Exodus Movement, Inc. (EXOD) Earnings Call Transcript & Summary

You can expect a response from our Investor Relations team within 24 hours. And with that, let's go to JP for [indiscernible]

Thank you, Chris, and to everyone watching. Thank you for joining us today for Exodus third quarter call. We talked about Wallet-as-a-Service last quarter. Building resilient business requires sector dominance and Wallet-as-a-Service embodies our commitment to a blue ocean strategy. What sets us apart is our active involvement in the development process. Wallet-as-a-service is not just about providing software, it's about cracking unparalleled, secure and visually captivating wallet mainstream experiences for Web3 dApps. This is not nearly a B2B revenue avenue. It's a gateway to partnerships and distribution channels for our B2B infrastructure, a white-label Aggregator, Swap and Fiat services. Exodus is proud to announce our first Wallet as-a-Service deal, with Magic Eden as our first customer. We are thrilled to partner with Magic Eden to provide wallet software, as well as infrastructure access to our Fiat and Swap services. This is about more broadly and talk about macro. In third quarter, Bitcoin and U.S. crypto companies continued their walk towards the mainstream. The United States SEC delayed its decision on a spot Bitcoin ETF for all applicants, including BlackRock and Fidelity. Bitcoin, Ethereum prices declined slightly in the quarter with Bitcoin down 12% and Ethereum down 16%, with both assets remain well above their prices at the beginning of the year. All of this was before the fourth quarter when continued speculation about a potential Bitcoin ETF sent crypto prices generally higher. On the regulatory front, Exodus has been proactive in preparing for the new regulations, which recently took effect in United Kingdom. Last month, the U.K. Financial Conduct Authority, set strict guidelines regarding how financial services can be advertised. We prepared for these guidelines and we worked to ensure we were in compliance before they went into effect. Unfortunately, when it comes to enforcement, the U.K. FCA appears to have cast a wide net for many crypto companies, utilizing the broad language of the regulations to place companies on warning list for unauthorized firms. Exodus is 1 of the companies that has been named by the U.K. FCA on that list. Now Exodus is invited to register with the FCA to clear everything up, but there's currently no way for a self-custodial crypto wallet to register. Because the laws are focused on asset custodians. Our best legal minds are working on this problem currently, the most immediate impact on our U.K. customers is that Exodus Mobile is not currently available through the U.K. App store. We're working to get this restored. So from a corporate perspective, our users are widely distributed globally, which includes the U.K. There's not an immediate effect on our current expected revenues, but the situation could reasonably impact our future revenues if it continues without any resolution or improvement. So this matter is something we have taken seriously in the past and we continue to work on today. And to be clear, the application is still working for those in the U.K. who have already downloaded Exodus. It's just those that are located in the U.K. that are trying to download Exodus that have never used Exodus before that are unable to do that because Exodus is not available on the U.K. App store currently. This broadly applied government regulation is another reminder of the importance of cell custody. I will always urge you to take custody of your own Bitcoin in digital assets using a self-custodial wallet like Exodus. Those who control their own wealth will not find themselves at the mercy of their custodian, has the best chance of adapting successfully to an unpredictable future. Our CFO, James, is here to review our third quarter finances. Take your way, James.

Thanks, JP. We'll start with Q3 results. But then at the end, I will give a little bit of commentary around how we see things shaken out for the full year 2023. Digital asset markets took what I'll call, a short breather in Q3 as prices and activity in general decreased slightly. And as such, our revenue is down versus Q2, but it's up from a year ago when the bear market was going full more. And you'll see that in general in our results, Q2 of '23 versus Q3 of 2022. But let's look deeper. So our revenue for the quarter was $12 million, which is down 3% from the $12.4 million in Q2, but up 8% versus the same quarter in 2022. And moving along the swap volume, a similar trend, we ended at $569 million in the quarter, which is down 3% from the prior quarter, but up 4% versus Q3 of 2022. MAUs were at 741,000, that's down 4% from the prior quarter. The interesting thing here is that our user base has shown us many times that while they may not be active in any given month, they usually do not leave Exodus. And we've seen some direct evidence of this in the last month or 2. And I'll talk more about that later when I go over some thoughts around 2023. So moving on to the next slide. This is really where we demonstrate our commitment to delivering profitability during all phases of our company's growth. So our adjusted EBITDA was $2 million for the quarter despite the market taking its short breather, if you will. And I'll repeat last quarter's expectation that we will remain adjusted EBITDA positive in each quarter of 2023 and as such, we have managed significant increases in profitability versus 2022. And even better, we're in a great position to scale further should 2024 see a bull run. And it certainly appears that we're on a good start. Obviously, we're all crossing our fingers that it continues that way into the Bitcoin avenue. And finally, as always, our balance sheet continues to be strong with no debt and $106 million in cash and digital assets at quarter end. We are always open to looking for opportunities to deploy this capital and accelerate our mission, as I've mentioned in previous quarters. So now if we jump to 2023 thoughts, JP had mentioned earlier in the call that cryptocurrency prices increased early in the fourth quarter and have stayed elevated thus far. And having taken that breadth in Q3, the market is really back to running. And our Exodus users who maybe they took a little time off at the end of September, they're back too. Our monthly active users metric is measured over 850,000 MAUs in the past few days and November is shaping up to be our highest swap volume month so far this year. And while it remains to be seen exactly where we'll end up in terms of MAUs at the end of Q4 and what December will bring for volumes, the increases have been really phenomenal to see. Overall, beyond the year, we expect full year 2023 revenues to land somewhere in the range between $51 million and $54 million. Of course, these predictions are best expectations at this point and the final numbers for Q4. That will be released next quarter, but we're looking to finish the end of the year strong. And with that, back to you, JP.

Thanks, James. As a reminder, our vision is to help the world exit the traditional financial system. And to me, there's always new innovation, creating new products and new experiences. Even the oldest cryptocurrency, Bitcoin has yet to turn 15 years old. Innovation was at the heart of our 2021 crypto only Regulation A stock offering that solidified Exodus' finances and put us on a path to become a fully public company. Many of you may recall that $75 million was raised 100% in crypto and all of it by using the Exodus Wallet. I'm sure many of you know that Exodus shares can be digitally represented on the Algorand blockchain an industry first. Now the time has come to find our company stock on working trade efficiently, and as a first step toward that goal, Exodus has applied for the OTC markets uplifting and our application is in progress. An OTC markets listing will allow Exodus to trade on many popular stock brokerage websites. For those of you prefer to keep your blockchain-based shares in your Exodus wallet, that's no problem, you'll still be able to do so and know you'll be happy in our flagship product, Exodus. Listing on OTC market is a solid first step towards an eventual listing on the NYSE or NASDAQ. A lot of those listing requirements are taken care of during the OTC markets listing process. So with our work in the current quarters, we are laying the foundation for the future move to benefit the company and its shareholders. As our company learns and grows from these moves, it brings Exodus 1 step closer to being the only wallet you'll ever need. So we can imagine a future where traditional markets trade inside of Exodus. Today, I'm excited to build a game-changing addition that will propel us towards that vision. In Q4, we'll be introducing XOPay our new Fiat service, the Exodus ecosystem. Before I delve into details, let's explore why XOPay is not just another payment solution, but revolutionary force within Exodus. Our journey towards XOPay began with the realization. We acknowledge that mainstream customers prioritize a frictionless experience. XOPay is designed to provide the most frictionless experience for buying and selling crypto. We're not just aiming for 1 click solution. We're crafting an environment where users can easily navigate the crypto landscape with unparalleled ease. As we embark on this journey with XOPay, we're not just introducing a service. We're creating a competitive advantage. XOPay aims to exceed mainstream expectations with the phased approach to market on-ramps and integration with platforms like Apple Pay and Google Pay. Looking ahead, XOPay represents a strategic move, aligning seamlessly with our vision of guiding the world toward an exit from the traditional financial system. And it all comes down to making this easy for the mainstream. The mainstream consumer should be able to use the world of Web3 directly from their credit card or bank account, and that's what XOPay is going to help to unlock. Shifting gears, for those who have questions or need help, Exodus' support team remains the industry's most helpful by solving any problems that arise quickly and effectively. They can act as your trusted friends in crypto and are standing by around the clock to support you. Please feel free to reach out. Our support staff makes an excellent reason to share Exodus with family and friends this holiday season. And as always, I'd like to send my heartfelt thanks to our loyal customers and investors. You have empowered yourselves and you have supported our mission to help the world exit the traditional financial system. Folks, that's all for me this quarter. So Chris, please take us to the finish line.

Thanks, JP. Remember, to visit our social channels to submit your questions for management, for the third quarter. Now, you can expect direct responses from our Investor Relations team to each of your inquiries within 24 hours. And that being said, thanks for joining us today.