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

Welcome, everyone, to Exodus' Fourth Quarter 2024 Earnings Conference Call. I'm your host, Greg McNiff, and joining us today are Exodus Cofounder and CEO, JP Richardson; and Exodus CFO, James Gernetzke. During today's call, we may make forward-looking statements. The company cautions investors that any forward-looking statements involve risks and uncertainties and are not a guarantee of future performance. Actual results may vary materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described under forward-looking statements in our earnings press release and our most recent registration statement on Form 10 filed with the Securities and Exchange Commission available on the Investor Relations portion of our website. We do not undertake any obligation to update forward-looking statements. Please visit our social media accounts, X or Reddit, to submit your questions for the quarter for our Investor Relations team after our call. And with that, let's go to JP for the review of Exodus' preliminary fourth quarter and full year 2024 results.

Hey, everyone. Thank you for joining us today. Our unaudited Q4 results represent yet another strong quarter for Exodus. As we continue executing on our strategy to bridge traditional finance and blockchain technology, we delivered record revenue while introducing innovations designed to make digital asset ownership frictionless and accessible to everyone. In Q4, we grew revenue 143% year-over-year to $44.8 million. We continue to scale our business by expanding on the partnerships we announced last quarter. We currently have 11 partners signed with XO Swap, with 5 of those already in the integration process. Exodus finished the full year with $116.3 million of revenue, and those are record revenues on the quarter and the year. Accordingly, we accomplished several milestones in the quarter, building on last quarter's momentum and aligning with our growth initiatives. Let's run through those milestones. First, we continue to invest in marketing and education. As many of you are aware, Exodus was a co-host of the first Crypto Ball in D.C. Expect to see similar marketing initiatives in the coming months as we shoulder increasing responsibility to foster awareness and adoption of Bitcoin, DeFi and Web3, especially to the policymakers in D.C. Meanwhile, self-custody remains the core of our business as Exodus continues to empower users with a secure multichain wallet for Bitcoin, Ethereum, Solana and beyond. Our Exchange Aggregator technology extends our natural multichain capabilities by connecting consumers with the most competitive rates and transaction speeds, while our newest launch, XO Pay, also simplifies fiat onboarding to improve the whole user experience. Now the most exciting development this quarter was the very strong performance of our newly announced B2B2C swap aggregator XO Swap. This XO Swap product leverages the Exchange Aggregator technology with its decade of refinement and reliability and serves to other industry players, including Ledger and Magic Eden. As a reminder, our Exchange Aggregator enables consumers to retain control over their crypto transactions while providing transparency and security. This aggregation is intended to enable consumers of other wallets to receive the best available rates and fulfillment times. XO Swap is truly a best-in-breed solution for any wallet or Web3 dApp, looking for multichain swap capabilities honed, as I mentioned, in our own wallet over the past decade. And with XO Swap contributing 12% of our Q4 revenue, we are enthusiastic about its long-term potential. We are closely tracking its momentum in 2025. Furthermore, the Passkeys Wallet launch marks a major step in simplifying crypto access with frictionless onboarding. Passkeys Wallet is a self-custodial multichain wallet that can be embedded directly into dApps and Web platforms. Some call this technology smart wallets. We prefer the phrase instant wallets. With Passkeys Wallet, consumers can create and access a crypto wallet without any friction, no need for downloads, no accounts, no e-mail verification, no storing of a 12-word secret recovery phrase. Instead, the self-custodial wallet is seamlessly managed using Face ID, Touch ID, a PIN or even password. This solution improves the user experience and offers developers a powerful tool to integrate crypto functionality into their platforms. Early adoption has been strong, and we are excited about its growth potential in the quarters ahead. Passkeys ended 2024 with over 200,000 users, thanks to a marketing program we ran on X. Shifting gears, acquisitions remain on the table as Exodus continues to build its pipeline of targets. There is significant inbound interest from companies looking to join us on our journey, but we will not be sharing any names at this time. There's a longer-term vision we will share in the future earnings release that we believe partnerships and acquisitions will help to accelerate. And in December, we celebrated with an uplisting to the NYSE American Exchange where we are enjoying the increased liquidity, better opportunities to access capital and improved visibility with investors. Beyond Exodus, our broader crypto ecosystem gained momentum throughout Q4, increasing mainstream adoption and institutional participation. The Trump election preceded major changes in the acceptance of our industry. Bitcoin ETF inflows were substantial with $16 billion on the quarter, while Bitcoin reached $100,000 for the first time. And to put a cherry on the sundae for Exodus, yesterday, President Trump announced a crypto strategic reserve by which the Presidential Working Group on Digital Assets would move towards creating U.S. investments in Bitcoin and other digital assets. As we say in crypto, LFG. And so Q4 was very strong as Exodus grew while innovating to make digital assets more accessible. Our NYSE American uplisting, our major product rollouts like XO Swap and Passkeys Wallet and our focus on superior customer experience, we believe all of these factors have Exodus solidly on track for a prosperous 2025. I just want to thank you all to our customers, partners, investors and team members for joining us at every milestone. We are at the very early stage of this journey to make Exodus the leading Web3 technology platform, and I couldn't be more excited about our opportunities ahead. We look forward to reaching many more milestones as we seek to transform our visions into reality. And now I'll hand it to James for a financial update.

Thanks, JP. Q4 was a strong milestone quarter for Exodus and the market. But before jumping into Q4 and 2024 results, I'd just like to remind everybody, we recognize the large majority of our revenue from fees we charge third-party API providers for access to our users. And in particular, revenue generated from our exchange aggregation API providers makes up the core of our business. We do have non-exchange aggregation revenue as well, which comes from API providers with other capabilities such as staking and fiat onboarding. Given our model, business performance has historically been affected by the cryptocurrency market cycles, which can be volatile in the short term. However, when looking over a longer period of time, we have been able to scale our business across these cycles. So in the future, we expect to further capture our addressable market through strategies such as partnerships and products such as XO Swap. In Q4, we generated $44.8 million in revenue, representing 143% growth year-over-year and 123% sequentially. This year-over-year revenue growth was driven by strength in both our exchange aggregation and non-exchange aggregation revenues and further supported by increased user activity and continued positive momentum in the cryptocurrency market. Exchange aggregation accounted for 92% of total revenue in the full year 2024. And of that exchange revenue, 93% was from our users and 7% was from our XO Swap partnerships, while non-exchange aggregation, including fiat onboarding and staking revenue, represented 8% of the total revenue. One of the key developments in the second half of 2024 was XO Swap as the partnerships came fully online with meaningful contributions towards the end of the year. And this momentum has continued into the first quarter of 2025. Exchange provider processed volumes for the quarter were $2.3 billion, reflecting 169% growth year-over-year and 139% sequentially, which was made possible as cryptocurrency valuations increased on the year along with Exodus' user base. Monthly active users in Q4 reached 2.3 million, which compares to 1.4 million a year ago and 1.6 million in Q3. This growth was driven by multiple factors. We enjoyed increased user engagement, new product launches and ongoing marketing initiatives throughout the year. On our balance sheet, we ended the quarter with $265 million in digital and liquid assets, primarily composed of Bitcoin, Ethereum, U.S. dollars and Treasury bills, while we remained debt-free. We continue to be early adopters of ASU 2023-08, which, as a reminder, means our digital assets are now recorded at fair value. You can clearly see our long-term Bitcoin strategy in action on this chart, which highlights our accumulation over time. We held 1,941 Bitcoin as of the end of Q4 compared to 1,800 units in Q3. Looking back, we held 1,787 Bitcoin as of 2023 year-end. Our Bitcoin holdings have grown over time as we have strategically managed our treasury to align with our long-term vision. Looking ahead, we intend to take a disciplined approach to treasury management, balancing operational needs with opportunities to strengthen our digital asset position. And to bring everybody up to speed on the new year, I'll provide preliminary Q1 highlights that demonstrate that this quarter is off to a strong start. Through the first 2 months of Q1 2025, we have seen volumes of $1.45 billion. which for comparison is already higher than the volume we saw in each of the whole first 3 quarters of 2024. Of that, 23% of the volume is related to XO Swap partnerships. We've also grown our digital asset holdings, ending February with over 2,000 Bitcoin units in our corporate treasury. So to wrap up our discussion, Q4 was another strong quarter for Exodus as we continue to capitalize on the growing digital asset market. We remain committed to maximizing shareholder value, and we thank you all for your support. With that, we'll take some questions.

[Operator Instructions] Our first question comes from Ed Engel from Compass.

Can you hear me?

Yes, loud and clear.

Great. Yes. Congrats on the NYSE uplist in last quarter and also on a really strong set of fourth quarter results. So just kind of high-level one first, just the industry experienced one of the biggest hacks ever last month when a centralized exchange was hacked for over $1 billion. How do you kind of think of these events and how they kind of impact demand for self-custodial products like Exodus? And then did you see any notable impacts on user onboarding after this event?

Thank you. So yes, absolutely. I mean one of the biggest exchange hacks ever, as you mentioned, $1.5 billion, happened through infiltration of the systems. Now ultimately, it was due -- the ETH was stored on a smart contract, but it was -- the hacks were customers' funds. Now fortunately, Bybit was able to, as far as I know, make whole on that kind of a hack. But it does continue to highlight the risk of custodial exchanges. And so for us, I mean this continues to reinforce the value proposition of Exodus in that we are self-custody. And so yes, absolutely, there was influx of customers, but nothing that we're willing to report just at this moment. But again, these hacks are going to continue to happen. Custodial exchanges are going to get hacked again and again and again. And this points to the origin as to why Exodus was created in the first place. If you go back to 2014 with Mt. Gox and then if you wanted to store multiple assets and swap multiple assets, you had to use an exchange. But today, that's no longer true, and you can use Exodus to hold all of your assets in one wallet.

Super helpful. And then one housekeeping one. I wasn't quite able to find it, but did Exodus disclose any gross margins in the fourth quarter or G&A expense? And then if you guys have that already, were there any onetime costs related to the NYSE uplisting?

There were costs related to the uplisting. Obviously, as you can imagine, in 2024, the Form 10 process generated some significant fees for our friends in the legal industry as well as the accounting industry. And you'll see those when we file our 10-K here shortly. In terms of -- sorry, what was the other part of that question?

Did you guys disclose any gross margins or G&A expense overall in the fourth quarter? Are we still waiting for the filing?

I would just wait for the filing.

Okay. And then I guess one last one. At the beginning of the quarter, you guys announced kind of a change to your pricing structure or the pricing mechanism or, I guess, the swap experience overall. I'm just kind of curious, what does that mean for, I guess, the product offering? Is it just kind of more options for users? And I guess does that have a substantial impact on your overall fee rate moving forward?

I'll take the first part, and JP, feel free to jump in if I miss something here. The overall -- I would say that that structure does not change the overall -- I believe that is specifically related to some of the Solana fees. However, it just signifies our desire to continue to improve that Exchange Aggregator, that we've been working on that for, as JP mentioned in the opening remarks, 10 years now. And we continue to refine and improve that overall experience as well as work to provide best execution and fee structure for our users going forward. The one thing -- the other thing I would say on that is in general, that did not necessarily change our margin structure at all on our base business.

Perfectly helpful. Congrats on a great start to the year.

Our next question comes from Kevin at H.C. Wainwright. Kevin, are you able to unmute your line?

Yes. Can you hear me now? Is that better?

It is.

Apologies for my ineptitude in handling Zoom and these communal venues. Listen, JP, first, let's dive in a little, please, and offering maybe some more color on XO Swap. Understand there are 11 agreements, 5 have been integrated, you're seeing a benefit already through the fourth quarter and through March so far this year. Can you talk about where you see that going versus your legacy aggregation business?

Absolutely. So if we look historically at some of the bigger current partnerships that we have, Magic Eden and more specifically Ledger, and you look at consumers that are using some of these products, specifically ledger, right, so Ledger has, I think, close to 7 million customers, maybe close to 8 million, but 7 million to 8 million customers. And today, these customers, what they're doing is they own a hardware wallet, and then they're plugging it into their machine and they're using it. Now despite the fact that a Ledger works with Exodus and so does a Trezor works with Exodus, many consumers are happy using the ledger software that they have today. And so what this allows us to do is it allows us to take our technology, the XO Swap technology, the swap aggregator technology and bring it to other business partnerships so that they can offer it to their consumers. And since we see wallets as, again, is kind of sticky for a customer base, it allows us to tap into other consumers without us having to go market to those consumers and actually have to bring them over to Exodus. So they can still use the platform that they know and love, say, Ledger in this case, and then again use the swap aggregator technology. So beyond this, we see and believe that many other wallets will adapt XO Swap as well because it is one of the best-in-class for providing swaps across chain for consumers.

It's hard to argue with you, JP, given the quarter's results. Congrats on that. So another stab at it, how do those users -- the ones on Ledger and Trezor or Magic Eden, how do they see that XO Swap technology? Is the Exodus Movement brand in any way put to those customers?

Yes. We like to create seamless and integrated experiences. So in the case of many -- some of these platforms, like Ledger, the brand is a little more pronounced. But in the case of, let's say, like Magic Eden, it's less pronounced. So it's going to vary on a case-by-case basis because all of what we're providing is APIs that route to our third-party API providers. And so the actual branding is going to vary on a case-by-case basis.

How do you look at the intellectual property that you've baked in? Granted 10 years of hard work, not to be dismissed, but how do you look at that in terms of Exodus having a moat?

Yes, absolutely. So that's a great question because what we're thinking -- the way that we're thinking about this long term is actually open-sourcing a lot of the client-side front-end code of Exodus with the intention of making a wallet cheaper for developers, Web3 projects to come and build wallets. Because ultimately, at the end of the day, if a consumer -- or if a developer builds a wallet with our APIs, then they're way more likely to integrate XO Pay or XO Swap. And so for XO Pay and XO Swap, these products are on the back end. They're on the server. They're not open source. They're not available to developers other than through an API. So it would be very hard for a competitor or another wallet provider to come along and say, "Hey, we're going to build our own XO Swap," because again, what we've done over the last 10 years is we've taken all the swap partners out there and we put them in one experience. And behind the scenes, we are monitoring and controlling what the consumer ultimately experiences, and we provide a back-end interface of analytics and control for our partnerships. So from the aspect of a moat, the real moat is going to be through XO Pay and XO Swap, not the front-end wallet itself. So I think that's really important to note that long term, we want as many wallets out there as there can be so that we can ultimately have more partnerships for XO Swap and XO Pay.

Last question for me, I promise. Let's talk a little bit about MoonPay and Banxa. I know that deal went south. And listen, I've covered Banxa for years and years, and the original figurehead of that company was an awesome guy. The most recent management change hasn't left me feeling very upbeat about where that company was going. I understand that they -- you and they couldn't align, and it makes sense. But I just -- I guess I would like to understand how that XO Pay and the MoonPay integrate and how difficult that integration is in delivering XO Pay.

Great question. So long term, everything that we think about is through the lens of the consumer experience. So today, as a consumer, using Exodus and then going and buying crypto with, say, a debit card or checking account, one of our biggest partners, MoonPay, and they've been a great partner, as a consumer, you go and you see a completely different experience. It almost feels foreign to you as a consumer. So our path of building out XO Pay is to provide a more customized and seamless and integrated experience, so as a consumer, you feel like you're just in one Exodus experience. Now at the end of the day, whether it's XO Pay or MoonPay, we ultimately do not care. We just want to provide the best experience for our customers. And you may look for more enhanced partnerships in the future that would help us to do that.

So the -- apologies, I lied. The Exodus user doesn't see the MoonPay and Ramp on-ramp or off-ramp activity, and then they have an alternative to use XO Pay?

You can ask as many questions as you want. These are great questions. So no, so right now...

Trust me, I went through an hour of this with James. He never wants to speak to me again.

No, I love it. Just keep throwing them out. So if you're a consumer and what you're presented with today is you are presented with a choice of MoonPay, XO Pay and other fiat on-ramp providers, other ways to purchase crypto with Bitcoin -- or sorry, purchase crypto with a credit card or a checking account or what other fiat method you want to use, so you have that choice today. Long term, we're looking to create a very strong seamless experience so that as a consumer, you don't have to think about whether you're using XO Pay, MoonPay, Ramp or any other provider. You're just integrated in Exodus, and it just feels like one cohesive experience. And this one cohesive experience really ultimately could be powered by a partnership with MoonPay or someone else. But that's ultimately what we're after, is a seamless experience. And today, it doesn't quite feel that way. It feels like as a consumer, like, I want to use my debit card to buy Bitcoin. Okay, I have to choose between an XO Pay, a MoonPay or some of the other providers. Does that help?

Yes, it helps a lot. So I guess it kind of becomes interesting, as you look down the pike and integrating all this seamlessly, it's hard for me to see anything seamless in the world of crypto. I mean it's absolutely probably one of the most awkward environments you can imagine. So I applaud the effort. How do you see that XO Pay launching and its growth ramp?

Here's what's great about XO Pay, is that to those who already are partners with XO Swap and they're getting value from XO Swap, XO Pay becomes a natural complement for us to go in and say, "Hey, you have this swap aggregation technology from us already. Now we have this other service and platform for you called XO Pay." And so we think that provides a strong channel for additional partners for XO Pay. But at the end of the day, what we're really trying to do is remove all complexity from crypto because to your point, crypto, it is complicated still, right? Like the fact that you have still 12-word secret phrases, still addresses, the fact that you have different -- you have to worry about, is this an L1, L2? Which network am I on? And do I have enough ETH to pay my gas fees? These are the things that we're looking to remove from the consumer experience long term.

Thanks very much, JP, for indulging me. It's a real pleasure to be on the call. I appreciate it. And James, thanks for allowing me to join. I know it was a tough decision for you, but it's fun to be included.

Anytime. I love the questions, just like JP.

Thank you, Kevin. That ends our Q&A session. Thanks to JP, James and our analysts. Please visit our social channels on X and Reddit to submit your questions for our Investor Relations team. And with that, we're concluding our call. Thank you very much for joining us today, and we hope to see you in the future. Take care.