Bakkt Holdings, Inc.

Greetings and welcome to the BACT Second Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded. I will now turn over to Olivia Keevey, Senior Lead of Communications at BACT. Please go ahead.

Good morning, and thank you for joining BACT's Second Quarter Earnings Call. Joining me on today's call are Andy Main, BACT's Chief Executive Officer, Rae Kamrath, Chief Commercial Officer for our crypto business, and Karen Alexander, Chief Financial Officer. Andy will provide a high-level overview of Key2 results, the current cryptocurrency macro landscape, and our operational progress during the quarter. Rae will provide an update on strategic initiatives and partnerships, and Karen will cover BAC's detailed financial results. After the prepared remarks, we will answer questions we received from our investors through the Say Technologies platform and any questions from the analyst community. As a reminder, today's earnings call includes a separate supplemental presentation that can be found at our investor relations website at www.investors.bac.com. During today's call, we may make certain forward-looking statements. These statements are based on management's current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially from those expressed or implied in such forward-looking statements. For a more complete discussion on forward-looking statements and the risks and uncertainties related to BAC's business, please refer to its filings with the Securities and Exchange Commission. Further, in addition to discussing results that are calculated in accordance with generally accepted accounting principles, we also make reference to certain non-GAAP financial measures. For more detailed information on our non-GAAP financial disclosures, please refer to our earnings release, which can be found on our investor relations website. Thanks, and I'll now turn the call over to Andy.

Thank you, Olivia, and good morning, everyone. Thank you for joining BAC's second quarter 2024 earnings call. It's great to speak to you all again. I'd like to start today by providing a high-level overview of our business performance, then dive into specific updates from our crypto and loyalty businesses. As we cover strategic initiatives and partnerships, I'm delighted that Ray Kamrath, our Chief Commercial Officer, is with us today. Ray is going to provide an update on some significant news for our crypto business. Turning to page three of our presentation, let's start with highlights of our Q2 financial performance. Q2 crypto and loyalty services revenue net of crypto costs and execution and clearing and brokerage fees was 14.8 million, up approximately 9% from Q2 last year, but down 13% sequentially. of this 14.8 million, 12.8 million came from our loyalty business, which improved 4% year over year and decreased 3% sequentially. The remaining 2 million was generated from crypto services revenue, which increased 35% year over year, but declined 46% sequentially. This was due to the downward trend in prices and notional crypto volume, that followed the significant spike in March after the Bitcoin spot ETF approval, which had driven broader institutional interest. OPEX excluding crypto costs and execution and clearing and brokerage fees were 36.8 million, down approximately 43% year over year and 25% sequentially as a result of our Q1 cost restructuring initiatives. Year-over-year revenue growth and significantly lower costs improved our net loss by 30% year-over-year and our adjusted EBITDA loss by approximately 27% year-over-year. Diving into our crypto business, let's start with our assets under custody. At the end of the second quarter, our assets under custody stood at $975 million, down from 1.233 billion at the end of Q1, but up significantly from 660 million in the same quarter last year. This was driven by stronger trading volumes across the entire market, including our platform. I'd also like to touch on some of the major changes in the regulatory landscape since our last call that we believe will provide tailwinds for our industry in the second half and beyond. On July 22nd, the SEC gave final approval for the spot Ethereum exchange traded funds or ETFs. This approval is yet another positive indication of the improving regulatory landscape and bipartisan support for our industry. Similar to the Bitcoin spot ETF earlier in the year, We believe approval of the ETH spot ETF provides further clarity and will likely act as another catalyst for continued mainstream adoption and investment going forward. With these regulatory advancements in mind, we remain extremely confident in our overall strategic direction to advance our institutional offerings and remain laser focused on scaling strategic partnerships, which I will cover next. In terms of our crypto business operations, we continue to double down on our commitment to expand our institutional crypto business. And here's a few highlights. In June, Bakx, our electronic communications network, executed its first trade between Bakx Crypto Solutions and DVChain, the first of many new liquidity providers that we're working to add to the platform. This milestone demonstrates our ability to bring offers rapidly to market, and in this case, offering seamless, efficient crypto trading solutions. Additionally, we recently announced that we significantly enhanced our BACTX institutional capabilities with a licensing agreement with Crossover Markets. This collaboration powers BACTX with Crossover's high-performance tech, providing institutional and professional traders with sub-10 microsecond matching latency customizable and tailored liquidity streams, and significantly lower trading costs than incumbent crypto brokers and exchanges. BAC2X will be available to BAC's liquidity providers and a group of early adopters in the coming months. Users will benefit from BAC's prioritization of risk management, reliability, and compliance alongside capital markets friendly workflows for digital assets trading. We will share more regarding the expected launch date in the very near future. At the end of May, we appointed Ray Kamrath as BAC's Chief Commercial Officer for our crypto business. I'm now delighted to introduce you to Ray. Ray is a Wall Street veteran with 30 years of experience in capital markets, where he served as Global Head of Foreign Exchange and Prime Brokerage at Jefferies and Managing Director in Foreign Exchange Sales in global electronic trading at Goldman Sachs. We are extremely delighted to have someone of Ray's caliber to help us scale our crypto business. With that, I'm happy to hand it over to Ray to share what we've accomplished recently in the market in terms of our strategic initiatives and partnerships.