New CEO Comments on 4Q23 Earnings and the Way Forward
Bakkt’s new President and CEO Andy Main led the earnings call, where net revenue of $16.7 million was better than pre-announced, while the GAAP EPS loss of $0.29 was worse than our expectation of a $0.19 loss, driven by higher restructuring and goodwill write-downs. While 4Q23 was pretty much old news, Main highlighted how strong tailwinds in 1Q24 have led to significant notional crypto trading volume increases. He stated that, “QTD notional traded volumes have been very strong, with March QTD up over ~260% from 4Q23 versus overall market activity up ~65%.” Objectives for 2024 include broadening client networks, expanding products, and expense management. The company guided to opex of $160-170 million, which would be down significantly from $195 million in 2023, and for year-end cash in the range of $35-50 million. In our FY24 model, we estimate net revenue of $83.9 million and a $0.29 EPS loss. We were previously modeling net revenue of $73.1 million and a $0.61 EPS loss. The stock was up more than 13% after the earnings release, likely due to the new CEO being in place, 1Q24 commentary on activity, the projected 2024 expense management, and the completion of the $42 million capital raise. Bakkt is trading at a significantly lower P/S than comps. The company’s comparables include digital wallet and crypto companies. The comparables have a median forward P/S of 7.3x, while Bakkt trades at 2.1x, a 71% discount. Founded in 2018, Bakkt builds solutions that enable its clients to grow with the crypto economy through a regulated approach in the US and internationally. Through institutional-grade custody, trading, and on-ramp capabilities, its clients leverage products and solutions built for sustainable, long-term involvement in crypto. Regulatory compliance-first infrastructure is a differentiated strength of Bakkt. Borne out of NYSE-owner Intercontinental Exchange, Bakkt is secure and fully regulated, creating a significant moat that comes to the forefront when markets are in turmoil. Bakkt is one of less than 20 firms that have a New York Bitcoin license. We will be hosting a fireside chat with new President and CEO Andy Main and CFO Karen Alexander on Thursday, March 28, 2024, at 11:00 am ET. Registration link in the full report.
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