Bakkt Holdings Inc

Previous wording

The following discussion and analysis of financial condition and results of operations should be read together with the accompanying consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 (this "Report") and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which is incorporated herein by reference. References in this section to “we,” “us,” “our,” “Bakkt” or the “Company” and like terms refer to Bakkt Holdings, Inc. and its subsidiaries for thethree and six months ending June 30, 2024, unless the context otherwise requires. Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, includes forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those factors discussed above in “Cautionary Statement Regarding Forward-Looking Statements” and “Item 1A. Risk Factors.”

Current wording

The following discussion and analysis of financial condition and results of operations should be read together with the accompanying consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (this "Report") and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which is incorporated herein by reference. References in this section to “we,” “us,” “our,” “Bakkt” or the “Company” and like terms refer to Bakkt Holdings, Inc. and its subsidiaries for thethree and nine months ending September 30, 2024, unless the context otherwise requires. Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, includes forward-looking statements. Such forward-looking statements are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Actual results could differ materially from those contemplated by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those factors discussed above in “Cautionary Statement Regarding Forward-Looking Statements” and “Item 1A. Risk Factors.”

Previous wording

Founded in 2018, Bakkt builds technology that connects the digital economy by offering one ecosystem for crypto and loyalty points. We enable our clients to deliver new opportunities to their customers through software as a service (“SaaS”) and API solutions that unlock crypto and drive loyalty, powering engagement and performance. The global market for crypto, while nascent, is rapidly evolving and expanding. We believe we are well-positioned to provide innovative, multi-faceted product solutions and grow with this evolving market. Our platform is uniquely positioned to power commerce by enabling consumers, brands, and financial institutions to better manage, transact with and monetize crypto in exciting new ways.

Current wording

Founded in 2018, Bakkt builds technology that connects the digital economy by offering one ecosystem for crypto and loyalty points. We enable our clients to deliver new opportunities to their customers through software as a service (“SaaS”) and application programming interface ("API") solutions that unlock crypto and drive loyalty, powering engagement and performance. The global market for crypto, while nascent, is rapidly evolving and expanding. We believe we are well-positioned to provide innovative, multi-faceted product solutions and grow with this evolving market. Our platform is uniquely positioned to power commerce by enabling consumers, brands, and financial institutions to better manage, transact with and monetize crypto in exciting new ways.

Previous wording

On April 29, 2024, following approval by our stockholders and Board of Directors, we effected a reverse stock split (the “Reverse Stock Split”) of our Class A Common Stock, par value $0.0001 per share (“Class A Common Stock”), and Class V Common Stock, par value $0.0001 per share (“Class V Common Stock” and collectively with the Class A Common Stock, the “Common Stock”), at a ratio of 1-for-25 (the “Reverse Stock Split Ratio”), effective as of 12:01 a.m. eastern time on April 29, 2024 (the “Effective Time”). Our Class A Common Stock began trading on a reverse-split adjusted basis on the New York Stock Exchange (the “NYSE”) as of the open of trading on April 29, 2024. After the Effective Time, the Class A Common Stock will continue to be listed on the NYSE under the symbol “BKKT”. As such, the Reverse Stock Split has been retroactively applied to all share and per share information throughout this Quarterly Report on Form 10-Q (unless otherwise noted).

Current wording

On April 29, 2024, following approval by our stockholders and Board of Directors (the "Board"), we effected a reverse stock split (the “Reverse Stock Split”) of our Class A Common Stock, par value $0.0001 per share (“Class A Common Stock”), and Class V Common Stock, par value $0.0001 per share (“Class V Common Stock” and collectively with the Class A Common Stock, the “Common Stock”), at a ratio of 1-for-25 (the “Reverse Stock Split Ratio”), effective as of 12:01 a.m. eastern time on April 29, 2024 (the “Effective Time”). Our Class A Common Stock began trading on a reverse-split adjusted basis on the New York Stock Exchange (the “NYSE”) as of the open of trading on April 29, 2024. After the Effective Time, the Class A Common Stock continues to be listed on the NYSE under the symbol “BKKT”. As such, the Reverse Stock Split has been retroactively applied to all share and per share information throughout this Quarterly Report on Form 10-Q (unless otherwise noted).

Previous wording

In the Concurrent Offerings, we entered into ICE Purchase Agreement, pursuant to which we issued and sold to ICE an aggregate of 461,361 shares of Class A Common Stock, Class 1 Warrants to purchase an aggregate of 230,680 shares of Class A Common Stock, and Class 2 Warrants to purchase an aggregate of 230,680 shares of Class A Common Stock. The purchase price of each share of Class A Common Stock and accompanying Warrant in the ICE Offering was $21.675.

Current wording

In a concurrent registered direct offering with ICE (the “ICE Offering”, together with the Third-Party Purchasers offering, the "Concurrent Offerings"), we entered into a purchase agreement with ICE, pursuant to which we issued and sold to ICE an aggregate of 461,361 shares of Class A Common Stock, Class 1 Warrants to purchase an aggregate of 230,680 shares of Class A Common Stock, and Class 2 Warrants to purchase an aggregate of 230,680 shares of Class A Common Stock. The purchase price of each share of Class A Common Stock and accompanying Warrant in the ICE Offering was $21.675.

Previous wording

After a year of significant volatility in crypto asset prices, a loss of confidence in many participants in the crypto asset ecosystem, regulatory actions and adverse publicity around specific companies in 2023, the crypto markets in 2024 continue to be impacted by the broader macroeconomic conditions, including the strength of the overall macroeconomic environment, high interest rates, spikes in inflation rates, general market volatility, and geopolitical concerns. We expect the macroeconomic environment and the state of the crypto markets to remain dynamic in the near-term.

Current wording

After a year of significant volatility in crypto asset prices, a loss of confidence in many participants in the crypto asset ecosystem, regulatory actions and adverse publicity around specific companies in 2023, the crypto markets in 2024 continue to be impacted by the broader macroeconomic conditions, including the strength of the overall macroeconomic environment, heightened interest rates, spikes in inflation rates, general market volatility, and geopolitical concerns. We expect the macroeconomic environment and the state of the crypto markets to remain dynamic in the near-term.

Previous wording

In January 2024, the SEC approved a number of applications for spot-traded bitcoin exchange-traded funds, or ETFs. Since then, the crypto market has seen a significant increase in interest from, and participation by, institutional investors. In May 2024, the SEC approved a number of applications for spot-traded ETH ETFs, furthering the momentum of institutional investor interest. We believe this increase in institutional interest and adoption intersects with our strengths, as we were originally conceived as an institutionally-focused crypto company.

Current wording

In January 2024, the SEC approved a number of applications for spot-traded bitcoin exchange-traded funds ("ETFs"). Since then, the crypto market has seen a significant increase in interest from, and participation by, institutional investors. In May 2024, the SEC approved a number of applications for spot-traded Ethereum ETFs, furthering the momentum of institutional investor interest. We believe this increase in institutional interest and adoption intersects with our strengths, as we were originally conceived as an institutionally-focused crypto company.

Previous wording

On April 1, 2023, we completed the acquisition of 100% of the ownership interests of Apex Crypto LLC (“Apex Crypto”) and subsequently changed the name of the legal entity to Bakkt Crypto Solutions, LLC (“Bakkt Crypto Solutions”). On March 20, 2024, Bakkt Marketplace, LLC ("Bakkt Marketplace") merged with Bakkt Crypto Solutions. The newly merged entity operates under the name Bakkt Crypto Solutions, LLC ("Bakkt Crypto"). We are leveraging Bakkt Crypto’s proprietary trading platform and existing relationships with liquidity providers to provide a wider range of assets and competitive pricing to our customers. Our acquisition of Bakkt Crypto Solutions complements our B2B2C growth strategy by broadening our business partnerships to fintechs and neobanks. Specifically, Bakkt Crypto offers customers the ability to purchase, sell, store and, in approved jurisdictions, deposit and withdraw approved crypto assets, all from within the applications of its clients with whom customers already have a relationship. Using Bakkt Crypto's platform, customers can purchase approved crypto assets, store crypto assets in custodial wallets, liquidate their holdings, and transfer supported crypto assets between a custodial wallet maintained by Bakkt Crypto and external wallets in certain jurisdictions, if enabled by the client.

Current wording

On April 1, 2023, we completed the acquisition of 100% of the ownership interests of Bakkt Crypto Solutions. On March 20, 2024, Bakkt Marketplace merged with Bakkt Crypto Solutions, which now operates as Bakkt Crypto. We are leveraging Bakkt Crypto’s proprietary trading platform and existing relationships with liquidity providers to provide a wider range of assets and competitive pricing to our customers. Our acquisition of Bakkt Crypto Solutions complements our B2B2C growth strategy by broadening our business partnerships to fintechs and neobanks. Specifically, Bakkt Crypto offers customers the ability to purchase, sell, store and, in approved jurisdictions, deposit and withdraw approved crypto assets, all from within the applications of its clients with whom customers already have a relationship. Using Bakkt Crypto's platform, customers can purchase approved crypto assets, store crypto assets in custodial wallets, liquidate their holdings, and transfer supported crypto assets between a custodial wallet maintained by Bakkt Crypto and external wallets in certain jurisdictions, if enabled by the client.

Previous wording

As part of our ongoing review of potential services, we continually evaluate how we can most effectively improve our platform and service offerings in a manner that is compliant with applicable governance and regulatory considerations. In such review, we may determine to stop pursuing a potential service offering in light of, among other things, revenue expectations and compliance with applicable laws. For example, following discussion with our clients we have elected to suspend the development of our Bakkt Payouts product indefinitely. Furthermore, we considered developing the capability for registered customers to transfer crypto assets to and from other registered customers within our platform but have indefinitely postponed further development and rollout of such functionality. In addition, we evaluated opportunities to offer staking, as well as opportunities to offer non-fungible tokens, and have postponed further development and rollout for both such functionalities indefinitely.

Current wording

As part of our ongoing review of potential services, we continually evaluate how we can most effectively improve our platform and service offerings in a manner that is compliant with applicable governance and regulatory considerations. In such review, we may determine to stop pursuing a potential service offering in light of, among other things, revenue expectations and compliance with applicable laws.

Previous wording

Following the closing of the acquisition of Bakkt Crypto Solutions and in light of recent regulatory developments, we reviewed all crypto assets then available on the Bakkt Crypto Solutions platform and determined it was appropriate to delist certain of such crypto assets. In effecting such delisting decisions, we attempted to mitigate impacts on our business and customers by affording customers a period in which to exit their positions in the impacted crypto assets as part of an orderly wind-down. The delisting process was completed on September 21, 2023 and we recognized transactional revenue associated with delisted crypto assets of approximately $27.6 million on that date.

Current wording

Following the closing of the acquisition of Bakkt Crypto Solutions and in light of recent regulatory developments, we reviewed all crypto assets then available on the Bakkt Crypto Solutions platform and determined it was appropriate to delist certain of such crypto assets. In effecting such delisting decisions, we attempted to mitigate impacts on our business and customers by affording customers a period in which to exit their positions in the impacted crypto assets as part of an orderly wind-down. The delisting process was completed on September 21, 2023 and we recognized transactional revenue associated with delisted crypto assets of approximately $27.6 million on that date. In September 2024, we added nine crypto assets to our trading service, some of which we had previously delisted.

Previous wording

On March 13, 2024, we were notified by NYSE that we were not in compliance with the Listing Rule because the average closing stock price of a share of our Class A Common Stock was less than $1.00 per share over a consecutive 30 trading-day period. Pursuant to the Listing Rule, we have six months following the NYSE notification to regain compliance with the Listing Rule, during which time our Class A Common Stock will continue to be listed on the NYSE.

Current wording

On March 13, 2024, we were notified by NYSE that we were not in compliance with the Listing Rule because the average closing stock price of a share of our Class A Common Stock was less than $1.00 per share over a consecutive 30 trading-day period. Pursuant to the Listing Rule, we had six months following the NYSE notification to regain compliance with the Listing Rule, during which time our Class A Common Stock will continue to be listed on the NYSE.

Previous wording

On April 29, 2024, Charles Goodroe resigned from his position as Chief Accounting Officer of the Company, effective May 22, 2024. Effective as of Mr. Goodroe’s resignation, Karen Alexander, the Company’s Chief Financial Officer and principal financial officer, assumed the role of the Company’s principal accounting officer.

Current wording

On April 29, 2024, Charles Goodroe resigned from his position as Chief Accounting Officer of the Company, effective May 22, 2024. Effective as of Mr. Goodroe’s resignation, Karen Alexander, the Company’s Chief Financial Officer and principal financial officer, assumed the role of the Company’s principal accounting officer. On July 8, 2024, the Company appointed Joe Henderson as Vice President, Chief Accounting Officer and principal accounting officer of the Company, effective July 8, 2024. Ms. Alexander continues to serve as the Company's Chief Financial Officer following Mr. Henderson's appointment.

Previous wording

Our ability to increase our revenue stream depends on our ability to grow clients on our platform. We collaborate with leading brands and have built an extensive network across numerous industries including financial institutions, merchants and travel and entertainment. To date, management has been focused on building through clients within a business-to-business-to-consumer (“B2B2C”) model. Our goal is to provide these clients opportunities to leverage our capabilities either through their existing environment or by leveraging our platform. Our acquisition of Bakkt Crypto Solutions complements our B2B2C growth strategy by broadening our business partnerships to fintechs and neo-banks.

Current wording

Our ability to increase our revenue stream depends on our ability to grow clients on our platform. We collaborate with leading brands and have built an extensive network across numerous industries including financial institutions, merchants and travel and entertainment. To date, management has been focused on building through clients within a B2B2C model. Our goal is to provide these clients opportunities to leverage our capabilities either through their existing environment or by leveraging our platform. Our acquisition of Bakkt Crypto Solutions complements our B2B2C growth strategy by broadening our business partnerships to fintechs and neobanks.

Previous wording

As detailed in Note 18 in the unaudited consolidated financial statements included in this Report, upon the adoption of Staff Accounting Bulletin 121 (“SAB 121”), we recorded a safeguarding obligation liability and a corresponding safeguarding asset related to the crypto held for other parties. As of June 30, 2024, the safeguarding obligation liability related to crypto assets held for other parties was approximately $974.5 million. We have taken steps to mitigate the potential risk of loss for the crypto we hold for other parties, including holding insurance coverage specifically for certain crypto incidents and using secure cold storage to store the vast majority of crypto that we hold. SAB 121 also asks us to consider the legal ownership of the crypto held for other parties, including whether the crypto held for other parties would be available to satisfy general creditor claims in the event of our bankruptcy.

Current wording

As detailed in Note 18 in the unaudited consolidated financial statements included in this Report, upon the adoption of Staff Accounting Bulletin 121 (“SAB 121”), we recorded a safeguarding obligation liability and a corresponding safeguarding asset related to the crypto held for other parties. As of September 30, 2024, the safeguarding obligation liability related to crypto assets held for other parties was approximately $938.7 million. We have taken steps to mitigate the potential risk of loss for the crypto we hold for other parties, including holding insurance coverage specifically for certain crypto incidents and using secure cold storage to store the vast majority of crypto that we hold. SAB 121 also asks us to consider the legal ownership of the crypto held for other parties, including whether the crypto held for other parties would be available to satisfy general creditor claims in the event of our bankruptcy.

Previous wording

The legal rights with respect to crypto held on behalf of third parties by a custodian, such as us, upon the custodian’s bankruptcy have not yet been settled by courts and are highly fact-dependent. However, based on the terms of our terms of service and applicable law, in the event that we were to enter bankruptcy, we believe the crypto that we hold in custody for users of our platform should be respected as users’ property (and should not be available to satisfy the claims of our general creditors). We do not allow users to purchase crypto on margin, and crypto held on our platform does not serve as collateral for margin loans. We hold crypto in custody for users in one or more omnibus crypto wallets. We hold cryptographic key information and maintain internal record keeping for the crypto we hold in custody for users, and we are obligated to secure such assets from loss or theft. Our contractual arrangements state that our customers and clients retain legal ownership of the crypto custodied by us on their behalf; they also benefit from the rewards and bear the risks associated with their ownership, including as a result of any price fluctuations. We have been monitoring and will continue to actively monitor legal and regulatory developments and may consider further steps, as appropriate, to support this contractual position so that in the event of our bankruptcy, the crypto custodied by us should not be deemed to be part of our bankruptcy estate. We do not expect potential future cash flows associated with the crypto safeguarding obligation liability.

Current wording

The legal rights with respect to crypto held on behalf of third parties by a custodian, such as us, upon the custodian’s bankruptcy have not yet been settled by courts and are highly fact-dependent. However, based on the terms and conditions of our terms of service and applicable law, in the event that we were to enter bankruptcy, we believe the crypto that we hold in custody for users of our platform should be respected as users’ property (and should not be available to satisfy the claims of our general creditors). We do not allow users to purchase crypto on margin, and crypto held on our platform does not serve as collateral for margin loans. We hold crypto in custody for users in one or more omnibus crypto wallets. We hold cryptographic key information and maintain internal record keeping for the crypto we hold in custody for users, and we are obligated to secure such assets from loss or theft. Our contractual arrangements state that our customers and clients retain legal ownership of the crypto custodied by us on their behalf; they also benefit from the rewards and bear the risks associated with their ownership, including as a result of any price fluctuations. We have been monitoring and will continue to actively monitor legal and regulatory developments and may consider further steps, as appropriate, to support this contractual position so that in the event of our bankruptcy, the crypto custodied by us should not be deemed to be part of our bankruptcy estate. We do not expect potential future cash flows associated with the crypto safeguarding obligation liability.

Previous wording

•Crypto-enabled accounts. We define crypto-enabled accounts as the total crypto accounts open on our platform. There were 6.4 million and 6.2 million crypto-enabled accountsas of June 30, 2024 and December 31, 2023, respectively.

Current wording

•Crypto-enabled accounts. We define crypto-enabled accounts as the total crypto accounts open on our platform. There were 6.5 million and 6.2 million crypto-enabled accountsas of September 30, 2024 and December 31, 2023, respectively.

Previous wording

•Transacting accounts. We define transacting accounts as unique accounts that perform transactions on our platform each month. We use transacting accounts to reflect how users across our platform use the variety of services we offer, such as buying and selling crypto to facilitate everyday purchases, redeeming loyalty points for travel or merchandise, or converting loyalty points to cash or gift cards. There were 0.7 million and 1.5 million unique monthly transacting accounts during thethree and six months ending June 30, 2024, respectively.

Current wording

•Transacting accounts. We define transacting accounts as unique accounts that perform transactions on our platform each month. We use transacting accounts to reflect how users across our platform use the variety of services we offer, such as buying and selling crypto to facilitate everyday purchases, redeeming loyalty points for travel or merchandise, or converting loyalty points to cash or gift cards. There were 0.6 million and 2.1 million unique monthly transacting accounts during thethree and nine months ending September 30, 2024, respectively.

Previous wording

•Notional traded volume. We define notional traded volume as the total notional volume of transactions across crypto and loyalty platforms. The figures we use represent gross values recorded as of the order date. Notional traded volumes were $672.3 million and $1,713.0 million during thethree and six months ending June 30, 2024, respectively.

Current wording

•Notional traded volume. We define notional traded volume as the total notional volume of transactions across crypto and loyalty platforms. The figures we use represent gross values recorded as of the order date. Notional traded volumes were $476.5 million and $2,189.5 million during thethree and nine months ending September 30, 2024, respectively.

Previous wording

•Assets under custody. We define assets under custody as the sum of coin quantities held by customers multiplied by the final quote for each coin on the last day of the quarter. Assets under custody were $974.5 million and$701.6 million as of June 30, 2024 and December 31, 2023, respectively.

Current wording

•Assets under custody. We define assets under custody as the sum of coin quantities held by customers multiplied by the final quote for each coin on the last day of the quarter. Assets under custody were $938.7 million and$701.6 million as of September 30, 2024 and December 31, 2023, respectively.

Previous wording

The following table is our consolidated statements of operationsfor the three and six months ended June 30, 2024 and June 30, 2023, respectively (in thousands):

Current wording

The following table is our consolidated statements of operationsfor the three and nine months ended September 30, 2024 and September 30, 2023, respectively (in thousands, except per share data):

Previous wording

•Revenue increased$162.3 million primarily driven by an increase in crypto trading volume compared to the prior year second quarter; and

Current wording

•Revenue increased$123.6 million primarily driven by an increase in crypto trading volume compared to the prior year third quarter; and

Previous wording

•Operating expenses increased $133.2 million primarily driven by higher crypto trading costs in connection with higher crypto trading volume compared to the prior year second quarter.

Current wording

•Operating expenses increased$98.2 million primarily driven by higher crypto trading costs in connection with higher crypto trading volume compared to the prior year third quarter.

Previous wording

Crypto services revenue increased by$161.8 million, or 48.3%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily driven by increased crypto trading volume due to improved market trading volume for crypto as compared to the prior year second quarter.

Current wording

Crypto services revenue increased by$124.6 million, or 65.0%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily driven by increased crypto trading volume due to improved market trading volume for crypto as compared to the prior year third quarter.

Previous wording

Loyalty services revenue increased by$0.5 million, or 3.7%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily related to a $1.1 million increase in subscription and services revenue, partially offset by a $0.7 million reduction in transaction revenue. Approximately half of the increase in subscription and services revenue was driven by an adjustment to the remaining life of one of our service contracts.

Current wording

Loyalty services revenue decreased by$0.9 million, or 7.2%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily related to a $0.8 million reduction in transaction revenue and a $0.2 million decrease in subscription and services revenue.

Previous wording

Crypto costs represent the gross value of crypto sold by our customers on our platform. These costs are measured at the executed price at the time of the trade. Crypto costs increased by $159.9 million, or 48.2%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase reflects increased volume driven by improved crypto market trading relative to the prior year second quarter.

Current wording

Crypto costs represent the gross value of crypto sold by our customers on our platform. These costs are measured at the executed price at the time of the trade. Crypto costs increased by $123.4 million, or 65.2%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase reflects increased volume driven by improved crypto market trading relative to the prior year third quarter.

Previous wording

Execution, clearing and brokerage fees primarily represent payments to clients in exchange for driving order flow to our platform. Execution, clearing and brokerage fees increased by $1.2 million during the three months ended June 30, 2024. The increase reflects increased crypto transaction volume as described above.

Current wording

Execution, clearing and brokerage fees primarily represent payments to clients in exchange for driving order flow to our platform. Execution, clearing and brokerage fees increased by $1.5 million during the three months ended September 30, 2024. The increase reflects increased crypto transaction volume as described above.

Previous wording

Our headcount decreased year over year as we undertook restructuring actions and right sized our expense base to meet current market demand. We expect to limit future hiring and further optimize our headcount as we complete development projects on our platform. Compensation and benefits expense is a significant component of our operating expenses, and we expect this will continue to be the case. However, we expect that our compensation and benefits expenses will decrease as a percentage of our revenue over time. Compensation and benefits decreased by $4.7 million, or 17.3%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was primarily due to decreases of $3.3 million in salaries and wages and $1.1 million in non-cash compensation.

Current wording

Our headcount decreased year over year as we undertook restructuring actions and right sized our expense base to meet current market demand. We expect to limit future hiring and further optimize our headcount as we complete development projects on our platform. Compensation and benefits expense is a significant component of our operating expenses, and we expect this will continue to be the case. However, we expect that our compensation and benefits expenses will decrease as a percentage of our revenue over time. Compensation and benefits decreased by $3.5 million, or 14.3%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily due to decreases of $2.7 million in salaries and wages and $0.6 million in non-cash compensation.

Previous wording

Professional services expense includes fees for accounting, legal and regulatory fees. Professional services increased by $0.8 million, or 27.1%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily due to an increase of $0.7 million in audit and tax fees.

Current wording

Professional services expense includes fees for accounting, legal and regulatory fees. Professional services increased by $3.4 million, or 172.5%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily due to an increase of $3.0 million in legal fees, mainly in relation to strategic and transformational initiatives, and an increase of $0.4 million in audit and tax fees.

Previous wording

Technology and communications expense also includes fees paid for access to external market data and associated licensing costs, which may be impacted by growth in electronic contract volume, our capacity requirements, changes in the number of telecommunications hubs, and connections with customers to access our electronic platforms directly. Technology and communications expense decreased by $0.7 million, or 16.9%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was primarily due to a decrease of $0.9 million in hardware and software license fees, partially offset by an increase of $0.2 million in hosting fees. We expect these costs to decline in the future as we optimize our operational footprint.

Current wording

Technology and communications expense also includes fees paid for access to external market data and associated licensing costs, which may be impacted by growth in electronic contract volume, our capacity requirements, changes in the number of telecommunications hubs, and connections with customers to access our electronic platforms directly. Technology and communications expense decreased by $1.3 million, or 23.5%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily due to a decrease of $0.9 million in hardware and software license fees, and a decrease of $0.4 million in hosting fees. We expect these costs to decline in the future as we optimize our operational footprint.

Previous wording

Acquisition-related expenses decreased by $17.0 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Acquisition-related expenses for the three months ended June 30, 2024 primarily consist of changes in the fair value of the contingent consideration associated with the acquisition of Bakkt Crypto, andfees for investment banking advisors, lawyers, accountants, tax advisors and public relations firms related to thesame acquisition.

Current wording

Acquisition-related expenses increased by $0.7 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Acquisition-related expenses for the three months ended September 30, 2023 included a reversal of accrued investment banking fees and adjustment to the contingent consideration, both related to the acquisition of Bakkt Crypto.

Previous wording

Depreciation and amortization expense consists of amortization of intangible assets from business acquisitions and internally developed software and depreciation of purchased software and computer and office equipment over their estimated useful lives. Depreciation and amortization decreased by $3.7 million, or 96.9%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was primarily due to lower net book values of intangible assets after impairments were recognized in 2023.

Current wording

Depreciation and amortization expense consists of amortization of intangible assets from business acquisitions and internally developed software and depreciation of purchased software and computer and office equipment over their estimated useful lives. Depreciation and amortization decreased by $3.9 million, or 97.3%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was primarily due to lower net book values of intangible assets and property, equipment and software after impairments were recognized in 2023.

Previous wording

Related party expenses consist of fees for transition services agreements. Related party expenses decreased by $1.4 million, or 90.1%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was due to the termination of the ICE transition services agreement in December 2023.

Current wording

Related party expenses consist of fees for transition services agreements. Related party expenses decreased by $0.9 million, or 85.5%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The decrease was due to the termination of the ICE transition services agreement in December 2023.

Previous wording

Loss from Change in Fair Value of Warrant Liability

Current wording

Gain (loss) from Change in Fair Value of Warrant Liability

Previous wording

We recorded a loss of $6.1 million during the six months ended June 30, 2024 for the change in fair value on the revaluation of our warrant liabilities associated with our public warrants and warrants from the Concurrent Offerings. We recorded a loss of$0.6 million during the six months ended June 30, 2023 for the change in fair value on the revaluation of our warrant liability associated with our public warrants. These are non-cash losses and gains and are driven by fluctuations in the market price of our public warrants and valuation of our warrants from the Concurrent Offerings.

Current wording

We recorded a gain of $20.0 million during the three months ended September 30, 2024 for the change in fair value on the revaluation of our warrant liabilities associated with our public warrants and the Class 1 and Class 2 warrants from the Concurrent Offerings. We recorded a loss of $(0.2) million during the three months ended September 30, 2023 for the change in fair value on the revaluation of our warrant liability associated with our public warrants. These are non-cash losses and gains which are driven by fluctuations in the market price of our public warrants and valuation of our warrants from the Concurrent Offerings.

Previous wording

Other income, net primarily consists of non-operating gains and losses. During the three months ended June 30, 2024, we had income of $0.4 million primarily related to foreign currency translation. During the three months ended June 30, 2023, we recognized a loss of $0.3 million primarily related to foreign currency translation.

Current wording

Other (expense) income, net primarily consists of non-operating gains and losses. During the three months ended September 30, 2024, we had other expense of $20.0 thousand primarily related to foreign currency translation offset by sublease rental income. During the three months ended September 30, 2023, we had other income of $0.4 million primarily related to foreign currency translation.

Previous wording

Income tax expense during the six months ended June 30, 2024 primarily consists of current state tax expense related to certain state jurisdictions wherein we are required to file income tax returns. Income tax benefit during the six months ended June 30, 2023 primarily consists of current state tax expense related to certain state jurisdictions wherein we are required to file income tax returns.

Current wording

Income tax benefit (expense) during the three months ended September 30, 2024 and 2023 primarily consists of current state tax expense related to certain state jurisdictions wherein we are required to file income tax returns.

Previous wording

The six months ended June 30, 2024 included the following notable items relative to the six months ended June 30, 2023:

Current wording

The nine months ended September 30, 2024 included the following notable items relative to the nine months ended September 30, 2023:

Previous wording

•Revenue increased$1,003.6 million primarily driven by a significant increase in crypto trading revenue due to our acquisition of Bakkt Crypto; and

Current wording

•Revenue increased$1,127.3 million primarily driven by a significant increase in crypto trading revenue due to our acquisition of Bakkt Crypto on April 1, 2023; and

Previous wording

•Operating expenses increased $961.0 million primarily driven by increased crypto trading costs in connection with our acquisition of Bakkt Crypto, partially offset by decreases in acquisition costs and compensation and benefits.

Current wording

•Operating expenses increased $1,059.1 million primarily driven by increased crypto trading costs in connection with our acquisition of Bakkt Crypto, partially offset by decreases in acquisition costs and compensation and benefits.

Previous wording

Crypto services revenue increased by$1,002.7 million, or 298.6%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was primarily driven by increased crypto trading volume due to our acquisition of Bakkt Crypto Solutions.

Current wording

Crypto services revenue increased by$1,127.3 million, or 213.7%, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily driven by increased crypto trading volume due to our acquisition of Bakkt Crypto Solutions, including a full nine months of crypto services revenue for Bakkt Crypto Solutions in 2024 compared to six months of crypto services revenue for Bakkt Crypto Solutions in 2023 following the April 1, 2023 acquisition date.

Previous wording

Loyalty services revenue increased by$0.9 million, or 3.7%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was driven by a $2.2 million increase in subscription and services revenue, partially offset by decline in transaction volume. Approximately half of the increase in subscription and services revenue was driven by an adjustment to the remaining life of one of our service contracts.

Current wording

Loyalty services revenue did not materially change for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 following a $2.0 million increase in subscription and services revenue, which was offset by $2.0 million decline in transaction volume. Approximately half of the increase in subscription and services revenue was driven by an adjustment to the remaining life of one of our service contracts.