Earnings call transcript Q1 2023

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Operator

Greetings, and welcome to the Bakkt First Quarter 2023 Earnings Conference Call. [Operator Instructions].

I would now like to turn the conference call over to our host, Ann DeVries, Head of Investor Relations at Bakkt. Please go ahead.

Ann DeVries

Good morning, and thank you for joining us for Bakkt's first quarter earnings call. separate Investor presentation will Relations forward-looking the found can contain including statements. our on website presentation earnings that call be certain Today's at www.investors@bakkt.com, to current are results actual forward-looking materially or and on statements. statements expressed differ uncertainties management's those in These are may based to subject implied risks from cause and which expectations such

the Commission. please For uncertainties related and and the refer its a to risks more Exchange complete discussion of Securities filings with Bakkt's statements business, and forward-looking to

During addition generally-accepted are principles, certain in today's in we calculated measures. financial to that presentation, results discussing to refer accordance accounting with non-GAAP will

morning For results the this, and the to SEC. on more measures, non-GAAP of this please refer information which presentation with financial our release our for our earnings basis filed was

Gavin our Executive will call Say through and from our Joining Officer; Alexander, Officer. to answer from today's we Technologies the prepared After will Chief Gavin remarks, questions analyst me received investors on Michael, community. we Chief and Financial Karen After that, be the available platform. questions are answer Karen

Gavin Michael

and Ann. for morning, everyone, thanks you, Thank joining. Good

we've Our the custody reaching client and fintech sets We scale, separate of premiere, are choice. apart. custody users to functions, across compliance-first a this and the that us partner, crypto the trusted win verticals, differentiated environment, approach capabilities, solution trading a Crypto's In crypto facilitating be trading our fast-growing of regulatory and clients our and infrastructure Apex and current advanced provider broad industry. millions entities including provides poised secure built this network the through to platform we is seeking environment positioned combination in of are

our flexibility. We're including further competitive mode. crypto expand We're capability and upon to this strengthened building for investing year priorities core this capabilities, Our enhance custody. our in

us to significant international clients approach, to X entity apart and capabilities. We setting our And overall our are inbound structure and secure SOC markets along crypto custody offering. certification, in trading our We're while conversations. our new trust interest investing alongside SOC to our investing really seeing our for enhance expand in strategically with those are X separate capabilities existing

We clients collaborate trading broadening with to and drive robust volumes, continuing existing these activating platform with committed our collectively network. This to to same capabilities partnering means new remain to to market. bring clients already

also I capital. our highlight to allocating wanted approach strategically to disciplined

across capital and managing deploying opportunistically areas in expenses. to highly leveraging analysis the investing place. for our intentionally most are we on and potential have across rigorous that have We being decisions prudent resources other We growth focused the remain inform organization capital in aspects, apply organization, allocation the already the

Moving which quarter. to second really of the first pleased, of acquisition we're Crypto, day Apex the on closed our

secure capabilities, we've combination the our holistically provider crypto trading shared, of infrastructure Apex choice transformational is for and with of As and our advanced to a powerful positioned of Bakkt businesses. Apex's broad capabilities, spectrum Crypto crypto is custody the for be

the segments. accounts, focused employees making seamlessly extremely It realize opportunities. thoughtful profitability about across expansion on engineering new adding new The to our and on market capabilities than our This and opportunities the to while to ensure offerings. product, customer team. our our of bring and markets with we on to talented bolsters acquisition platform new more distribution along our path crypto full acquisition fast of immediate that to with includes X.X crypto-enabled million significant operations a pool We're new to and integration of scale capitalize tracks approach the executing provides to decisions potential

our the on of listing of delist Following the the policy and coins our we made the coins a platform. a conducted analysis of acquisition, to closing decision against detailed number

interests those commitment, and and interests most ensures best are best contemplate up-to-date customers' regulatory we their core our are environment. review when clients served Our that our the process

internationally and capabilities international regions We of term that as as their Apex into to client markets about are base, base. of to in have part continue operations have services Solutions new EU our agreement well which working many make the on Asia, and near-term expand Southeast the that investments our opportunity commercial The provide we'll UK, to and as we're Fintech with growth client near work focused to today. through in are most excited

noteworthy platforms acquisition it's significantly serving and to addressable rapidly-growing Our entertainment include travel attractive client now clients our we're the in represents and addition fintech and wealth our in trading to fintechs, an market, managers, and merchants. broadens reach that neobanks, TradFi, group This industry.

more Fintech lines savvy demographics, have and activation likely tech crypto. more including firms individuals are who younger, serve They agile. customer more understand shorter and time much to are attractive trade

the have Webull, actively Apex in as clients, clients Finance We're capabilities collaborate of amazing and Crypto the volumes. and slide, trading of how can some closed, crypto With more. many we see exploring big elevate relationships a we closely to the on deepen acquisition side right-hand also roster increased platform to more current the Public.com, opportunity MX serving with can Stash, and we're you

simplification. our that get are already customers We looking they research that their know and for to companies trust the ease from crypto know from and

through crypto investing purchasing exchange. is a is latest an personal crypto believe crypto crypto trustworthy research provider or than purchasing more through finding traditional study Our finance consumers that

and purchased a crypto Also, primarily through concerns crypto through who a those consumers fintech traditional exchange. purchased provider have who regulation than less safety

revenue engagement for that serve, ways Further, new we and through more clients new with serve we they to are looking like ways power like to their customers, the increase crypto. are growth fintechs, seeing offerings opportunities drive

offer complementary capabilities is ability advanced and our accelerates clients. to offerings our our to to platform Apex The

in integrate the top what able the Clients instant uptime. APIs as types, account required. redundant investing acquisition deeply enable pricing rich the from and be able seamlessly to a offer and liquidity transparent By days. with customers classes at is we're offer them that settlement unparalleled Customers to multiple look with prefunding set for now around let's enable fund asset we're clients deep, to provide Now, We along to enable which price a with tight providers, of more receive in as with several quality. complete. broad production partnering and of platform no that markets, range XX in XXX% liquidity well same platform on

The customers significant clients activity ability end for these to settle to is advantage drive strong provides a and competitive opportunity and seamlessly asset multiple their with classes and users. invest and deepen relationships between

can customers our ensures all XX/X, just crypto as markets protection time. platform failover Additionally, the operate the access

block cash, quantity trade multiple services, cost spectrum of coin sending receiving full and can with soon. customized denomination, A trading order fee per that transfers coming order, of of allocations, broad and execution more coin be capabilities and such including as with gifting base and order light Bitcoin fees types with Bitcoin, structures

We market, in U.S. new clients Based expand those the to also from seeing We're Southeast remain our on demand U.K. but already we internationally. and we recognize into markets committed greatest Asia. compelling opportunities there to EU, the are the conversations, growth together. interest the see

Not clarity. our we've clients, only appealing to markets regulatory these are but seen enhanced

For of also regulation Korean bill. regions Kong adoption. recently crypto and transaction position for review of crypto as and MiCA. to South towards lawmakers example, set itself sentiment a an approved consumer progress a crypto positive volumes comprehensive consumer U.K. Hong unveiled boast impressive These initial activity, to introducing is with legislation progressing of The regulate levels really rules the proposed crypto. a hub with European Parliament's

Now indicators. turning to Apex Crypto key performance

quarter, the platform. be going we'll the Crypto key performance performance But showing historical This company's we're of forward, Apex combined reporting indicators.

Apex attractiveness past throughout can crypto-enabled across have the the several months the see see numbers in green grow of served at the continued but to shoots crypto accounts number reinforcing segment Crypto. as As When we there accounts, you the figures was by we volatility steady, see begin market, market of to look hold expect see, we markets. even when increase you active to crypto these the emerge

the clear it's saw volume, that momentum first of the the this we crypto crypto that and broader quarter. pullback year with traded positive last notional in beginning the end at metric the market of in the aligns Within

lift positive an be custody, quarter also a You increase specific can the trend emphasis with crypto to in attributed in can Bitcoin. see assets under where prices reflected first on a a

last from crypto. trade customers business, their in year those of retail the utilizing with and many and so out crypto benefit with going from fintechs flight industry, like the relationships quality exchanges buy Following existing to we the to fallout and direct apps trading

do winter into crypto turns while And seeing to their the spring, revenue, tangible drive to growth to with customers. to and signs win As engagement translate continues more of life. as to seek we're takes clients Crypto time new business drive Apex it

increasing to domestically We share, market capture the market are improves. as internationally, and both poised

and outlook the Karen hand Now, I'll us to Apex results. to our guide through for of financial rest Crypto over our expected it

Karen Alexander

and you, good Thank everyone. morning, Gavin,

XXXX in performance outlook financial recent look Crypto's Apex the XXXX. a to at for expected turn now Let's and preliminary

assets items we on reporting, GAAP Gross aligns management captures revenue here. revenue, with The role line with which accordance trade transactions, basis. as Crypto's and all with a a under presentation gross gross revenue In in principal Apex with fees customers. X showed associated

will which trend revenue line clearing crypto, follow fees. associated and fees the partner creating cost items show as figure. generally execution same the from crypto Crypto and cost a X fees provide contribution which the profit and activity, trading the also brokerage revenue. these captures non-GAAP We with is Netting gross costs activity, other share of will and

numbers. the to on move Let's

You of can halves. see here that story XXXX was a X

start $X.X quarter. QX illustrated markets year from We turmoil gross light the billion was with on half industry, market market with gross performance we where strong, as levels, over the XXXX revenue the of volume half trends, second saw We activity we driving saw evaluated in and revenue with consistent expect first half consistent total million, and revenue. Then the XXXX for in rebound very industry to XXXX. the declined second by stalled XXXX XX% of crypto crypto in similar in activity of second $XXX broader customer the volume prior volumes QX levels transaction the overall slide. the The gross ended to expected

our first saw to Accordingly, of the XXXX. for we the half similar of is XXXX second half in what outlook

second an progresses, to outlook the market of estimate reflects delisting We Gavin the coin also activity expect half that. crypto impact actions levels and as XXXX reflects earlier. recover outlook of This XXXX described our

Taking all the in into range the year revenue is to $X.X gross of billion for our approximately factors full these $X.X billion. outlook of account,

can profitability provides revenue to see with it about environment to have path costs market. these our expect in as the on a tough Apex this impact strong We're continues environment positive with which you Crypto the excited crypto to We crypto lift a on the our even for revenue a recover. base proportionate to levels, slide. year be will

the first acquisition of our you beginning since closed financials reminder earnings. XXXX, with Moving I'm page. quarter the will through. April that results Apex financial results. be I second walk now in their to Apex included next not quarter to X, Crypto walk financial you going in through will XXXX results A are Crypto reflected quick the on our

have first primarily driven transaction by revenue Turning quarter redemptions. million, net compared to first XX, from results. of which We X% or had quarter XXXX, we XXXX of financial Slide quarter increased the for $XX.X loyalty to our the by activity $XXX,XXX

period, nonrecurring million restructuring expense Operating current X% million in reduction. expenses actions year around The were million our expense is the quarter of $X.X $X.X or to year-over-year. a which operating related earlier $XX.X this headcount down includes

Excluding coupled margins. in in our margin nonrecurring revenue driving down improvement were XX% improved restructuring the growth, our base, expense as strong expense, year-over-year, expenses efficiencies with operating

an an of loss to $XX.X interest $X.XX the quarter in loss the share XX.X loss net the a $X.XX diluted diluted for count basic share Net Inc. $XX.X of noncontrolling average resulted average Holdings, million was million, per base loss shares. in of leaving on a million, allocated to was $XX.X net The loss shares. attributable Bakkt operating at per of share which or company share million XX.X a million

shares. count of shareholding with at shareholder of has ICE was share XX their as largest our remained total with shares, of XX% March relatively December consistent as aggregate ownership million which XXX.X Our XXXX. remains XX,

period. compensation the year, XX, Adjusted versus EBITDA XXXX. grew million for unchanged reflects and and adjusted the by $XX.X acquisition-related losses costs Adjusted higher earlier unit-based and for that for first and million, as quarter we headcount EBITDA part costs the we professional of due EBITDA the of $XX.X EBITDA have primarily adjustments of loss Slide company year and related our EBITDA the prior items EBITDA were adjusted the respectively. in period, to quarter and offset lower fees. the On to impacted was marketing service higher nonshare-based noncash

up XXXX service quarter On increased which net of X% of Slide net broken we year-over-year. out was $X.X XX, revenue. subscription first the year-over-year. transaction The show revenue revenue Transaction between in million revenue million, and is $XX.X total XX% and revenues

strong volume. in is in travel bookings, significant The which travel first you reflected for air seasonally saw increase the quarter typically is

However, which since lower volumes by half pressure this latter car remained booking was hotel the under partially offset have and of XXXX.

of revenues behalf service period. $X.X at due component, reduction it's and of X% revenue. our slightly year-over-year, service has by revenue and to Service call work declined primarily driven in our a revenue technology customer in increased Subscription on centers variable and the levels Subscription out year-over-year activity million a clients. development volume-based

Turning to operating Slide expense X% first XX, quarter the we $XX.X million year-over-year. expense. for have of total Total decreased

compensation expense. we XXXX due amortization Excluding were a expense expense $XX.X and by operating quarter, of included down decrease headcount The and compensation this took expenses the depreciation expenses restructuring declined expenses marketing was million decrease $X.X our of XX% primarily actions year-over-year driven increased SG&A as expense expense decline around Total operating million million salary noncash to reduction. expenses the million restructuring in to and of a to compared declined. related year-over-year. $XX.X in X% the $X.X year-over-year first recent Other quarter in X%

in million ahead, million acquisition-related quarter deal expenses Looking to to expect of the recognize XXXX. we second $X $X

our quarter. for expect reflected the remaining the fully our as expense second of in from quarters year starting become financials this the to our headcount We decline in reductions impact compensation recent

reminder, XXXX. a savings $XX restructuring the the in As and million in expect savings expected impact is million an $X in expense from XXXX incremental actions be of to we expense

full indicators. accounts breadth across On and Bakkt were Transacting XXX,XXX. Slide loyalty and our how crypto These the reflect our experiences have experiences. key are the both performance partner of capabilities XX, KPIs across accessed Bakkt we and platform across

volume, growth. more Digital directly down. and levels $XXX asset to travel hotel conversions Volume aligned are reflect while in up air growth revenue Activity million bookings a year-over-year car and measure strong was X% of dollar-weighted year-over-year. were

quarter for the generally reminder, volumes. seasonally a first is strong As traveling

growth out were of While the pandemic. what volumes when this reflected coming we to a rates quarter strong in the XXXX, in some very experienced than year-over-year muted first had degree, we rebound the more

A quick decline the is strong why which reminder these seasonally there is that our metrics. in is to season, fourth a due quarter quarter-on-quarter holiday

year-over-year platform strong continue our increase visitors with see We our from in to interest consumers, platform. a website in to XX%

forward. we with you shared Crypto the indicators to report earlier key the Gavin on Apex expect call that performance related going to

to that our quarter, starting a company. As report for reflect the result we metrics acquisition, the next combined of KPIs the will change

of for an included million. the of moved million cash million first XX, Slide sheet. uses our to balance escrow $XXX.X the significant with In we nonrecurring equivalents These of account transaction. $XX had nonrecurring in $XXX.X purchase several Turning and cash cash the ended We cash and closing have price Crypto's This available-for-sale $XX.X the cash. quarter usage of into condensed Crypto comprised $XX Apex we of was million items, first the resulted cash million of the cash, for quarter, securities. which Apex

reflected consistent also which which the million of suppliers seasonably purchasing with million with higher redemption payable acquisition-related drives is $X.X included quarter expenses. usage cash for settlements, $XX.X being high This settlements quarter facilities. volume, First fourth of seasonably and

included is cash that costs surety quarter First cash million fourth into also and bonds. quarter million 'XX was to $X.X cash restructuring, 'XX related of usage collateral cash restricted the and first quarter of $X.X for moved severance

reducing cash to we're program, on cash don't that of settle withhold highlight have from been using shares an stock taxes, to the used I shareholder vested dilution wanted otherwise market. actually have buyback awards. to million quarter, the the to released to we stock we also by During would $X.X withholding cover official that taxes although

$XX million. for these our usages the Excluding quarter was cash approximately items,

Crypto, our starting recognize Apex to operations will results quarter. in the the from regards their impact in With second we

cash deal inclusion we Excluding Crypto's XXXX remainder free to flow be the cost, expect Apex breakeven. of for the of operations approximately

I back will for it pass to closing remarks. now his Gavin

Gavin Michael

Karen. Thanks,

few Just a final thoughts.

our industry-leading winning sustainable truly advanced focused crypto really together and is for are with our combination We the regulatory company a compliance-first differentiated and is platform trading for in of our market, capabilities. approach, current brought conditions. We improving growth. built crypto well and positioned Coupled custody solutions market

Our significantly key includes both that initiatives focused for a results XXXX priorities in This near-term building and while to the internationally. our network expand U.S. highly on long-term drive will clients of areas for are future.

our meet a to especially and base are great We have their providing opportunity collaborate to client existing expand regulatory internationally, with markets clarity. that needs in

continuing prospects to with the board. We're have active conversations across

some we the U.S., pockets seeing green remains environment there regulatory ongoing some regarding of shoots. are the caution Although in

and continue management We to allocate with while around in business, capital. highly opportunities we continue driving evaluate how disciplined we'll strategically growth further our expense deploy our being to capital decisions strengthen and efficiencies to

pivotal a our for is moment growth. This

positioned, We are are as we to are confident off. really improves, we and with ready how the take environment

Ann Thank you manage now today. joining our I'll Q&A. over to for turn it us to

Ann DeVries

Gavin. Thanks,

Let's investor to Instructions]. the from move over questions community. [Operator

question comes first will larger please company? by acquired Our Gavin, Who question? you is a this take that it asks, from Rajeev get S. can Bakkt possible

Gavin Michael

Yes.

we've to question. a that we're of really value provide get things said, We're team really proposition We with of built a shareholders. companies. the and So, take look, our our are strong path That in actions our ahead Look, the with great Apex value platform fall. our committed a Crypto sure monitoring to happy leading markets is Crypto. making opportunities excited building like to acquisition Apex always about the to business, about attractive and lot maximum the of approached that to evaluating we that's a lot

Ann DeVries

from Mastercard would like our Next question is on partnership. an update

an you can update here? give Gavin,

Gavin Michael

Yes.

with partners our the has we've many Unfortunately, regulatory crypto now to to rewards remain in and that Mastercard many to work our work around highly seen U.S. down are slowed committed our waiting TradFi Much for successful. we it offering, and been of the time and So the integration TradFi partners. the crypto the Continuing right trouble. completed, of environment making on no go-to-market enter market. this with of the activation

Given these TradFi, Apex acquisition Crypto could at better facing of headwinds the have not of a closing time. happened our

is more to through into verticals compelling ability existing base and even fintech now. expand client internationally Our our right

Ann DeVries

Next question and answer Karen, is platform it? asked, can you why from be who aren't one? of part listing XRP a you when this will your

Karen Alexander

safe our policy has coin I a can for of the listing their takes factors users. listing Bakkt if take through suitable account number rigorous a determine to to a into and Yes, question. that partners and is

One status. regulations committed is markets laws of complying to the relevant as the regulatory Bakkt and with coins. legal primary serve, considered limited of is the the we is a guidance to factors number status of and in currently there

a these approach Given we are crypto prudent to our that offering this tokens at on factors, time. taking the we platform are

monitor continue will potential that we'll the and make to to if changes coins we evolves as list when We it regulatory appropriate. and the environment

Ann DeVries

are next revenue? tangible P your in U.S.? wants Our working Pay is in jump await to to from question Bitcoin you with what custody here? internationally while the can plans know crypto, who we clarity drive Karen, regulatory

Karen Alexander

Yes.

demand offer into clear like to bring our regulatory want given question the First, an U.S. further crypto capabilities secure pursue new that these reiterate U.S. opportunity regulation. committed incredible crypto our It's are crypto trading, to, clients. to alludes time bit the to capabilities, That world is these the our that This than said, absolutely right P's staying jurisdictions the as existing to the with have working and to regards progressed I to a in around there from markets. we environment there markets are strong

that trying provide really won't is we launch specific engaged say right actively and I in timing July. now, will that on this before I focused something to While this on any

we we that the are in and secure, did built that compliant we to well is U.S. we like when do business, everything first out. careful thought ensure Just our

compliance-first is and look expand. and that part Our decisions forefront we're and to is of regulatory at our approach any the DNA we going of as take actions to

Ann DeVries

Great.

Karen, enforcing dilutive asked, one? employees? While compensate from are are for accountability P of can Platform to the from you Our business the you impact? business final million issuing shares considering adequately, question you tangible needs take delivering I impact this the Say is an XX who additional understand working to

Karen Alexander

Sure, happy to.

to the grants want I First, XX shares over of pool clarify period. equity cover that a million would X-year

both company and performance compensation Our is tied firm's as employees. to program overall for absolutely well individual goals our as teams equity

these equity of against company's Our goals available pool to determines our ability awards concrete execute the for employees.

metrics among pay and include on revenue these awards others. targets, not out equity deliver we cash We not if do will that expense

the Our by compensation rigorous program is the subject our process and is to Board. of governed Committee Compensation

Ann DeVries

call the And phone to with I now to questions the to the over analyst like turn community. line would take operator open that, the from up to back

Operator

[Operator Instructions].

first question Andrew of from Our line Bond of Securities. comes the Rosenblatt

Andrew Bond

Gavin, Karen and Ann.

on couple a Just Apex.

the brokers demand to the seems and as is You've grow always are countries? the road So platform. a opportunity driver an discussed U.S. more crypto to customers. here greater administration but regulators in their make been for other as there trading this in to has the Apex, for now you're participants, it be in what difficult U.S. down in current environment looking priority regulatory on industry growth other from allow that doing a extent seems the has their just speaking with outside to to understanding it But best

experiencing potential the this feedback post from So this clients you or U.S.? clients and receiving like in acquisition more are

Gavin Michael

Gavin. it's Andrew,

Let me one. that take

talk we reasons. when for a respect positive that change accelerating in to with couple coming the about internationally, think I it's of growth

from getting client we're the existing these think, I base to firstly, strong markets. enter demand

take in that of conducive seeing to start favor advantage we're many provides that markets a these other As us environment, to into easy with more route want markets. it's legislation and an crypto and

the spoken about Southeast about the EU U.K., we've and spoken Asia. we've So

But opportunities. trying here to in see so we the much grow effectively. we efficiently term maximize and We're in we're we the still the short the where -- see the see U.S., market, very potential U.S. we to committed growth

barrier fact the the with move generated Apex client markets is spaces. And into as has together new these engaging the as to us base we the a with more route post are this base markets I can that has entry really think by led those are into so being change we And and quickly reasonably the becoming their crypto near-term low those into while by have those fact being now that that fact markets focus a actively been producer the of that for we thoughtful. close, client

Andrew Bond

just Okay. follow-up Great. a And custody. on

mean a following crisis. inbound significant to spoke banking increase You the your particularly I for in solution, custody

starting So pipeline for wins of translate the And convert to like more to line the business? is this look what's and interest? this time to

Gavin Michael

we're discussions. our Yes, seeing that that trust like way store a really by us. appealing setting we custody a ourselves SOC want crypto those custody to certainly the with firms in continued traction We're SOC crypto able X, are the solution. run separate secure entity apart to have approach structure, X provider overall certifications, to many they be a

very So those there's traction discussions. strong in

expect able to to operates. the and And expand to solution through areas broaden custody custody half. see how structure be we our invest said, around we've other in We second the basic continue momentum to as also then into

use as It's space. about been from core competency excited advantage pathway founding, and we're continue this product folks great to that custody anchor starting down ours of when talking to many to our the very an a we by We're with us. a

Operator

comes question Jefferies. Williams line of the next Trevor of Our from

Trevor Williams

regulatory tone a kind environment. I regulatory that Great. bit just been providing least just Gavin, bit have mentioning around of of kind in markets more clarity. change -- on of may think international I a this higher level you're a be to the little maybe know start at

kind state to that the the been that from to see U.S.? of actions on regulatory of a there's enforcement then of maybe how focus some the legislative helpful. of with just on progress expecting are in X U.S., A, both, be obviously, today see just the the the you where union months or just there's would all here noise this environment anything year? versus of you just down, coming guys side, But That X rest And maybe the you through at kind if have bunch of ago the

Gavin Michael

up everyone, Trevor, to regulators look, crypto through space. stepped the and and the that you the pleased federal think high-profile logical failures against see federal clear consumers support partners. for is have We restore the space. market the bad to needed for order we're in year, certainly think last confidence When actors actions Congress attention about in the in to the enforcement that it's their I to and framework us investors, regulatory for the

where to conduct when about framework, you needs But operations in and regulatory third also very to highly to able compliant clearly comprehensive a rails benefits transparent way. for a to define shouldn't a good But the innovation allowing good the their regulatory outline safe innovations way. bring in be can those how It think and just are. framework actors for it, of a market us

ourselves we them And So as discussions right. we're issues well on issues. acknowledge but as to consider and the that a capital they we directly relevant getting continue. it as more We that see resource in conversations, important these involved get as the both with regulators these these complex, are very they're

we But important that but see that that The happens also it's desperately very all a in we'll hopeful protect ensure 'XX, been the moves. coin the offshore. in still I'm innovation U.S. consumers recent space. driven it's clarity it's stable through We're encouraging. discussions U.S. the that seeing in, to here not need we have and space

from where we MiCA with seeing paper has similar Kong out Whilst of discussions the clarity we're move threads how U.K. up how with been forward. template look at lot together, the that these come other Hong markets a what a just reasonable it whether there's And has regulatory Treasury. put evolve, be can to sets

about to should these papers evolve. common using able threads frameworks space of this existing have drive to regulatory All be that the way

to and continue clarity. that Hopeful something a where we'll is see that we're us that year, just defining the operate to to third getting. the see through framework allows into that the of to business that So this is and innovate. away pleased we comprehensive rail move attention from the course the And need

Trevor Williams

don't That's quarter. anything revenue gave incrementally And Karen, you I last XXXX that then, think Okay. outlook helpful. we heard on the

base wondering on million expectation? million still the assuming just I'm to if the still should $XX range revenue be $XX So we is

I year the correctly full you're the year as post a to going the and had the the contribution that X understanding million sure, revenue of as want for that that to then year, is $X Apex you close? am quarters revenue And number to $X of for full net I only make a part Apex Or contributing portion slides this that, just base? to in million get

Karen Alexander

that. answer Happy to

our we in midyear So would last look the on company do Apex And that. at to guidance second as provide Apex. to we need we obviously was on update have update quarter what as that do not we guidance. review, gave any whether on that quarter, combined that terms time the now Typically, that as a did do updates far Crypto, which to that's we our of an certainly, basis we excluding closed we is provide

So to guidance no revenue there. updates

the $X the In terms numbers you $X million seeing that million presentation, of of the terms numbers. are to full were year in

the the contribution for fact I of million. So gross we if pick that was quarter second margin can think or quarter, say the revenues XXXX, will you $X.X net Apex that those first net about up the in starting

that that they So is we'd you could basically now in range our are say expect part of the results. rest that of what

Operator

Citigroup. the of Christiansen from Our of next comes question line Peter

Peter Christiansen

rate XXs kind couple was a least Apex. it of high drifting like of year. higher. I mid- at looks Just take been net It's the like mean to on kind last

that? XX, points, Is follow-up. And what's like XX about underlying or it Can a have activity-wise? there. driving XXs, token I then client you talk low basis of mix around somewhere mix kind Now

Karen Alexander

to be that I'd happy take Pete, one.

we upon talked we've Apex buyers themselves. how that to So the work, which spread add -- crypto offerings crypto about organic similar to client we an every has agreed Bakkt how upon

client. And then and there differ client -- clients. purchases of just from of correspondence. differs crypto, a is that rev been what is there, the a cost And client. does by the the the that beyond billing That's so by share has really Again, client with termed

seeing So be the by if it tends underlying to driven client's each customer relative you volume trading by there, are mixes mix.

Peter Christiansen

XX%, I like the stress minus the millions at our XX% be like outlook looking the crypto values, assumption that flow if Apex maybe we analysis, at free That's be of to dollars. helpful. to test test then crypto that cash And kind imagine we that it I'm of single about free right breakeven, way for change would plus cash think models? assuming scenario Is for and flow as the were current to prices, would

Karen Alexander

revenue crypto share up, gross up of Obviously, up, the goes revenue is in the that we also goes but rev go gross the prices provide then as -- the proportionally. cost crypto

influenced by So same. being crypto terms about and actual would are on rate volume mean, being in certainly, actively take the prices that it that the based about is the of coins of it's both I and -- volume sold, gross think being But that I yes. bought

Peter Christiansen

income. Okay. understand relationship wanted operating to I the to down fixed cost just

Okay.

Operator

comes from Cantwell the Our line Jeff of next Wells question of Fargo.

Jeffrey Cantwell

the drive versus couple underlying Congrats What ask the half your go that. gross us of to XX presentation, through I that wanted of on you you on assumptions gross assumptions Crypto. If to half the the we revenue year of this your back closing of the a sequentially for Apex for Crypto to would year? sort Slide front Apex walk can improve are revenue?

to accounts so think crypto-enabled on trying and of accounts, through the just of forth. assets some the and active in custody terms I'm drivers underlying and

what So of year? currently assumptions the you're the for back were half contemplating this that

Karen Alexander

that. can I certainly take

period it what how at accounts how at. look number the behavioral frequently over of So we the and access we money trading we if when activity, that The at the is you X.X crypto deal. acquired to accounts and think the starts obviously, one make of closed We now. with those any about have notional accounts million really of we active actively percentage in the drivers

activity time at in look the we over that trend. So

year, we for relationship didn't have an expect what behavior time, if of end the that pick up even for that over instance, of we client ranged the additional we look to the on like. things is, do one based transaction So the data we've

And great then mentioned, pipeline on top we've of client of brought that, opportunities. Apex as us to additional a

them -- of signed in are and sign on some in getting working of we to actively are others the the activating, process phase. So are

our the on clients platform them. reflects analysis of also customers additional range their coming terms that and So in with to bringing

Jeffrey Cantwell

about gave through how can happening is color your us this the will update what in without providing numbers Can much full thinking of play think year. then help you you forth, quarter. -- thinking us will but question the so how Okay. give on of you so you on just like there's you Great. is full doesn't you sort about us you're an any with give follow -- now to quarter, Trevor's X can earlier guidance what prior for you're macro But months to that And and now terms relative it thinking the business -- ago? up year about the of kind but out? Or sound about next

Karen Alexander

Yes.

got guidance, And from traditional the more crypto So the steady-state when business end our traditional the things quarter of about we the history one loyalty also contribution about the we that talked provides revenue we've then pre-Apex talked of pipeline a finance range. with last long clients at year. about is coming obviously, a our we talked of

where So things TradFi constantly momentum looking one up do the we on see the are is start picking we space. of at activations to that the

especially one that combined on from in things chance part the see resources the -- pivot the the of us the focus for environment to we these allows of about perspective, to as what Apex that this fact a we depending think is and And instance. regulatory now company, now, subset

in U.S. to continue the finance uncertainty on wanting because estimate traditional to the of softness environment. We see regulatory companies

immediate where activation We the will focusing efforts for opportunities and pivot more very expansion. on see to more the we of quickly

potential how company. our about combined terms So I this of in update we and second investors as to as for prepare has together of think we part the quarter all of the earnings want come think of

Operator

the John Our Tower line comes next Research. question of from Roy Water of

John Roy

discussion Karen, we helpful. give you there's That combine any you doing new about be would thought the company? what us a on Apex. been might lot be of start or can wondering, given line color metrics when any So you disclosure, items obviously, seeing I was or have

Karen Alexander

Yes.

So great question, John.

One of are we which at way how business, talked the presentation revenue, is our a Page a things net we have legacy presenting that revenue and I'm talking sure on of our about people have different and in noticed compared to looked gross of when that loyalty terms of XX is basis. they

have is the that to orders. how on activity rules how buy/sell just we this we to report based fill of Some relative that accounting crypto around

jargon, So are in transactions. accounting we considered the these principal in

we So sold business crypto really cost sell fulfilling then as every those gross contribution. we the of that any identify the and fees, revenue, correspondent orders well the goods to the becomes to brokerage as the -- separately cost of share to first get have like dollar and fee net

will to the how the with business. one loyalty historically. We So gross Crypto our now of on of other which that income a very Gavin X then you'll basis, and come see we that to quarter on that we and the things KPIs different presentations for together Apex second with in activity, basis. will be our were statement that that that expand be business complement the is definitely sides mentioned, intend, will continue as presenting X

and like business. number transactions, about think of of our dollar the transactions the for asset both that of accounts and things the you if loyalty relevance side So crypto on has value

of in So a is on present to that, seeing growth every our really dollar it, on the what see so terms that can gross activity net customers investors forward or platform terms combined contribution profit. active and basis of really reach customers understand impact, activity investors can all that the our we quarter look through and is so what in going type to, revenue the call of platform

that is sign thing what our will in the total measure on compare crypto-enabled other the a of notional we mention new how will customers. X, and heard even you to the industry. Page something show to very we number clients And good that us seeing looking think then underlying provide of we and accounts we The are then at again, activate crypto volumes, continue

So very far, Crypto, is with Apex trends. consistently performed to prior we what have acquisition, seen the market the broader

data continuing company. of we the investors performance provide So and think helpful our will understand that be the for to the to potential

John Roy

Great. of, way this in that $XX what, cash this and on be obviously, the -- and side, I fair any previously. continue color management million you've actions quarter taken had expense the quarter. there? terms give of number to a burn Is you Can you cash And a us likely was burn? of that to

Karen Alexander

most we when the . around going had going quarter. think go one to to that really March, expense, down. about aren't make the to in down second of tough we we to themselves go is until notably mean, the things you'll manifest the headcount our That's see I those that quarter second expense compensation in get compensation the in decisions

So to we down. certainly go expect compensation expense

As QX the on But one-timers certainly with going pay a basis, to quarter those costs deal to continue probably it mentioned, say we normalized the some high, associated loans. speaking, to be decline. even that I second cash generally to is there I a quarter will expenses we're Apex in we a continue as burn is -- that Crypto would and highest have, expect

Operator

time, for team management I'd like waiting remarks. As no hand closing questions there this back at additional are the to to the over conference

Ann DeVries

look Have this soon. day. everyone, call to morning. again earnings forward our you you, good Thank a connecting We for with attending

Operator

and Ladies gentlemen, our event. this concludes

now lines. may your disconnect You

Bakkt (BKKT) 11 May 232023 Q1 Earnings call transcript