Bakkt (BKKT) - 2024 Q2 - Quarterly Results

Report Overview Bakkt reported Q2 2024 total revenues of $509.9 million, showcasing strategic partnership advancements and a 43.1% year-over-year reduction in operating expenses (ex-crypto costs) - CEO Andy Main highlighted significant partnership progress, including a letter of intent with Hidden Road, to enhance risk management and back-office functions for institutional clients on the BakktX platform[2] - | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Total Revenues | $509.9M | 46.7% | | Operating Expenses (ex-crypto costs) | $36.8M | -43.1% | Key Performance Indicators Bakkt's Q2 2024 KPIs showed mixed results, with growth in crypto-enabled accounts and assets under custody driven by higher prices, but a significant decline in transacting accounts due to reduced large customer activity - | Key Performance Indicator | Q2 2024 Value | Change (YoY) | | :--- | :--- | :--- | | Crypto enabled accounts | 6.4 million | +6.7% | | Transacting accounts | ~719,281 | -39.1% | | Notional traded volume | $672 million | +26.6% | | Assets under custody | $975 million | +47.7% | - The sharp decrease in transacting accounts was primarily due to reduced activity from a large customer in international markets[2] - Growth in notional traded volume and assets under custody was primarily driven by higher crypto asset prices, not increased user activity[2] Financial Performance Bakkt's Q2 2024 financial performance demonstrated strong revenue growth, with total revenues up 46.7%, and improved profitability, significantly narrowing operating and net losses through higher revenues and cost-cutting - | Financial Metric ($ in millions) | 2Q24 | 2Q23 | Change (YoY) | | :--- | :--- | :--- | :--- | | Total Revenues | $509.9 | $347.6 | 46.7% | | Operating Loss | ($22.0) | ($51.1) | 56.9% improvement | | Net Loss | ($35.5) | ($50.5) | 29.7% improvement | | Adjusted EBITDA Loss (non-GAAP) | ($17.9) | ($24.5) | 26.9% improvement | - The increase in total revenues was primarily driven by gross crypto services revenues from Bakkt Crypto, with net loyalty revenues also increasing 4% year-over-year to $12.8 million[3][11] - Total operating expenses increased to $531.9 million, mainly due to a corresponding rise in crypto costs ($491.7 million) and execution fees, presented on a gross basis with crypto revenues[3][11] - Excluding crypto-related costs, operating expenses decreased 43.1% year-over-year to $36.8 million, primarily due to Q1 2024 cost restructuring and headcount reductions[3] Operational Highlights & Strategic Initiatives Bakkt strengthened its leadership by appointing Ray Kamrath as COO and enhanced institutional offerings through a licensing agreement with Crossover Markets and a letter of intent with Hidden Road, improving trading and risk management - Appointed Ray Kamrath as Chief Operating Officer (COO) to lead sales for the crypto business, encompassing trade, custody, and institutional offerings[4] - Announced a licensing agreement with Crossover Markets to enhance the BakktX ECN, providing faster execution and lower trading costs for institutional clients[4] - Signed a letter of intent with Hidden Road to integrate real-time risk management and back-office functionality, aiming to minimize counterparty and credit risk for institutional clients[2][4] Updated 2024 Guidance Bakkt updated its full-year 2024 guidance, projecting total revenues between $2.57 billion and $2.83 billion, alongside forecasts for operating expenses, cash flow, and year-end cash and securities - | Full Year 2024 Guidance | Low End | High End | | :--- | :--- | :--- | | Total Revenues | $2,568M | $2,827M | | - Gross Crypto Revenues | $2,515M | $2,770M | | - Net Loyalty Revenues | $53M | $57M | | Operating Expenses (ex-crypto costs, etc.) | $157M | $162M | | Net Cash Used in Operating Activities | ($72M) | ($79M) | | Free Cash Flow Usage (non-GAAP) | ($79M) | ($86M) | | End of Year Cash & Securities | $35M | $42M | - Guidance assumptions include revenue from existing clients based on Q2'24 metrics, a decrease in new crypto trading accounts due to international strategy realignment, and the addition of institutional clients in H2 2024[6] Non-GAAP Financial Measures Bakkt uses non-GAAP measures like Adjusted EBITDA and Free Cash Flow to supplement GAAP results, with Q2 2024 Adjusted EBITDA loss improving to $17.9 million from $24.5 million year-over-year Reconciliation of Net Loss to Adjusted EBITDA | $ in millions | 2Q24 | 2Q23 | | :--- | :--- | :--- | | Net loss | ($35.5) | ($50.5) | | Adjustments (D&A, Interest, Taxes, etc.) | $17.6 | $26.0 | | Adjusted EBITDA loss | ($17.9) | ($24.5) | FY2024 Free Cash Flow Guidance | $ in millions | Low | High | | :--- | :--- | :--- | | Net cash used in operating activities | ($72.0) | ($79.0) | | Capex | (3.1) | (3.1) | | Interest income, net | (3.9) | (4.0) | | Free Cash Flow | ($79.0) | ($86.1) | - Adjusted EBITDA is utilized by management to assess earnings before the impact of investing, financing, taxes, and other non-core operational items[13]