Good morning, and welcome to Bitcoin Depot's Second Quarter 2024 Conference Call. My name is Serra, and I will be your operator today. Before this call, Bitcoin Depot issued its financial results for the second quarter ended June 30, 2024, in a press release, a copy of which will be furnished in a report on Form 8-K filed with SEC and will be available in the investor relations section of the company's website. Joining us on today's call are Bitcoin Depot’s CEO, Brandon Mintz; and CFO, Glen Leibowitz. Following their remarks, we will open the call for questions. Before we begin, Cody Slach from Gateway Group will make a brief introductory statement. Mr. Slach, please proceed.

Great. Thank you, operator. Good morning, everyone. Before management begins their formal remarks, we would like to remind everyone that some statements we're making today may be considered forward-looking statements under securities laws and involve a number of risks and uncertainties. As a result, we caution you that there are a number of factors, many of which are beyond our control, which could cause actual results and events to differ materially from those described in the forward-looking statements. For more detailed risks, uncertainties, and assumptions relating to our forward-looking statements, please see the disclosures in our earnings release and public filings made with the SEC. We disclaim any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made, except as required by law. We will also discuss non-GAAP financial metrics and encourage you to read our disclosures and the reconciliation tables to applicable GAAP measures in our earnings release, carefully as you consider these metrics. We refer you to our filings with the SEC for detailed disclosures and descriptions of our business, as well as uncertainties and other variable circumstances, including, but not limited to risks and uncertainties identified under the caption risk factors in our recent filings. You may get Bitcoin Depot's SEC filings for free by visiting the SEC website at www.sec.gov. I would like to remind everyone that, this call is being recorded and will be made available for replay via a link available in the Invest Relations section of Bitcoin Depot's website. A supplemental earnings presentation highlighting our Q2 performance has also been made available on our IR website. Now, I will turn the call over to Bitcoin Depot's CEO, Brandon Mintz. Brandon?

Thanks, Cody, and good morning everyone. Thank you for joining our second quarter 2024 Conference Call. I'd like to briefly discuss some recent developments across our business and what gives us confidence in the year ahead. We've built on our momentum in the second quarter with sequential growth in revenue, net income and adjusted EBITDA. We continued to focus on our growing kiosk network and building a robust pipeline of major regional and national retail partners to enhance their footprint. In fact, we proudly announced just last month that, we achieved and exceeded, our ambitious goal of deploying over 8,000 Bitcoin ATMs, five months ahead of schedule with 8,180 kiosks. This is a testament to the relentless dedication of our team and our strategic initiatives aimed at expanding Bitcoin's accessibility. Building on the momentum we've already cultivated in the first half of 2024, we have no intention of slowing down as we gear up to provide even more customers with seamless access to the crypto ecosystem. This, along with our acquisition of over 2,700 kiosks in 2024 will increase our total kiosk fleet size to over 10,400 kiosks once all kiosks are delivered, furthering our industry-leading market share. Over the past three quarters, we have focused heavily on relocating underperforming BTMs through to new locations, which historically has shown increased average profitability per kiosk over time. While we do not get that benefit immediately, over time, the increase in profitability typically continues to grow as the BTMs ramp up. While it's not apparent in our consolidated numbers for the quarter, the relocation strategy is working and is showing a lot of growth potential baked into the business as it sits today. For example, in June of this year, the average monthly revenue per kiosk for BTM that have been installed…

Thanks, Brandon, and good morning, everyone. I'll start with a detailed review of our second quarter 2024 results and we'll finish with a discussion on our outlook. Second quarter revenue declined approximately 17% year-over-year to $163 million, compared to $197 million for last year's second quarter. This decline was largely driven by the impact of unfavorable legislation that was passed in California that went into effect in January, along with relocating kiosks during the quarter to optimize our fleet for maximum profitability. We are actively engaged in California with their legislature and continue to seek constructive changes to the operational limitations that are currently in place in that state. However, as Brandon mentioned, our focus remains to drive revenue growth through kiosk expansion in other markets. Adjusted gross profit for the second quarter of 2024 decreased 13% to $26.4 million, compared to $30.2 million for the second quarter of 2023. Adjusted gross margin in the second quarter of 2024 increased 80 basis points to 16.2% compared to 15.3% in the second quarter of 2023. This margin increase was largely driven by optimizing our markup for maximized profitability. Total operating expenses for the second quarter of 2024 declined 3% to $18.8 million compared to $19.7 million for the last year's second quarter. The improvement was attributable to lower professional service expenses and we anticipate this trend will continue over the coming quarters, as we move further away from the De-SPAC transaction and optimize expenses to life as a public company. GAAP net income for the second quarter of 2024 was $4.4 million compared to a net loss of $4 million for the second quarter of 2023. This was driven by an approximate $10 million expense recorded in the year-ago quarter related to the fair value of our Series A preferred stock,…

[Operator Instructions]. Your first question comes from the line of Mike Colonnese with H.C. Wainwright. Your line is open.

Hi. Good morning, guys. Congrats on a great quarter and all the progress you've made so far to date in 2024 here. First one for me, if you could just provide more details around your Bitcoin strategy, your Bitcoin Treasury strategy. You guys are generating really strong operating cash flow here, but are also aggressively expanding your footprint. So, how should we think about future Bitcoin purchases within the context of your broader capital allocation strategy?

Hi, Mike. Thanks for the question. This is Scott Buchanan. So, I mean, we're going to continue to look at adding Bitcoin to the balance sheet opportunistically. We're not allocating all of our excess capital there and we don't want to be too aggressive, but it will remain something that we consider, as we continue to build cash onto the balance sheet, along with the other opportunities we have for using cash, like stock buybacks or dividends in the future even.

Got it. And then in terms of external financing opportunities, as you strategically continue to expand your footprint here, how are you guys thinking about financing and financing alternatives outside of just the operating cash flows as you guys are generating to continue to increase scale organically, but also potentially to evaluate some M&A opportunities out there?

Yes. I mean, we're always open to M&A opportunities. We're just going to approach those opportunistically. We're not going to force it. And so, we continue to be in conversations with different operators in the space or other adjacent industries. And, if something comes up that makes sense, we'll be happy to go after it. As far as financing kiosks, we continue to look to our leasing partners as much as possible, so that we're efficiently using our capital, as we expand the fleet of kiosks.

Your next question comes from the line of Harold Goetsch with B. Riley Securities. Your line is open.

I have a couple of questions on expansion. Could you just give us a little more detail on what you guys are doing on your end to educate legislators and/or regulators in New York that feed this along? It's probably one of the remaining states, one of them a little more detail on what the holdup is and what needs to be done there, and how the process actually works? And then second question is on Australia, Puerto Rico and any other countries you're considering, what is the regulatory process there? What's the potential for kiosks in Australia? Thank you.

Thanks for the question, Hal. This is Brandon. As far as New York goes, we've been in the final stages of review by their review team that submits the applications to this committee, within the New York Department of Financial Services. And that committee will make a decision to approve or deny the application. Now, unfortunately, during this review process, we believe, a big part of the delay is somebody on that review team unfortunately passed away. So, a new person had to come in and pick up slack, and get up to speed on our application. Outside of that, we're not aware of anything specifically that would be holding itself. It's just the expected Q&A from them. Hopefully, it's still something that can be achieved this year. There's still no other editors operating within the state of New York. Now in Puerto Rico, we don't anticipate growing our footprint there in the near future very much, just because the kiosks are so new. We want to see some sales data on how those kiosks will perform. Also, we have such significant market share on the island already. I believe, we have over half of the market share, so there's not really a need to deploy more kiosks from that perspective as well. In terms of Australia, we believe, it's a shorter license application process than something like New York state in the U.S. And we believe, we're at the final stages of our application process there for application that was submitted earlier this year in 2024. We do have over 200 kiosks already in Australia waiting to be deployed. At the moment, we're ready, and we do have location relationships available as soon as, we are ready as well. We anticipate Australia is something that'll happen within the next quarter or so in 2024 as far as the launch goes. And that market is still looking very solid in terms of opportunity. Australia's population is similar to Texas in the U.S. Texas typically ranges somewhere in the neighborhood of 3,000 to 4,000 Bitcoin ATMs at any given time. Australia currently sits at around 1200 Bitcoin ATMs in the market. So, there's a big opportunity to fill that gap and the market has potential to grow by thousands of Bitcoin ATMs over the next couple of years in Australia. And we plan to be a big part of that and take a huge piece of that market share.

Your next question comes from the line of Mike Grondahl with Northland Capital Markets. Your line is open.

Hi, thanks. The new retailer, Nouria Energy, did you say, how many of those 175 stores you're already in or expect to be in?

Yes. I believe let me look at my notes here. I said it in the transcript. It is around 60. 57 to be exact across Massachusetts, Maine, and New Hampshire.

That's where you are right now.

That's what we've originally taken in the contract. So, these kiosks are -- some of them are already installed or pending transit at the moment.

Got it. 60. Okay. And then, you talked about 2Q and 3Q being your seasonally strongest quarter. But if I look back to last year, clearly 2Q was stronger than 3Q. Is that something we should be cognizant of this year too, between 2Q and 3Q? Or how should we think about that with you guys not giving guidance?

Well, over the past few years, if you look at it on a per kiosk basis, because it's hard on a total number basis, since we're always deploying or relocating kiosks, et cetera, 2Q is usually slightly higher than Q3 and in terms of revenue per kiosks.

Got it. And then, cash flow in the back half of the year, in the last six months, what do you guys kind of -- what's the range to think about there?

I think the easiest way to look at it would be to assume the first half of the year is what continues. The first half of the year, Q1 in terms of cash flow is significantly lower than Q2, but we still had a little bit more of those fee stack expenses dragging on that we were paying. So, I think it'll even out, even though if Q3 behaves on a revenue basis like it has in the past a little bit lower than Q2, then we should expect to see somewhat similar results. And I'm just speaking from a historical basis.

Sure. And then what are your priorities for that cash that you're generating? Do you want to address the debt, buying more Bitcoin? Can you just talk about how you're thinking about uses with that cash?

Right now, really exploring options. I think, there's potential for M&A opportunities. We do have the Bitcoin treasury strategy, and we were opportunistic with that and picking up some on this dip here over the past couple of weeks. Our debt has a prepayment penalty that will end, I believe, at the very end of Q1 of next year. So that's another thing to consider as well. This is a cash-flowing business, and now its true colors are really starting to show a lot of the issue in the prior quarter since we've been public, which is De-SPAC-related expenses that weren't going to continue in the future. And so, now that the world can kind of see that with this very impressive cash flow number for Q2 based on the enterprise value of the business, as it sits today, this is even a company that could be a dividend-paying company in the future. So that's always another option. Really, we're just trying to evaluate these options over this next quarter and figure out what the best direction will be, since there are so many options, since we do have this cash flow. We want to do something that is not only accretive to the business and for the long-term, but something that will attract additional investors and keep our current investors happy and incentivize to hopefully buy more shares moving forward. So, weighing those options further will allow us to get you a clear answer in the future.

[Operator Instructions]. Your next question comes from the line of Pat McCann with Noble Capital Markets. Your line is open.

Congrats on the quarter. Just a couple of quick questions from me. First of all, I was just curious with the franchising program. Are you getting a lot of additional interest? Are you in more conversations about expanding that further? I'm just wondering, if other players are seeing that and wanting to dip their toes in as well?

Hi, Pat. To answer your question, things are going very well on that profit-sharing program. You guys have seen we did a press release with Sopris Capital where they decided to purchase an additional 200 Bitcoin ATMs from us because they were happy with the initial results. And we do have new groups talking to us, at the moment as well. There have been competitors of ours in the past that have done this, and their profit-sharing partners, a couple of them actually came over from those competitors to us. I think those profit-sharing partners were just impressed with kind of how we run the business and how it's just very organized and how we were provide the reporting and such. I would say, we're not really worried about our current competitors such as other Bitcoin ATM operators, because in reality, if you were to partner with somebody that were operating a fleet of Bitcoin ATMs for you, you would want to know everything you possibly can about what's going on inside that business. And since the vast majority of our competitors are private, and the two public ones are not on major markets like we are on NASDAQ, they don't really provide the level of public disclosure and reporting that we provide. So, I think we're just a lot more of a trusted vendor to be doing this, than our competition with everyone being able to see our financials publicly, and be on calls such as this to learn more details about the business that others may not be willing to share.

Great. Thanks for that. And then my other question was around the Nouria partnership. I was just wondering, if there's any commentary you could give around, based on the geographical location or customer demographics, are they any particulate key factors that maybe you want to pursue a partnership with that retailer in those locations?

Well, we're always trying to get larger enterprise accounts, such as Nouria and the -- But the states specifically that we're going in, these are pretty solid states in terms of the revenue numbers per machine for us. So, we're excited about expanding in them specifically.

At this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Scott.

Thanks, everybody for joining the call. We appreciate you following the company and have a great day.

Thank you for joining us today for Bitcoin Depot's conference call. You may now disconnect.