Bakkt, Inc. Q3 FY2024 earnings call

• Strategic direction: Acknowledged favorable market conditions post-U.S. presidential election, with crypto trading volumes ramping up. - Q3 financial highlights: Crypto and loyalty services revenue down Y/Y due to normalized revenue share agreement, operating expenditures down Y/Y due to cost reduction. - Crypto business operations: Launched BakktX institutional electronic communication network, partnered with Blockwyre for brokerage infrastructure, added new coins to platform, initiated winddown of Bakkt Trust due to lack of traction and high costs. - Regulatory and macro developments: FASB adoption of fair value accounting, Bitcoin/Ethereum spot ETFs, SEC approval of options trading, Fed rate cuts providing tailwinds. - Strategy: Building ecosystem of partners for institutional market, expanding product solutions (BakktX, coin listings), improving cost structure.

Q3 crypto and loyalty services revenue, net of crypto costs and execution and clearing and brokerage fees, was $13.4 million, down approximately 8.8% from Q3 last year. Gross crypto services revenue for the quarter was $316.3 million, an increase of 65% from the same quarter last year. Net loyalty revenues were $12.1 million, down 7.2% year-over-year. Ended Q3 with 6.5 million crypto enabled accounts. Transacting accounts in Q3 were 610,568, with 417,000 loyalty redemptions and 193,000 crypto trading. Total initial traded volume was $476.5 million, with $314.9 million from crypto and $161.6 million from loyalty redemptions. Crypto notional traded volume was down 36.2% sequentially but up 64.9% year-over-year.

• Lower forecasted loyalty revenue range: $49 million to $50 million, missing previous range. - Crypto net revenue contribution: At low end of $10 million to $15 million range. - Higher cash utilization for remainder of year due to expected revenue and higher expenses. - End of year available cash, cash equivalents, and available for sale securities expected: $34 million to $39 million.

• Custody space margin compression. - Increased competition from new players. - Regulatory reform. - Impact of Bakkt Trust winddown on regulatory capital requirements.

Q: What is Bakkt doing to bring its products to the market? There seems to be no enthusiasm from the company itself and nothing as far as announcements. So how can others be excited about you and your products?

A: Our priority this year has been delivering innovative, high quality products that meet market demands. We've concentrated on BakktX, refining current offerings like coin listings, and working on BakktX as a new offering. We're committed to only announcing developments when finalized and focused on building momentum and driving profitability.

Q: What is the long term vision for the company? What unique value can Bakkt offer its customers that competitors can't match?

A: Our long-term vision is to establish ourselves as a leader in the crypto ecosystem. We offer best-in-class retail crypto trading platform and BakktX for institutional market. Unique value includes unmatched security and compliance expertise, strong network of partnerships, and commitment to operational efficiency.