Greetings, and welcome to the Bakkt's Third Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn it over to Ann DeVries, Head of Investor Relations at Bakkt. Please go ahead.

Good morning, and thank you for joining us for Bakkt's third quarter earnings call. Today's presentation, including the separate earnings call presentation that can be found at our Investor Relations website at investors.bakkt.com, contains certain statements about Bakkt that are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on the current expectations of the management of Bakkt and are subject to uncertainty and changes in circumstances, many of which are beyond Bakkt's control, which may cause actual results to differ materially from those expressed or implied in such forward-looking statements. In addition, these statements are based on a number of assumptions that are subject to change. Please refer to our company's most recent current report on Form 8-K filed on October 21, 2021, following the closing of our recent business combination for a more complete discussion on forward-looking statements and the risk factors applicable to our company. During today's presentation, in addition to discussing results that are calculated in accordance with generally accepted accounting principles, we will refer to certain non-GAAP financial measures. A reconciliation of such measures to the most comparable GAAP measures and certain related information can be found in our earnings release, which was recently filed this morning with the SEC. Joining me on today's call are Gavin Michael, Chief Executive Officer; and Drew LaBenne, Chief Financial Officer. After our prepared remarks, Gavin and Drew will be available for your questions. I'll now turn it over to Gavin.

Thanks, Ann. Good morning, everyone. Thank you for spending time with us this morning. It's my great pleasure to welcome everyone to our inaugural quarterly earnings call for Bakkt. My journey with Bakkt started in January of this year, shortly before the merger with VPC Impact Acquisition Holdings was announced. I'm proud of all that we have accomplished since we announced the transaction, particularly as we have worked through the close and the access to capital that our public listing will provide us. We began with the opportunity to help consumers, businesses and institutions manage their digital assets. These digital assets span cryptocurrency, loyalty points and rewards, gift cards and expanding into newer asset classes. Consumers can't manage these assets easily. And importantly, businesses and merchants can't enable them for use across the channels in a way that their consumers might want to. Also, institutions seek the financial infrastructure and capabilities to access new markets, products and digital asset ecosystems. Bakkt's vision is simple: to connect the digital economy. But how we got here today is important. And 2021 was a significant year for our company's journey. Early in 2021, we announced the merger with VPC Impact Acquisition Holding. Leading up to being deemed effective by the SEC in mid-September, we launched our platform to the market, which includes a consumer app. We hired a diverse and highly skilled management team with a combination of backgrounds in fintech, crypto, banking and loyalty. We spent the course of this year setting the foundation for our go-forward strategy. Our first fully integrated partner with Choice Hotels came onto the platform in Q3, and we've made recent announcements of significant partnerships with Finastra, Mastercard and Fiserv. These are expected to further accelerate our growth and help us gain meaningful momentum heading into 2022.…

Thanks, Gavin. I will now discuss Bakkt's financial results for the third quarter of 2021. As a reminder, the earnings we are discussing related to Bakkt are prior to the business combination and therefore, certain measures, such as EPS, are not reported given differences in share count and other factors. Slide 18 has a summary of our financial results for the third quarter of 2021, the previous quarter and the same quarter of 2020. Net revenues of $9.1 million, increased by $2.5 million or 38% year-over-year, primarily driven by strong transaction revenue growth from the redemption of rewards on our platform. Operating expenses of $39 million, increased $14.7 million or 60% year-over-year, primarily due to increased head count. Other income was $1.1 million, primarily related to a nonrecurring gain from the sale of bitcoin to rebalance the bitcoin inventory that we hold for liquidity purposes. The rebalance was related to the introduction of ether to our platform. The bitcoin we sold had a low cost base since it was acquired in early 2020, which drove the large gain on sale. Slide 19 shows a further breakdown of our revenue. As shown on the previous slide, net revenue was $9.1 million. The largest component of that revenue, subscription and service revenue, was $6.4 million and increased 18% year-over-year, partially due to the addition of a large financial institution to our platform. Transaction revenue of $2.7 million, increased 133% year-over-year, primarily due to high customer activity and the redemption of loyalty rewards and the recovery in travel activity previously impacted by COVID. Transaction revenue shows a high degree of seasonality, and we expect to see an increase in revenue in the fourth quarter, in line with previous years. Negative revenue improved $1.4 million year-over-year as we removed certain rebates from trading and…

Thanks, Drew. So just to emphasize the path for me, Bakkt has an incredibly unique place in the market with a highly secure and regulated platform, differentiated capabilities across crypto loyalty and payments, expansive partnerships with leading brands and a world-class management team to execute on our growth agenda. We will utilize the nearly $450 million of recent deal funding to execute this plan. So this means continuing to grow our B2B2C partnerships and activating those that we've already announced; enhancing our products and capabilities to support existing and new partnerships; and deepening consumer relationships with our partners. We will execute on new growth opportunities as they arise. We are just so excited for Bakkt to realize our full potential. Thank you all very much for listening to us today. And with that, we'll take your questions.

[Operator Instructions] Our first question today comes from Trevor Williams of Jefferies.

Great. And it's been great to see all the progress just over the course of the year. But -- so -- as we think about the potential for more loyalty integrations within the consumer app, specifically, how ripe is the opportunity to convert the relationships you guys already have on more of the white label side for loyalty redemption through Bridge2? So thinking about -- you called out Wells Fargo and United in the deck. Just thinking of those as examples, just how have those conversations gone with the existing white label customers? And then kind of what are the gating factors to be able to get them on board into the consumer app? So any thoughts there would be great.

Trevor, great to hear from you. Look, I think it's a great question. We're leveraging all of our integrations and the work that we do with those as a trusted partner to continue to look at other ways we can add value. The platform that we've said is really focused on this intersection of crypto payments and loyalty. And by constructing new offers for those that we already work on the merchandising part of the platform with, we're finding very robust discussions. Obviously, we take into account the broader environment that they find themselves in, particularly with some of the travel and entertainment partners. But what we're seeing is, as we see a broader recovery in their businesses, they're looking for opportunities to reengage with their customers in new and innovative ways. And that plays right to the sweet spot of our platform and of the work that we're doing to continue to structure those rewards proposition that stretch beyond simple merchandising and look at the way in which we can enhance loyalty and multiply the number of touch points they have.

Okay. Perfect. That all makes a ton of sense. And then along those same lines, I know the timing of the transaction was a little bit extended relative to what the initial hope had been. Can you give us a sense [ if at ] all that changed your approach over the last 6 to 9 months and where you were focused more on the partnership side? And now with the transaction closed, should we expect that to accelerate some of the potential discussions that might have been put on hold over the last year?

So I think, Trevor, we've continued to sign partners through the course of the last several months. We've made a terrific multiyear partnerships with Mastercard, with Fiserv, with Finastra as good indicators of how strong the value proposition is and how relevant it is to the market. As we think about what we're doing now with the capital that we've raised from the transaction, it's all about accelerating those activations together with continuing to onboard additional partners focused very much on consumer financial services, travel and entertainment, retail and then these platform and payment companies that give us great reach into the marketplace. I think when you look at more broadly where the business is positioned, we're so excited by the fact that we have an addressable market that is already stretching beyond the 100 million. So when we start to think about the work from now on in, it really is about activation. And when we talk about the funds that we've had and raised through the transaction, it's very much about putting that to work against these activations. So we haven't, by any stretch of the imagination, paused during the course of the transaction. In fact, I think we've exited in a very, very strong space with that addressable market with some great partners on board and then proof points with customers like Choice.

That's all points well taken. I'm just thinking of whether there's just some kind of an unlock post transaction on the new partnership side, but I totally get that the -- just the size of the opportunity with Mastercard and Finastra and Fiserv, all that's been great to see. So I appreciate the color, guys.

Our next question today comes from Owen Lau of Oppenheimer.

Could you please add a little bit more color on the 100 million potential end users or addressable market? And I think Mastercard has over 500 million cards in the U.S. I think you mentioned, Gavin, 2.9 billion cards globally. So what is included or excluded in your 100 million user estimate?

Owen, great to hear from you. When we look at how the addressable market is portrayed, we're looking at different vehicles. So clearly, Mastercard obviously gives us reach with its debit and credit card network together with its bank issuers. We also look at the opportunity with Finastra. Through our partnership, we're making our solutions available to their customers of community banks and credit unions as part of Finastra's Fusion Digital Banking solution. They support over 5,000 financial institutions across the Americas. When we think about Fiserv, it's serving together with the community and credit unions that they serve through their bank platform together with reaching the merchants through their omnichannel tariff solution. So when we think about our addressable market, we're working by considering the reach that these partners have. We think the same when we think about Choice, when we think about Wyndham. Now the reason you see us net it down is because we're also trying to account for the fact that most people hold multiple relationships. Now while we expect that to be an opportunity for us in the way in which we measure our progress with these transacting accounts, we're also being reasonable in the way in which we estimate where we are with respect to addressable market.

Got it. That's very helpful. And then how do you think about the pace of user acquisitions over the next couple of quarters given your partnership with Mastercard and Fiserv? And then broadly speaking, can you also give us an update of your end-user projection? Is the 31 million active users in 2025 still the same or any change there?

Owen, I'll start, and then I'll pass to Drew on the metrics. So when you think about where we are with our recently announced partnerships, these will take some time to implement. And -- but we already have very robust discussions underway in activating the next set of partners that are made available to us through the partnerships that we have. So in working with Mastercard and working with Fiserv and working with Finastra, we already have a roster of opportunities that they are presenting to us. We focus very hard on building a platform that makes it easy for our partners to consume our services quickly. So what I would take away from this is that we have very strong momentum as we enter 2022. So this quarter has been about building the backlog for execution in the first half of next year. Drew?

Yes. And with regards to the long-term projections, I think as we've been saying now for a number of months, as we've ramped after the merger closed, the opportunity here is going to be signing partners and then marketing into those partners' consumer bases to bring users onto the overall Bakkt platform. And I think with the partnerships we announced previously, the ones we've just announced and presumably ones we will announce in the future, I think we're very optimistic that there is a lot of growth ahead for the Bakkt platform.

[Operator Instructions] The next question today comes from Kevin Dede of H.C. Wainwright.

So I'm curious -- I mean I think you've developed a heck of an ecosystem in integrating all our partnerships. I was curious as whether or not you were looking at specific crypto on-ramps and off-ramps. Companies like Simplex or Banxa.

So Kevin, when we think about the opportunity for us to be able to work in the crypto space, we're looking at the ability for us to be able to act as that bridge for non-crypto-native companies to get access to crypto services. So for example, the work we're doing with Mastercard to be able to take crypto rewards and use that as a way for people to continue to innovate and take advantage of the transformation that is happening in the rewards space. So our focus is really about how do we bring utility to crypto in our customer's everyday life and helping partners take advantage of what that presents for them in the way in which they want to be able to grow their business. So we look very closely at how we work to be able to enable crypto and give them access to it as a part of their business, taking into account that is one of our core competencies on the platform, playing in that unique space of payments, loyalty and crypto.

I know the sort of the appall of increased regulation, hurts many players in the crypto space. I'm wondering how you perceive it and what you think you might need to do at Bakkt just to make sure you operate within regulatory compliance.

So our platform has been engineered to be digitally asset native from the ground up. We've come out of a strong heritage of regulation given our background from ICE. And the platform itself is designed with a strong set of controls and regulatory practices even at its very core. So as we watch the regulatory landscape evolve around us, we're able to respond very, very quickly to that changing environment. So we don't see the headwind of regulation. In fact, we believe that we're well placed given where we've come from, given the way we've engineered the platform to be able to respond in a very agile fashion as the regulatory environment evolves around us.

Okay. Do you have a particular opinion on various stablecoins and how they may be regulated? And how that might affect the way that you handle them in your platform?

So our focus continues to be how do we take the existing crypto assets that we support, bitcoin and ether, into the market to be able to find new and innovative ways to give access to everyday consumption, whether it be through the passive acquisition of crypto or whether it be through the use of rewards and payments. When we think about how other places are evolving, obviously, we keep an eye on what's happening with stablecoins and with Central Bank digital currencies. And we think that we're well placed if they become mainstream to be able to support them given our background and given our regulatory posture. So right now, we're very focused on the 2 coins that we support and making sure that we make those available. But we're doing it in a way that is keeping one eye on how the market is evolving around us.

Thank you for your questions. We have no further questions on the line, so I'll hand back over to Ann DeVries for closing remarks.

Thank you. Thank you, everyone, for attending our inaugural earnings call this morning and your continued interest in Bakkt. We look forward to speaking with you all again next quarter.

This concludes today's call. Thank you for joining us. You may now disconnect your lines.