Exodus Movement Inc(EXOD) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025, highlighting a significant increase in total assets and a turnaround to net income driven by digital asset appreciation Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $52,933 | $37,883 | $15,050 | | Digital assets | $233,190 | $196,359 | $36,831 | | Total Assets | $313,706 | $287,995 | $25,711 | | Liabilities & Equity | | | | | Total current liabilities | $11,151 | $8,345 | $2,806 | | Total liabilities | $36,586 | $30,468 | $6,118 | | Total stockholders' equity | $277,120 | $257,527 | $19,593 | - Total assets grew by $25.7 million, primarily driven by a $36.8 million increase in the fair value of digital assets held by the company[17] Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Statement of Operations Summary (in thousands, except EPS) | Metric | Q2 2025 | Q2 2024 | YoY Change | Six Months 2025 | Six Months 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $25,827 | $22,308 | +16% | $61,823 | $51,368 | +20% | | (Gain) loss on digital assets, net | ($52,500) | $17,232 | Favorable | ($23,691) | ($39,567) | Unfavorable | | Technology, development and user support | $14,730 | $10,767 | +37% | $29,623 | $21,471 | +38% | | General and administrative | $18,817 | $9,054 | +108% | $33,135 | $17,109 | +94% | | Net Income (Loss) | $37,667 | ($9,606) | Favorable | $24,794 | $45,181 | -45% | | Diluted EPS - Class A | $1.12 | ($0.37) | Favorable | $0.78 | $1.42 | -45% | - The company achieved a net income of $37.7 million in Q2 2025, a significant improvement from a $9.6 million loss in Q2 2024, primarily due to a $52.5 million gain on digital assets, though six-month net income decreased by 45% YoY due to a smaller gain on digital assets compared to the prior year period[20] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | ($11,433) | ($1,916) | ($9,517) | | Net cash provided by investing activities | $36,331 | $19,536 | $16,795 | | Net cash used in financing activities | ($9,848) | ($1,227) | ($8,621) | | Change in cash and cash equivalents | $15,050 | $16,393 | ($1,343) | - For the first six months of 2025, cash used in operating activities increased significantly to $11.4 million, while investing activities provided $36.3 million in cash, largely from treasury bill redemptions, and financing activities used $9.8 million primarily for share repurchases[24] Notes to Unaudited Condensed Consolidated Financial Statements The notes provide detailed information on accounting policies, revenue concentration, digital asset holdings, stock-based compensation, and legal contingencies, including a proposed $2.47 million OFAC settlement - For the six months ended June 30, 2025, five API providers (Companies A, B, C, D, and E) each accounted for over 10% of total revenues, indicating a concentration of revenue sources[31] Digital Asset Holdings (as of June 30, 2025, in thousands) | Digital Asset | Units | Cost Basis | Fair Value | | :--- | :--- | :--- | :--- | | Bitcoin | 2,058 | $87,826 | $220,510 | | Ethereum | 2,729 | $5,162 | $6,790 | | Other | 4,785,240 | $9,081 | $5,890 | | Total | | $102,069 | $233,190 | - The company reached a proposed settlement with OFAC, agreeing to pay a civil monetary penalty of $2,473,360 and invest an additional $630,000 in sanctions compliance controls, with a liability for the penalty recognized[65] - In June 2025, the company sold its right to receive a portion of future Magic Eden tokens, recognizing a gain of $2.0 million[44] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting a 20% year-over-year revenue increase for the first six months of 2025, driven by exchange aggregation services and business-to-business partnerships, alongside significant operating expense increases and profitability influenced by digital asset market fluctuations Results of Operations - Revenue for the six months ended June 30, 2025, increased by $10.5 million (20%) compared to the same period in 2024, primarily driven by a 23% increase in exchange aggregation revenue from business-to-business partner efforts[90] - Technology, development, and user support expenses increased by 38% for the first six months of 2025, mainly due to a $5.8 million rise in partner fee expenses correlated with revenue growth from partnerships[93] - General and administrative expenses grew by 94% for the first six months of 2025, driven by increased spending on marketing ($4.5M), meetings and travel ($4.5M), and legal/consulting ($5.8M)[96] - The company recognized a net gain on digital assets of $23.7 million for the first six months of 2025, compared to a net gain of $39.6 million in the prior year period, with the Q2 2025 gain at $52.5 million contrasting a $17.2 million loss in Q2 2024[97][98] Key Performance Indicators User Metrics as of June 30 | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Monthly Active Users (MAUs) | 1.5 million | 1.5 million | 0% | | Quarterly Funded Users (QFUs) | 1.7 million | 1.5 million | +13% | - While Monthly Active Users (MAUs) remained flat year-over-year, Quarterly Funded Users (QFUs), which management considers a more stable cohort, grew by approximately 200,000 or 13%[87] Liquidity and Capital Resources - The company believes its existing cash, digital assets, and cash generated from operations will be sufficient to fund operations for the next twelve months[100] Liquid Asset Holdings (in thousands) | Asset Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $52,933 | $37,883 | | USDC | $158 | $12 | | Treasury bills | $4,961 | $30,490 | | Total liquid assets | $58,052 | $68,385 | Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($11,433) | ($1,916) | | Net cash provided by investing activities | $36,331 | $19,536 | | Net cash used in financing activities | ($9,848) | ($1,227) | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are related to the price volatility of its digital asset holdings, interest rate fluctuations, and foreign currency risk, with a hypothetical 10% change in digital asset prices impacting fair value by $23.3 million - A hypothetical 10% increase or decrease in the price of digital assets held as of June 30, 2025, would result in a change to their fair value of $23.3 million[110] - A hypothetical 100 basis point (1%) change in average interest rates would have resulted in a $0.6 million change in interest earned on cash, cash equivalents, and treasury bills as of June 30, 2025[112] - The company recognized net foreign currency gains of $1.9 million for the six months ended June 30, 2025, compared to losses of $0.9 million in the same period of 2024[114] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025, due to previously identified material weaknesses in internal control over financial reporting, despite ongoing remediation efforts - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting[117] - The material weaknesses relate to not having a sufficient quantity of personnel with appropriate expertise and not designing effective control activities, including issues with segregation of duties[118] - Remediation efforts are ongoing and include hiring additional personnel, engaging a third-party consultant, and enhancing the financial close process, but the material weaknesses are not yet considered fully remediated[119][120] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 10 of the financial statements, which details a proposed settlement with the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC), involving a civil monetary penalty of $2,473,360 and an additional $630,000 investment in compliance controls - The company's legal proceedings are detailed in Note 10 of the financial statements, primarily concerning the OFAC matter[125][65] Item 1A. Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K - There have been no material changes in risk factors from those previously disclosed in the Annual Report on Form 10-K[126] Item 5. Other Information This section discloses that three company executives, including the CEO and CFO, have adopted Rule 10b5-1(c) trading plans to sell shares of the company's common stock over a future period - The Chief Financial Officer, James Gernetzke, adopted a Rule 10b5-1(c) trading plan to sell up to 96,000 shares between August 2025 and December 2026[130] - The CEO, Jon Paul Richardson, and Director Daniel Castagnoli also adopted Rule 10b5-1(c) trading plans to sell up to 1,000,000 and 400,000 shares, respectively, between September 2025 and June 2026[131][132]