Bakkt Holdings, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. The filing reports Bakkt Holdings, Inc. and its consolidated subsidiaries. The quarter includes Bakkt Crypto Solutions, acquired April 1, 2023, so reported year-over-year revenue comparisons are not like-for-like.
Financial and operating performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Total revenue | $854.6 million | $13.2 million |
| Operating loss | $31.8 million | $45.4 million |
| Net loss | $21.3 million | $44.9 million |
| Net loss attributable to Bakkt Holdings | $8.2 million | $14.0 million |
| Adjusted EBITDA loss (non-GAAP) | $16.3 million | $28.9 million |
| Cash from operating activities | $38.4 million provided | $47.2 million used |
- Crypto services revenue was $841.3 million, versus $0.4 million a year earlier; crypto costs were $832.0 million, and execution, clearing and brokerage fees were $5.6 million. Management attributed the increase primarily to trading volume from the acquired crypto business. Loyalty services revenue was $13.2 million, up 3.6%.
- Revenue is reported gross for crypto buy/sell trades, while loyalty redemption revenue is reported net. The filing does not present a single conventional gross-margin figure; crypto revenue less crypto costs and execution fees was approximately $3.7 million.
- The operating loss narrowed by $13.6 million. Lower compensation and depreciation/amortization contributed, while restructuring expense was $6.1 million. A $9.0 million non-cash gain from revaluing warrant liabilities reduced the net loss; Q1 2023 included a $1.0 million warrant loss.
- Operating cash flow benefited from a $55.2 million increase in customer funds payable. It should not be read as evidence of sustainable positive operating cash generation; the company says it has not achieved positive operating cash flow since inception.
- At March 31, cash and cash equivalents were $56.6 million, restricted cash $44.0 million, customer funds $88.2 million, and available-for-sale securities $18.0 million. Restricted cash and customer funds are not equivalent to unrestricted operating liquidity. Bakkt reported no long-term debt to service.
- Total liabilities were $1.445 billion, largely reflecting a matching $1.233 billion crypto safeguarding asset and obligation. Stockholders’ equity was $57.0 million; total equity, including noncontrolling interest, was $130.9 million.
Changes, outlook, and notable matters
- Reported revenue growth chiefly reflects the acquisition, not comparable organic growth. For context, pro forma Q1 2023 revenue assuming the acquisition had occurred January 1, 2023 was $458.3 million; pro forma net loss was $38.5 million.
- The company raised approximately $36.9 million net from the offerings completed by March 31. A further ICE offering closing on April 25 generated approximately $7.6 million gross. The offerings included common shares and warrants and increased potential dilution.
- Management estimates unrestricted cash and proceeds from securities maturities will fund operations into June 2025, based on fully implemented budgets that exclude forecasts for new products and markets. Management says its cost reductions, financing, and entity integration alleviate substantial doubt about continuing as a going concern for at least 12 months after issuance; it also warns that future funding needs and revenue growth remain uncertain.
- A May 2024 workforce reduction affecting 28 employees, about 13% of the non-call-center full-time workforce, is expected to save approximately $13 million over 12 months, excluding severance. Estimated severance and benefit expense is $0.8–$1.0 million. Management also expects the crypto-entity merger to reduce regulatory capital and insurance collateral needs by up to $12 million by year-end.
- Crypto-enabled accounts were 6.3 million at quarter-end; monthly transacting accounts were 0.8 million versus 0.7 million; notional traded volume was $1.04 billion versus $193.0 million. Assets under custody were $1.233 billion, up from $701.6 million at December 31, 2023.
- Risks include evolving crypto regulation and market conditions, uncertainty around expansion and sustainable profitability, and an ongoing SEC information request concerning the acquired crypto business. A vendor dispute produced a $1.1 million accrual. A securities class action settlement received final court approval after quarter-end; the company expects insurance coverage less its retention.
- Disclosure controls were deemed ineffective due to a material weakness in review of a third-party specialist’s valuation of newly issued warrants. The company says it corrected the valuation errors and began remediation, but cannot assure remediation will be sufficient.
- After quarter-end, Bakkt effected a 1-for-25 reverse stock split, retroactively reflected in the filing’s share and per-share figures. It had previously received an NYSE minimum-bid-price deficiency notice and says the split was intended to address it.
Important facts for investors to verify
- Whether cash burn, customer-fund-related working-capital movements, and restricted liquidity support the stated runway into June 2025.
- Whether crypto trading activity and client activation can produce sustainable operating profit, given gross-reported trading revenue and associated costs.
- The dilution and accounting impact of the equity offerings, outstanding warrants, and future capital needs.
- Progress remediating the warrant-valuation control weakness and any further developments in the SEC inquiry or vendor dispute.
- Whether the reverse split restored and maintains NYSE listing compliance.