2Q23 Revenues Jump on Apex Crypto Acquisition Closing; Adjusted EBITDA Loss 17% Lower Y/Y
2Q23 revenue of $347.6 million now includes the Apex Crypto acquisition (rebranded as Bakkt Crypto Solutions). Net loyalty revenues of $12.3 million were down 8% Y/Y, driven by a reduction in volume-based service revenues. Adjusted EBITDA loss was down 17% Y/Y (from a $29.6 million loss to a $24.5 million loss) as the company has taken expense management steps. It expects operating cash flow usage for the full-year 2023 to be $78-84 million, down more than 20% from previous guidance. 2H23 operating cash flow usage is also expected to be significantly lower, down more than 75% from 1H23. The company had more than $99 million in cash at the end of 2Q23. Key highlights in the quarter include: (1) good traction in expanding client base with seven new crypto trading and custody clients signed, including in Latin America; (2) strong pipeline opportunity given Bakkt’s new strategic collaborations with Plaid and Fireblocks; (3) crypto-enabled accounts of 6.0 million have continued to increase steadily; (4) notional traded volume of $531 million decreased 51% Y/Y due to an industrywide decline in crypto trading volumes and lower hotel, rental car, and merchandise loyalty redemption activity; and (4) assets under custody of $660 million increased 3% Y/Y primarily due to higher coin prices. Institutional-grade custody continues to be a key element for Bakkt. The compliance-first approach is working, and the market is moving to Bakkt-qualified sales opportunities, which are up 10x from 2H22 to 1H23. The collaboration with Fireblocks for off-exchange solutions shows how the market needs the type of custody Bakkt provides. The Fireblocks network is used every day by thousands of organizations to transfer more than $3 trillion in digital assets to more than 1,800 institutions. As US regulators dawdle, Bakkt is ramping up its international efforts. Bakkt expects to launch in Latin America in the fourth quarter and is actively working to expand into the United Kingdom, European Union, Hong Kong, and Australia. The company updated full-year guidance to now include Apex Crypto and to reflect the current environment. Revenue is expected to be $2.1-3.8 billion, with net loyalty revenues of $55 million. Net cash used in operations is expected to be $78-84 million, down from $100-110 million. 2023 FCF usages outlook is now $90-96 million, down from $105-115 million. Join our fireside chat with CEO Gavin Michael and CFO Karen Alexander on Wednesday, August 16, 2023, at 1:00 pm ET.
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