Exodus Movement, Inc.: Form 10-Q for the period ended Mar 31, 2026

The following discussion and analysis of Exodus' financial condition and results of operations should be read in conjunction with the unaudited, condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 1A. Risk Factors” in the Form 10-K and "Cautionary Note Regarding Forward Looking Statements" and in other parts of this Quarterly Report on Form 10-Q.

Overview of Our Business

We are engaged principally in the business of creating and distributing self-custodial wallets for digital assets. Due to a majority of our revenue being derived from services provided by API Providers to persons located outside the United States pursuant to a transaction-based structure, our profitability is dependent on a number of factors including the pricing of digital assets, the volume of transactions and the quality of our third-party relationships.

Our revenues are primarily derived from digital asset-related transactions and consist of fees from third-party API agreements. These API agreements typically consist of transaction-based contracts and tiered subscription contracts where fees are generated based on transaction volume which is primarily driven by users interacting with the API providers.

Our expenses primarily consist of:

• Technology, development, and user support;
• Amortization expense relating to software development; and
• General and administrative expenses (primarily including administrative, legal, financial operations, information technology services, marketing and advertising expenses).

Based on the services offered and transactions conducted by API Providers, the following table shows the digital assets that are most material to our business by revenue.

Known Trends and Uncertainties

Stablecoins - We expect stablecoin adoption will increase globally as cryptocurrencies become more widely used in the future. User adoption of cryptocurrency networks for payments, or lack thereof, as well as worldwide government regulation, both friendly and adversarial, have and will continue to influence global stablecoin usage. Stablecoins will not function without a digital asset wallet. The Company's wallet supports a wide variety of stablecoins, including the largest coins such as Tether's USDT and Circle’s USDC. Additionally, by supporting over 40 different networks, including large networks like Ethereum, Solana, and Tron, we believe Exodus is positioned to natively support stablecoins wherever current and future use cases emerge. Furthermore, Exodus' XO Swap product already provides the Company's partners a solution for swapping between stablecoins and between blockchains.

Cloud based infrastructure expense – Cloud infrastructure expenses were $1.8 million and $1.9 million for the three months ended March 31, 2026 and 2025, respectively. We anticipate increased cloud infrastructure expenses as the platform continues to grow due to increased database capacity and new users.

Investment in human capital – Costs related to investment in human capital were $15.2 million and $13.1 million for the three months ended March 31, 2026 and 2025, respectively. As the Exodus Platform continues to expand, we anticipate the need to add more team members to accommodate the growth in our business, which is expected to materially increase expenses as a result of the impact on the human capital costs. Human capital costs are also expected to increase due to the need to add additional team members to address compliance with the evolving regulatory environment.

Marketing expenses – Marketing-related costs were $2.6 million and $1.2 million for the three months ended March 31, 2026 and 2025, respectively. The increase was primarily due to increased spending on website advertisements targeted at digital asset focused spaces and on online platforms, such as the App Store, and marketing agency expenses. To date, we have primarily focused our marketing strategy toward user growth. We continue to evaluate our marketing strategy, and in the future, may decide to refocus the current strategy to a more competitive approach, which would be expected to substantially increase marketing-related expenses.

Changes in tax laws – The Pillar 2 approach, which came into effect in 2023 in certain jurisdictions, will establish a global minimum tax rate of 15%, such that multinational enterprises with an effective tax rate in a jurisdiction below this minimum rate will need to pay additional tax. While many aspects of the application of Pillar 2 remain to be clarified, including how the jurisdictions in which we operate, and those in which we and our subsidiaries are based, choose to implement the Organization for Economic Cooperation and Development’s approach in their tax treaties and domestic tax laws, we do not expect Pillar 2 to apply in 2026. On July 4, 2025, the "One Big Beautiful Bill Act" (P.L. 119‑21) was enacted into law. The legislation reinstates and extends several provisions of the 2017 Tax Cuts and Jobs Act, including permanent 100% bonus depreciation, enhanced Section 179 expensing, full R&D expense deduction for domestic expenditures and modification to the international tax framework.

Growth Initiative and Transaction-Related Expenses

During the three months ended March 31, 2026 and 2025, the Company incurred $2.8 million and $1.8 million, respectively, in expenses associated with the evaluation and negotiation of, and travel due to, prospective business acquisitions. The Company expects these expenses to continue throughout 2026 as it continues to evaluate potential acquisition targets. These expenses primarily include legal and advisory costs and are recorded within general and administrative expenses in the accompanying condensed consolidated statements of operations.

In addition, the Company incurred $3.4 million and $4.3 million in revenue sharing expenses related to its business-to-business partnerships for the three months ended March 31, 2026 and 2025, respectively. While the Company does not control the operations or growth of its partners, their success can directly impact our own performance. As these partners grow or as new partnerships are formed, our associated revenue sharing expenses are expected to increase. These expenses represent costs of revenue and are included within technology, development, and user support expenses in the condensed consolidated statements of operations.

Monthly Active Users

Monthly Active Users ("MAUs") were 1.5 million and 1.6 million as of March 31, 2026 and 2025, respectively. Our strategic focus remains on expanding our active user base, improving app features, and expanding our business-to-business partnerships. We believe that over the long term, interest in digital assets and digital asset markets will continue to increase. However, during any given period, we cannot be certain that our MAU growth efforts will be effective or that interest in digital assets will remain or continue to increase.

MAUs are defined as any user with activity history in any month. A user has “activity history” if, in the last calendar month, the user performed any activity within the application such as opening their application to check digital asset prices, reading news, or accessing the services of our API Providers. MAUs provide a measurement of user engagement, allowing management to compare engagement over time. MAUs consist of both funded wallets and unfunded wallets. Because Exodus users do not have accounts, users do not close an account. Therefore, users may be inactive one month and active the next as they re-engage with the platform. Management views increasing interest in the Exodus Platform over time as a key indicator of increasing revenue, especially for MAUs outside of the United States as the likelihood of revenue generating transactions increases as user interest increases.

Quarterly Funded Users

In addition to MAUs, we utilize Quarterly Funded Users ("QFUs") to assess user trends and market sentiment. QFUs are defined as unique users with an Exodus wallet that was funded at any point prior to or during the fiscal quarter and during which the user remained active, i.e. opening the app during the period. A wallet is considered “funded” if it holds a non-zero balance of any supported digital asset. QFUs offer a longer-term view of engagement by capturing users who have already funded their wallets.

QFUs totaled 1.4 million and 1.8 million as of March 31, 2026 and 2025, respectively, reflecting a decrease of 0.4 million, or 22.2%. This decrease reflects a reduction in user engagement as the cryptocurrency market cap has decreased from the first quarter of the prior year. We expect MAUs to fluctuate more significantly in response to app usage patterns and broader market conditions. In contrast, QFUs provide a longer-term view of engagement, representing a more stable cohort—users with funded wallets actively participating in the Exodus Platform.

We consider both MAUs and QFUs to be Key Performance Indicators ("KPIs") that provide insight into user activity and platform engagement. While MAUs may fluctuate more significantly due to changes in app usage patterns and broader market conditions, QFUs offer a longer-term view of engagement by capturing users with actively funded wallets who are transacting on the platform. Management uses these metrics to monitor platform health, inform product and marketing strategies, and assess user trends over time.

Results of Operations

The following table presents our condensed consolidated results of operations for the three months ended March 31, 2026 and 2025:

(in thousands, except percentages)

* Percentage variances not considered meaningful.

Revenue decreased $13.2 million, or 36.8%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The decrease was primarily driven by exchange aggregation revenue, which decreased $13.8 million, or 40.8%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, which was primarily attributable to a decrease in user exchange volume growth. Non-exchange aggregation (i.e., fiat onboarding, staking, consulting, and other) revenue increased $0.6 million, or 25.4%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The non-exchange revenue increase was driven by fiat onboarding revenue with an increase of $0.8 million, or 70.8%, offset by a decrease in consulting revenue, reflecting a decrease of $0.2 million or 68.0%.

For the three months ended March 31, 2026, five API Providers accounted for more than 10% each of total revenue and collectively generated exchange aggregation revenue of $14.8 million. For the three months ended March 31, 2025, six API Providers accounted for more than 10% each of total revenue and collectively generated exchange aggregation revenue of $28.4 million.

The following table summarizes the revenue by users of the platform and the business-to-business partnerships for the three months ended March 31, 2026 and 2025:

(in thousands, except percentages)

Technology, development and user support increased $1.3 million, or 9.1%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The increase was primarily due to a $2.3 million increase in team member compensation and benefit expense as a result of increased team member compensation, payroll taxes and stock-based compensation, an increase of $0.7 million in fiat onboarding fees, partially offset by a $0.9 million decrease in partner fee expense as a result of a correlated decrease in revenue from business-to-business partnerships, $0.4 million decrease in depreciation and amortization expenses and a $0.1 million decrease in cloud services expenses and a $0.1 million increase in capitalized labor.

General and administrative expenses increased $1.1 million, or 8.0%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. Expenses driving the increase include a $1.4 million increase in marketing expenses, an increase of $0.6 million in foreign currency expenses, a $0.3 million increase in legal and consulting expenses, a $0.2 million increase in network fees and a $0.1 million increase in depreciation and amortization expenses, partially offset by a $0.9 million decrease in meeting and travel expenses and a $0.8 million decrease in political contributions.

The Company experienced an unfavorable fluctuation in the market price of digital assets held during the three months ended March 31, 2026, primarily driven by market volatility due to macroeconomic headwinds, including the Federal Reserve's revised economic outlook, with a lower growth forecast and a higher inflation outlook, and the current administration's tariff policy. During the three months ended March 31, 2026, the Company recognized net realized gains from exchange of digital assets of $40.4 million and net unrealized losses from remeasurement of digital assets of $76.8 million. The Company experienced an unfavorable fluctuation in the market price of digital assets held during the three months ended March 31, 2025, primarily driven by market volatility due to macroeconomic headwinds, including the Federal Reserve's revised economic outlook, with a lower growth forecast and a higher inflation outlook, and the looming threat of broader tariffs. During the three months ended March 31, 2025, the Company recognized net realized gains from exchange of digital assets of $5.1 million and net unrealized losses from remeasurement of digital assets of $33.9 million. The Company expects that volatility in digital asset prices will continue and may result in significant fluctuations in the Company’s results of operations in future periods.

Income tax benefit was $8.7 million for the three months ended March 31, 2026, compared to a benefit of $8.9 million for the three months ended March 31, 2025. The effective tax rate during the three months ended March 31, 2026 was 21.2%, compared to 40.8% during the three months ended March 31, 2025. For the three months ended March 31, 2026, the change from the statutory tax rate to the effective rate was primarily due to a benefit related to stock option exercises net of non-deductible executive compensation, U.S. Foreign Derived Intangible Income and research and development tax credits partially offset by nondeductible expenses. For the three months ended March 31, 2025, the change from the effective rate was primarily impacted by the change in permanent differences, including the tax benefit from the foreign derived intangible income and non-deductible expenses, and discrete items, including stock-based compensation and tax effect of realized and unrealized digital asset gains and losses during the period.

Liquidity and Capital Resources

Overview

Our primary source of funding is from API fee revenues. We fund our operational costs from these revenues. Our primary use of funds is payment of our operating costs, which consist mostly of compensation and benefit expenses and security costs. As of the date of this filing, based on current operating plans, we believe that our existing cash and cash equivalents, treasury bills, stablecoins and digital assets will be sufficient to fund our operations and anticipated growth for the next twelve months and thereafter for the foreseeable future. We may seek to opportunistically raise additional capital through private or public equity securities offerings in the future.

We expect that increased market acceptance of digital assets and blockchain technology, combined with our expected continued growth of the Exodus Platform, market acceptance of our services and ability to attract and retain users on our platform, should support our ability to generate sufficient cash to meet our requirements and plans for cash.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

(in thousands)

Net Cash Used In Operating Activities

Net cash used in operating activities decreased by $3.6 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The primary drivers of the change were a decrease of $14.7 million in operating activities settled in digital assets and stablecoins, an increase in working capital of $11.5 million, a net increase in loss on digital assets of $7.6 million, an increase in stock-based compensation expense of $1.8 million, partially offset by an increase in net loss of $19.3 million, an increase in deferred tax benefit of $8.2 million, an increase in accrued interest income of $3.9 million, a decrease in the other loss, net of $0.4 million and a decrease in depreciation and amortization of $0.2 million. The primary drivers of the change in operating activities settled in digital assets and stablecoins included a decrease to revenue of $11.8 million related to decreased transaction volume, $6.6 million of increased expenses, $5.9 million decrease in conversion of digital assets and stablecoins to cash, and an increase in accounts receivables and other assets of $1.1 million.

Net Cash Provided By Investing Activities

Net cash provided by investing activities increased by $38.2 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. The increases were related to an increase of $67.4 million of net digital assets sold for cash, of which the proceeds are to be used to fund the W3C acquisition. This increase was partially offset by a $29.0 million of net change in treasury bills investments and redemptions.

Net Cash Used In Financing Activities

Net cash used in financing activities decreased by $4.3 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. This was primarily driven by cash used for the repurchase of shares of our common stock to pay employee withholding taxes.

Total Digital Assets and Liquid Assets

The following tables show the Company’s holdings of digital assets and cash and cash equivalents (including treasury bills with a maturity date of less than three months) and stablecoins.

The digital asset holdings as of March 31, 2026 and December 31, 2025 were:

(in thousands, except units)

(in thousands, except units)

* Other digital assets unit balances are not considered meaningful.

The liquid asset holdings as of March 31, 2026 and December 31, 2025 were:

(in thousands)

Material Capital Commitments

Exodus currently has no material commitments for capital expenditures.

Critical Accounting Estimates

See the section titled "Critical Accounting Estimates" set forth under "Item 7. Management's Discussion and Analysis of the Financial Condition and Results of Operations" in the Form 10-K. There have been no material changes from those disclosed in the Form 10-K.

Market price risk of digital assets

A large portion of our revenue generated from API providers is received in Bitcoin. A decline in the market price of digital assets had (and could in the future, have) an adverse effect on the Company's operations, the value of our digital assets, and our future operations and cash flows.

The market price of Bitcoin is impacted by a variety of factors and is determined primarily using data from various exchanges, over-the-counter markets and derivative platforms. The digital asset industry has been negatively impacted by market price volatility. Pricing may be the result of, and may continue to result in, speculation regarding future appreciation in the value of Bitcoin. There can be no assurance that we will be able to exchange our digital assets for U.S. dollars on a timely basis, if at all, or for a fair price. If the value of our digital assets declines, or if we experience difficulties converting our digital assets to U.S. dollars, we may not have sufficient liquidity to satisfy our liabilities, expenses and costs as they become due, which may negatively affect our business operations and financial condition. A hypothetical 10% increase or decrease in the digital assets held would have resulted in a change to the fair value of $4.8 million and $15.6 million as of March 31, 2026 and December 31, 2025, respectively.

Other Risks

We have risk exposure related to interest rates and foreign currency exchange rates. There have been no material changes in our primary risk exposures or management of these risks from those disclosed in our Form 10-K.

Evaluation of Disclosure Controls and Procedures

We, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act")). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded, as of the end of the period covered by this Form 10-Q, that such disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

No change was made in our internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f), during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes in our risk factors from those previously disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2025.