% sequentially.
Speaker Change: Services revenue for the quarter was $7 billion up 27, 7% year over year.
Speaker Change: 48%.
Speaker Change: Sequentially.
Speaker Change: As noted earlier the sequential decline in services revenue.
Mark: Mark it's moderation.
Mark: A record breaking performance in the fourth quarter of 2024, while year over year increase segment sales improved market sentiment that we have seen them.
Mark: So far in 2024.
Good day services revenue cryptococcus.
Mark: Vacation clearing and brokerage fees CBD totaled $3 $5 million, reflecting a five 4% decrease year over year.
Mark: 47, 8% decrease sequentially.
Karen Alexander: Net realty revenues were $9.2 million, down 30.3% year-over-year and 17.1% sequential. Of this amount, loyalty transaction revenues contributed $5 million, while subscription and services revenues were $4.2 million. The year-over-year decline was primarily related to the exit of a loyalty client in 2024, as well as reduced volume-based service revenue and transaction volume. Moving to slide 22. Total operating expenses for the quarter were $1.09 billion, including $1.06 billion of crypto costs and ECB, which are correlated to crypto trading volumes. SG&A expenses were $3.8 million, 51.3% year-over-year, and 19.1% sequentially, driven by reductions in insurance, marketing, and promotion and occupancy.
Mark: Net loss was $9 $2 million.
Mark: Great.
Mark: Looking at year over year, and 17, 1% sequentially.
Mark: Royalty transaction revenues contributed $5 million subscription and services revenue of $419 million every year decline is primarily related to the <unk>.
Nathan: Thanks Nathan.
Nathan: Well, let's maybe just volume based service revenue and transaction volume.
Nathan: Moving to slide 22.
Nathan: Total operating expenses for the quarter were $1 $9 billion.
Nathan: Got it.
Nathan: CPE, which are correlated to that trading volume.
Nathan: SG&A expenses were $38 million.
Nathan: One, 8% every year and 19, 1% sequentially.
Nathan: But actions and insurance marketing and promotion.
Nathan: Thank God.
Karen Alexander: Total compensation expense was $17.8 million, then 27.3% year over year, and up 17.1% sequentially. The year over year decline reflects lower salaries, wages and benefits driven by our restructuring actions in 2024. The sequential increase in compensation expense is driven by a migration away from cash bonuses towards stock-based incentive compensation. Our Q424 results included a $4 million reversal of cash bonus accrual, reflecting the change in compensation strategy that did not repeat in Q125.
Nathan: Total compensation expense of $17 $8 million and 27, 8% year over year.
Nathan: 17, 1% sequentially and year over year decline reflects lower salaries wages and benefits driven by our restructuring actions in 2024.
Nathan: Sequential increase in compensation expense is driven by migration away from cash balances twice stock based incentive compensation, our coupons 24 results.
Nathan: $4 million reversal of cash bonus accrual, reflecting the change in compensation strategy that did not repeat.
Nathan: <unk>.
Karen Alexander: Turning to slide 23, we present our condensed profit and loss statement, net income for the quarter was $16.2 million, up 176.5% year-over-year, improving from a loss of $21.3 million for the last year. $8.5 million was attributable to the non-controlling interest in the operating company, and $7.7 million was attributed to Bakkt Holdings, resulting in an income of $1.18 per basic share on an average share base of 6.4 million shares.
Nathan: Turning to slide 23.
Nathan: Presenter condensed profit and loss statement.
Nathan: For the quarter was $16 $2 million.
Nathan: 176, 5% year over year.
Nathan: From a loss of $21 3 million last year.
Nathan: $8 5 million attributable to the non controlling interest in the operating company.
Nathan: $7 million was attributed to back buildings, resulting pending.
Nathan: $1 18 per basic share average share base.
Nathan: One 1 million shares.
Karen Alexander: On slide 24, we have our condensed balance sheet as of March 31st, 2025. We ended the quarter with $23.0 million of cash and cash equivalents and $22.8 million in restricted cash. including after taking into account the $5 million draw on the ICE line of credit in the court. Cash and cash equivalents decreased by $16.0 million in Q1. Excluding the $5 million drawn by assignment credit, we utilized $23.1 million of available cash in the first quarter of 2025. As Andy mentioned, the sale of our trust business is now presented as an asset held for sale on the balance sheet for $3.5 million.
Nathan: On slide 24, we have our condensed balance sheet as of March 31, 2025.
Nathan: Quarter with $23 million of cash and cash equivalents and $22 $8 million in restricted cash.
Nathan: Including after taking to account for $5 million John.
Nathan: In the quarter.
Nathan: Cash and cash equivalents decreased by $16 million in Q1.
Nathan: Excluding the $5 million got it.
Nathan: <unk> $22 1 billion.
Nathan: Cash in the first quarter of 2025.
Nathan: As Andy mentioned the sale of our trust business is now presented as an asset held for sale on the balance sheet, let's say $5 million.
Karen Alexander: The closing of that transaction is expected to occur on or about May 5th. On slide 25, we have our adjusted EBITDA for the first quarter of 2025. Adjusted EBITDA reflects adjustments for certain non-cash, infrastructuring, and transaction-related items that impacted the period. Adjusted EBITDA for the first quarter of 2025 was a loss of $14.5 million.
Nathan: Think of that transaction is expected to occur on or about may.
Nathan: And slide 25.
Nathan: Alright yesterday for the first quarter of 2025.
Nathan: EBITDA reflects adjustments for certain non cash and restructuring.
Nathan: Action related items.
Nathan: That impacted the period.
Nathan: Adjusted EBITDA for the first quarter.
Nathan: 2020 was a loss of $14 $5 million a year over year improvement in adjusted EBITDA loss narrowed by 11% primarily due to the increase in compensation and benefits and SG&A expenses, partially offset by an increase in professional fees.
Karen Alexander: The year-over-year improvement in adjusted EBITDA loss, which narrowed by 11 percent, was primarily due to the overall decrease in compensation and benefits and SG&A expenses, partially offset by an increase in professional Thank you, everyone.
Nathan: Thank you everyone that concludes the prepared remarks section of our first quarter 2025 earnings call.
Unknown Executive: That concludes the prepared remarks section of our first quarter 2025 earnings.
Cody Fletcher: I will now pass it back to Cody for a quick Thank you, Karen, Andy, Akshay, and everyone for attending our earnings call. We look forward to connecting with you again soon.
Speaker Change: I will now pass it back to Tony for Clinton.
Speaker Change: Thank you Karen Andy Akshay and everyone for attending our earnings call. We look forward to connecting with you again soon.
Unknown Executive: Ladies and gentlemen, this concludes our event.
Speaker Change: Ladies and gentlemen. This concludes our event you may now disconnect. Thank you.
Unknown Executive: You may now disconnect. Thank you.