Bitcoin Depot (BTM) - 2024 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's discussion and analysis of Bitcoin Depot Inc., along with market risk and internal controls Item 1. Financial Statements. This section presents the unaudited consolidated financial statements of Bitcoin Depot Inc. for the periods ended June 30, 2024, and December 31, 2023, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, prepared in accordance with U.S. GAAP and SEC interim reporting rules Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and equity as of June 30, 2024, and December 31, 2023 Total Assets (in thousands): | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :----------------------------- | :----------------------------- | :------------------- | :--------- | | Total Assets | $97,538 | $77,377 | $20,161 | 26.1% | Total Liabilities (in thousands): | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :----------------------------- | :----------------------------- | :------------------- | :--------- | | Total Liabilities | $93,095 | $68,004 | $25,091 | 36.9% | Total Stockholders' Equity (in thousands): | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :----------------------------- | :----------------------------- | :------------------- | :--------- | | Total Stockholders' Equity | $4,443 | $9,373 | $(4,930) | -52.6% | Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income This section details the company's revenue, expenses, and net income (loss) for the three and six months ended June 30, 2024 and 2023 Revenue (in thousands): | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | % Change | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | % Change | | :------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | | Revenue | $163,066 | $197,474 | -17.4% | $301,605 | $361,077 | -16.5% | Net Income (Loss) (in thousands): | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | % Change | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | % Change | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | | Net Income (Loss) | $4,350 | $(4,006) | 208.6% | $122 | $2,075 | -94.1% | Net (Loss) Attributable to Bitcoin Depot Inc. (in thousands): | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | % Change | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | % Change | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :--------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | | Net (Loss) Attributable to Bitcoin Depot Inc. | $(2,561) | $(10,699) | 76.1% | $(4,099) | $(10,699) | 61.7% | Consolidated Statement of Changes in Stockholders' Equity This section outlines the changes in the company's stockholders' equity from January 1, 2024, to June 30, 2024 Total Stockholders' Equity (in thousands): | Metric | January 1, 2024 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :----------------------------- | :--------------------------- | :------------------- | :--------- | | Total Stockholders' Equity | $9,373 | $4,443 | $(4,930) | -52.6% | - Key Changes (Six Months Ended June 30, 2024): * Distributions: $(7.75) million[20] * Stock compensation: $2.61 million[20] * Net (loss) income attributable to Bitcoin Depot Inc.: $(4.10) million[20] Consolidated Statements of Cash Flows This section presents the cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2024 and 2023 Net Cash Flows Provided by Operations (in thousands): | Metric | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :--------- | | Net Cash Flows Provided by Operations | $11,475 | $26,599 | $(15,124) | -56.9% | Net Cash Flows Used In Investing Activities (in thousands): | Metric | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :--------- | | Net Cash Flows Used In Investing Activities | $(3,190) | $(18) | $(3,172) | 17622.2% | Net Cash Flows Provided by (Used In) Financing Activities (in thousands): | Metric | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :--------- | | Net Cash Flows Provided by (Used In) Financing Activities | $5,851 | $(36,727) | $42,578 | 116.0% | Notes to Consolidated Financial Statements This section provides detailed disclosures and explanations for the figures presented in the consolidated financial statements, covering the company's organization, accounting policies, recent transactions like the Merger, related party dealings, revenue and cost breakdowns, fair value measurements, equity structure, debt, income taxes, share-based compensation, leases, commitments, contingencies, and subsequent events (1) Organization and Background This section describes Bitcoin Depot's business model, financial position, and the regulatory challenges it faces in the cryptocurrency industry - Bitcoin Depot Inc. operates a network of cryptocurrency kiosks (BTMs) and offers BDCheckout for cash-to-crypto transactions at retail locations, and online cryptocurrency purchases. It also provides software solutions to other BTM operators via BitAccess Inc[36] - As of June 30, 2024, the Company had $54.6 million in current assets, $43.9 million in cash, $46.9 million in current liabilities, and $4.4 million in total stockholders' equity. It generated $11.5 million in positive cash flow from operations for the six months ended June 30, 2024, and expects existing cash and operations to fund activities for the next 12 months[39] - The company faces significant regulatory challenges and uncertainties in the cryptocurrency industry, with evolving laws and regulations (e.g., California's $1,000 daily transaction limit for crypto kiosks). These uncertainties have led to lower revenue, increased compliance costs, and potential operational restrictions[40][42][43] (2) Basis of Presentation and Summary of Significant Accounting Policies This section outlines the accounting principles, merger treatment, cryptocurrency valuation, and revenue recognition policies used in the financial statements - Unaudited interim consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules. The Merger was accounted for as a reverse recapitalization, with Legacy Bitcoin Depot as the predecessor, reflecting historical costs and a recapitalized equity structure. Bitcoin Depot Inc. is the primary beneficiary of BT HoldCo, consolidating its assets, liabilities, and operations[45][52][56] - Cryptocurrencies are accounted for as indefinite-lived intangible assets at cost, less any impairments. Impairment losses are recognized when the fair value drops below carrying value, and the new adjusted carrying amount is not adjusted upward for subsequent fair value increases. The company also allocates a portion of its cash reserves to Bitcoin[66][68][72] - Revenue is primarily from BTM kiosk and BDCheckout sales of cryptocurrencies, recognized when control is transferred to the customer. The Company acts as the principal in these transactions, presenting revenue and cost of revenue on a gross basis, as it controls the cryptocurrency, bears ownership risk, and sets transaction fees[82][83][85] (3) Recent Accounting Pronouncements This section details the adoption and assessment of recent accounting standards, including those for business combinations, fair value measurement, and crypto assets - The Company adopted ASU 2021-08 (Business Combinations) effective January 1, 2023, with no impact, and ASU 2022-03 (Fair Value Measurement of Equity Securities) effective January 1, 2024, with no material impact[117][118] - The Company is assessing the impact of ASU 2023-06 (Disclosure Improvements), ASU 2023-07 (Segment Reporting), ASU 2023-09 (Improvements to Income Tax Disclosures), and ASU 2023-08 (Accounting for and Disclosure of Crypto Assets), all effective for fiscal years beginning after December 15, 2023 or 2024. ASU 2023-08 will require crypto assets to be measured at fair value with changes reflected in net income[119][120][122] (4) Merger This section explains the accounting treatment and financial impact of the reverse recapitalization merger consummated on June 30, 2023 - The Merger, consummated on June 30, 2023, was accounted for as a reverse recapitalization, with Bitcoin Depot Inc. issuing stock for GSRM's net assets. This resulted in a net impact of $(3.50) million on the Statement of Changes in Stockholders' Equity[125] - GSRM entered a private placement agreement for Series A Preferred Stock, with settlement terms tied to Class A common stock trading prices. The PIPE Agreement was settled on October 11, 2023, for de minimus consideration, resulting in approximately $9.2 million in expenses recognized for the three and six months ended June 30, 2023[126][132][339] - GSRM entered agreements with Non-Redeeming Stockholders, issuing 659,340 shares of Class A common stock and paying $18.7 million in cash from the SPAC trust account at closing[133][134] (5) Related Party Transactions This section details cash distributions to BT Assets and a kiosk profit share franchise agreement with Sopris Capital Distributions to BT Assets (in thousands): | Metric | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :--------- | | Total cash distributions to BT Assets | $7,748 | $12,711 | $(4,963) | -39.0% | - During Q2 2024, Sopris Capital acquired 2,906,976 Class A common shares for $5.0 million from the Company, and BT Assets exchanged an equal number of Class V common shares. The Company also entered a kiosk profit share franchise agreement with Sopris for 50 kiosks, recognizing $0.6 million as a long-term liability[139][140] (6) Revenue (Disaggregated) This section breaks down total revenue by stream, highlighting changes in BTM Kiosks, BDCheckout, Company Website, Software Services, and Hardware revenue Total Revenue by Stream (in thousands): | Revenue Stream | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | % Change | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | % Change | | :--------------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | | BTM Kiosks | $162,291 | $196,916 | -17.6% | $300,067 | $359,942 | -16.6% | | BDCheckout | $186 | $241 | -22.8% | $396 | $601 | -34.1% | | Company Website | $187 | $89 | 110.1% | $548 | $168 | 226.2% | | Software Services| $127 | $150 | -15.3% | $263 | $288 | -8.7% | | Hardware Revenue | $275 | $78 | 252.6% | $331 | $78 | 324.4% | | Total Revenue| $163,066 | $197,474 | -17.4% | $301,605 | $361,077 | -16.5% | - Kiosk Transaction Revenue decreased by 17.6% for Q2 2024 YoY and 16.6% for H1 2024 YoY, primarily due to lower transaction volume, regulatory daily transaction limits in California (accounting for ~50% of the decrease), and kiosk reinstallations from an optimization plan[141][288][303] - Company Website revenue increased by 110.1% for Q2 2024 YoY and 226.2% for H1 2024 YoY due to an increase in the number of transactions. Hardware revenue increased by 252.6% for Q2 2024 YoY and 324.4% for H1 2024 YoY, primarily due to the sale of 100 kiosks[291][292][306] (7) Cost of Revenue (Excluding Depreciation and Amortization) (Components) This section details the components of cost of revenue, including cryptocurrency expenses, floorspace lease expenses, and kiosk operations expenses Total Cost of Revenue (excluding D&A) by Category (in thousands): | Cost Component | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | % Change | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | % Change | | :--------------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | | Cryptocurrency expenses | $121,759 | $153,193 | -20.5% | $230,223 | $280,854 | -18.0% | | Floorspace lease expenses | $9,120 | $8,749 | 4.2% | $17,656 | $17,782 | -0.7% | | Kiosk operations expenses | $5,829 | $5,300 | 10.0% | $10,116 | $9,907 | 2.1% | | Total Cost of Revenue (excl. D&A) | $136,708 | $167,242 | -18.3% | $257,995 | $308,543 | -16.4% | - Cryptocurrency expenses decreased by 20.5% for Q2 2024 YoY and 18.0% for H1 2024 YoY, mainly due to lower transaction volume. Impairment losses recognized on cryptocurrencies were $2.0 million for Q2 2024 and $4.1 million for H1 2024[142][294][309] - Mining fees increased significantly by 113.2% for Q2 2024 YoY and 196.6% for H1 2024 YoY, attributed to higher blockchain network fees due to increased traffic. Software processing fees decreased by 82.6% for H1 2024 YoY due to the migration of BTMs to the BitAccess platform[144][295][296] (8) Fair Value Measurements This section describes the fair value measurement methodologies for various financial instruments, including contingent consideration, cryptocurrencies, and notes payable - The contingent consideration liability related to the BitAccess acquisition was settled in July 2023 with a $2.0 million payment. The liability changed from Level 3 to Level 1 after performance conditions were removed[149] - Cryptocurrencies, safeguarding liability, and corresponding assets are measured at fair value on a recurring basis using Level 1 inputs (quoted prices on active exchanges). Notes payable for franchise profit sharing arrangements are updated quarterly using a retrospective interest method, considered Level 3 fair value estimates[151][152] - Cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to short maturities. Fixed-rate notes payable are estimated at fair value using Level 2 inputs[153][154] (9) Prepaid expenses and other current assets This section details the composition and changes in prepaid expenses and other current assets as of June 30, 2024, and December 31, 2023 Total Prepaid expenses and other current assets (in thousands): | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :------------------- | :--------- | | Prepaid expenses and other current assets | $9,777 | $6,554 | $3,223 | 49.2% | - Prepaid expenses increased from $2.33 million to $5.16 million, while cryptocurrency safeguarding asset slightly decreased from $3.04 million to $2.88 million[155] (10) Accrued expenses and other current liabilities This section outlines the changes in accrued expenses and other current liabilities, including payables to liquidity providers and cryptocurrency safeguarding liability Total Accrued expenses and other current liabilities (in thousands): | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :----------------------------- | :----------------------------- | :------------------- | :--------- | | Accrued expenses and other current liabilities | $21,591 | $21,545 | $46 | 0.2% | - Payables to liquidity providers increased from $5.14 million to $6.23 million, while accrued expenses decreased from $13.36 million to $12.48 million. Cryptocurrency safeguarding liability slightly decreased from $3.04 million to $2.88 million[157] (11) Non-controlling interests This section details the changes in non-controlling interests, including the company's increased ownership in BT HoldCo and the use of the HLBV method Total Non-controlling Interests (in thousands): | Metric | January 1, 2024 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :----------------------------- | :--------------------------- | :------------------- | :--------- | | Total Non-controlling Interests| $25,187 | $21,104 | $(4,083) | -16.2% | - Bitcoin Depot Inc.'s ownership of BT HoldCo interests increased from 27.50% to 31.65% from December 31, 2023, to June 30, 2024, while non-controlling interest holders' ownership decreased from 72.50% to 68.35%[164] - During the three and six months ended June 30, 2024, non-controlling interest holders redeemed 2,906,976 BT HoldCo interests, resulting in a 4.3% ownership transfer to the Company. The Company uses the Hypothetical Liquidation at Book Value (HLBV) method to determine its equity in BT HoldCo's earnings[164][204] (12) Cryptocurrencies (Transactions) This section provides the cryptocurrency balance, impairment losses, and amounts owed to liquidity providers for Bitcoin purchases Cryptocurrency Balance (in thousands): | Metric | January 1, 2024 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :----------------------------- | :--------------------------- | :------------------- | :--------- | | Total Cryptocurrency Balance | $712 | $600 | $(112) | -15.7% | - Impairment losses recognized on cryptocurrencies were $2.06 million for Q1 2024 and $2.04 million for Q2 2024[168] - As of June 30, 2024, the Company owed $6.2 million to liquidity providers for Bitcoin purchases, recorded under "Accrued expenses and other current liabilities"[169] (13) Notes Payable This section details the amendment of the credit agreement, the increase in principal financing, and other debt from franchise arrangements and equipment financing - On March 26, 2024, the Company amended its credit agreement, increasing the principal financing by $15.7 million to a total of $35.6 million. This was accounted for as debt extinguishment, resulting in a $3.2 million loss on extinguishment of debt (write-off of $2.7 million unamortized deferred loan costs and $0.5 million in origination fees)[176][338] Total Notes Payable (in thousands): | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | % Change | | :----------------------------- | :----------------------------- | :----------------------------- | :------------------- | :--------- | | Total Notes Payable | $43,159 | $21,086 | $22,073 | 104.7% | - Other debt includes $0.6 million and $3.2 million from kiosk profit share franchise arrangements (classified as debt) and $1.6 million from equipment financing for BTM kiosks, all entered into during Q2 2024[178][179] (14) Common Stock, Preferred Stock and Stockholders' Equity This section outlines the company's authorized share classes, characteristics of Class V common stock and Series A Preferred Stock, and details on outstanding warrants and the share repurchase program - The Company is authorized to issue 2,223,250,000 shares across seven classes of stock, including Class A, B, M, O, V, E common stock, and Preferred Stock[182] - Class V common stock are voting, non-economic shares exchangeable into Class A common stock, along with common units of BT HoldCo. Series A Preferred Stock is economically identical to Class A common stock, convertible 1:1, and participates fully in dividends/distributions; 50,000 shares were converted to Class A common stock during H1 2024[190][193][194] - 43,848,750 warrants are outstanding (Public and Private), exercisable at $11.50 per share, expiring June 30, 2028. The $10.0 million share repurchase program expired on June 30, 2024, with 190,620 shares repurchased for $0.4 million through that date[195][196][203] (15) Income Taxes This section covers the effective tax rate, valuation allowance for deferred tax assets, and the Tax Receivable Agreement liability - The effective tax rate was 51.97% for H1 2024, compared to (172.7%) for H1 2023[206] - A full valuation allowance was established as of June 30, 2024, for deferred tax assets related to the investment in BT HoldCo, as realization is not considered more likely than not[210] - The Tax Receivable Agreement (TRA) liability was $2.1 million as of June 30, 2024. An additional $1.3 million liability was recorded in April 2024 due to an exchange of 2.9 million BT HoldCo units, representing 85% of expected tax benefits[212][214] (16) Share-Based Compensation This section details the share-based compensation expense recognized, including grants of performance-based and time-based RSUs under the 2023 Omnibus Incentive Plan - The Company recognized $1.7 million and $2.6 million in share-based compensation expense for the three and six months ended June 30, 2024, respectively, under the 2023 Omnibus Incentive Plan[223] - 580,116 fully vested performance-based RSUs (PSUs) were granted in H1 2024, resulting in $1.1 million in stock compensation expense. No unrecognized expense remains for PSUs[224] - 1,037,286 time-based RSUs were granted in H1 2024, with $1.5 million in stock-based compensation expense recognized. Unrecognized compensation expense for time-based RSUs was $3.1 million as of June 30, 2024[225][226] (17) Net Loss Per Share This section presents the basic and diluted net loss per share attributable to Bitcoin Depot Inc. and lists anti-dilutive securities excluded from the calculation Loss Per Share (in thousands, except per share data): | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | Net loss attributable to Bitcoin Depot Inc. - basic and diluted | $(2,561) | $(4,099) | | Weighted average common stock outstanding - basic and diluted | 19,432,011 | 18,016,761 | | Net loss per share - Bitcoin Depot Inc. | $(0.13) | $(0.23) | - Securities not included in diluted EPS calculation due to anti-dilutive effect or unfulfilled conditions include Public/Private Warrants (43.85 million), Class E Common Stock Earnout Units (1.08 million), BT OpCo Founder Convertible Preferred Units (2.9 million), BT OpCo Exchangeable Non-Controlling Interest (38.29 million), BT OpCo Earnout Units (15.0 million), and 2023 Incentive Plan RSU awards (2.13 million)[231] (18) Leases This section details total lease expenses by type and new finance lease agreements for BTMs, including associated right-of-use assets and lease liabilities Total Lease Expense (in thousands): | Lease Type | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | | :-------------------------- | :---------------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | | Finance lease expense | $1,688 | $4,417 | $3,324 | $7,186 | | Operating lease expense | $261 | $57 | $361 | $109 | | Short-term lease expense | $8,919 | $8,749 | $17,395 | $17,782 | | Total lease expense | $10,868 | $13,223 | $21,080 | $25,077 | - The Company entered into new finance lease agreements for 250 BTMs (Q1 2024) and 136 BTMs (Q2 2024), recognizing right-of-use assets and lease liabilities of $1.3 million and $0.6 million, respectively, due to bargain purchase options[238][239] - As of June 30, 2024, total operating lease liability was $2.57 million and total finance lease liability was $7.41 million[242] (19) Commitments and Contingencies This section addresses legal claims, including a $23.0 million breach of contract claim from Canaccord Genuity Corp., and the impact of evolving cryptocurrency regulations - Canaccord Genuity Corp. filed a claim seeking $23.0 million in damages for alleged breach of contract related to advisory services. The Company disputes the claim and intends to vigorously defend against it. The discovery phase is expected to complete by Q4 2024[248][249] - The Company faces potential unforeseen effects on its financial condition and operations from evolving U.S. and non-U.S. financial and tax regulations concerning cryptocurrencies[250] (20) Subsequent Events This section reports on significant events occurring after the reporting period, including a preferred distribution, a kiosk service agreement, and additional BTM investments - On July 1, 2024, the Company paid a $15.0 million preferred distribution to BT Assets, reducing the preferred dividend attributable to Non-Controlling Interest to $14.0 million[251] - On July 10, 2024, the Company entered a Kiosk Service Agreement with an entity owned by the CEO, providing kiosk placement, treasury management, and back-office services for 30% of net profit[252] - On July 11, 2024, Sopris invested in an additional 200 BTMs for the franchise profit share program[253] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on Bitcoin Depot's financial condition and operational results, highlighting key business metrics, revenue and cost drivers, liquidity, and non-GAAP financial measures. It details the impact of regulatory changes and kiosk optimization on recent performance and outlines the company's strategy to bring cryptocurrency to a broader audience Business Overview This section outlines Bitcoin Depot's mission, operational scale with BTMs and BDCheckout, and its strategy for managing Bitcoin price volatility and regulatory challenges - Bitcoin Depot aims to "bring Crypto to the Masses™" by enabling cash-to-Bitcoin conversions via BTMs and a mobile app, serving individuals excluded from or preferring cash in the digital financial system[257] - As of June 30, 2024, the company operated approximately 8,068 BTMs and offered BDCheckout at about 7,441 retail locations across North America, maintaining a leading position among cash-to-Bitcoin BTM operators[258] - The company uses a sophisticated Bitcoin management process to minimize exposure to price volatility by maintaining a low balance (typically <$0.6 million) and replenishing Bitcoin through liquidity providers on a just-in-time basis. The company operates in a rapidly evolving regulatory landscape, with new laws like California's Digital Financial Assets Law imposing daily transaction limits ($1,000) on crypto kiosks, negatively impacting revenue[262][265] Key Business Metrics This section presents key operational metrics, including installed kiosks, returning user transaction count, and median kiosk transaction size Installed Kiosks (at period end): | Metric | June 30, 2024 | June 30, 2023 | Change | % Change | | :------------------------ | :------------ | :------------ | :----- | :------- | | Installed kiosks (at period end) | 8,068 | 6,351 | 1,717 | 27.0% | Returning User Transaction Count: | Metric | June 30, 2024 | June 30, 2023 | Change | % Change | | :-------------------------------- | :------------ | :------------ | :----- | :------- | | Returning user transaction count | 7.1 | 9.2 | -2.1 | -22.8% | Median Kiosk Transaction Size (in $): | Metric | June 30, 2024 | June 30, 2023 | Change | % Change | | :------------------------------ | :------------ | :------------ | :----- | :------- | | Median kiosk transaction size (in $) | 230 | 200 | 30 | 15.0% | Components of Results of Operations This section describes the primary drivers of revenue, cost of revenue, and operating expenses, including transaction markups, Bitcoin costs, and administrative overhead - Revenue is primarily from cash-to-Bitcoin sales at kiosks (99.9% of Q2 2024 revenue), including a markup (15-31% for BTMs, 15% for BDCheckout) and a flat transaction fee ($3.00 for BTMs, $3.50 for BDCheckout)[276][277][278] - Cost of revenue is driven by transaction volume, including Bitcoin cost, acquisition fees, impairment, software fees, floorspace leases, and kiosk operations (repair, maintenance, cash transport). BDCheckout has lower operating expenses but similar profitability due to higher BTM markups[280][281] - Operating expenses comprise selling, general, and administrative (customer support, marketing, professional fees, payroll) and depreciation and amortization (BTMs, hardware, leasehold improvements, intangibles)[282][283] Results of Operations This section analyzes the company's financial performance, detailing revenue, cost of revenue, and net income (loss) for the three and six months ended June 30, 2024 and 2023 Comparison between Three Months Ended June 30, 2024 and Three Months Ended June 30, 2023 This section compares the company's financial performance for the three months ended June 30, 2024, against the same period in 2023, focusing on revenue, net income, and cost of revenue - Revenue decreased by $34.4 million (17.4%) to $163.1 million, mainly due to lower kiosk transaction revenue from decreased transactions, California regulatory limits, and kiosk reinstallations[287][288][289] - Net income swung to $4.35 million from a net loss of $(4.01) million, a 208.6% improvement. Net loss attributable to Bitcoin Depot Inc. improved by 76.1% to $(2.56) million[286] - Cost of revenue (excluding D&A) decreased by $30.5 million (18.3%) to $136.7 million, aligning with lower transaction volumes and regulatory impacts. Cryptocurrency expenses decreased by 20.5%[293][294][295] Comparison between Six Months Ended June 30, 2024 and Six Months Ended June 30, 2023 This section compares the company's financial performance for the six months ended June 30, 2024, against the same period in 2023, focusing on revenue, net income, and cost of revenue - Revenue decreased by $59.5 million (16.5%) to $301.6 million, driven by lower kiosk transaction volume, California regulatory limits (50% of decrease), and kiosk relocations/new installations[302][303][304] - Net income decreased by 94.1% to $0.12 million. Net loss attributable to Bitcoin Depot Inc. improved by 61.7% to $(4.10) million[301] - Cost of revenue (excluding D&A) decreased by $50.5 million (16.4%) to $258.0 million, consistent with lower transaction volumes and regulatory changes. Cryptocurrency expenses decreased by 18.0%[308][309][310] - Overall Performance: Revenue decreased for both three and six months ended June 30, 2024, primarily due to lower kiosk transaction volume, regulatory limits in California, and kiosk reinstallations. Net loss attributable to Bitcoin Depot Inc. significantly improved for both periods[287][302] Liquidity and Capital Resources This section assesses the company's working capital, cash position, and ability to fund operations, emphasizing its Bitcoin management strategy and future capital needs - As of June 30, 2024, working capital was $7.7 million (positive), a significant improvement from $(8.8) million (negative) as of December 31, 2023. Cash and cash equivalents were $43.9 million as of June 30, 2024[322][323] - The Company believes existing cash and cash equivalents, combined with cash from operations, will be sufficient for at least the next 12 months. Future capital needs depend on revenue growth, R&D, and kiosk expansion[325][326] - The company maintains a low Bitcoin balance (typically <$0.6 million) and uses a just-in-time purchase strategy to minimize working capital requirements related to Bitcoin. Cash in BTM kiosks was approximately 23.6% of average monthly revenues for the trailing twelve months ended June 30, 2024[324][325] Non-GAAP Financial Measures This section presents and explains non-GAAP financial measures, including Adjusted Gross Profit and Adjusted EBITDA, used by management for performance evaluation and planning Adjusted Gross Profit This section provides a reconciliation and analysis of Adjusted Gross Profit and Adjusted Gross Profit Margin for the three and six months ended June 30, 2024 and 2023 Adjusted Gross Profit (in thousands): | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | % Change | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | % Change | | :---------------------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | | Adjusted Gross Profit | $26,358 | $30,232 | -12.8% | $43,610 | $52,534 | -17.0% | Adjusted Gross Profit Margin: | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Adjusted Gross Profit Margin | 16.2% | 15.3% | 14.5% | 14.5% | Adjusted EBITDA This section provides a reconciliation and analysis of Adjusted EBITDA and Adjusted EBITDA Margin for the three and six months ended June 30, 2024 and 2023 Adjusted EBITDA (in thousands): | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | % Change | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | % Change | | :--------------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | :---------------------------------------------- | :---------------------------------------------- | :--------- | | Adjusted EBITDA | $12,664 | $19,812 | -36.0% | $17,549 | $33,443 | -47.5% | Adjusted EBITDA Margin: | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Adjusted EBITDA margin | 7.8% | 10.0% | 5.8% | 9.3% | - Adjusted Gross Profit and Adjusted EBITDA are non-GAAP measures used by management to evaluate operational efficiency, performance, and for strategic/financial planning, providing period-to-period comparisons[328][332] Sources of Liquidity This section details the company's liquidity sources, including the amended credit agreement and the settlement of the PIPE Agreement - On March 26, 2024, the Company amended its credit agreement, increasing the term loan facility to $35.6 million by providing an additional $15.7 million in principal financing, resulting in net cash flow of $15.2 million. This was accounted for as an extinguishment of debt[338] - The PIPE Agreement was settled on October 11, 2023, for de minimus consideration, eliminating the subscription receivable and embedded derivative liability. This resulted in approximately $9.2 million in expenses for the three and six months ended June 30, 2023[339] Cash Flows This section analyzes changes in cash flows from operating, investing, and financing activities for the six months ended June 30, 2024 and 2023 - Net cash provided by operating activities decreased by $15.1 million for H1 2024 YoY, primarily due to a decrease in accrued expenses and other current liabilities and a decrease in loss on Series A Preferred Share PIPE issuance, partially offset by a write-off of deferred financing costs[341] - Net cash used in investing activities increased by $3.2 million for H1 2024 YoY, mainly due to a $3.1 million increase in property and equipment acquisition[342] - Net cash provided by (used in) financing activities increased by $42.6 million for H1 2024 YoY, driven by a $20.4 million increase in proceeds from notes payable, a $16.5 million decrease in principal payments on notes payable, and a $5.0 million decrease in distributions[343] Commitments and Contractual Obligations This section summarizes the company's aggregate operating and finance lease obligations as of June 30, 2024 - As of June 30, 2024, aggregate operating and finance lease obligations totaled approximately $10.0 million[344] Commitments and Contingencies This section discusses ongoing lawsuits and claims, including a $23.0 million claim from Canaccord Genuity Corp., and their potential financial impact - The Company is involved in various lawsuits and claims, including a $23.0 million claim from Canaccord Genuity Corp. for alleged breach of contract. The Company believes adequate provisions have been made for probable losses and does not expect a material adverse effect on its financial condition, but it could impact results of operations, cash flows, or liquidity in a given period[348][349] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements for the company - The Company has no off-balance sheet arrangements[350] Recently Issued Accounting Standards This section reviews the adoption of recent accounting standards and the ongoing assessment of new pronouncements, particularly those affecting crypto assets - ASU 2021-08 (Business Combinations) and ASU 2022-03 (Fair Value Measurement of Equity Securities) were adopted with no material impact[351][352][354] - The Company is assessing the impact of ASU 2023-06 (Disclosure Improvements), ASU 2023-07 (Segment Reporting), ASU 2023-09 (Improvements to Income Tax Disclosures), and ASU 2023-08 (Accounting for and Disclosure of Crypto Assets). ASU 2023-08 will require crypto assets to be measured at fair value[355][356][357] Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to market risks from changes in foreign currency exchange rates and interest rates, which are managed through normal operating and financing activities - The Company's market risk exposure primarily stems from fluctuations in foreign currency exchange rates and interest rates[359] - These market risks are managed through the Company's normal operating and financing activities[359] Item 4. Controls and Procedures Management concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2024, due to identified material weaknesses in internal control over financial reporting, including lack of formalized systems, reliance on IT systems, insufficient technical accounting resources, inadequate cryptocurrency controls, and ineffective cash reconciliation. Remediation efforts are ongoing Evaluation of Disclosure Controls and Procedures This section states that the company's disclosure controls and procedures were deemed ineffective as of June 30, 2024, due to material weaknesses - As of June 30, 2024, the Company's disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control over financial reporting[360][361] Material Weaknesses in Internal Control Over Financial Reporting This section identifies specific material weaknesses in internal control over financial reporting and outlines management's remediation plans - Material weaknesses include: lack of formalized internal control system; reliance on IT systems without adequate evaluation; insufficient general IT controls; lack of technical accounting resources; insufficient controls to prevent unauthorized cryptocurrency activity; and ineffective reconciliation controls over cash in transit[362] - These weaknesses arose because the Company, as a private entity prior to the Merger, lacked the necessary business processes, personnel, and internal controls for public company accounting and financial reporting requirements[362] - Management plans to remediate by hiring additional qualified accounting and financial reporting personnel, enhancing accounting processes and risk assessment, and designing, implementing, and monitoring respective controls[363] Changes in Internal Control Over Financial Reporting This section confirms that no material changes in internal control over financial reporting occurred during the quarter ended June 30, 2024 - No changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[365] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings The Company is involved in various legal proceedings, most notably a $23.0 million claim from Canaccord Genuity Corp. for alleged breach of contract related to advisory services. The Company disputes the allegations and is vigorously defending the claim, with the discovery phase expected to conclude by Q4 2024 - Canaccord Genuity Corp. filed a claim on January 13, 2023, seeking $23.0 million in damages for alleged breach of contract related to advisory services for a potential IPO or sale transaction. The claim amount was amended on October 25, 2023, to include an additional $0.7 million and Bitcoin Depot Operating LLC as a defendant[367] - Bitcoin Depot denies the allegations and intends to vigorously defend against the claim. The potential loss range is between $0 and $23.0 million[368] - The matter entered the discovery phase in March 2024, with completion expected by the end of Q4 2024[368] Item 1A. Risk Factors This section refers to the comprehensive discussion of risk factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. A specific risk highlighted is the potential for further reductions in Bitcoin mining rewards (e.g., halving events), increased mining costs, or new regulations, which could negatively impact the Bitcoin network and the Company's stock price - For a complete discussion of risk factors, refer to Part I, Item 1A, "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023[370] - Further reductions in Bitcoin mining rewards (e.g., block reward halving events, most recent on April 19, 2024), increases in mining costs (electricity, hardware/software), or new/enhanced regulation/taxation of Bitcoin mining could cause a decline in support for the Bitcoin network, adversely affecting the business and stock price[370] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds to report[371] Item 3. Defaults upon Senior Securities This section states that there were no defaults upon senior securities to report - No defaults upon senior securities to report[372] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable[373] Item 5. Other Information This section discloses insider trading arrangements and policies, specifically detailing the adoption and termination of Rule 10b5-1 plans by the Chief Financial Officer, Glen Leibowitz, for selling company stock - On May 20, 2024, CFO Glen Leibowitz adopted a 10b5-1 plan to sell approximately 20% of his holdings each quarter starting September 1, 2024, until December 31, 2025. He terminated a previous 10b5-1 plan adopted on November 21, 2023, on May 19, 2024[374] Item 6. Exhibits and Financial Statement Schedules This section lists the exhibits and financial statement schedules filed with the Form 10-Q, including supplemental consolidating information, an amendment to the credit agreement, and certifications from the CEO and CFO - Exhibits include Supplemental Consolidating Information (2.6), Amendment No. 1 to the Amended and Restated Credit Agreement (10.1), and Certifications of CEO and CFO (31.1, 31.2, 32.1, 32.2)[376] SIGNATURES This section confirms the official signing of the report by the President and Chief Executive Officer and the Chief Financial Officer - The report was signed on August 15, 2024, by Brandon Mintz, President and Chief Executive Officer, and Glen Leibowitz, Chief Financial Officer[379]