Exodus Movement, Inc.

Previous wording

The following discussion and analysis of Exodus’ financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this quarterly report. The following discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors,” “Forward Looking Statements,” and in other parts of this quarterly report and the Form 10.

Current wording

The following discussion and analysis of Exodus’ financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 1A. Risk Factors” in the Form 10-K and “Cautionary Note on Forward Looking Statements” and in other parts of this Quarterly Report on Form 10-Q.

Previous wording

We are engaged in the business of creating and distributing self-custodial wallets for digital assets. Because a majority of our revenue is derived from services provided by API Providers to persons located outside the United States pursuant a transaction-based structure, our profitability is dependent on a number of factors including the pricing of digital assets, the volume of transactions and the quality of our third-party relationships.

Current wording

We are engaged principally in the business of creating and distributing self-custodial wallets for digital assets. Because a majority of our revenue is derived from services provided by application programming interface (“API”) providers (“API Providers”) to persons located outside the United States pursuant to a transaction-based structure, our profitability is dependent on a number of factors including the pricing of digital assets, the volume of transactions and the quality of our third-party relationships.

Previous wording

Our revenues are primarily derived from digital asset related transactions and consist of fees from third party API agreements. Our expenses primarily consist of:

Current wording

Our revenues are primarily derived from digital asset-related transactions and consist of fees from third-party API agreements. These API agreements typically consist of transaction-based contracts and tiered subscription contracts where fees are generated based on transaction volume which is primarily driven by users interacting with the API providers.

Previous wording

Cloud based infrastructure expense - Cloud infrastructure expenses increased by $0.6 million and $2.5 million for the three and nine months ended September 30, 2024, respectively, compared to the corresponding prior year period. We anticipate increased cloud infrastructure expenses as the platform continues to grow due to increased database capacity and new users.

Current wording

Cloud based infrastructure expense – Cloud infrastructure expenses decreased by $0.1 million for the three months ended March 31, 2025 compared to three months ended March 31, 2024 primarily due to cost optimization efforts, including monthly reviews by the Development Operations team to reduce waste, improve instance efficiency, and minimize inter-zone transfer costs. We anticipate increased cloud infrastructure expenses as the platform continues to grow due to increased database capacity and new users.

Previous wording

Investment in human capital - Costs related to investment in human capital (including recruiting costs, salary, incentive and compensation costs) increased $2.7 million and $7.3 million for the three and nine months ended September 30, 2024, respectively, compared to the corresponding prior year period. As the Exodus platform continues to expand, we anticipate the need to add more team members to accommodate the growth in our business, which is expected to materially increase both cost of revenues and general and administrative expenses as a result of the impact on the human capital costs described above. Human capital costs are also expected to increase due to the need to add additional team members to address compliance with the evolving regulatory environment.

Current wording

Investment in human capital – Costs related to investment in human capital (including recruiting costs, salary, incentive and compensation costs) increased $2.9 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024 primarily due to an increase in salaries, stock based compensation and headcount. As the Exodus platform continues to expand, we anticipate the need to add more team members to accommodate the growth in our business, which is expected to materially increase expenses as a result of the impact on the human capital costs described above. Human capital costs are also expected to increase due to the need to add additional team members to address compliance with the evolving regulatory environment, including as a publicly traded company.

Previous wording

Marketing expenses – Marketing-related costs increased $0.8 million and $1.3 million for the three and nine months ended September 30, 2024, respectively, compared to the corresponding prior year period. The increase in both periods was primarily due to increased spending on website advertisements targeted at the crypto space and on social platforms. To date, we have primarily focused on an organic growth-based marketing strategy. We continue to evaluate our marketing strategy and in the future may decide to refocus the current organic growth strategy in growing our user base to a more competitive approach, which would be expected to further increase marketing-related expenses.

Current wording

Marketing expenses – Marketing-related costs increased $1.1 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase was primarily due to increased spending on website advertisements targeted at the digital asset focused spaces and on online platforms, such as the App Store, and marketing agency expenses. To date, we have primarily focused our marketing strategy toward user growth. We continue to evaluate our marketing strategy and in the future may decide to refocus the current organic growth-based strategy in growing our user base to a more competitive approach, which would be expected to further increase marketing-related expenses.

Previous wording

Monthly active users were 1.6 million and 1.1 million as of September 30, 2024 and 2023, respectively, reflecting an increase of 0.5 million, or 40%. We believe the increase in MAUs was primarily attributable to a positive movement in consumer-related sentiment related to the cryptocurrency markets, leading to higher prices and increased trading activity. Our strategic focus remains on expanding our active user base, improving app features, and expanding our business-to-business partnerships. We believe that over the long term, interest in digital assets and digital asset markets will increase. However, during any given period, we cannot be certain that our MAU growth efforts will be effective or that interest in digital assets will increase.

Current wording

Monthly Active Users ("MAUs") were 1.6 million and 1.7 million as of March 31, 2025 and 2024, respectively, reflecting a period-on-period decrease of 0.1 million, or 6%. We believe this decrease in MAUs was primarily attributable to a negative movement in consumer-related sentiment related to the cryptocurrency markets primarily due to evolving macroeconomic factors including uncertainty surrounding current U.S. presidential policies, particularly related to tariffs and trade, which contributed to a broader risk-off environment, similar to what was observed in the equity markets during the three months ended March 31, 2025. These dynamics have led to increased market volatility and reduced user confidence across digital asset markets. leading to lower prices and decreased engagement. Our strategic focus remains on expanding our active user base, improving app features, and expanding our business-to-business partnerships. We believe that over the long term, interest in digital assets and digital asset markets will continue to increase. However, during any given period, we cannot be certain that our MAU growth efforts will be effective or that interest in digital assets will remain or continue to increase.

Previous wording

To measure user activity, we rely on the number of monthly active users (“MAUs”) of our Exodus Platform. We define an MAU as any user with transaction history in any month. A user has “transaction history” if, in the last 30 calendar days, the user performed any activity within the application such as opening their application to check digital asset prices, reading news, or accessing the services of our API Providers. A user will not have “transaction history” if it merely opens our wallet application without further action. MAUs provide a measurement of attraction and retention levels and user engagement by allowing management to compare “churn users,” defined as users who have been inactive on the Exodus Platform for three consecutive months, against “renewing users,” defined as users who have been active on the Exodus Platform for two consecutive months, and “new users,” defined as users new to the platform that month. Within each cohort of churn users, renewing users, and new users, we then identify the funded users to assess users’ ability to engage with the Exodus Platform. The term “funded users” refers to users whose wallet currently holds digital assets of value as determined by blockchain and pricing provider data. MAUs consist of both funded wallets and unfunded wallets. Because Exodus does not have accounts, users do not close an account or otherwise leave the platform. Therefore, churn users may become new users in the next month or at any point in the future as they re-engage with the platform. A positive MAUs percentage indicates that new and renewing users exceed churned users in a given month and that interest in the Exodus Platform is increasing. Management views increasing interest in the Exodus Platform over time as a key indicator of increasing revenue, especially for MAUs outside of the United States as the likelihood of revenue generating transactions increases as user interest increases.

Current wording

MAUs are defined as any user with activity history in any month. A user has “activity history” if, in the last calendar month, the user performed any activity within the application such as opening their application to check digital asset prices, reading news, or accessing the services of our API Providers. MAUs provide a measurement of user engagement, allowing management to compare engagement over time. MAUs consist of both funded wallets and unfunded wallets. Because Exodus users do not have accounts, users do not close an account. Therefore, users may be inactive one month and active the next as they re-engage with the platform. Management views increasing interest in the Exodus Platform over time as a key indicator of increasing revenue, especially for MAUs outside of the United States as the likelihood of revenue generating transactions increases as user interest increases.

Previous wording

Results of operations for the three and nine months ended September 30, 2024 and 2023 (in thousands):

Current wording

Results of operations for the three months ended March 31, 2025 and 2024 (in thousands):

Previous wording

Total revenue increased $8.1 million, or 68%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was primarily driven by exchange aggregation revenue, which increased $6.9 million, or 62%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. See Note 3 Revenue Recognition for further details. Additionally, non-exchange aggregation revenue increased $1.2 million, or 163%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. For the three months ending September 30, 2024, revenue growth across all sources was primarily driven by an increase in user growth (as discussed under “Monthly Active Users” above) and expansion through our business-to-business partner initiatives. For the three months ended September 30, 2024, four API Providers accounted for more than 10% each of total revenue and collectively generated exchange aggregation revenue of $13.8 million. For the three months ended September 30, 2023, five API Providers accounted for more than 10% each of total revenue and collectively generated exchange aggregation revenue of $10.1 million. See Note 2 - Summary of Significant Accounting Policies, Concentration of Revenue.

Current wording

For the three months ended March 31, 2025, six API Providers accounted for more than 10% each of total revenue and collectively generated exchange aggregation revenue of $28.4 million. For the three months ended March 31, 2024, four API Providers accounted for more than 10% each of total revenue and collectively generated exchange aggregation revenue of $21.2 million.

Previous wording

Cost of revenues increased $3.6 million, or 46%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was primarily due to a $1.1 million increase in team member compensation and benefit expense as a result of increased headcount, a $0.6 million increase in cloud infrastructure service costs due to increased database capacity needs as a result of the continued expansion of our platform and addition of new users, a $0.5 million increase in partner fee expense, a $0.2 million increase in subscription expenses, a $0.3 million increase in consulting expenses, a $0.5 million decrease in capitalized labor and a $0.2 million increase in software amortization expense.

Current wording

Technology, development and user support increased $4.2 million, or 39%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increase was primarily due to a $4.0 million increase in partner fee expense as a result of a correlated increase in revenue from business-to-business partnerships, a $0.7 million decrease in capitalized labor as a result of impairment of software projects, a $0.3 million increase in subscription expenses primarily driven by higher costs associated with key infrastructure vendors for development tools, application development, performance optimization and security protections, a $0.2 million increase in consulting expenses, partially offset by a $0.7 million decrease in team member compensation and benefit expense as a result of lower incentives awarded and a $0.1 million decrease in cloud infrastructure service costs due to cost optimization efforts,

Previous wording

General and administrative expenses increased $3.9 million, or 84%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was primarily due to a $1.6 million increase in team member compensation and benefit expenses, a $1.5 million increase in legal and consulting expenses, a $0.8 million increase in meeting and travel expenses, a $0.7 million increase in marketing expenses, a $0.3 million increase in charitable donations and a $0.1 million increase in subscription expenses, partially offset by a $1.1 million decrease in foreign currency expense.

Current wording

General and administrative expenses increased $6.3 million, or 78%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. During the three months ended March 31, 2025, the Company incurred approximately $1.8 million in transaction-related expenses associated with the evaluation, negotiation, and travel due to prospective business acquisitions. The Company expects these expenses to continue throughout 2025 as it continues to evaluate potential acquisition targets. These expenses primarily include legal and advisory costs. In addition to these transaction related expenses, other expenses driving the increase include a $2.2 million increase in team member compensation and benefit expenses as a result of increased team member compensation, increased stock based compensation and increased headcount, a $0.3 million increase in legal and consulting expenses, a $1.0 million increase in meeting and travel expenses, a $1.1 million increase in marketing expenses, and a $1.0 million increase in political contributions, partially offset by a $1.4 million decrease in foreign currency expense.

Previous wording

During the nine months ended September 30, 2024, the Company recognized net realized gains from exchange of digital assets of $5.1 million and net unrealized gains from remeasurement of digital assets of $34.1 million. For the nine months ended September 30, 2023, the Company recorded net gain on digital assets of $0.3 million.

Current wording

The Company experienced an unfavorable fluctuation in the market price of digital assets held during the three months ended March 31, 2025, primarily driven by market volatility due to macroeconomic headwinds, including the Federal Reserve's revised economic outlook, with a lower growth forecast and a higher inflation outlook, and the looming threat of broader tariffs. During the three months ended March 31, 2025, the Company recognized net realized gains from exchange of digital assets of $5.1 million and net unrealized losses from remeasurement of digital assets of $33.9 million. During the three months ended March 31, 2024, the Company recognized net realized gains from exchange of digital assets of $4.0 million and net unrealized gains from remeasurement of digital assets of $52.8 million.

Previous wording

Our primary source of funds is from API fee revenues. Our primary use of funds is payment of our operating costs, which consist mostly of compensation and benefit expenses and security costs.

Current wording

Our primary source of funding is from API fee revenues. We fund our operational costs from these revenues. Our primary use of funds is payment of our operating costs, which consist mostly of compensation and benefit expenses and security costs. As of the date of this filing, based on current operating plans, we believe that our existing cash and cash equivalents, treasury bills, USDC and digital assets, together with cash generated from our operations, will be sufficient to fund our operations and anticipated growth for the next twelve months and thereafter for the foreseeable future. We may seek to opportunistically raise additional capital through private or public equity securities offerings in the future.

Previous wording

Net cash used in financing activities for the nine months ended September 30, 2024 was $2.7 million, which was used for the repurchase of shares of our common stock to pay employee withholding taxes as a part of our 2021 Plan.

Current wording

Net cash used in financing activities increased from March 31, 2024 to March 31, 2025 by $5.3 million. This was primarily driven by cash used for the repurchase of shares of our common stock to pay employee withholding taxes as a part of our 2019 and 2021 Plan.

Previous wording

The digital asset holdings as of September 30, 2024 and December 31, 2023 were (in thousands):

Current wording

The digital asset holdings as of March 31, 2025 and December 31, 2024 were (in thousands, except units):

Previous wording

See “Critical Accounting Estimates” set forth under “Management’s Discussion and Analysis of the Financial Condition and Results of Operations” in the Form 10. There have been no material changes from those disclosed in the Form 10.

Current wording

See the section titled “Critical Accounting Estimates” set forth under “Item 7. Management’s Discussion and Analysis of the Financial Condition and Results of Operations” in the Form 10-K. There have been no material changes from those disclosed in the Form 10-K.