Bakkt (BKKT) - 2025 Q2 - Quarterly Report

Item 1. Consolidated Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for Bakkt Holdings, Inc., including the balance sheets, statements of operations, comprehensive loss, changes in equity, and cash flows, along with detailed notes explaining the company's organization, significant accounting policies, revenue recognition, goodwill, balance sheet components, debt, equity, and recent events Consolidated Balance Sheets The consolidated balance sheets show a decrease in total assets and total liabilities from December 31, 2024, to June 30, 2025, primarily driven by a significant reduction in customer funds and customer funds payable. Total equity also saw a slight decrease Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------------- | :-------------------------- | :------------------ | | Total assets | $190,140 | $269,377 | | Total liabilities | $132,315 | $206,524 | | Total equity | $57,825 | $62,853 | | Cash and cash equivalents | $43,493 | $39,049 | | Customer funds | $21,336 | $88,566 | | Customer funds payable | $21,336 | $88,566 | - Customer funds and corresponding customer funds payable decreased significantly from $88,566 thousand at December 31, 2024, to $21,336 thousand at June 30, 2025, indicating a substantial reduction in customer activity or holdings[17] Consolidated Statements of Operations The consolidated statements of operations show an increase in total revenues for both the three and six months ended June 30, 2025, compared to the prior year periods, primarily driven by crypto services. Despite increased revenues, the company continued to report net losses, though the net loss attributable to Bakkt Holdings, Inc. decreased Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $577,882 | $509,898 | $1,652,792 | $1,364,480 | | Operating loss | $(18,489) | $(22,017) | $(37,009) | $(53,854) | | Net loss | $(30,152) | $(35,512) | $(13,915) | $(56,787) | | Net loss attributable to Bakkt Holdings, Inc. | $(14,734) | $(16,424) | $(7,026) | $(24,589) | | Basic EPS | $(2.16) | $(2.67) | $(1.05) | $(4.66) | - Total revenues increased by 13.3% for the three months ended June 30, 2025, and by 21.1% for the six months ended June 30, 2025, compared to the respective prior year periods, primarily due to growth in crypto services[19] - Net loss attributable to Bakkt Holdings, Inc. decreased by 10.3% for the three months ended June 30, 2025, and by 71.5% for the six months ended June 30, 2025, indicating improved financial performance despite ongoing losses[19] Consolidated Statements of Comprehensive Loss The consolidated statements of comprehensive loss show a comprehensive loss of $(29,266) thousand for the three months ended June 30, 2025, and $(13,000) thousand for the six months ended June 30, 2025, which includes net loss and currency translation adjustments Consolidated Statements of Comprehensive Loss Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(30,152) | $(35,512) | $(13,915) | $(56,787) | | Currency translation adjustment, net of tax | $886 | $(199) | $915 | $(620) | | Comprehensive loss | $(29,266) | $(35,554) | $(13,000) | $(57,408) | | Comprehensive loss attributable to Bakkt Holdings, Inc. | $(14,303) | $(16,443) | $(6,581) | $(24,828) | Consolidated Statements of Changes in Equity The consolidated statements of changes in equity detail movements in Class A and Class V Common Stock, additional paid-in capital, accumulated deficit, and other comprehensive loss. Key changes include share-based compensation, shares issued upon vesting, and net loss attributable to Bakkt Holdings, Inc Key Changes in Equity (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Balance as of December 31 (prior year) | $62,853 | $135,714 | | Share-based compensation | $9,681 | $10,419 | | Net loss attributable to Bakkt Holdings, Inc. | $(14,734) | $(16,424) | | Total equity as of June 30 | $57,825 | $102,579 | - Total Bakkt Holdings, Inc. stockholders' equity decreased from $33,894 thousand at December 31, 2024, to $35,294 thousand at June 30, 2025, primarily due to net loss, partially offset by share-based compensation and currency translation adjustments[24] Consolidated Statements of Cash Flows The consolidated statements of cash flows indicate a significant increase in cash used in operating activities for the six months ended June 30, 2025, compared to the prior year, primarily due to a decrease in customer funds. Investing activities provided cash, while financing activities provided less cash compared to the prior year Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(95,929) | $(27,540) | | Net cash provided by investing activities | $4,369 | $1,993 | | Net cash provided by financing activities | $21,264 | $44,190 | | Net (decrease) increase in cash, cash equivalents, restricted cash, customer funds and deposits | $(69,381) | $18,023 | | Cash, cash equivalents, restricted cash, customer funds and deposits at end of period | $84,365 | $136,521 | - Net cash used in operating activities increased significantly to $(95,929) thousand for the six months ended June 30, 2025, from $(27,540) thousand in the prior year, largely due to a $67.2 million decrease in customer funds[29][368] - Financing activities provided $21,264 thousand, primarily from the issuance of convertible debentures, but this was lower than the $44,190 thousand provided in the prior year from equity offerings[29][373][374] Notes to Unaudited Consolidated Financial Statements These notes provide detailed disclosures on the company's financial statements, covering its organizational structure, significant accounting policies, revenue breakdown, asset valuations, debt instruments, equity structure, compensation plans, regulatory capital, commitments, contingencies, income taxes, leases, fair value measurements, segment reporting, and subsequent events Note 1. Organization and Description of Business Bakkt Holdings, Inc. operates an 'up-C' structure, with its primary assets and business held by Opco. The company provides crypto trading and loyalty services, facilitating transactions in various crypto assets. Recent corporate actions include the sale of Bakkt Trust in May 2025 and an agreement to sell the loyalty business on July 23, 2025, signaling a strategic shift towards a crypto-focused business model - Bakkt completed the sale of Bakkt Trust to Intercontinental Exchange, Inc. on May 15, 2025, after suspending all customer activities in November 2024[39] - The company agreed to sell its loyalty business on July 23, 2025, as part of a strategic realignment to focus on crypto[42] - Bakkt Crypto holds a New York State virtual currency license (BitLicense) and money transmitter licenses in all required U.S. states[40] Note 2. Summary of Significant Accounting Policies This note outlines the basis of presentation for the unaudited interim consolidated financial statements, the use of estimates, and recent changes in accounting principles. Notably, the company retrospectively adopted SAB 122, derecognizing safeguarding obligations for crypto assets, and adopted ASU 2020-06 for convertible instruments. Management also evaluated the company's ability to continue as a going concern, concluding that current liquidity and recent financing will be sufficient for 12 months - The company retrospectively adopted SAB No. 122 as of December 31, 2024, which rescinds previous guidance on safeguarding crypto assets, resulting in the derecognition of safeguarding obligations and assets with no impact on net income or equity[49] - Management believes that the company's cash and cash equivalents, along with net proceeds from the Private Placement and common stock/pre-funded warrant issuance, will be sufficient to fund operations for 12 months from the financial statements' issuance date[60] - The company adopted ASU 2020-06, simplifying accounting for convertible instruments, which did not have a material impact on consolidated financial statements[63] Note 3. Revenue from Contracts with Customers Revenue is disaggregated by service type (transaction, subscription, and service) and platform (loyalty redemption and crypto services). Transaction revenue, primarily from crypto services, is the dominant component. The company also details deferred revenue and remaining performance obligations Revenue Disaggregation (in thousands) | Service Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Transaction revenue | $573,855 | $503,717 | $1,644,562 | $1,351,701 | | Subscription and service revenue | $4,027 | $6,181 | $8,230 | $12,779 | | Total revenue | $577,882 | $509,898 | $1,652,792 | $1,364,480 | | Platform | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Loyalty redemption platform, net | $9,779 | $12,757 | $18,933 | $25,999 | | Crypto services | $568,103 | $497,141 | $1,633,859 | $1,338,481 | | Total revenue | $577,882 | $509,898 | $1,652,792 | $1,364,480 | - Crypto services revenue increased by 14.3% for the three months and 22.1% for the six months ended June 30, 2025, compared to the prior year periods, while loyalty services revenue decreased by 23.3% and 27.2% respectively[67] - Remaining performance obligations decreased from $15.4 million as of June 30, 2024, to $8.4 million as of June 30, 2025, with weighted-average recognition periods of 13 months for both subscription and service fees[70][71] Note 4. Goodwill and Intangible Assets, Net Goodwill decreased by $3.3 million due to the sale of Bakkt Trust. The company performed a quantitative impairment assessment as of March 31, 2025, following the non-renewal of the Webull agreement, but concluded no impairment of goodwill or tradename was required. Intangible assets primarily consist of indefinite-lived trademarks/trade names Goodwill (in thousands) | Metric | Amount | | :-------------------------- | :------- | | Balance as of January 1, 2025 | $68,001 | | Sale of Bakkt Trust | $(3,343) | | Balance as of June 30, 2025 | $64,658 | - The non-renewal of the Webull agreement, a significant crypto client, triggered a goodwill impairment assessment as of March 31, 2025, but no impairment was recognized[75][81] - Intangible assets, primarily trademarks/trade names, remained at $2.9 million as of June 30, 2025, with no amortization recorded as finite-lived intangible assets have been fully impaired[83][84][85] Note 5. Consolidated Balance Sheet Components This note provides a detailed breakdown of various balance sheet accounts. Accounts receivable, net, decreased slightly, while other current assets also saw a reduction. Property, equipment, and software, net, decreased, and other assets, including operating lease right-of-use assets, also declined. Accounts payable and accrued liabilities increased, while other current and noncurrent liabilities remained relatively stable or decreased Accounts Receivable, Net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total accounts receivable, net | $23,306 | $24,648 | Property, Equipment and Software, Net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Property, equipment and software, net | $1,839 | $2,064 | - The company's owned crypto assets, reported in 'Other assets,' were $1.4 million as of June 30, 2025, and $1.2 million as of December 31, 2024, with fair value changes recognized in 'other (expense) income, net'[90] Accounts Payable and Accrued Liabilities (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total accounts payable and accrued liabilities | $42,683 | $39,911 | Note 6. Convertible Debenture On June 17, 2025, Bakkt issued a $25.0 million convertible debenture for $23.75 million in a private placement. The debenture accrues 0% interest (18% upon default), matures in one year, and is convertible into Class A Common Stock at the holder's option, subject to a monthly conversion cap and an Exchange Cap of 2,827,906 shares - Bakkt issued a $25.0 million convertible debenture on June 17, 2025, for $23.75 million, with net proceeds intended for working capital and general corporate purposes[94][95] - The debenture has a 0% annual interest rate (18% upon default), a one-year maturity, and allows conversion into Class A Common Stock at the lower of $14.51 per share or 97% of the lowest daily VWAP (not below $2.418)[96][100] - Conversion is subject to a monthly cap of $6.25 million in principal and an Exchange Cap of 2,827,906 shares of Class A Common Stock, unless stockholder approval is obtained[98][99] Note 7. Tax Receivable Agreement Bakkt entered into a Tax Receivable Agreement (TRA) with Opco equity holders, entitling them to 85% of certain net income tax benefits from tax basis increases upon exchange of Opco Common Units for Class A Common Stock. As of June 30, 2025, no liability has been recorded under the TRA due to the company's history of taxable losses, making future cash tax payments improbable - The TRA provides for payments to Opco equity holders of 85% of certain net income tax benefits realized from increases in tax basis due to exchanges of Opco Common Units for Class A Common Stock[111] - As of June 30, 2025, 1,061,075 Opco Common Units have been exchanged for Class A Common Stock[111] - No liability has been recorded under the TRA because, based on the company's history of taxable losses, it is not probable to expect cash tax payments in the foreseeable future[111][166] Note 8. Related Parties Bakkt completed the sale of Bakkt Trust to Intercontinental Exchange, Inc. (ICE), a major shareholder, for $1.5 million cash plus assumption of regulatory capital. The company also had a $40.0 million revolving credit facility with ICE, which was fully repaid and terminated on July 30, 2025. Related party expenses from a previous transition services agreement with ICE terminated in December 2023 - Bakkt sold Bakkt Trust to ICE for $1.5 million cash plus assumption of approximately $3.0 million in regulatory capital, recognizing a $2.3 million loss on sale[112] - The $40.0 million ICE Credit Facility was fully repaid on June 18, 2025, and subsequently terminated on July 30, 2025[119][122] - No related party expenses were recognized for the three and six months ended June 30, 2025, as the ICE Transition Services Agreement terminated in December 2023[123] Note 9. Warrants Bakkt has public warrants, Class 1 Warrants, and Class 2 Warrants outstanding. The company recognized an $8.6 million loss from the change in fair value of warrant liability for the three months ended June 30, 2025, but a $23.6 million gain for the six months ended June 30, 2025, reflecting market fluctuations and valuation model changes - As of June 30, 2025, there were 7,140,383 public warrants outstanding, exercisable at $287.50 per 25 warrants[124] - Bakkt recognized an $8.6 million loss from the change in fair value of warrant liability for the three months ended June 30, 2025, compared to a $15.1 million loss in the prior year period[133] - For the six months ended June 30, 2025, the company recognized a $23.6 million gain from the change in fair value of warrant liability, a significant improvement from a $6.1 million loss in the prior year period[133][355] Note 10. Equity Bakkt's equity structure includes Class A Common Stock (voting, economic) and Class V Common Stock (voting, no economic value, paired with Opco Common Units). The authorized shares of Class A Common Stock were increased from 30 million to 60 million on June 17, 2025. Noncontrolling interests represent the ownership of Opco Common Units by holders other than Bakkt Holdings, Inc - On June 17, 2025, stockholders approved an increase in authorized Class A Common Stock from 30,000,000 to 60,000,000 shares[134] Common Stock Outstanding (Shares) | Class | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Class A Common Stock | 6,974,740 | 6,510,885 | | Class V Common Stock | 7,177,076 | 7,178,303 | Opco Ownership Interest | Holder | June 30, 2025 Ownership % | December 31, 2024 Ownership % | | :--------------------------------------- | :-------------------------- | :-------------------------- | | Bakkt Holdings, Inc. | 49% | 48% | | Noncontrolling interest holders | 51% | 52% | Note 11. Share-Based and Unit-Based Compensation The 2021 Incentive Plan allows for equity awards, with reserved shares increasing to 4,014,121 as of June 17, 2025. Share-based compensation expense for RSUs and PSUs totaled $6.3 million for the three months and $9.7 million for the six months ended June 30, 2025. Unrecognized compensation expense was $24.8 million as of June 30, 2025 - The 2021 Incentive Plan's reserved shares for issuance increased to 4,014,121 as of June 17, 2025[148] Share-Based Compensation Expense (in thousands) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--------------------------------------- | :------------------------------- | :----------------------------- | | RSU compensation expense | $3,600 | $6,400 | | PSU compensation expense | $2,700 | $3,200 | | Total share-based compensation expense | $6,300 | $9,600 | - Unrecognized compensation expense for RSUs and PSUs was $24.8 million as of June 30, 2025, to be recognized over a weighted-average period of 1.23 years[151][152] Note 12. Net Loss per share Basic and diluted net loss per share attributable to Class A Common Stockholders were $(2.16) and $(1.05) for the three and six months ended June 30, 2025, respectively. Several potential common shares, including RSUs, PSUs, warrants, and convertible debentures, were excluded from diluted EPS calculations as their effect would be anti-dilutive Net Loss Per Share (Basic and Diluted) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--------------------------------------- | :------------------------------- | :----------------------------- | | Net loss attributable to Bakkt Holdings, Inc. | $(14,734) | $(7,026) | | Weighted average shares outstanding – basic/diluted | 6,825,634 | 6,677,934 | | Net loss per share – basic/diluted | $(2.16) | $(1.05) | Potential Common Shares Excluded from Diluted EPS (in thousands) | Security Type | June 30, 2025 (3 Months) | June 30, 2025 (6 Months) | | :--------------------------------------- | :----------------------- | :----------------------- | | RSUs and PSUs | 3,215 | 3,215 | | Public warrants | 286 | 286 | | Class 1 and Class 2 warrants | 2,018 | 2,018 | | Convertible debentures | 1,912 | 1,912 | | Opco common units | 7,177 | 7,177 | | Total excluded | 14,608 | 14,608 | Note 13. Capital Requirements Bakkt Crypto, holding a BitLicense and money transmitter licenses, is subject to regulatory capital requirements from NYDFS and various states. As of June 30, 2025, Bakkt Crypto was in compliance with these requirements, which may restrict cash transfers and necessitate future cash injections from the parent company - Bakkt Crypto is required to maintain a capital balance based on predefined minimums or percentages of transmitted and custody assets, as well as wind-down costs, under its NYDFS BitLicense[162] - The company was in compliance with all regulatory capital requirements as of June 30, 2025, but these requirements may restrict cash transfers and necessitate future cash transfers to Bakkt Crypto[164] Note 14. Commitments and Contingencies This note details various commitments and contingencies, including 401(k) plan contributions, the Tax Receivable Agreement (TRA) for which no liability is recorded, ongoing class action and derivative litigation related to past disclosures, and a commercial purchasing card facility with reduced credit limits. The company also has purchase obligations and a Cooperation Agreement with DTR for payment processing technology - A putative class action complaint was filed on April 2, 2025, alleging false or misleading statements related to the non-renewal of agreements with Webull and Bank of America[167] - The commercial purchasing card facility's credit line was reduced from $35.0 million to $15.0 million between March 2024 and March 2025, with payment frequency changed to weekly[179] Purchase Obligations as of June 30, 2025 (in thousands) | Period | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Total | | :-------------------- | :--------------- | :-------- | :-------- | :---------------- | :------ | | Purchase obligations | $5,000 | $6,000 | $0 | $0 | $11,000 | - The company entered into a Cooperation Agreement with DTR on March 19, 2025, for exclusive payment processing technology and infrastructure, with potential future acquisition rights (Call/Put Option) for DTR Equity[181] Note 15. Income Taxes Bakkt's income tax expense primarily relates to its allocable share of Opco's taxable income/loss and its corporate subsidiaries. The effective tax rates for the three and six months ended June 30, 2025, were (0.20)% and (0.8)%, respectively, differing from statutory rates due to noncontrolling interest and the absence of taxable income to realize deferred tax assets, for which a full valuation allowance is maintained - Effective tax rates were (0.20)% for Q2 2025 and (0.8)% for H1 2025, primarily due to noncontrolling interest and the inability to realize deferred tax assets[184] - A full valuation allowance is maintained against net deferred tax assets as of June 30, 2025, and December 31, 2024, due to uncertainty regarding their realizability[186] Note 16. Leases The company leases office space under operating leases, with remaining terms ranging from 10 to 87 months. A Lease Assignment for the New York office lease in January 2025 resulted in a recognized income of approximately $1.8 million. The weighted average remaining lease term for operating leases was approximately 76 months, with a weighted average discount rate of 5.4% as of June 30, 2025 - The company recognized approximately $1.8 million in income from a Lease Assignment for its New York office lease during the six months ended June 30, 2025[193] - As of June 30, 2025, the weighted average remaining lease term for operating leases was approximately 76 months, and the weighted average discount rate was 5.4%[196] Note 17. Fair Value Measurements Financial assets and liabilities measured at fair value are classified into Level 1, Level 2, and Level 3. Crypto assets are valued using Level 2 inputs, while public warrant liability is Level 1. Class 1 and Class 2 Warrants are valued using Level 3 inputs (Black-Scholes-Merton and binomial lattice models) Fair Value Measurements as of June 30, 2025 (in thousands) | Category | Total | Level 1 | Level 2 | Level 3 | | :--------------------------------------- | :---- | :------ | :------ | :------ | | Assets: | | | | | | Crypto Assets | $1,435 | $0 | $1,435 | $0 | | Liabilities: | | | | | | Warrant liability - Class 1 and Class 2 warrants | $21,922 | $0 | $0 | $21,922 | | Warrant liability - public warrants | $1,357 | $1,357 | $0 | $0 | - Crypto assets are valued using Level 2 inputs, based on the mid-point of bid-ask spread in the principal market[199] - Class 1 and Class 2 Warrants are valued using Level 3 inputs, specifically the Black-Scholes-Merton model and a binomial lattice model, respectively[201] Note 18. Segment Reporting Bakkt operates as a single operating and reportable segment, with all material operations within the United States. The chief operating decision maker allocates resources and assesses performance at the consolidated level. The note provides a breakdown of significant segment expenses - Bakkt has one operating and reportable segment, with all material operations located in the United States[51][68][205] Significant Segment Expenses (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Personnel | $13,971 | $27,002 | $28,429 | $43,218 | | Non-cash compensation | $6,338 | $2,407 | $9,681 | $10,420 | | Crypto costs | $561,074 | $491,701 | $1,615,709 | $1,323,673 | | Total operating expenses | $596,371 | $531,915 | $1,689,801 | $1,418,334 | - Webull Pay LLC represented approximately 74% of the company's Crypto services revenue for the year ended December 31, 2024, but notified Bakkt of non-renewal of its agreement[210] - Bank of America represented approximately 16% of the company's loyalty business's net revenue for the year ended December 31, 2024, and also notified Bakkt of non-renewal[211] Note 19. Subsequent Events Significant events after June 30, 2025, include the departure of co-CEO Andrew Main, an increase in authorized Class A Common Stock to 560 million shares, the acquisition of a 30% interest in MarushoHotta Co., Ltd. for $11.5 million, and the formal Commercial Agreement with DTR. The ICE Credit Facility was terminated, and a July 2025 equity offering raised $75 million gross proceeds. Additionally, $4.0 million of the convertible debenture was converted, and the loyalty business was agreed to be sold for $1.00 plus adjustments - Andrew Main is departing as co-Chief Executive Officer and President, effective August 11, 2025, with Akshay Naheta assuming the CEO and President roles[213] - Stockholders approved an increase in authorized Class A Common Stock from 60 million to 560 million shares on August 6, 2025[215] - Bakkt acquired approximately 30% of MarushoHotta Co., Ltd. for $11.5 million on August 6, 2025, to advance its multinational bitcoin treasury strategy[216][265] - A Commercial Agreement with DTR was entered into on July 31, 2025, for global payments processing services powered by stablecoins[217] - The ICE Credit Facility was terminated on July 30, 2025, and a July 2025 equity offering raised $75 million in gross proceeds, intended for Bitcoin purchases, working capital, and general corporate purposes[220][222] - The company agreed to sell its loyalty and travel redemption business for $1.00 plus certain adjustments, expecting to recognize a loss on the sale[226][228] - On July 7 and July 28, 2025, $4.0 million of the convertible debenture was converted into 597,641 shares of Class A Common Stock, reducing the outstanding balance to $17.0 million[225] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Bakkt's financial condition and results of operations, highlighting the company's strategic shift towards crypto, market developments, recent corporate actions, key performance indicators, and liquidity. It details revenue and expense trends for the three and six months ended June 30, 2025, compared to the prior year, and discusses the company's going concern assessment and non-GAAP financial measures Overview Bakkt, founded in 2018, focuses on providing SaaS and API solutions for crypto trading and loyalty services. The company's platform supports various crypto assets and is built with institutional-grade KYC/AML measures, aiming to power commerce by enabling businesses and consumers to manage and transact with crypto - Bakkt's platform provides crypto trading capabilities and loyalty solutions through SaaS and API, supporting various crypto assets[240][241] - The platform incorporates institutional-grade 'know your customer' (KYC), anti-money laundering (AML), and anti-fraud measures[241] Crypto Market Developments The U.S. cryptocurrency market is experiencing significant transformation due to a maturing regulatory environment, increased institutional participation, and sustained retail adoption. Key drivers include a pro-innovation political shift, legislative progress like the GENIUS Act for stablecoins, and broadening adoption, with Bitcoin's price reaching highs near $100,000 and a market cap above $1.8 trillion - The U.S. crypto market is driven by a maturing regulatory environment, increased institutional participation, and sustained retail adoption[243] - Bitcoin's price reached highs near $100,000, with its market cap above $1.8 trillion, reflecting a stronger and more resilient market[245] - The newly enacted GENIUS Act provides a comprehensive regulatory framework for stablecoins, mandating full reserve backing and defining them as a distinct asset class[249] Recent Developments Bakkt has undertaken several strategic initiatives and experienced significant changes, including entering a commercial agreement with DTR for global payments, completing a $75 million equity offering to fund digital asset investments, and exiting its loyalty business to focus on crypto. The company also updated its Investment Policy to include Bitcoin and other digital assets, dissolved Bakkt Brokerage, and sold Bakkt Trust. Key customer contracts with Webull and Bank of America were not renewed, impacting revenue. These developments are detailed further in Note 19 - Bakkt entered a Commercial Agreement with DTR for global payments processing services powered by stablecoins, granting Bakkt a non-exclusive license to DTR's technology[246][247] - A July 2025 equity offering raised approximately $75 million in gross proceeds, intended for purchasing Bitcoin and other digital assets, working capital, and general corporate purposes[252] - The company is exiting its loyalty business, having entered an agreement to sell it, to realign its focus with a crypto strategy[255][256] - Bakkt updated its Investment Policy in June 2025 to allocate capital into Bitcoin and other digital assets, aiming to enhance stockholder value and expand its treasury strategy globally[264][267] - Key customer contracts with Webull (74% of 2024 Crypto services revenue) and Bank of America (16% of 2024 loyalty net revenue) were not renewed, leading to expected material reductions in revenue[278][279] Key Factors Affecting Our Performance Bakkt's performance is influenced by its ability to grow its client base, expand and innovate its product offerings in the rapidly evolving crypto market, manage intense competition, navigate general economic and market conditions, and comply with complex and evolving U.S. and international regulations - Revenue growth depends on expanding the client base through a B2B2C model and broadening partnerships to fintechs and neobanks[303] - Continuous innovation and meeting client capability demands are crucial in the rapidly evolving crypto marketplace[304] - The company faces intense competition in the crypto marketplace and is subject to complex, uncertain, and overlapping local, state, and federal regulations[306][308] Key Performance Indicators Bakkt monitors three key performance indicators: transacting accounts, notional traded volume, and assets under custody. For the three months ended June 30, 2025, there were 0.7 million unique monthly transacting accounts and $733.0 million in notional traded volume. Assets under custody were $1,335.0 million as of June 30, 2025 Key Performance Indicators | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | As of June 30, 2025 | As of December 31, 2024 | | :--------------------------------------- | :------------------------------- | :----------------------------- | :------------------ | :---------------------- | | Unique monthly transacting accounts | 0.7 million | 1.5 million | N/A | N/A | | Notional traded volume | $733.0 million | $1,946 million | N/A | N/A | | Assets under custody | N/A | N/A | $1,335.0 million | $2,301.9 million | - Assets under custody decreased from $2,301.9 million as of December 31, 2024, to $1,335.0 million as of June 30, 2025[313] Results of Operations Bakkt's results of operations for Q2 and H1 2025 show increased revenues driven by crypto services, but also higher crypto costs. Operating expenses saw mixed changes, with compensation and benefits decreasing due to headcount reductions, while professional services increased. The company reported a gain from changes in fair value of warrant liability for the six-month period, contributing to a reduced net loss Three Months Ended June 30, 2025 compared to Three Months Ended June 30, 2024 For the three months ended June 30, 2025, total revenue increased by $68.0 million (13.3%) to $577.9 million, primarily from a $71.0 million (14.3%) increase in crypto services revenue. Operating expenses rose by $64.5 million (12.1%) to $596.4 million, mainly due to higher crypto costs. Net loss attributable to Bakkt Holdings, Inc. decreased by $1.7 million (10.3%) to $(14.7) million Revenue and Operating Expenses (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--------------------------------------- | :----- | :----- | :------- | :------- | | Total revenues | $577,882 | $509,898 | $67,984 | 13.3% | | Crypto services revenue | $568,103 | $497,141 | $70,962 | 14.3% | | Loyalty services, net | $9,779 | $12,757 | $(2,978) | (23.3%) | | Total operating expenses | $596,371 | $531,915 | $64,456 | 12.1% | | Crypto costs | $561,074 | $491,701 | $69,373 | 14.1% | | Compensation and benefits | $20,124 | $22,381 | $(2,257) | (10.1%) | | Selling, general and administrative | $3,590 | $5,516 | $(1,926) | (34.9%) | | Loss from change in fair value of warrant liability | $(8,604) | $(15,114) | $6,510 | n/m | - The decrease in compensation and benefits was primarily due to a $6.2 million reduction in salaries and wages and bonuses, partially offset by a $3.9 million increase in non-cash compensation[324] - Selling, general and administrative costs decreased by $1.9 million, mainly due to a $1.8 million decrease in general insurance[330] Six Months Ended June 30, 2025 compared to Six Months Ended June 30, 2024 For the six months ended June 30, 2025, total revenue increased by $288.3 million (21.1%) to $1,652.8 million, driven by a $295.4 million (22.1%) increase in crypto services revenue. Operating expenses increased by $271.5 million (19.1%) to $1,689.8 million, primarily due to higher crypto costs. Net loss attributable to Bakkt Holdings, Inc. significantly decreased by $17.6 million (71.5%) to $(7.0) million, aided by a $23.6 million gain from changes in fair value of warrant liability Revenue and Operating Expenses (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :--------------------------------------- | :----- | :----- | :------- | :------- | | Total revenues | $1,652,792 | $1,364,480 | $288,312 | 21.1% | | Crypto services revenue | $1,633,859 | $1,338,481 | $295,378 | 22.1% | | Loyalty services, net | $18,933 | $25,999 | $(7,066) | (27.2%) | | Total operating expenses | $1,689,801 | $1,418,334 | $271,467 | 19.1% | | Crypto costs | $1,615,709 | $1,323,673 | $292,036 | 22.1% | | Compensation and benefits | $37,943 | $46,912 | $(8,969) | (19.1%) | | Selling, general and administrative | $7,419 | $13,326 | $(5,907) | (44.3%) | | Gain (loss) from change in fair value of warrant liability | $23,644 | $(6,068) | $29,712 | n/m | - Compensation and benefits decreased by $9.0 million, primarily due to reductions in salaries, wages, bonuses, and benefit-related costs as the company optimized its cost structure[346] - Selling, general and administrative costs decreased by $5.9 million, mainly due to a $4.1 million decrease in general insurance and a $1.0 million reduction in marketing and promotions[351] Liquidity and Capital Resources As of June 30, 2025, Bakkt had $43.5 million in cash and cash equivalents and $18.0 million in restricted cash. Recent financing activities, including a $23.8 million private placement of convertible debentures and a $75.0 million gross proceeds equity offering, are expected to fund operations for 12 months. Net cash used in operating activities significantly increased to $(95.9) million for the six months ended June 30, 2025, primarily due to a $67.2 million decrease in customer funds Cash and Cash Equivalents (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $43,493 | $39,049 | | Restricted cash | $17,965 | $24,889 | - The company secured $23.8 million net proceeds from a convertible debenture private placement in June 2025 and $75.0 million gross proceeds from an equity offering in July 2025, intended for digital asset purchases, working capital, and general corporate purposes[360] - Net cash used in operating activities was $(95.9) million for the six months ended June 30, 2025, primarily due to a $67.2 million decrease in customer funds, largely from Webull moving trading activity off the platform[368] - Management believes current cash and recent financing proceeds will be sufficient to fund operations for 12 months[364] Tax Receivable Agreement Bakkt's Tax Receivable Agreement (TRA) with Opco equity holders entitles them to 85% of certain net income tax benefits from tax basis increases upon Opco Common Unit exchanges. As of June 30, 2025, no TRA liability has been recorded, as the company's history of taxable losses makes future cash tax payments improbable - The TRA mandates payments of 85% of certain net income tax benefits to Opco equity holders resulting from tax basis increases[377] - No value has been recorded under the TRA as of June 30, 2025, due to the company's history of taxable losses, making future cash tax payments improbable[378] Contractual Obligations and Commitments As of June 30, 2025, Bakkt's significant contractual obligations include $11.0 million in purchase obligations (cloud computing) and $20.2 million in future minimum operating lease payments. The commercial purchasing card facility's credit line was reduced to $15.0 million. The company also has a Cooperation Agreement with DTR, which includes potential future acquisition obligations (Call/Put Option) for DTR Equity Contractual Obligations and Commitments as of June 30, 2025 (in thousands) | Category | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | Total | | :--------------------------------------- | :--------------- | :-------- | :-------- | :---------------- | :------ | | Purchase obligations | $5,000 | $6,000 | $0 | $0 | $11,000 | | Future minimum operating lease payments | $4,071 | $6,183 | $5,093 | $4,845 | $20,192 | | Total contractual obligations | $9,071 | $12,183 | $5,093 | $4,845 | $31,192 | - The commercial purchasing card facility's credit line was reduced from $35.0 million to $15.0 million between March 2024 and March 2025[380] - The Cooperation Agreement with DTR includes Call and Put Options for DTR Equity, with consideration in Class A Common Stock representing 19.9% to 31.5% of Bakkt's aggregate common stock, subject to regulatory and stockholder approvals[385] Non-GAAP Financial Measures Bakkt uses Adjusted EBITDA as a non-GAAP financial measure to assess performance by excluding certain non-core items like share-based compensation, warrant liability fair value changes, and restructuring charges. Adjusted EBITDA loss decreased by $5.4 million (29.9%) for the three months and $7.1 million (20.7%) for the six months ended June 30, 2025, compared to the prior year periods, primarily due to a lower net loss - Adjusted EBITDA is defined as EBITDA before share-based and unit-based compensation, goodwill and intangible asset impairments, restructuring charges, changes in fair value of warrant liability, and other non-cash/non-recurring items[392] Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(30,152) | $(35,512) | $(13,915) | $(56,787) | | EBITDA | $(29,885) | $(36,566) | $(13,999) | $(58,584) | | Share-based and unit-based compensation expense | $6,338 | $2,406 | $9,681 | $10,420 | | Loss (gain) from change in fair value of warrant liability | $8,604 | $15,114 | $(23,644) | $6,068 | | Loss on sale of Bakkt Trust | $2,301 | $0 | $2,301 | $0 | | Adjusted EBITDA loss | $(12,555) | $(17,915) | $(27,101) | $(34,175) | - Adjusted EBITDA loss decreased by $5.4 million (29.9%) for the three months and $7.1 million (20.7%) for the six months ended June 30, 2025, compared to the prior year periods, primarily due to a lower net loss[395][396] Critical Accounting Policies and Estimates Bakkt's critical accounting policies and estimates, discussed with the Audit and Risk Committee, involve significant judgments and assumptions, including those related to going concern, income tax valuation allowances, asset useful lives and fair values, credit loss provisions, and impairment assessments. No material changes to these policies or estimates have occurred since the December 31, 2024, Form 10-K filing - Significant estimates and assumptions include going concern, income tax valuation allowances, useful lives and fair value of intangible assets and property, equipment and software, fair value of financial assets and liabilities, and impairment of assets[48][398] - No material changes to critical accounting policies and estimates have occurred since the filing of the Form 10-K for the year ended December 31, 2024[397] Recently Issued and Adopted Accounting Pronouncements Information regarding recently issued and adopted accounting pronouncements is detailed in Note 2 to the unaudited consolidated financial statements - Details on recently issued and adopted accounting pronouncements are provided in Note 2 of the consolidated financial statements[399] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not applicable for Bakkt Holdings, Inc. for the reported period - This section is marked as 'Not applicable'[400] Item 4. Controls and Procedures Bakkt's management, including its principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025. There were no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level as of June 30, 2025[401] - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2025[402] Item 1. Legal Proceedings Bakkt is subject to legal proceedings and claims in the ordinary course of business. While the resolution of these matters is not expected to have a material adverse effect on financial position, an unfavorable outcome could materially affect future business. Additional details are provided in Note 14 - The company is subject to legal proceedings and claims arising in the ordinary course of business[406] - While current knowledge suggests no material adverse effect, an unfavorable resolution could materially affect future business, results of operations, or financial condition[406][407] Item 1A. Risk Factors Investors should consider risk factors detailed in previous filings, including the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q for March 31, 2025, as well as risks related to the updated Investment Policy. Future issuances of common stock or other equity securities may dilute ownership and reduce market price - Investors should consider risk factors from the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q for March 31, 2025[408] - Risks related to the company's updated Investment Policy are also highlighted[408] - Future issuances and sales of common stock or other equity securities may reduce the market price of securities and dilute existing stockholders' ownership[409] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities There were no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities during the reported period - This section is marked as 'None'[410] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities during the reported period - This section is marked as 'None'[411] Item 4. Mine Safety Disclosures This item is not applicable for Bakkt Holdings, Inc. for the reported period - This section is marked as 'Not applicable'[412] Item 5. Other Information During the last fiscal quarter, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the last fiscal quarter[413] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, debt agreements, registration rights agreements, and certifications - Exhibits include amendments to the Certificate of Incorporation, Convertible Debenture, Purchase Agreement, Global Guaranty Agreement, Registration Rights Agreement, and certifications[415][416] Signatures The report is duly signed on behalf of Bakkt Holdings, Inc. by its Co-Chief Executive Officer, President and Director (Principal Executive Officer), Chief Financial Officer (Principal Financial Officer), and Chief Accounting Officer (Principal Accounting Officer) as of August 11, 2025 - The report is signed by Andrew Main (Co-Chief Executive Officer, President and Director), Karen Alexander (Chief Financial Officer), and Joseph Henderson (Chief Accounting Officer) on August 11, 2025[420]