Business Overview

Bitcoin Depot Inc. owns and operates the largest network of Bitcoin ATMs (BTMs) across North America, where customers can buy and sell Bitcoin. The company’s mission is to bring cryptocurrency to the masses by providing a simple and convenient process for users to convert cash into Bitcoin through its BTMs and mobile app.

As of June 30, 2024, Bitcoin Depot had approximately 8,068 BTMs installed in retail locations throughout the U.S. and Canada, as well as its BDCheckout product accepted at 7,441 retail locations and a mobile app. The company maintains a leading position among cash-to-Bitcoin BTM operators in the U.S. and Canada.

Financial Performance

Bitcoin Depot’s revenue decreased by 17.4% in the three months ended June 30, 2024 compared to the same period in 2023, primarily due to decreases in kiosk transaction volume. Revenue also declined 16.5% for the six months ended June 30, 2024 versus the prior year period, again driven by lower transaction volumes.

The decrease in revenue was partially offset by higher average transaction sizes. However, regulatory changes in California, which imposed daily transaction limits, accounted for approximately 50% of the revenue decline in both the three and six month periods.

Bitcoin Depot’s cost of revenue (excluding depreciation and amortization) decreased by 18.3% and 16.4% for the three and six month periods ended June 30, 2024, respectively, in line with the decline in transaction volume. The company’s gross profit margin was 14.3% in Q2 2024, up from 13.5% in the prior year quarter.

Operating expenses increased 6.0% for the six months ended June 30, 2024, primarily due to higher payroll costs from increased headcount and professional services expenses related to regulatory and lobbying efforts. However, operating expenses decreased 4.6% in Q2 2024 compared to the prior year quarter.

Bitcoin Depot reported net income of $4.4 million in Q2 2024, compared to a net loss of $4.0 million in Q2 2023. For the six month period, net income was $0.1 million in 2024 versus $2.1 million in 2023. The improvement was largely driven by lower interest expense and the absence of one-time expenses related to the company’s PIPE financing in 2023.

Key Metrics

Bitcoin Depot tracks several key business metrics to measure performance and guide strategic decisions:

• Installed Kiosks: The company had 8,068 installed kiosks as of June 30, 2024, up from 6,351 a year earlier, reflecting continued expansion of its network.

• Returning User Transaction Count: This metric, which measures user retention, declined from an average of 9.2 transactions per returning user in Q2 2023 to 7.1 in Q2 2024.

• Median Kiosk Transaction Size: The median transaction size increased from $200 in Q2 2023 to $230 in Q2 2024.

• BDCheckout Locations: The number of retail locations accepting Bitcoin Depot’s BDCheckout product grew from 5,195 in Q2 2023 to 7,441 in Q2 2024.

These metrics indicate that while Bitcoin Depot continues to expand its physical footprint, user engagement and retention have declined somewhat, potentially due to the regulatory changes in California and kiosk relocation efforts. The company will need to monitor these trends closely going forward.

Regulatory Environment

Bitcoin Depot operates in a rapidly evolving regulatory environment, with heightened focus by global regulators on the payments industry. New or changing laws and regulations, such as the California Digital Financial Assets Law, can have a material adverse impact on the company’s business.

For example, the California law imposed a daily limit of $1,000 on the amount of funds that Bitcoin Depot can accept from or dispense to a California resident at its crypto kiosks, negatively impacting the company’s revenue in the state.

The company notes that legislation or guidance from regulatory bodies like FinCEN and the IRS may differ significantly from its current practices or interpretations, potentially having unforeseen effects on its financial condition and results.

Liquidity and Capital Resources

As of June 30, 2024, Bitcoin Depot had working capital of $7.7 million, including $54.6 million in cash and cash equivalents. The company reported net income of $0.1 million for the six months ended June 30, 2024.

Bitcoin Depot’s working capital requirements are limited, as it maintains a relatively low balance of Bitcoin (typically less than $0.6 million) at any given time to manage volatility. The company’s cash flow is primarily driven by cash accumulating in the BTM kiosks until it is collected by armored carriers.

The company believes its existing cash and cash flow from operations will be sufficient to meet its needs for at least the next 12 months. However, future capital requirements will depend on factors like revenue growth, research and development spending, and potential acquisitions or investments.

In June 2023, Bitcoin Depot amended and restated its credit agreement, refinancing $20.8 million in debt at an annual interest rate of 17%. The company also entered into an additional $15.7 million amendment to the credit facility in March 2024, providing $15.2 million in net cash flow.

Outlook and Analysis

Bitcoin Depot’s financial results in the first half of 2024 reflect the challenges the company has faced, including regulatory headwinds in California and disruptions from its kiosk optimization efforts. The decline in revenue and user engagement metrics is concerning and will require close monitoring.

However, the company’s leading market position, growing kiosk network, and diversified revenue streams (including BDCheckout and hardware sales) provide a foundation for potential future growth. Maintaining a disciplined approach to managing Bitcoin inventory and operating expenses will also be critical.

Navigating the evolving regulatory landscape will be an ongoing priority for Bitcoin Depot. The company will need to stay agile and adapt its practices to comply with new rules and guidelines, while also advocating for policies that support the adoption of cryptocurrency and digital financial services.

Looking ahead, Bitcoin Depot’s success will depend on its ability to drive user adoption, expand its product offerings, and manage costs effectively - all while remaining compliant with an increasingly complex regulatory environment. Investors will be closely watching the company’s progress in these areas in the coming quarters.