Aug 11, 2023

Crypto trading firm Bakkt reported second-quarter earnings results yesterday, posting a quarterly loss of $0.19 per share on revenue of nearly $348 million.

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. Fact reported second quarter earnings results yesterday, the crypto trading firm posted a quarterly loss of 19 cents per share on revenue of nearly $348 million. Joining us now to discuss is back, Ceo Gavin, Michael Gavin. Welcome to. Welcome to the show. Good morning, Jen. How are you? Thank you. I'm I'm great. It's a pleasure to have you on. Let's talk about this. Let's talk about these QT two results. They included the apex uh Crypto acquisition that happened back in April. It's now rebranded as back to Crypto Solutions. I have to ask you, I got, I've been wondering this since the earnings call any other um ma on the horizon. So, so Jen, I think look in a market such as we find ourselves, you're always on the lookout for, for assets and dislocation uh around uh around the market. We're well positioned, given the the liquidity in our stock. Um But, but nothing planned, always looking. Ok. So that's interesting. Nothing planned, but you're planning to expand to five different international regions, Latin America the UK, European Union, Hong Kong and Australia. We've seen other firms expand in some of these jurisdictions through M and A. So talk to us about what that expansion could look like for you. Yeah, look, I think in the results we spoke to yesterday, we're demonstrating that we're making strong progress on the priorities that we laid out at the beginning of the year. You know, we're executing around expanding our crypto platform, activating and broadening our network of partners and then being very prudent in the way we allocate capital. You know, obviously a key part of the the activation and expanding is moving into international markets. And yesterday we announced a new partner IB which is taking us into Latin America. But what we're certainly seeing is in the markets, you mentioned, as we start to see regulatory clarity, we're seeing consumer sentiments start to change to become very positive. And many of our partners want to take advantage of that, you know, our entry strategy into these markets is unique. You know, we have a number of partners who are on our platform today, who already operate in these markets and are looking to expand and take advantage of the regulatory clarity that they see. So the expansion opportunities are very uh near term and real for us because we're working with people who are already integrated onto the platform. I'm curious to get your perspective on Hong Kong, of course, earlier this year, they announced their new crypto license. A lot of action going on over there. What does Hong Kong look like for you and the firm uh for the rest of the year? Well, Jen, I think it's an attractive market. I think as you've seen the the regulators really lay out how crypto should operate. It's not just about bringing regulation to crypto. It's also enabling the ecosystem to actually function, you know, working with traditional financial in uh institutions to be able to get access to payment rails, getting access to uh depository services as well as using them as distribution vehicles. So we think the market itself is, is attractive because of the way the structure has been built. Do a little comparison here. For me, we're talking about these jurisdictions who seemingly have a little bit more friendly or at least more clear regulation than we have over here in North America, more particularly the United States. What's it like working in these other jurisdictions compared to working with regulators over here? So I think, you know, we have productive discussions with regulate with all our regulators. I think, you know, we're closely engaged and involved in helping uh regulators understand the work in which we're doing, understanding the way in which the regulations affect and impact the way we we operate. I think the challenge is that we just don't have that clarity that we're really seeking in terms of what it means to be able to operate in the industry that we find ourselves in. So part of what we think about when we're talking to our regulators and we see it at different levels, you know, at the state level, New York Department of Financial Services is very clear on how we operate. We operate a bit license, we operate our NDFS Bank Trust Charter, which is our custody service and we understand the operations and how we, how we go to market as we then start to look at what happens at a federal level. You know, I think the recent findings in the ripple case are acting as a catalyst to be able to bring the debate, an informed debate around these assets. You know, we saw movement out of house financial services over the last couple of weeks with mark ups of the bills completed, although they have a long way to go before we see them get signed into law. So the discussions are happening. I think the challenge for us is the pace at which they're operating. And when we compare that, then to what we see in jurisdictions where there is absolute clarity. The rules of the road are understood. It really changes the way in which you can operate and, and, and run the run the company. Let's talk a little bit more about the ripple case. It felt like when that partial win came out. Uh, there was a collective sigh of relief. Now we have the sec appealing that as a CEO of back, how are you watching the ripple case? How does it actually have an effect anymore? It seems like we're gonna have a lot of back and forth until we get any real clarity in that one. Yeah, I think that's right, Jen. I mean, obviously we uh have taken moves through the course of the last several months around listing of different tokens to, to take them off the platform. You know, we, we take a number of factors into account when we make those decisions, one of which is obviously the macro regulatory environment and when we see things like the the the judgment and then the appeal, there are obviously things we take notice of we follow because there are important inputs into the process. But right now we're sitting back and watching to see to see how, how this evolves. Yeah, those tokens you brought up but they were solana polygon and Cardo, what would need to happen for you to reist those? Look, I think we've always said it's not a one way door. You know, when we, when we look at the way in which the the environment moves and the piece and the pace at which it moves, you have to be agile. So taking them off the platform was the right decision in the context of the the the current environment. As we see that change, if we see key measures change, then of course, we revisit those decisions. But I think we've been very clear that none of these are one way doors. They're all point in time judgments based on the sophistication of the market at a particular moment. I know we spoke a little bit about the back and forth in the ripple case, but when that partial win was announced, was there any part of you that thought we're going to re list those tokens or we should reist those tokens sometime soon? I think it's fair to say we took a look. All right, we'll leave that one there. Then I wanna uh I wanna ask you about something that was mentioned on the earnings call from your CFO about reducing cash burn. I believe it was between 70 to 80%. Uh talk to us about what you've done to reduce that cash burn and what will still happen throughout the rest of the year. So I think, you know, we always said 22 was a big year for us. It was a year where we were investing in the platform investing to bring basic the the capabilities to market. We're leveraging those investments now and the way we move forward as we continue to activate the ecosystem as we continue to deliver with the, with the platform, you know, we are obviously being very prudent in the way in which we manage our expense base. And you know, the some of the synergies that you're seeing out of the apex acquisition are really starting to pay dividends. When we look at the cost base of the organization, the acquisition is allowing us to move quickly as well. You know, we signed several new clients this quarter. We also announced, you know, the strategic partnerships with plad and with fire blocks. And we're excited by what they bring to us in terms of improving our, our, our go to market and giving, you know, alternate ways to distribute the, the services. And so what I think you start to see when we look at the expense base is just the efficiencies coming in through the acquisition as well as the fact that much of what we were building last year is now in the market. And we're turning our attention to the next wave of, of investments, particularly focused on custody. And I gotta ask you on that reduction of cash burn question. There were layoffs earlier this year, any plans for any more reduction in staff uh moving towards the end of the year. So Jen, I think the, the, the like uh the the industry at a at a whole, we're being very prudent in the way we manage our expense space. We're looking for efficiencies where we can find them uncomfortable with where we are right now. All right, Gavin, thanks very much for joining the show this morning. It was a pleasure having you on. Thanks, Jen. Pleasure. Thank you. That was back to Eo Gavin Michael.

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