Exodus Movement Inc (EXOD) 2023 Q4 法說會逐字稿

Welcome, everyone to Exodus' fourth quarter 2023 earnings conference call. Joining us today are Co-Founder and CEO, JP Richardson and Chief Financial Officer, James Gernetzke. Now during today's call, we may make forward-looking statements. Actual statements may vary materially from today's statements. Information concerning risks, uncertainties, and other factors that could cause results to differ from these forward-looking statements is included in our SEC filings available on the Investor Relations portion of our website. Please visit our social media X or Reddit to submit your questions for the quarter after our call. You can expect a response from our Investor Relations team within 24 hours.

And with that, let's go to JP for the fourth quarter review. Thank you, Kris, and thank you to all viewers for joining us today on Exodus' fourth quarter call. The Magic Eden wallet is the first iteration of our wallet-as-a-service strategy.

Wallet-as-a-service went from first thought to business partnership to live product in less than a year's time. Watching users and adoption of the Magic Eden wallet grow and it's great to see, and we're thrilled to continue development of the premier wallet for the NFT collector. Exodus looks forward to signing and announcing future partnerships as we are proving our economic value today. Every day, alongside Magic Eden who is an amazing partner, there are talented crew, and we invite you to check out all of their magic and creativity in the Magic Eden wallet.

Exodus is also building new wallet-as-a-service products and tools. We see opportunities not only in the digital asset in DeFi space, but also in more traditional sectors. Stay tuned, and we look forward to updating you on our progress. Exodus shares start trading on the T-Zero ATS, the end of the fourth quarter. And in January, we began trading on OTC markets.

Well, it's been a limited rollout in traditional brokerages. So far, we've laid the groundwork to reach the main stream stock investor and Exodus' filing of our Form 10 is a big part of that strategy. James will talk later about the Form 10. Another step towards mainstream stock trading has been adding independent directors to our Board. We welcome Carol McKinley and Tyler Skelton, who each bring significant experience in the cryptocurrency industry to their board roles.

Our vision for an ideal crypto wallet experience includes a better way to buy and sell bitcoin into your local currency. Last quarter I introduced eXo Pay, making entry to Bitcoin fast and easy is a fundamental skill in our industry. eXo Pay will perform for excess of customer as well as for Magic Eden wallet and other initiatives.

We are working on some finishing touches to the initial version of eXo Pay and planning is launch in limited jurisdictions in the second quarter. The general crypto market at the end of the year was driven upward by anticipation of a spot Bitcoin ETF, which became a reality in January, a multitude of spot Bitcoin ETFs are now traded in US stock markets and across the crypto industry, money appears to be flowing into Bitcoin.

The bitcoin having is expected in April, which has historically been a time of great enthusiasm in our industry. Those tailwinds had excess and enabling 2023 on a strong note as our Fiat and Swap services increased revenue 26% and 52% from the third quarter, an outstanding fourth quarter. And so for more detail on our fourth quarter and finances, let's go to our CFO, James. James?

Thank you, JP. Let's jump right. 2023 revenue increased 11% to $56.2 million, and this came as markets turned bullish at the end of last year. And so Q4 itself saw $18.5 million in revenue, and that was driven by our best quarter of swap volume since 2021, and I will highlight a little more than halfway through the first quarter of 2024. We have seen volumes keep pace with how we ended 2023. From an adjusted EBITDA perspective for the year, we had $17.6 million, $8.1 million of that was in Q4.

Our expense reduction efforts at the end of 2022, combined with the continued expense discipline in 2023, provided that steady expense base that we have now -- the pop in Q4 revenues that scaled very well on that expense base. And so while we do expect to grow our expenses in 2024, as we invest in new growth strategies, we will not do it at the pace that we did in 2021. So even if the market god smiled down and graced upon grace us with 2021 level revenues, it is very unlikely that we would have 2021 level expense increases.

So as Exodus and the digital industry have continued to mature, we evaluated and looked at some of the business metrics that we use and have shared with you, particularly around user activity. Historically, Exodus has defined monthly active users or MAUs as a user who has funded their wallet and opened up an instance of their wallet during a 30-day period. However, most companies in our industry consider an MAU any user, whether they funded their wallet or not, who opens up any different -- any platform and counts each platform user separately, even if it's the same person.

So to help provide you with a more apples-to-apples comparison, we're going to be changing our QAU and MAUs to match others in the industry. And then what we're going to do is we're going to rename our historical definition of MAUs. We're going to call that monthly funded users or MFUs. So this slide here is a look at the new methodology for QAUs and MAUs and to get -- and it gives history going all the way back to 2020. You'll see that in Q4 of 2023, we increased our MAUs by $150,000 or 13.6% versus Q3 of 2023.

And those MAUs were just shy of the first quarter, low of 2022 level. So that's the closest quarter that we had recently. So by way of comparison, let's take a look at MFUs. Q4 MFUs were up by $165,000 or 22% from the previous quarter. From an MFU perspective, Q4 was stronger than Q1 2020, where MFUs or -- I'm sorry, MAUs were not.

We see the increase in MFUs vis-a-vis MAUs in Q4 being driven by two items. First, funded wallet users are inherently more stickier than unfunded users. They actually have money on the platform. So while MFUs, they might not always be active, they are present and they are very willing and able to jump back in and make that jump from a quarterly funded user to a monthly funded user when the markets start to get fund like they have been recently.

Secondly, the team has been working diligently on the onboarding experience and then also our Fiat on-ramp products. And this drives wallet funding, which decreases that delta between MAUs and MFUs. For comparison, our Fiat onboarding revenue that increased over 300% in 2023. So it really highlights the efforts of the team there. Here's our treasury slide. Our balance sheet continues to remain very strong, and we ended the year with a market value of $138 million.

Since year end, I just wanted to highlight that this has gotten stronger as digital asset prices have positively impacted our holding so far. For the next few slides, I wanted to visually highlight some of the aspects of the Magic Eden partnership that JP described earlier. The first slide here highlights the beautiful product design. You can see the design of the wallet and highlight some of the value-added features that you can only get when you combine a Magic Eden and an Exodus such as the cross chain ability of Exodus with the NFT portfolio management of Magic Eden. And together, we're able to create an amazing experience for both of our users.

And finally, I just wanted to highlight just how well this was received. Just this announcement had over 400,000 views shortly after it was launched. And so we're really grateful for that Magic Eden partnership and the success that they've had, especially, and just telling the world about it.

And this final slide here shows how well the world has loved it. The customer reviews have been solid, has had a great rating, and we're very, very proud of the work that we've done here.

From a financial perspective, I would like to highlight that the Magic Eden wallet is already generating revenue and for both of us, and we look forward to sharing more about our wallet-as-a-service growth and maturation as well as our other infrastructure-as-a-service products as they gain traction throughout 2024.

Finally, I do want to highlight that you may have noticed. we filed our financials on a different form than normal with the SEC. Form 10, 12-G. We did this to comply with Section 12-G of the Securities Exchange Act of 1934, which dictates that Exodus has become a reporting issuer under Section 13. And that's a very complicated and legal way of saying that the rules are forcing us to become a fully public company that files standard forms such as 10-K's and 10-Q's.

Now when we conducted our Reg A public offering in 2021, we had over 6,800 individual investors. So we knew that this day was coming and we've been preparing ever since. For example, we've been reporting quarterly results that were not necessarily required to be reported under Reg A, but it did align us with the Section 13 reporting cadence. And it also gave you guys more information, which we thought was very helpful for everyone.

Another thing we've done is we've really focused on governance. And so you've noticed that we've appointed a majority independent Board and that will meet -- fully meets the New York Stock Exchange standards. And finally, we've made that move to the traditional market with our OTCQB listing. Now we expect the Form 10 to become fully effective at the end of April and during the 60-day period before effectiveness, our team together with outside securities counsel, will be evaluated in a national exchange listing. So a nice year, NASDAQ listing.

And really that's because it's the next logical step for a 12-K public company, obviously, and I see listing would be a major move for the company. So we'll keep everyone up-to-date as much as we can on our progress. And with that, I'll send it back to you, Kris.

Thank you, James. At this point in the call, I'd like to take time for a couple of questions from Singular Research Analyst, Edward Engel. Ed starts by asking how is Magic Eden's new wallet been performing and what segments of B2B customers are most interested in the wallet-as-a-service offering?

We're still in the first phase of our build-out, but the early results have exceeded our expectations. And more importantly, Magic Eden users have thoroughly embraced the product so far. We've seen comments such as the premier wallet and for all NFPs regardless of chain have been common and warm our hearts. Our initial market for wallet-as-a-service is the Web3 space in the DeFi applications or DApps. In order to access a DApp, a wallet is a must. Right now, DApps have to rely on third-party wallets, which does not allow them to control the onboarding experience and also causes friction for users who do not already have a wallet. An excess bill wallet with the DApps branding and some level of customization solves this problem.

Thank you, JP. Ed also asks, is Exodus seeing mass market users regain interest in crypto or are volumes mostly driven by traders that were active throughout the bear market?

So as I discussed in my remarks about MAUs and QAUs and then MFUs, the funded wallet is a lot stickier than a non-funded or an unfunded wallet. And we kind of -- in the question that you've mentioned, that's kind of the trader who've stuck with us through all time. That's definitely in the funded wallet category.

So what we see, though, is the less than active, the quarterly-funded units, are users who, in times of interest and fund in the market will move to monthly-funded users. And we definitely saw that in spades with that 165,000 quarter-over-quarter user swing. So yes, definitely part of it is traders, if you will, coming back into Exodus and just becoming more active. They're there. They're just becoming more active from, but it's not that entirely. If you look at the MAUs and the QAUs slide, you'll see that they have grown as well. And that is an indication of general increase in interest in Q4 for Exodus' product. And that likely is an indication of general increased interest around digital assets.

Okay. So those who have been in the digital asset industry for a while, unscientifically measure, mass market user interest in terms of how many and how often our friends and family ask about bitcoin and crypto. And I will say that metric has picked up a lot of steam over the past few months. Thanks to Ed for the questions. Of course, we continue to offer world-class customer support. You can try reaching out through our app and through our website and at Exodus, we are truly excited for everything that 2024 will offer. Magic Eden, mainstream bitcoin ETFs, and another bitcoin, halving fourth in history. These are historic times for our company, and we thank you for joining us. Kris over to you to wrap things up.

Thanks, JP. Please visit our social channels to submit your questionings for management for the fourth quarter. And as I mentioned before, you can expect a direct response from our Investor Relations team to each of your inquiries within 24 hours. Thanks for joining us today.