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 March 31, 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 months ending March 31, 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 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.”

Previous wording

Our platform is built to operate across various cryptoassets and offers clients the flexibility to choose some or all of our capabilities, and the manner in which these capabilities are enabled for consumers, based on their needs and objectives. Some clients may choose to enable our capabilities directly in their experience, while others may want a “ready-to-go” storefront and leverage capabilities such as our web-based technology. Our institutional-grade platform, born out of our former parent company, Intercontinental Exchange, Inc. (“ICE”), supports "know your customer" ("KYC"), anti-money laundering ("AML"), and other anti-fraud measures to combat financial crime.

Current wording

Our platform is built to operate across various crypto assets and offers clients the flexibility to choose some or all of our capabilities, and the manner in which these capabilities are enabled for consumers, based on their needs and objectives. Some clients may choose to enable our capabilities directly in their experience, while others may want a “ready-to-go” storefront and leverage capabilities such as our web-based technology. Our institutional-grade platform, born out of our former parent company, Intercontinental Exchange, Inc. (“ICE”), supports "know your customer" ("KYC"), anti-money laundering ("AML"), and other anti-fraud measures to combat financial crime.

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”. In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 505 Equity, changes in the capital structure of a public reporting entity due to a reverse stock split occurring after the balance sheet date, but before the release of the financial statements, should be given retroactive effect. As such, the Reverse Stock Split has been retroactively applied to all figures 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, 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).

Previous wording

In connection with the Reverse Stock Split, we effected a corresponding and proportional adjustment to our authorized shares of Common Stock, such that the 1,000,000,000 authorized shares of Common Stock, consisting of 750,000,000 shares of Class A Common Stock and 250,000,000 shares of Class V Common Stock were reduced proportionately to 40,000,000 authorized shares of Common Stock, consisting of 30,000,000 shares of Class A Common Stock and 10,000,000 shares of Class V Common Stock. The par value per share of Common Stock and number of authorized shares of preferred stock did not change.

Current wording

In connection with the Reverse Stock Split, we effected a corresponding and proportional adjustment to our authorized shares of Common Stock, such that the 1,000,000,000 authorized shares of Common Stock, consisting of 750,000,000 shares of Class A Common Stock and 250,000,000 shares of Class V Common Stock were reduced proportionately to 40,000,000 authorized shares of Common Stock, consisting of 30,000,000 shares of Class A Common Stock and 10,000,000 shares of Class V Common Stock. The par value per share of Common Stock, the par value per share of preferred stock and the number of authorized shares of preferred stock did not change.

Previous wording

We did not issue fractional shares in connection with the Reverse Stock Split. Stockholders who would have otherwise held fractional shares because the number of shares of Class A Common Stock they held before the Reverse Stock Split was not evenly divisible by the Reverse Stock Split Ratio received cash (without interest, and subject to any required tax withholding applicable to a holder) in lieu of such fractional shares. To maintain parity with the Class A Common Stock, holders of paired interests (each of which is a combination of one share of Class V Common Stock and one common unit of Bakkt Opco Holdings, LLC and is exchangeable into a share of Class A Common Stock on a one-for-one basis) were also correspondingly adjusted for the Reverse Stock Split and paid out in cash, applying the same per-share price, for any resulting fractional interests. The aggregate cash in respect of fractional interests was not material. Immediately after the Reverse Stock Split, each stockholder’s percentage ownership interest and proportional voting power remained unchanged, except for minor changes that resulted from the treatment of fractional shares.

Current wording

We did not issue fractional shares in connection with the Reverse Stock Split. Stockholders who would have otherwise held fractional shares because the number of shares of Class A Common Stock they held before the Reverse Stock Split was not evenly divisible by the Reverse Stock Split Ratio received cash (without interest, and subject to any required tax withholding applicable to a holder) in lieu of such fractional shares. To maintain parity with the Class A Common Stock, holders of paired interests (each of which is a combination of one share of Class V Common Stock and one common unit of Opco and is exchangeable into a share of Class A Common Stock on a one-for-one basis) were also correspondingly adjusted for the Reverse Stock Split and paid out in cash, applying the same per-share price, for any resulting fractional interests. The aggregate cash in respect of fractional interests was not material. Immediately after the Reverse Stock Split, each stockholder’s percentage ownership interest and proportional voting power remained unchanged, except for minor changes that resulted from the treatment of fractional shares.

Previous wording

1,396,701 shares of our Class A Common Stock, Class 1 Warrants (“Class 1 Warrants”) to purchase an aggregate of 922,722 shares of Class A Common Stock, Class 2 Warrants (“Class 2 Warrants”) to purchase an aggregate of 922,722 shares of Class A Common Stock and Pre-Funded Warrants (“Pre-Funded Warrants”) to purchase an aggregate of 448,742 shares of Class A Common Stock. As of the date of this report, holders have exercised all of the Pre-Funded Warrants. The offering of such securities was conducted in a registered direct offering (the “Third-Party Offering”). The purchase price of each share of Class A Common Stock and accompanying Class 1 Warrant or Class 2 Warrant (each, a “Warrant”) was $0.8670 and the purchase price of each Pre-Funded Warrant and accompanying Warrant was $0.8669.

Current wording

On February 29, 2024, we entered into a securities purchase agreement (the “Third-Party Purchase Agreement”) with certain institutional investors (the “Third-Party Purchasers”). The consummation of the transactions contemplated by the Third-Party Purchase Agreement (the “Third-Party Closing”) occurred on March 4, 2024. At the Third-Party Closing, pursuant to the Third-Party Purchase Agreement, we issued and sold to the Third-Party Purchasers an aggregate of 1,396,701 shares of our Class A Common Stock, Class 1 Warrants (“Class 1 Warrants”) to purchase an aggregate of 922,722 shares of Class A Common Stock, Class 2 Warrants (“Class 2 Warrants”) to purchase an aggregate of 922,722 shares of Class A Common Stock and Pre-Funded Warrants (“Pre-Funded Warrants”) to purchase an aggregate of 448,742 shares of Class A Common Stock. As of the date of this report, holders have exercised all of the Pre-Funded Warrants. The offering of such securities was conducted in a registered direct offering (the “Third-Party Offering”). The purchase price of each share of Class A Common Stock and accompanying Class 1 Warrant or Class 2 Warrant (each, a “Warrant”) was $21.675 and the purchase price of each Pre-Funded Warrant and accompanying Warrant was $21.6725.

Previous wording

In a concurrent registered direct offering (the “ICE Offering” and, together with the Third-Party Offering, the “Concurrent Offerings”), we entered into a securities purchase agreement (the “ICE Purchase Agreement” and, together with the Third-Party Purchase Agreement, the “Purchase Agreements”) with ICE, pursuant to which we agreed to sell to ICE up to 461,360 shares of Class A Common Stock, Class 1 Warrants to purchase up to 230,680 shares of Class A Common Stock, and Class 2 Warrants to purchase up to 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 is $0.8670.

Current 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.

Previous wording

In addition, crypto assets and crypto market participants have recently faced increased scrutiny by regulators. For example, in 2023, the SEC has brought charges against a number of crypto asset exchanges, including Bittrex, Coinbase, Binance, Kraken, and other crypto asset service providers, identifying a number of crypto assets as securities and alleging violations of, and non-compliance with, U.S. federal securities laws. We continue to monitor regulatory developments in this area and assess our business model and the assets we support in light of such developments.

Current wording

In addition, crypto assets and crypto market participants have recently faced increased scrutiny by regulators. For example, in 2023, the SEC brought charges against a number of crypto asset exchanges, including Bittrex, Coinbase, Binance, Kraken, and other crypto asset service providers, identifying a number of crypto assets as securities and alleging violations of, and non-compliance with, U.S. federal securities laws. We continue to monitor regulatory developments in this area and assess our business model and the assets we support in light of such developments.

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. 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, 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.

Previous wording

In addition, Bakkt Crypto is in the process of developing, subject to applicable regulatory approvals, functionalities enabling transfers of supported crypto assets between registered customers. Bakkt Crypto is also in the process of enhancing capabilities on its trading platform, including support for larger orders and recurring buys, and extending the platform to support institutional execution.

Current wording

In addition, Bakkt Crypto is in the process of enhancing capabilities on its trading platform, including support for larger orders and recurring buys, and extending the platform to support institutional execution.

Previous wording

At the time our acquisition of Bakkt Crypto Solutions closed, Bakkt Crypto Solutions had agreements with more than 30 fintech clients pursuant to which the clients made Bakkt Crypto Solutions’s crypto asset trading service available to their customer base. Our acquisition of Bakkt Crypto Solutions resulted in us obtaining access to such partners. The majority of these fintech clients are also part of Apex Fintech Solutions’ client network.

Current wording

At the time our acquisition of Bakkt Crypto Solutions closed, Bakkt Crypto Solutions had agreements with more than 30 fintech clients pursuant to which the clients made Bakkt Crypto Solutions’ crypto asset trading service available to their customer base. Our acquisition of Bakkt Crypto Solutions resulted in us obtaining access to such partners. The majority of these fintech clients are also part of Apex Fintech Solutions’ client network.

Previous wording

Under the NYSE’s rules, if a Company determines it will cure its noncompliance with the Listing Rule by taking an action that will require stockholder approval, it must so inform the NYSE, and the noncompliance with the Listing Rule will be deemed cured if the price promptly exceeds $1.00 per share and the price remains above that level for at least the following 30 trading days. As discussed above, we implemented the Reverse Stock Split, which we believe will cure the noncompliance with the Listing Rule.

Current wording

Under the NYSE’s rules, if a Company determines it will cure its noncompliance with the Listing Rule by taking an action that will require stockholder approval, it must so inform the NYSE, and the noncompliance with the Listing Rule will be deemed cured if the price promptly exceeds $1.00 per share and the price remains above that level for at least the following 30 trading days. On June 3, 2024, we received notice that we had regained compliance with the Listing Rule.

Previous wording

On April 29, 2024, Charles Goodroe tendered his resignation from his position as Chief Accounting Officer of the Company, to be effective as of May 22, 2024. Upon the effectiveness of Mr. Goodroe’s resignation, Karen Alexander, the Company’s Chief Financial Officer and principal financial officer, will assume 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.

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 March 31, 2024, the safeguarding obligation liability related to crypto held for other parties was $1,233.2 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 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.

Previous wording

•Crypto-enabled accounts. We define crypto-enabled accounts as the total crypto accounts open on our platform. There were 6.3 million and 6.2 million crypto-enabled accountsas of March 31, 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 6.4 million and 6.2 million crypto-enabled accountsas of June 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 0.8 million and 0.7 million unique monthly transacting accounts during thethree months ended March 31, 2024 and March 31, 2023, 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 0.7 million and 1.5 million unique monthly transacting accounts during thethree and six months ending June 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 $1,040.7 million and $193.0 million during thethree months ended March 31, 2024 and March 31, 2023, 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 $672.3 million and $1,713.0 million during thethree and six months ending June 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 period. Assets under custody were$1,233.2 million and$701.6 million as of March 31, 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 $974.5 million and$701.6 million as of June 30, 2024 and December 31, 2023, respectively.

Previous wording

The following table is our consolidated statements of operationsfor the three months ended March 31, 2024 and March 31, 2023, respectively (in thousands):

Current 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):

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$831.6 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, which reflects increased volume driven by our acquisition of Bakkt Crypto Solutions.

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 $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.

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 were$5.6 million during the three months ended March 31, 2024. The increase reflects increased volume driven by our acquisition of Bakkt Crypto Solutions.

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 $1.2 million during the three months ended June 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 $9.6 million, or 28.2%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was primarily due to a decrease of $4.8 million in non-cash compensation and incentive bonuses, a decrease of $3.1 million in salaries, wages and benefits and a decrease of $1.4 million in contract labor, net of capitalized software development costs.

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 $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.

Previous wording

Professional services expense includes fees for accounting, legal and regulatory fees. Professional services increased by $1.3 million, or 52.9%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily due to increases of $0.8 million in audit and tax fees and $0.3 million in legal fees, as well as $0.2 million in professional services fees related to our Concurrent Offerings.

Current 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.

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 increased by $0.1 million, or 0.9%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was primarily due to an increase in hardware and software license fees.

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 $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.

Previous wording

Selling, general and administrative expenses include marketing, advertising, business insurance, rent and occupancy, bank service charges, dues and subscriptions, travel and entertainment, rent and occupancy, and other general and administrative costs. Our marketing activities primarily consist of web-based promotional campaigns, promotional activities with clients, conferences and user events, and brand-building activities. Selling, general and administrative expenses do not include any headcount cost, which is reflected in the “Compensation and benefits” financial statement line item. We expect these costs will decrease as a percentage of our revenue in future years as we gain improved operating leverage from our projected revenue growth.

Current wording

Selling, general and administrative expenses include marketing, advertising, business insurance, rent and occupancy, bank service charges, dues and subscriptions, travel and entertainment, rent and occupancy, and other general and administrative costs. Our marketing activities primarily consist of web-based promotional campaigns, promotional activities with clients, conferences and user events, and brand-building activities. Selling, general and administrative expenses do not include any headcount cost, which is reflected in the compensation and benefits financial statement line item. We expect these costs will decrease as a percentage of our revenue in future years as we gain improved operating leverage from our projected revenue growth and exercise prudent expense management.

Previous wording

Acquisition-related expenses decreased by $0.8 million, or 98.6%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. Acquisition-related expenses for the three months ended March 31, 2024 primarily consisted offees for investment banking advisors, lawyers, accountants, tax advisors and public relations firms related to theacquisitions of Apex Crypto and Bumped. The amount and timing of acquisition-related expenses is expected to vary across periods based on potential transaction activities.

Current 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.

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 $3.0 million, or 98.1%, for the three months ended March 31, 2024 compared to the three months ended March 31, 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 $3.7 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.

Previous wording

Related party expenses consist of fees for transition services agreements. Related party expenses decreased by$0.5 million, or 75.0%, for the three months ended March 31, 2024 compared to the three months ended March 31, 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 $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.

Previous wording

We recorded a gain of $9.0 million during the three months ended March 31, 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 $1.0 million during the three months ended March 31, 2023 for the change in fair value on the revaluation of our warrant liability associated with our public warrants. These are non-cash charges 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 loss of $15.1 million during the three 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 gain of $0.4 million during the three 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.

Previous wording

Other income (expense), net primarily consists of non-operating gains and losses. During the three months ended March 31, 2024, we recorded income of$0.7 million primarily related to foreign currency translation. During the three months ended March 31, 2023, we recorded expense of less than $0.1 million primarily related to foreign currency translation.

Current 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.

Previous wording

Income tax expense during the three months ended March 31, 2024 primarily consisted of current state tax expense related to certain state jurisdictions wherein we are required to file income tax returns during the period. Income tax benefit during the three months ended March 31, 2023 primarily consisted of current state tax expense related to certain state jurisdictions wherein we are required to file income tax returns during the period.

Current wording

Income tax expense during the three 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 three 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.

Previous wording

•Revenue increased$841.4 million, primarily driven by a significant increase in crypto services revenue due to our acquisition of Bakkt Crypto Solutions; and

Current 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

Previous wording

•Operating expenses increased $827.8 million primarily driven by increased trading costs in connection with our acquisition of Bakkt Crypto Solutions.

Current 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.

Previous wording

Crypto services revenue increased by$840.9 million for the three months ended March 31, 2024 compared to the three months ended March 31, 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$1,002.7 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.

Previous wording

Restructuring expenses of $6.1 million during the three months ended March 31, 2024 consist of severance costs and accelerated vesting of non-cash compensation related to the termination of a former executive.

Current wording

Restructuring expenses of$7.1 million during the six months ended June 30, 2024 consist of $4.9 million of accelerated vesting of non-cash compensation related to the termination of a former executive and certain employees and $2.2 million of severance costs.

Previous wording

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

Current wording

Loss from Change in Fair Value of Warrant Liability

Previous wording

As of March 31, 2024, we had $56.6 million and $44.0 million of cash and cash equivalents and restricted cash, respectively. Additionally, as of March 31, 2024, we had $18.0 million of available-for-sale debt securities that mature over the next one to seven months. Cash and cash equivalents consist of cash deposits at banks and money market funds. Restricted cash is held to satisfy certain minimum capital requirements pursuant to regulatory requirements, or as collateral for insurance contracts. Restricted cash increased over the last 12 months primarily due to insurance and banking collateral requirements. However, we expect the amount of cash that is restricted associated with regulatory capital and insurance requirements to decrease by approximately $10.0 million due to the NYDFS approving the merger of Bakkt Crypto Solutions and Bakkt Marketplace in March 2024.

Current wording

As of June 30, 2024, we had $47.5 million and $34.0 million of cash and cash equivalents and restricted cash, respectively. Additionally, as of June 30, 2024, we had $13.2 million of available-for-sale debt securities that mature over the next one to four months. Cash and cash equivalents consist of cash deposits at banks and money market funds. Restricted cash is held to satisfy certain minimum capital requirements pursuant to regulatory requirements, or as collateral for insurance contracts and our purchasing card facility. Restricted cash decreased by $10.0 million in the second quarter of 2024 due to the reduction of insurance collateral requirements following the NYDFS approval of the merger of Bakkt Crypto Solutions and Bakkt Marketplace in March 2024.

Previous wording

As discussed above, we consummated the initial closings related to Concurrent Offerings in March 2024. As of March 31, 2024, we have raised net proceeds from the Concurrent Offerings of approximately $36.9 million, after deducting the placement agent’s fees and estimated offering expenses payable by us. Approximately $2.4 million of proceeds from the ICE Offering were received concurrently with the closing of the Third-Party Offering, and an additional $7.6 million in gross proceeds from the ICE Offering were received on April 25, 2024.

Current wording

As discussed above, we consummated the Concurrent Offerings in March and April 2024. As of June 30, 2024, we have raised net proceeds from the Concurrent Offerings of approximately $46.5 million, after deducting the placement agent’s fees and offering expenses payable by us.

Previous wording

We intend to use our unrestricted cash, inclusive of the net proceeds from the Concurrent Offerings, and proceeds from maturity of available-for-sale debt securities primarily to fund our day-to-day operations, including, but not limited to funding our regulatory capital requirements, compensating balance arrangements and other similar commitments, each of which is subject to change, and as available (i) activate new crypto clients, (ii) maintain our product development efforts, and (iii) optimize our technology infrastructure and operational support. We continue to evaluate our headcount and expense base. We completed a reduction in force on May 2, 2024, and may take further action to right-size headcount and expenses in 2024. Excluding the cash purchase price to acquire Bakkt Crypto Solutions in 2023, we expect our operating cash usage in 2024 (exclusive of potential acquisitions or other strategic initiatives) to decline from 2023 levels driven by the combined impact of increased revenue and expense reductions related to the completion of large-dollar investments in 2023 and benefits from restructuring actions. In addition, we may in the future enter into arrangements to acquire or invest in complementary businesses, services, technologies or intellectual property rights. However, we have no agreements or commitments with respect to any such acquisitions or investments at this time. Our expected uses of available funds are based on our present plans, objectives and business condition. Based on fully-implemented operating budgets and forecasts, which exclude forecasts for new products or markets, our cash and proceeds from the maturity of available for sale debt securities as of the date of the filing of this Form 10-Q are estimated to fund our operations into June of 2025.

Current wording

We intend to use our unrestricted cash, inclusive of the net proceeds from the Concurrent Offerings, and proceeds from maturity of available-for-sale debt securities primarily to fund our day-to-day operations, including, but not limited to funding our regulatory capital requirements, compensating balance arrangements and other similar commitments, each of which is subject to change, and as available (i) activate new crypto clients, (ii) maintain our product development efforts, and (iii) optimize our technology infrastructure and operational support. We continue to evaluate our headcount and expense base. We completed a reduction in force on May 2, 2024, and may take further action to right-size headcount and expenses in 2024. Excluding the cash purchase price to acquire Bakkt Crypto Solutions in 2023, we expect our operating cash usage in 2024 (exclusive of potential acquisitions or other strategic initiatives) to decline from 2023 levels driven by the combined impact of increased revenue and expense reductions related to the completion of large-dollar investments in 2023 and benefits from restructuring actions. In addition, we may in the future enter into arrangem ents to acquire or invest in complementary businesses, services, technologies or intellectual property rights. However, we have no agreements or commitments with respect to any such acquisitions or investments at this time. Our expected uses of available funds are based on our present plans, objectives and business condition. Based on fully implemented operating budgets and forecasts, which exclude forecasts for new products or markets, our cash and proceeds from the maturity of available for sale debt securities, along with the ICE Credit Facility, as of the date of the filing of this Report are estimated to fund our operations for at least 12 months.

Previous wording

Our losses and projected cash needs, combined with our liquidity level, initially raised substantial doubt about our ability to continue as a going concern in the third quarter of 2023, which we alleviated through management plans which emphasized reducing headcount and other cost cutting measures. In connection with the filing of subsequent amendments thereto, we disclosed that without additional equity financing we could not conclude that we could maintain our operations for a period of at least 12 months from the dates of such amendment filings. We subsequently closed on equity offerings that, when considered with management’s other plans, resulted in management concluding that, notwithstanding the initial doubt that was raised, management’s plans were expected to alleviate substantial doubt. As of the date of this filing, management believes the expected impact on our liquidity and cash flows resulting from the entity integration and operational initiatives outlined above are probable of occurring, if not already completed as discussed above, are sufficient to enable us to meet our obligations for at least twelve months from the date the consolidated financial statements in this Report are issued, and alleviate the conditions that raised substantial doubt about our ability to continue as a going concern. However, there are certain risks associated with this determination. Please see “Risk Factors - Risks Related to Our Business, Finance and Operations - We might not be able to continue as a going concern.” in our Annual Report on Form 10-K for more information.

Current wording

Our losses and projected cash needs, combined with our liquidity level, initially raised substantial doubt about our ability to continue as a going concern in the third quarter of 2023, which we alleviated through management plans which emphasized reducing headcount and other cost cutting measures. In connection with the filing of subsequent amendments thereto, we disclosed that without additional equity financing we could not conclude that we could maintain our operations for a period of at least 12 months from the dates of such amendment filings. We subsequently closed on the Concurrent Offerings that, when considered with management’s other plans, resulted in management concluding that, notwithstanding the initial doubt that was raised, management’s plans were expected to alleviate substantial doubt. As of the date of this filing, management believes the expected impact on our liquidity and cash flows resulting from the operational initiatives outlined above are probable of occurring, if not already completed as discussed above, and along with the amounts available for borrowing under the ICE Credit Facility are sufficient to enable us to meet our obligations for at least 12 months from the date the consolidated financial statements in this Report are issued. However, there are certain risks associated with this determination. Please see “Risk Factors - Risks Related to Our Business, Finance and Operations—We might not be able to continue as a going concern.” in our Annual Report on Form 10-K filed with the SEC on March 25, 2024 (our "Form 10-K") for more information.