Bitcoin Depot Inc. Price & Performance (BTM)

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The conference will begin shortly. Good morning, and welcome to Bitcoin Depot's Fourth Quarter and Full Year twenty twenty four Conference Call. My name is Kate, and I will be your operator today. Before this call, Bitcoin Depot issued its financial results for the fourth quarter and full year that ended 12/31/2024 in a press release. A copy will be furnished in a report on Form eight k filed with the SEC and will be available in the Investor Relations section of the company's website. Joining us on today's call are Bitcoin Depot's CEO, Brandon Mint and COO and Interim CFO, Scott Buchanan. Following their remarks, we will open the call for questions. Before we begin, Cody Slough from Gateway Group will make a brief introductory statement. Mister Slough, please proceed.

Thank you, operator. Good morning, everyone. Before management begins their formal remarks, we would like to remind everyone that some statements we're making today may be considered forward looking statements under securities laws and involve a number of risks and uncertainties. As a result, we caution you that there are a few factors many of which are beyond our control, could cause actual results and events to differ materially from those described in the forward looking statements. For more detailed risks, uncertainties and assumptions relating to our forward looking statements, please see the disclosures in our earnings release and public filings made with the Securities and Exchange Commission. We disclaim any obligation or undertaking to update forward looking statements to reflect circumstances or events that occur the date the forward looking statements are made, except as required by law. We will also discuss non GAAP financial metrics and encourage you to read our disclosures and the reconciliation tables to applicable GAAP measures in our earnings release carefully as you consider these metrics. We refer you to our filings with the Securities and Exchange Commission for detailed disclosures and descriptions of our business as well as uncertainties and other variable circumstances including, but not limited to, risks and uncertainties identified under the caption Risk Factors in our recent filings.

You may get Bitcoin Depot's Securities and Exchange Commission filings for free by visiting the SEC website at sec.gov. I'd like to remind everyone this call is being recorded. And will be available for replay via link in the Investor Relations section of Bitcoin Depot's website. A supplemental earnings presentation highlighting our performance has also been made available on our IR website. Now I would like to turn the call over to Bitcoin Depot's CEO, Brandon Mintz.

Brandon? Thanks, Cody, and good morning, everyone. Thank you for attending our fourth quarter conference call. I believe this call marks the pivotal moment for our business. I will start with three main points that Scott and I want to drive home on today's call. First, our kiosk growth and optimization plan are starting to show through in our financial results and the tough comparisons in the wake of the California California legislation are largely behind us. Q4 adjusted gross profit was up 18% year over year and adjusted EBITDA was up 34%. These results should continue as this strategy unfolds. Second, our business model inherently throws off healthy cash flow which gives us the optionality to drive various initiatives that we believe will create maximum shareholder value. This could come in the form of continued organic growth, debt reduction or as we previewed last quarter the potential to be the only company in the world associated with crypto that will pay a dividend. Third, our growth plan coupled with our healthy cash flow generation is increasing the confidence we have in our business. As such, we are reintroducing our financial outlook which displays continued strong quarter over quarter and year over year growth in our first quarter of this year, which Scott will cover later in the call.

Now I'd like to discuss some recent developments across our business that support these three main takeaways. During the fourth quarter, we continued to focus on growing our kiosk network optimizing our existing fleet and building a robust pipeline of regional and national partners enhance our footprint.

We ended 2024 with approximately 8,457 active machines surpassing our goals and reflecting our team's execution and vision to enhance Bitcoin's accessibility. We expect to see continued growth in our kiosk footprint to continue in 2025. Now onto our BPM relocation strategy. Today, 3,800 of our kiosks have been installed for less than one year. On average, we typically reach breakeven in four to five months on relocation expenses. We know the relocation strategy is working because we continue to see improved volumes at locations after they have been relocated. To highlight the value of our BTMs, we think a comparison to Bitcoin miners is helpful. Bitcoin mining revenue is highly correlated to the price of Bitcoin, whereas our BCMs have shown almost no correlation to the price of Bitcoin. Bitcoin miners have had a great year in 2024 as the Bitcoin price more than doubled Even in 2024, with strong Bitcoin price appreciation, public Bitcoin mining companies roughly averaged a payback period of one to two years on an individual miner. However, our Bitcoin ATMs have typically seen payback periods of less than eight months regardless of Bitcoin price. This highlights the strong profitability of our core business. Now moving to our retail partnership.

We are excited to announce that we secured an early extension many months before the end of our term with our largest retail partner Circle K. This adds roughly twelve months to our agreement with them in The U. S. Additionally, in January, we announced the deployment of 50 additional Bitcoin ATMs in partnership with a prominent convenience store operator with locations across the Texas Panhandle and nearby states.

The expansion provides customers with convenient access to purchase Bitcoin and participate in the broader digital financial system. With this partnership, we're not only expanding our retail footprint in the Southwestern U. S, we're directly addressing the growing demand for convenience crypto access. Now turning to our growth strategy. First is international expansion. We have shipped over 300 kiosks for our Australia launch. We are expecting the launch in Australia to commence in 2025 and are targeting additional countries for further expansion. Australia is fast becoming a global hotspot for Bitcoin adoption ranking third worldwide in the number of Bitcoin ATMs. We believe the growing adoption of cryptocurrency will offer us an opportunity to establish a market leading presence outside of North America. While it's still early, we are encouraged by the pace of retail opportunities we have identified in Australia. We are also evaluating the entrance into at least two additional countries in 2025. Second, we are focused on deploying the remaining kiosks in our inventory from our large kiosk purchases last year. The kiosk remaining in our inventory could allow us to reach fully installed fleet of roughly 10,000 kiosks. Third, we will continue to pursue New York State.

New York State remains one of the largest potential geographical growth opportunities for our kiosks. And we are in regular dialogue with regulators to secure license to operate in the state. At this moment, we do not have any updates on the expected timeline for approval, but are hopeful this can happen in 2025. According to coinathumradar.com, there are still no physical Bitcoin ATMs. In the state of New York. Looking ahead, we believe our business is well positioned to grow and drive shareholder value. Today, we are much more prepared to address how states might approach regulating our industry and this gives us a greater influence when regulations may be drafted. Additionally, are pleased to see our new administration's pro crypto policies beginning to emerge. We believe this positive momentum can be helpful for our business. To recap, we are encouraged by our recent momentum and remain well positioned to execute our strategic goals. Now I'll turn the floor over to our COO, and Interim CFO, Scott Buchanan, who will provide more in-depth insights into our financial performance and business outlook.

Scott?

Thanks, Brandon, and good morning, everyone. My focus today will be on our fourth quarter results and our outlook for 2025. Fourth quarter revenue was 136,800,000.0 compared with $148,400,000 for last year's fourth quarter. A large part of the decline was driven by the impact of unfavorable legislation that was passed in California that went into effect in January 2024. As well as regulatory changes in Connecticut, Vermont and Minnesota went into effect in Q2 and Q3 of twenty twenty four.

Additionally, we relocated kiosks during the quarter to optimize our fleet for maximum profitability. Adjusted gross profit for the fourth quarter of twenty twenty four increased 18% to $25,400,000 compared to $21,600,000 for the fourth quarter of twenty twenty three. Adjusted gross margin in the fourth quarter of twenty twenty four increased 400 basis points to 18.6% compared to 14.5% in the fourth quarter of twenty twenty three.

This margin increase was largely driven by optimizing our markup for MAX profitability and by relocating underperforming kiosks.

Total operating expenses for the fourth quarter of twenty twenty four declined 16% to $15,000,000 compared with $17,800,000 for last year's fourth quarter. The improvement was attributable to lower professional services expenses we anticipate that trend will continue over the coming quarters as we move farther away from the DFAST trends [indiscernible] And optimize expenses for life as a public company. We have saved multiple million dollars on an annual basis by reducing our costs related to third party legal costs and audit services. We've also seen our insurance costs declined $1,500,000 as a result of reduced D and O GAAP net income for the fourth quarter in 'twenty four increased significantly to $5,400,000 compared to a net loss of $1,700,000 for the fourth quarter of twenty twenty three.

The increase was due to lower depreciation and amortization and lower operating expenses in 2024. Adjusted EBITDA, a non GAAP measure, increased 34 percent $12,000,000 for the fourth quarter of twenty twenty four compared to $9,000,000 for the fourth quarter of twenty twenty three.

This increase was primarily due to higher net income Also as a reminder, as we deploy more kiosks, we increased fixed costs.

These deployments do not come with immediate revenue or EBITDA improvement. But they are expected to drive growth later in 2025 and in future years.

Now turning to our balance sheet and cash flow.

In June of last year, we announced our plans to allocate a portion of our cash reserves to Since that time, we have continued to strengthen our position in the market through our Bitcoin treasury strategy.

Recently increasing our holdings to 94 Bitcoin.

This move reflects our confidence in Bitcoin's long term potential as a financial asset as aligns with our commitment to supporting broader access and underscoring our long standing belief in Bitcoin as a significant financial asset and store value. We ended the year with $31,000,000 of cash and cash equivalents and in 2024, We generated $22,500,000 of cash from operating activities, Debt at quarter end was $60,900,000 which includes finance leases and profit share arrangements. Of our total debt balance, dollars 36,000,000 is our term loan, which we are planning to pay down by at least $9,000,000 in 2025. In addition, we are working to continue to improve our cash flow as more of our kiosks transition from lease to own. And as we continue to become an overall more efficient organization. As such, 8,000,000 is the current balance on the kiosk lease and we believe that this will fall to $3,500,000 by the end of the year. As we think about our capital allocation strategy, we completed the paydown of our remaining preferred dividend to BT Asset. Now that this is repaid, we will next focus our attention on other ways of driving shareholder value, including playing down our term loan or potential dividends as we do not expect significant CapEx in 2025.

Now turning to our outlook.

As Brandon mentioned, given the improved visibility we have in our business, we are reinstating our financial guidance Q1 twenty twenty five is off to a very strong start as we continue to see growth from our relocation strategy. We anticipate Q1 revenues to be between $151 and 154,000,000 which would represent growth of between 911% compared to Q1 twenty twenty four. We are projecting adjusted EBITDA for Q1 twenty twenty five to be between $12,000,000 and $14,000,000 would represent growth of over 200% compared to Q1 of twenty twenty four. We would anticipate a similar revenue seasonality trend with significantly higher revenue in Q2 than Q1 and Q4. We remain committed to additional operational to drive profitable growth going forward. Including improving vendor pricing, lowering professional services costs, and optimizing customer markups. We are focused on optimizing the business for profitability and positive cash flow ahead. With that, we are now happy to take your questions. Operator?

At this time, I would like to remind everyone in order to ask a question, please press star then the number one on your telephone keypad. Your first question comes from the line of Mike Colenis with H. C. Wainwright. Please go ahead.

Hi. Good morning, and thank you for taking my questions. First for me, curious how you guys are thinking about growth for the overall global ATM market in 2025 here. And then how growth should look within that context for Bitcoin Depot.

I saw the overall industry grew by about 5% last year as it relates to the growth in the number of PIs So it'd be again good to get your views on market growth trends.

Hey, Mike, it's Brandon. Thanks for joining today.

On the growth related to overall global Bitcoin ATM market, I don't think it's going to be that significant [indiscernible] 2025 compared to 2024, maybe you'll see similar trends We believe Australia will continue to see growth. And that's a good thing for us. We want to be the player growing, not necessarily have a lot more competitive Bitcoin ATMs out there. Typically, you know, if we place our machines in areas with lower competition, we see increased revenues. So, I think a lot of the operators, especially the smaller ones, over the past year or so have been struggling to keep up with new regulation and just the competitiveness in the industry now with larger players that have such an established brand and very sophisticated employees and means of doing business.

Yeah, it's a nice segue onto my next question, which is around the environment. So, Brendan or Scott, it'd be great to see your on the whole regulatory backdrop here in The U. S. For the industry. Especially under the new administration, which is obviously pro crypto. But we also did see the Crypto ATM fraud prevention act introduced just last month, which seems like it could present potentially some headwinds to your business if enacted. You could get your views here.

Yeah, we do believe the new administration will be very friendly to crypto as a whole, of course, and our own industry. We're not very worried about that potential piece of legislation that you're talking about. I think with the new administration, something that could negatively impact our industry's less likely to be passed into law. Great. Thanks for taking my questions, Brandon.

Thanks, Mike.

Your next question comes from the line of Mike Grondahl with Northland Securities. Please go ahead. Hey. Thanks, guys.

The 1,600 kiosk you have in inventory, does that include the 300 in Arizona, in Australia How do you think those 1,600 kind of get put to work in 2025? What is kind of a rough level of expectation?

Yes, Mike, would include the Australia kiosk inventory as well.

And really, the way to kind of look at it is 10,000 machines is roughly what we could get to if we installed everything we could. There's always a few hundred machines moving around from location to location, maybe being refurbished, or repaired, etcetera.

So we actually have more than 1,600 in inventory, but there's always some machines moving around. And the second part of your question was what again?

Just sort of, what should we think of as a goal You had eight thousand four fifty seven at year end '24. Do you think you can get it? 10,000 by year end twenty five nine thousand? How do we model that growth? Well, we do think we'll be some point throughout the year the highest installed fleet that we've had. In Australia, if things look very positive, we would likely send a lot of more machines over there. And that being such a fast growing market, that could accelerate the growth as well. So I would say look out for updates related to Australia. If we're expanding there, then likely we'll reach a higher number in terms of the total installed fleet than just The US or US in Canada.

Got it. And then [indiscernible] in transit if you will, post California, I know 1Q was really busy, 2Q was busy, 3Q was busy, Did you do a lot of moving around of eight of kiosks in Q4. I'm just trying to figure out, did that finally slow down If you could give us some color there that would be helpful.

Throughout the year we remain steady on the removals and therefore the relocations. We didn't remove everything from California. For example, in the first couple quarters of the year, we were trying to see if we could influence the bill that ultimately was passed into law there to be changed. We still believe that there's hope to get it changed. And we're actively working on it. But unfortunately, in 2024, we did not make any changes. And so once we got towards the end of the year, we made a bigger push to relocate a larger number of those machines from California. We were kind of holding on to them for a while to see what happened.

So that played into the relocations as a whole quite a bit.

And continue to be aggressive and removing machines because we see such a quick payback time of four to five months on the relocation expenses. So we think it's just going to be a part of this business model moving forward.

Got it. Got it. And then, the gross margin 18.6% took a nice step up from kind of the 16% level earlier in the year. What's driving that?

Well, it's a combination of things. Just continuing to optimize the spread charged at the machines to find the sweet spot, and in addition to that, we had some armored expenses decline as we were able to renegotiate some contracts. Throughout the year. And achieve more economies of scale. So that was really helpful as that's factored in to that margin there. And also, lastly, our rents on average per machine have been declining as well. So we're saving money on the rent cost And we're continuing to try and get the rent to be as low as possible. To be able to still get as many machines out as possible at these stores.

Got it. And then just lastly, on OpEx, did you guys say that that 15,000,000 is about the right run rate going forward.

Yeah.

I don't think we'll yeah. Hey, Mike. Or sorry.

Yeah, Mike. So we do expect that to be roughly the run rate going forward.

We think we can come down a little bit more.

As we keep getting, some of these more frivolous lawsuits behind us. So we can reduce some legal cost.

Think it'll come down a little bit even as we keep scaling number of guests for the fleet, but I don't think it'll come down materially from where we are now.

Fair. Fair. Okay. Well, great job on that too. Thanks, guys. Thanks, Mike.

Your next question comes from the line of Hal Gottsch with B. Riley Securities. Please go ahead.

Hey, thank you. My first question is on international expansion.

Like how long will it take to get to kind of breakeven at a country level in Australia? Is that a consideration? And will you actually burn cash getting started there for a year or two? And my next question is more, you know, business development wise, like, are you doing anything to increase the velocity of usage in why don't we have a partnership with Circle K where you can buy Bitcoin at Circle K and then use the app on your phone to like check out at the point of sale or buy gas and triple K with Bitcoin. And would help increase the velocity and usage, would think. Your thoughts on those two topics.

Yes. Hey, Hal, this is Scott. Thanks for the question.

Question. So the first one on international expansion, mean, yeah, we definitely will burn cash initially.

In these international markets just as we deploy bunch of kiosks, so they ramp up in performance. Just like we see in The US when kiosks are brand new, they're not instantly profitable. And on month one, you gotta do the installations and everything, which will cost money. And then the often will see profitability after a couple months.

But we think about Australia on the scale of the overall business, right, even the 300 kiosks we've shipped there so far, it's relatively small. And so it won't be too much cash that will be reduced as we we start that expansion process. And then your second question, on kind of Circle K and and using the app to spend Bitcoin at Circle K. I mean, you can do that already with Bitcoin. There there's a lot of different card services out there where you can link cards to your Bitcoin wallets and spend the Bitcoin anywhere.

So we don't really think that's just our core value proposition of helping people spend the Bitcoin. We're more focused on ways that people can use our kiosks as a vehicle to load cash into the crypto ecosystem or or potentially other services. So we think our core value is a cash on ramp and helping provide services to the underbanked. Not so much in ways that people can spend Bitcoin.

Okay.

And I have one follow-up. Have about 4% of your kiosks are under a year.

Right in position in a certain position, And so it looks like productivity is going to ramp and that's kind of what you're guiding to. But like could you give us some color on maybe what percent of your installed base has kind of been in a good spot and, you know, for more than twenty four months. And it's very productive. And could you share with us some of the KPIs of your top 10 or 20% of machines that are like haven't been moved in a while. So we kind of know what a well positioned kiosk looks like. And the reason why I'm asking that is, is that you can put a kiosk into a new store it starts out at zero and goes to something over time, But it also could go to something over time just because it's kind of like a novelty. It's like, can people see it there for a few months six months and nine months in get some repeat bar repeat customers. Really the metal is like really seeing a kiosk that's been in one place for several years and it's doing X. And what kind of how many machines do you have doing that and kind of what are they doing?

It's a good question. I don't have all those stats off the top of my head. Or or in front of me.

But Yeah.

So what we've kinda highlighted is, like, the number we provided, right, is the number that are less than a year old because those are the ones we expect to continue ramping.

So obviously, the the the delta or the difference of that percentage from a hundred is the amount for over a year. I don't know the percentage over twenty four months. I'll off the top of my head, but it would be a good portion of the ones that are less than a year. Because we don't typically remove kiosks that are over a year old. We're typically removing them between month six twelve. So it'd be safe to assume that the ones that aren't under a year most of those will be over two years. As far as the volume averages on those, I don't know it off the top of my head again. We'd have to pull the data and check it. But do see strong performance from those kiosks that have been installed for for multiple years.

And that's why we're so aggressive in relocating kiosks because we know we do find a good spot, the performance for those that stay in their location for a long time are are generally really strong.

Right. Okay.

Thank you.

Before going to the next question, again, if you would like to ask a Your next question comes from the line of Pat McCann with Noble Capital Markets. Please go ahead.

Hey, thanks for taking my questions. My first question has to do with the regulatory environment. I know that although the the administration, the presidential administration is friendly to crypto, Ultimately, on a state by state basis, that's an important factor as well, of course. I'm just wondering [indiscernible] are you seeing as far as trickle down effect from the federal administration to the individual states? Is there any Are there any positive developments in, let's say, the bluer states where you might expect tighter regulation on crypto, any thoughts there?

Hey, Pat. This is Scott. Thanks for the question. So like like Brandon said and like you mentioned, we do think federally there's positive momentum, and more favorability for the crypto space and Bitcoin ATM specifically even. Which is great. They think that's obviously the would be the biggest concern is some federal legislation that negatively impacts the business.

At the state level, it's very different state to state. We have seen some positive movement with the federal positions on things. There's still challenges in in certain blue states. Right? And so we stay on top of that with lobbyists. [indiscernible] high value states for us. We also partner with others in the crypto space more broadly to monitor these things. And and make sure we can explain our business effectively to legislators. So that they understand what we do and the protections we provide for consumers. So that we don't get blindsided by something like California. But it's really hard to say exactly what happens on each state level. It's it's not all guided federally, like you said, and what we we can do is just stay on top of the lobbyists and and make sure we explain our business well to these different legislators.

Thanks. And then my other question, to do with uses of capital and you guys have mentioned the prospect of a dividend, but I think Brandon also mentioned the some of the challenges of some of your competitors. I was wondering, are there any M and A opportunities? Is that a potential use of some of the cash that you might consider? Any thoughts there?

Hey, Pat, it's Brandon. I'll take that one. On the M and A opportunities, we're always having conversations with potential targets and just getting to know more and more competitors. Not only in The US, but across the world where we may be interested in expanding to.

What we typically see is they are not understanding kind of our value in terms of market cap in relation to theirs. Right now, don't know what the multiple is, but it's typically been around two times EBITDA or so.

And going to one of these competitors and trying to buy them for less than that can be difficult. But what we've also been seeing is as we continue to buy kiosks for reduced prices like the purchase we made around ten, eleven months ago, wherein that press release, we said we bought this kiosk for less than a discount of over 50% versus what we've paid. It's been less and less worth it to do m and a. Because if we can get kiosks for much lower prices, we're continuing to reduce our rents They need to have more and more of something strategic to us for it to make sense. Because when we run the numbers, it makes more sense to grow organically. Now internationally, I think there's more likelihood of an acquisition versus in The US at the moment just because they have something potentially more strategic. Maybe they have a license that we don't have to operate or maybe they have a big retailer that they sign that would be difficult and take a long time for us to get into. So [indiscernible] we're not expecting you know, a lot of M and A activity.

But if we do find something interesting, it would probably be pretty strategic to us versus just boosting our financial profile.

Great. That's very helpful. Appreciate the color.

I will turn the call back over to Brandon Mintz for closing remarks.

Thanks, everyone, for joining the call today. We look forward to continuing to show strong results in Q1 and we'll talk to you guys next time.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

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