Product Team Discusses Relaunch of Custody and How It Forms the Foundation of Bakkt's Platform
On December 14, WTR held a fireside chat with Andrew Sabola, Senior Director of Business Development, Ray Kamrath, Head of Institutional Solutions, and Sam Auch, Group Product Manager for Institutional Services. The conversation can be accessed on-demand and is accessible in our full report. On the call, the team highlighted the relaunch of Bakkt’s industrial strength crypto custody platform and its continued focus on enhancing its crypto capabilities for institutional clients. Its relaunched custody will form the foundation for all Bakkt’s institutional trading products. Many of the added features were driven by customer demand (e.g. APIs and segregated wallets). One way to think of custody is that it is the ‘axle’ of the cryptocurrency ‘car’. A client may just need an axle, or the clients may need the whole solution, the car. In this way, Bakkt can sell to many more clients with a broad set of needs. The team is particularly excited about the new US Bitcoin ETF approvals (which are expected soon), the halving of Bitcoin (around April 17, 2024), and the eventual clarification of the US regulatory environment (unclear when this will happen). On the last earnings call, the company laid out extensive guidance for FY23 and FY24, including revenue, net revenue, operating cash flow usage, and non-GAAP FCF usage. For FY23, midpoint revenue guidance is $1,009 million (crypto $956 million and loyalty $53 million). For FY24, midpoint revenue guidance is $6,266 million (crypto $6,213 million and loyalty $53 million). Non-GAAP FCF midpoints are for $100 million usage in FY23 and $53 million usage in FY24, with the improvement driven by cost control actions already taken and more than 40% net revenue growth in 2024. Bakkt is building a significant backlog of client activity, which it clearly demonstrated this quarter. This should directly translate to strong revenue growth in 2024. The company reiterated that it still expects to be approximately break-even on an adjusted EBITDA basis by the end of 2024.
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