Good morning, and welcome to Bitcoin Depot's Third Quarter 2024 Conference Call. My name is Dustin, and I will be your operator today. For this call, Bitcoin Depot issued its financial results for the second quarter ended September 30, 2024, in a press release. A copy will be furnished in a report on Form 8-K filed with the SEC and will be available in the Investor Relations section of the company's website. Joining us on today's call are Bitcoin Depot 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.

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 Securities and Exchange Commission. 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 Securities and Exchange Commission 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 Securities and Exchange Commission filings for free by visiting the SEC website at sec.gov. I'd like to remind everyone this call is being recorded and will be made available for replay via link in the Investor Relations section of Bitcoin Depot's website. A supplemental earnings presentation highlighting our Q3 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 attending our third quarter 2024 conference call. I'd like to briefly discuss some recent developments across our business and what gives us confidence in the quarters ahead of us. During the quarter, we continue to focus on growing our kiosk network, optimizing our existing fleet and building a robust pipeline of regional and national retail partners to enhance our footprint. We ended the quarter with approximately 8,300 active machines, surpassing our goals and reflecting our team's execution and vision to enhance Bitcoin's accessibility. Over the past year, we have continued to focus on relocating underperforming BTMs to new locations, which historically has shown to increase average profitability per kiosk over time. We continue to progress this initiative during the quarter. Today, 3,600 of our kiosks have been installed for less than one year. This is an important metric as we don't experience an immediate bump in profitability. On average, we typically reach breakeven in 4 to 5 months on relocation expenses. So while it's not apparent in our consolidated financials, the relocation strategy is working. For example, median transaction size continues to rise on a year-over-year basis. Furthering our North American expansion in the third quarter, we recently signed a retail partnership with a prominent convenience store chain in the Southwestern U.S. with more than 80 locations across Texas, New Mexico, Oklahoma and Kansas. Through this partnership, Bitcoin Depot will install Bitcoin ATMs in roughly 50 locations beginning this month in Texas, providing customers with convenient access to purchase Bitcoin and participate in the broader digital financial system. We have seen continued interest in our profit share program as we have seen an expansion of 433 Bitcoin ATMs in this program since the start of Q3 of this year, which brings…

Thanks, Brandon, and good morning, everyone. I'll start with a detailed review of our third quarter 2024 results, and will finish with a discussion on our outlook. Third quarter revenue declined 25% year-over-year to $135.3 million compared to $179.5 million in last year's third quarter. This decline was largely driven by the impact of unfavorable legislation that was passed in California that went into effect in January as well as regulatory changes in Connecticut, Vermont and Minnesota that went into effect in Q2 and Q3. Additionally, we relocated kiosks during the quarter to optimize our fleet for maximum profitability. We are actively engaged in California and other states with their legislature to continue to seek constructive changes to the operational limitations that are currently in place in the state. However, as Brandon mentioned, our focus remains to drive revenue growth through kiosk expansion in other markets. Adjusted gross profit for the third quarter of 2024 decreased 17% to $22.4 million compared to $26.9 million for the third quarter of 2023. Adjusted gross margin in the third quarter of 2024 increased 160 basis points to 16.6% compared to 15% in the third quarter of 2023. This margin increase was largely driven by optimizing our markup, maximized profitability. Total operating expenses for the third quarter of 2024 declined 13% to $16.9 million compared to $19.5 million last year's third quarter. The improvement was attributable to lower professional services expenses, and we anticipate that trend to continue over the coming quarters as we move further away from the de-SPAC transaction and optimize our expenses for the life as a public company. GAAP net income for the third quarter of 2024 increased 116% to $2.3 million compared to $1.1 million for the third quarter of 2023. This was driven by lower operating expenses as…

[Operator Instructions] And our first question comes from the line of Mike Colonnese from H.C. Wainwright. Please proceed.

Good morning, guys. Hi, thank you for taking my questions today. First one for me, maybe for you, Brandon, it would be great to get your outlook for the Bitcoin ATM industry in the U.S. from a regulatory standpoint, especially after last week's election results. The market seems to believe that Bitcoin Depot will be a major beneficiary from the new administration, given the recent run in the stocks. So it would be great to get your views here?

Mike, generally speaking, the whole cryptocurrency industry is expecting less regulation and any existing regulations to likely be less harsh if it is considered harsh today than it is. So for us, I think on a federal level, it will definitely be more positive on a state-by-state basis, I think some of that will trickle down as well. I don't think we're going to see a change overnight in the 4 states that are impacting our financial performance today. But I think moving forward, any states that are thinking about coming out with legislation that could impact our business financially, I think it's a little less likely to happen. And if it does happen, I think it's slightly less likely to be as impactful in a negative way, but it's a little bit too early to tell.

Got it. Appreciate the color there. And I know you guys just announced last quarter a Bitcoin treasury strategy. How has your views on that approach may be shifted with, again, this new administration coming in, the recent run in Bitcoin, and now while considering the potential for a dividend in 2025?

We're really excited about the Bitcoin treasury, and we're glad we bought 11.3 Bitcoin when we did. For now, our focus is on paying out the remainder of the preferred dividend and giving us that flexibility to pay a cash dividend at some point in 2025, to common shareholders. For now, we don't believe we're going to upsize the Bitcoin treasury in a very meaningful way until we get to a point to where we evaluate what exactly we're going to do as far as the cash dividend to common shareholders. We didn't want to buy too much Bitcoin and not have ability to pay off the rest of the preferred dividend. So things could change in the future. But right now, our focus is getting to be the first company or one of the first companies that are in the cryptocurrency services industry that are doing a cash dividend based on our strong cash flow.

[Operator Instructions] Our next question comes from the line of Hal Goetsch from B. Riley. Please proceed. guys.

Hey, good morning, on Slide 22, you showed the productivity ramp year-to-year of your cohorts from 2020, 2021, 2022. You've had a large launch this year of new kiosks. And I know you're not giving guidance, but can you give us some color on what you're seeing in the new kiosks that have been deployed maybe back half of 2023 and thus far in '24 that are they tracking maybe this sort of trajectory of new kiosk productivity improvement from launch to month 3, month 6, month 12. Can you give us your thoughts on that?

Yes. This is Scott Buchanan. We're definitely still seeing the kiosks ramp up like we have historically. They continue to grow in volume as they've established a customer base and been in place longer. So nothing is really changing there on the trends. As far as an exact comparison between the ramp in previous years and this year, I don't have that in front of me, but nothing materially has shifted there, and we're still seeing a ramp up in volume as kiosks mature.

All right. But like you think like, hey, can you just give us a feel for like, hey, you launch a kiosk. What is the -- in the first quarter, it's kind of in a store, first 90 days, like what is it generally doing on a median basis, not the average, not the best, like the median? Is it doing like a couple of grand, a couple of hundreds, kind of -- does that really go through all discovery...

In the first 90 days? Yes, in the first 90 days doing a couple of grand on average. By the end of the first 90, it's probably doing like $2,000 a month.

At this time, we will conclude the question-and-answer session over here. I will now turn the call back over to Brandon Mintz for closing remarks. Sir?

Thanks, everyone, for your interest in Bitcoin Depot, and hope to see you guys next quarter.

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