BTGO Q2 Earnings Call Highlights

Revenue increased 79.6% year over year to $4.3 billion, but weaker trading margins and an unfavorable mix pushed adjusted EBITDA to a $4.2 million loss from a $3 million profit a year earlier. BitGo expanded normalized assets on its platform to approximately $65 billion and staked assets to about $12 billion despite a weaker crypto market, while staking and stablecoin-as-a-service revenue showed mixed but significant growth. The company expects cost-cutting measures to generate $15 million in annualized savings beginning in the third quarter and aims to approach adjusted EBITDA break-even; CFO Ed Reginelli will transition out of the role during the coming quarter.

BTGO NYSE: BTGO reported higher second-quarter revenue and continued growth in assets on its platform, but lower trading margins and an unfavorable revenue mix weighed on profitability as digital asset markets weakened. Co-founder and CEO Mike Belshe said the company expanded normalized assets on platform to approximately $65 billion and normalized assets staked to approximately $12 billion, with both measures rising sequentially and year over year. He said BitGo gained market share during a quarter in which total crypto market capitalization fell 13%, Bitcoin declined about 14%, industry trading volumes dropped more than 20%, and volatility remained at multiyear lows.

“While revenue grew, lower margins and unfavorable revenue mix pressured profitability,” Belshe said. He attributed the pressure in part to narrower spreads on certain spot transactions, lower derivatives contribution, and changes in staking-client activity.

CFO Ed Reginelli said total revenue reached $4.3 billion, up 14.7% sequentially and 79.6% from a year earlier. Direct costs were also about $4.3 billion, increasing 15.1% from the first quarter and 80.8% year over year. BitGo posted a GAAP net loss of $19 million, an improvement from a $60.7 million loss in the first quarter. The sequential improvement reflected a smaller unrealized mark-to-market loss on digital assets and lower compensation and benefits expense. The company recorded an $18.8 million unrealized loss on digital assets in the second quarter, compared with a $53.7 million loss in the prior quarter.

Adjusted EBITDA was a loss of $4.2 million, compared with a $1.7 million loss in the first quarter and adjusted EBITDA profit of $3 million a year earlier. Reginelli said the sequential decline was primarily driven by lower economic contribution from digital asset sales and staking, partly offset by lower cash compensation and professional fees. Digital asset sales revenue was $4.2 billion, up 14.7% sequentially and 84.3% year over year. Digital asset sales margin was about $7.1 million, with the overall margin declining to 17 basis points from 32 basis points in the first quarter. Staking revenue was $64.7 million, up 30.9% sequentially but down 28.8% year over year. Subscriptions and services revenue was $27.5 million, up 7.7% from the prior quarter. Stablecoin-as-a-service revenue was $38.8 million, up 1.7% sequentially and 148% year over year. Reginelli said derivatives notional volume was roughly $1 billion in the second quarter, down from nearly $3 billion in the first quarter. He said the company had seen some margin recovery in July and expected digital asset sales margins to move back toward historical averages of roughly 20 to 25 basis points.

The company said it reduced its workforce in June and streamlined operations. It recorded a $1.3 million restructuring charge related to the reduction. BitGo expects the restructuring to produce $9 million in annualized savi...