Bakkt Holdings, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2022; filed November 10, 2022. Bakkt operates crypto services, loyalty redemption, payments, and related technology. Because the October 2021 business combination created a “successor” reporting period, comparisons with 2021 “predecessor” results are not fully like-for-like.
Key financial metrics
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Net revenue | $12.9 million | $9.1 million | $39.0 million | $25.8 million |
| Operating loss | $1,594.9 million | $29.9 million | $1,686.9 million | $89.6 million |
| Consolidated net loss | $1,592.5 million | $28.8 million | $1,663.5 million | $89.6 million |
| Adjusted EBITDA loss | $30.7 million | $24.1 million | $89.2 million | $65.9 million |
| Cash used in operating activities | — | $93.9 million | $43.8 million |
Revenue rose 40.7% in Q3 and 51.2% for the first nine months. Transaction revenue increased to $6.6 million in Q3 and $20.1 million year to date, mainly from loyalty redemption activity; subscription and service revenue was $6.3 million and $18.8 million, respectively. Loyalty redemption accounted for nearly all reported revenue. The filing does not provide a clear gross-margin figure.
The reported losses include a non-cash impairment charge of $1,547.7 million: $1,389.9 million for goodwill and $157.8 million for indefinite-lived intangible assets. Excluding that charge, operating loss was approximately $47.2 million for Q3 and $139.2 million for the nine-month period. Bakkt Holdings’ net loss attributable to the company was $468.1 million for Q3 and $479.2 million for the nine months; basic and diluted loss per share were $6.11 and $7.00, respectively.
At September 30, 2022, cash and cash equivalents were $159.9 million, restricted cash was $16.5 million, and available-for-sale Treasury securities were $113.9 million. Total current assets were $459.0 million and current liabilities $184.3 million; these include $119.4 million of crypto safeguarding assets and matching obligations. The filing reports no conventional funded debt balance. Cash, restricted cash, and customer funds totaled $177.0 million at period end, down from $408.4 million at the start of the year. Investing cash outflow was $136.6 million, including purchases of securities and software investment. No positive operating cash flow has been achieved.
Changes, outlook, and risks
- Revenue growth was offset by higher costs: nine-month compensation and benefits rose 86.7%, and Adjusted EBITDA loss widened 35.5%. Management attributed higher costs to headcount, share-based compensation, professional services, insurance, and public-company expenses.
- Management cited delayed partner activations for crypto products and a sustained decline in market capitalization as impairment triggers. Further declines or failure to meet business objectives could lead to additional impairments.
- Management expects a restructuring charge in Q4 2022 to align costs with revenue drivers, but had not adopted or approved a formal restructuring plan. It said platform investment was substantially completed in 2022 and described a focus on core capabilities. No quantified revenue, earnings, or cash-flow guidance was provided.
- On November 2, 2022, after quarter-end, Bakkt agreed to acquire Apex Crypto for $55 million cash, up to $45 million in shares tied to Q4 2022 profitability targets, and up to $100 million in shares tied to targets through 2025. Closing is subject to regulatory approvals and was expected in the first half of 2023. Management expects added scale and transaction volume; execution, integration, retention, dilution, and approval risks remain.
- Bakkt records $119.4 million of customer crypto assets and an equal safeguarding obligation. The company says customers retain ownership, but notes that bankruptcy treatment has not been settled by courts. Other risks include evolving digital-asset regulation, partner and customer growth, and litigation over alleged securities disclosures and controls relating to the business combination; Bakkt intends to defend the case.
- A $35 million Bank of America purchasing-card facility requires a $7 million minimum liquidity balance as collateral. The prior purchasing-card facility was paid down substantially in September and closed in October 2022. No material changes to internal control over financial reporting were reported; management concluded disclosure controls were effective.
Investor verification points
- Review the impairment valuation assumptions, including projected growth, margins, and the 15.5% discount rate, and assess the potential for further write-downs.
- Track cash burn, cash and securities available for operations, regulatory capital restrictions, and the planned restructuring charge.
- Verify Apex closing approvals, final contingent consideration, customer and partner retention, integration progress, and share dilution.
- Assess crypto custody safeguards and the legal treatment of customer assets in a bankruptcy scenario.
- Follow partner activation timelines, growth in loyalty and crypto transaction revenues, and developments in the securities class action and TRA exposure.