Yahoo Finance Bakkt Holdings Inc (BKKT) Q1 2024 Earnings Call Transcript Highlights: Strategic Moves Yield ...
Q1 Revenue: $17 million, up 33% from Q1 last year.
Operating Expenses (OpEx): Decreased by 16% from Q1 last year.
Net Loss Improvement: Improved by 53% year over year.
Adjusted EBITDA Loss: Improved by approximately 44% year over year.
Assets Under Custody: Grew to a record $1.1 billion by the end of Q1.
Notional Traded Volume: Increased by 324% from Q4 2023.
Workforce Reduction: Reduced by 28 employees, part of a plan to reduce headcount by 20% by end of 2024, expected to yield $13 million in annualized cash savings.
Total Q1 Revenue: $854.6 million.
Net Loss: $21.3 million for the quarter, resulting in a diluted loss of $1.86 per share.
Cash and Equivalents: Ended the quarter with $74.6 million in cash, cash equivalents, and available-for-sale securities.
Release Date: May 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Revenue net of crypto services increased by 33% from Q1 last year, demonstrating strong growth.
Notional trading volume on the platform increased by 94% compared to the same period last year, indicating robust trading activity.
Operating expenses decreased by 16% versus Q1 last year due to effective cost restructuring initiatives.
Net loss improved by 53% year over year, and adjusted EBITDA loss decreased by approximately 44% year over year.
Assets under custody grew to a record $1.1 billion at the end of the first quarter, reflecting strong asset management performance.
Negative Points
Despite revenue growth, the company still reported a net loss, indicating ongoing challenges in achieving profitability.
A workforce reduction of 28 employees was implemented as part of cost restructuring, which could impact morale and operational efficiency.
The company's take rate decreased from 80 basis points in Q4 2023 to approximately 44 basis points in Q1 2024, reflecting lower profitability per transaction.
Crypto trading volumes are highly volatile, as evidenced by fluctuations in monthly trading volumes, which poses risks to stable revenue generation.
The company acknowledged a material weakness in internal controls related to the valuation of Class 1 and Class 2 warrants, raising concerns about financial governance.
Q & A Highlights
Q: As the United States embarks on a new era of Bitcoin and cryptocurrency advancements, how is Bakkt positioning itself at the forefront of this movement, particularly with the support of the Intercontinental Exchange and ultimately restoring confidence to shareholders? A: (Andy Main - CEO & President, Bakkt Holdings Inc) Bakkt is focusing on expanding its client network, broadening its product offerings within the Bakkt ecosystem, primarily the anticipated institutional Bakkt X ECN offering, and enhancing cost management strategies. Having ICE's support and leveraging its infrastructure and market presence are crucial as Bakkt aims to lead in the evolving crypto landscape and deliver value to stakeholders.
Q: Why did you pursue the reverse split so quickly after shareholder approval, when you had several months to regain good standing on the New York Stock Exchange? A: (Andy Main - CEO & President, Bakkt Holdings Inc) The goal was to promptly address compliance issues with the NYSE's minimum price requirements, stabilize the market perception of Bakkt's financial health, and open doors for institutional investors who may have minimum price requirements. This action is part of a broader strategy to secure the company's financial foundation and improve investor confidence.
Q: Is your company exploring the possibility of collaborating with ICE to secure cryptocurrency custody business from the top four to five ETF providers? Additionally, what customer feedback do you undertake to successfully acquire businesses? A: (Andy Main - CEO & President, Bakkt Holdings Inc) Bakkt aims to leverage ICE's infrastructure and market presence to develop robust customer solutions for institutional players. The focus is on enhancing technological capabilities, ensuring regulatory compliance, and building a product suite that meets the needs of large institutional clients. Strategic partnerships and product development are geared towards securing a significant market share in the institutional crypto markets.
Q: Can you explain the increase in the estimate for the end of the year cash balance to 42 to 57 million euros? Is that mainly savings in OpEx and expense management or are there some non-OpEx factors involved? A: (Karen Alexander - CFO, Bakkt Holdings Inc) The increase is due to a combination of factors beyond operations, including adjustments for surety bond collaterals and cash related to the purchasing card facility. The expected cash balance reflects efficiencies from integrating regulated entities, reducing duplicate surety bond requirements, and an improved cash utilization rate towards the end of the year.
Q: In an election year, how do you see the state of the union on the regulatory side, and how are you expecting things to evolve over the next 12 to 24 months? How is Bakkt positioning the business for a range of outcomes on the regulatory front? A: (Andy Main - CEO & President, Bakkt Holdings Inc) Bakkt is focused on compliance with NYDFS and SEC regulations, anticipating that the U.S. government will continue to support current crypto regulations and facilitate market entry for new licensees. The company remains optimistic about government support for the crypto sector, which will help the industry develop and flourish.
Q: What are the main drivers behind the projected end-of-year cash balance increase, and how does this relate to Bakkt's operational strategies? A: (Karen Alexander - CFO, Bakkt Holdings Inc) The increase in the projected cash balance is driven by a combination of operational efficiencies, strategic expense management, and one-time adjustments. Bakkt's focus on reducing operating expenses and optimizing cash flow management is central to achieving these financial targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
