Exodus Movement, Inc.: Form 10-Q for the period ended Jun 30, 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

Exodus is a financial technology company that operates two complementary platforms. Through the Exodus brand, the Company provides Web3 services, including self-custodial digital asset software and related digital asset services to API providers and direct consumers. Through the Monavate brand, the Company provides payment processing services, including card issuance, payment processing, and payment infrastructure solutions to traditional commerce and on-chain finance customers. The Company completed the acquisitions of Monavate Holdings Limited, Monavate Ltd, Baanx.com Ltd, and Baanx US Corp. ("Acquired Entities") in May 2026, expanding its operations beyond Web3 services into payment processing services.

The acquisitions of the Acquired Entities represents a significant milestone in the Company's evolution, expanding its enterprise offerings, diversifying its revenue base, and adding payment processing services and customer programs that complement its existing Web3 services.

Key Business Metrics

In addition to the measures presented in our condensed consolidated financial statements, management uses the key business metrics described below to evaluate operating performance, identify trends affecting the business, and support strategic decision-making.

* Percentage variances not considered meaningful.

(1) See "Non-GAAP Financial Measures" below for a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measure and an explanation of why management believes Adjusted EBITDA is useful to investors.

Monthly Active Users ("MAUs")

MAUs are defined as any unique user with Exodus 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 products and 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 and product adoption.

Quarterly Funded Users ("QFUs")

In addition to MAUs, we utilize 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 application 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.

Exchange Volume

Exchange volume is defined as the total U.S. dollar equivalent value of spot trades transacted through the Exodus platform, together with the value of spot trades routed to our exchange aggregation technology from third-party platforms during the reporting period. Exchange volume represents the quantity of digital assets transacted multiplied by the applicable trade price when the transaction is executed.

Exchange volume includes transactions from direct consumers and enterprise partners. Transactions from enterprise partners generally generate lower revenue per transaction than transactions from direct consumers. Accordingly, changes in direct consumer Exchange volume may have a more pronounced effect on transaction revenue than comparable changes in enterprise partner Exchange volume. Management uses Exchange volume to evaluate transaction activity and platform utilization. Exchange volume is influenced by digital asset prices, market volatility, customer engagement, and broader macroeconomic conditions.

Gross Transaction Volume ("GTV")

GTV is defined as the aggregate U.S. dollar equivalent value of purchase transactions made using payment cards issued on behalf of enterprise customers during the reporting period, before deducting refunds, returns, chargebacks, or other transaction adjustments. GTV excludes cash advances, balance transfers, finance charges, and fees unless otherwise specified. Transactions denominated in currencies other than the U.S. dollar are converted into U.S. dollars using the applicable currency exchange rate. Management uses GTV to evaluate payment activity and the utilization and scale of the Company's payment capabilities.

Total Active Cards

Total active cards represents the total number of unique payment cards issued on behalf of enterprise customers that made transactions during the reporting period. Management uses total active cards to evaluate the scale of the Company's card programs and the adoption of its payment capabilities. This metric does not imply the number of unique persons as a person may have more than one card.

Results of Operations

The following table presents our condensed consolidated results of operations for the three and six months ended June 30, 2026 and 2025:

(in thousands, except percentages)

* Percentage variances not considered meaningful.

Revenue

Revenue increased $0.4 million for the three months ended June 30, 2026 compared to the same period in 2025. The increase was primarily driven by a $5.0 million increase in revenue contributed by the Acquired Entities within payment processing services, partially offset by a $4.6 million decrease in revenue from Web3 services, primarily attributable to a $4.7 million decrease in exchange aggregation revenue due to lower volume.

Revenue decreased $12.8 million for the six months ended June 30, 2026 compared to the same period in 2025. The decrease was primarily driven by a $17.8 million decrease in revenue from Web3 services, primarily attributable to an $18.5 million decrease in exchange aggregation revenue due to lower volume, partially offset by a $5.0 million increase in revenue contributed by the Acquired Entities within payment processing services.

The following table summarizes revenue generated from the Company's Web3 service direct users and partnerships revenues:

(in thousands, except percentages)

31

Revenue generated from the Company's Web3 service direct users and business-to-business partnerships decreased $4.6 million for the three months ended June 30, 2026 compared to the same period in 2025. The decrease was primarily driven by a $5.9 million decrease in exchange aggregation revenue from direct users due to lower volume, partially offset by a $1.2 million increase in exchange aggregation revenue from business-to-business partnerships due to higher volume through and a $1.1 million increase in fiat onboarding revenue from direct users due to higher volume.

Revenue generated from the Company's Web3 service direct users and business-to-business partnerships decreased $17.8 million for the six months ended June 30, 2026 compared to the same period in 2025. The decrease was primarily driven by a $17.2 million decrease in exchange aggregation revenue from direct users due to lower volume and a $1.3 million decrease in exchange aggregation revenue from business-to-business partnerships, partially offset by a $1.9 million increase in fiat onboarding revenue from direct users due to higher volume and growth in the Company's customer base.

The following table summarizes the Company's external revenue by category within our payment processing services:

(in thousands, except percentages)

(1) This reflects the revenues of the Acquired Entities beginning on May 1, 2026. Accordingly, comparative prior-period information is not presented.

Web3 platform expenses

Web 3 platform expenses decreased $0.3 million for the three months ended June 30, 2026 compared to the same period in 2025. The decrease was primarily driven by a $0.4 million decrease in consulting expense, a $0.4 million decrease in depreciation and amortization expense, and a $0.3 million decrease in testing expense, partially offset by a $0.5 million increase in fiat onboarding costs and a $0.3 million increase in salary and benefit expenses.

Web3 platform expenses increased $1.9 million for the six months ended June 30, 2026 compared to the same period in 2025. The increase was primarily driven by a $2.6 million increase in salary and benefit expenses and a $1.0 million increase in fiat onboarding costs, partially offset by a $0.8 million decrease in depreciation and amortization expense, a $0.4 million decrease in consulting expense, and a $0.5 million decrease in testing expense.

Partnership expenses

Partnership expenses increased $1.5 million for the three months ended June 30, 2026 compared to the same period in 2025. The increase was primarily driven by higher transaction volume.

Partnership expenses increased $0.7 million for the six months ended June 30, 2026 compared to the same period in 2025. The increase was primarily driven by higher transaction volume and growth in the Company's customer base.

General and administrative expenses

General and administrative expenses increased $25.9 million for the three months ended June 30, 2026 compared to the same period in 2025. The increase was primarily driven by a $17.0 million increase in transaction-related incentives, a $5.8 million increase in professional services expense, a $2.5 million increase in compensation and benefit expenses, a $2.2 million increase in foreign currency expense, and a $2.1 million increase in subscription, bank and network, depreciation and amortization and other general and administrative expenses, partially offset by a $2.5 million decrease in travel expense and a $1.2 million decrease in marketing expense.

General and administrative expenses increased $27.0 million for the six months ended June 30, 2026 compared to the same period in 2025. The increase was primarily driven by a $17.0 million increase in transaction-related incentives, a $6.1 million increase in professional services expense, a $2.3 million increase in compensation and benefit expenses, a $2.8 million increase in foreign currency expense, and a $2.2 million increase in subscription, bank and network, depreciation and amortization, and other general and administrative expenses, partially offset by a $3.4 million decrease in travel expense.

Income tax (benefit) expense

Income tax benefit was $3.1 million for the three months ended June 30, 2026, compared to an expense of $9.8 million for the three months ended June 30, 2025. The effective tax rate during the three months ended June 30, 2026 was 14.4%, compared to 20.7% during the three months ended June 30, 2025.

Income tax benefit was $11.8 million for the six months ended June 30, 2026, compared to an expense of $0.9 million for the six months ended June 30, 2025. The effective tax rate during the six months ended June 30, 2026 was 18.9%, compared to 3.6% during the six months ended June 30, 2025. For the six months ended June 30, 2026, the change from the statutory tax rate to the effective rate was primarily due to non-deductible incentive expenses partially offset by 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. For the six months ended June 30, 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.

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.

Non-GAAP Financial Measure

Adjusted EBITDA is a supplemental non-GAAP financial measure that management uses to evaluate the operating performance of the Company's business. We define Adjusted EBITDA as net (loss) income before interest income net, income tax (benefit) expenses, and depreciation and amortization, further adjusted to exclude certain non-cash and other items that management does not consider indicative of the Company's ongoing operating performance.

Management uses Adjusted EBITDA to evaluate the Company's ongoing operations and for internal planning and forecasting purposes. Management believes these adjustments provide investors with additional insight into the Company's ongoing operating performance by removing the effects of items that are not indicative of the Company's underlying operating performance. We believe Adjusted EBITDA assists investors in evaluating the underlying trends of the Company's business, facilitates period-to-period comparisons, and enhances comparability with other companies. However, Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for net (loss) income or any other financial measure prepared in accordance with U.S. GAAP. In addition, other companies may calculate Adjusted EBITDA differently or may use other measures to evaluate their performance, which could reduce the usefulness of Adjusted EBITDA as a comparative measure.

A reconciliation of Adjusted EBITDA is presented below. Investors are encouraged to review the related U.S. GAAP financial measure and the reconciliation, and not to rely on any single financial measure to evaluate the Company's business.

(in thousands)

Liquidity and Capital Resources

Overview

Our primary sources of liquidity are cash flows generated from operations, together with our balances of cash and cash equivalents, stablecoins and digital assets. Our primary uses of liquidity are funding operating expenses, working capital requirements, strategic investments and product development initiatives that support the growth of our business. Based on our current operating plans, we believe our existing cash and cash equivalents, stablecoins and digital assets will be sufficient to fund our operations, strategic initiatives and anticipated growth.

We expect that increased adoption of digital assets and blockchain technology, together with continued growth of the Exodus Platform, expansion of our payment processing services, continued market acceptance of our products and services, and our ability to attract and retain customers, will support our ability to generate sufficient cash flows to meet our liquidity requirements and execute our long-term growth strategy.

Cash Flows

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

(in thousands)

* Percentage variances not considered meaningful.

Net Cash Used In Operating Activities

Net cash used in operating activities increased by $40.7 million for the six months ended June 30, 2026 compared to the same period in 2025. The increase was primarily driven by a $75.5 million increase in net loss, a $20.4 million gain on extinguishment of debt, a $16.7 million increase in deferred tax benefit, a $10.9 million increase in working capital, a $2.7 million increase in staking and other income, a $1.6 million increase in accrued interest income, and a $0.4 million decrease in other loss, net, partially offset by a $67.1 million increase in net loss on digital assets, a $18.9 million decrease in operating activities settled in digital assets and stablecoins, a $2.5 million increase in stock-based compensation expense, a $2.0 million increase in loss (gain) on disposed investments, a $0.3 million increase in impairment of other assets, a $0.3 million increase in accretion of the future purchase obligation, and a $0.2 million increase in depreciation and amortization.

Net Cash Provided By Investing Activities

Net cash provided by investing activities increased by $380.0 million for the six months ended June 30, 2026 compared to the same period in 2025. The increase was primarily driven by a $342.3 million net cash related to the Acquired Entities, a $66.5 million increase in proceeds from the disposal of digital assets, a $4.9 million decrease in purchases of treasury bills, a $2.0 million decrease in proceeds from the sale of disposed investments, and a $0.1 million decrease in investments in Simple Agreements for Future Equity notes, partially offset by a $30.7 million decrease in redemptions of treasury bills, a $0.1 million increase in purchases of digital assets, a $0.9 million increase in other investing activities, and a $0.2 million purchase of an equity security.

Net Cash Used In Financing Activities

Net cash used in financing activities decreased by $7.8 million for the six months ended June 30, 2026 compared to the same period in 2025. The decrease was primarily driven by a $7.8 million decrease in repurchases of shares to satisfy employee tax withholding obligations, partially offset by cash used for the exercise of stock options.

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 June 30, 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 June 30, 2026 and December 31, 2025 were:

(in thousands)

Material Capital Commitments

As of June 30, 2026, the Company had material contractual cash requirements related primarily to long-term marketing sponsorship and cloud infrastructure arrangements. Remaining contractual commitments totaled approximately $72.2 million, consisting primarily of approximately $51.7 million under a long-term marketing sponsorship agreement and approximately $20.5 million under long-term cloud infrastructure agreements. Based on the contractual payment terms, approximately $10.4 million is expected to be paid during the remainder of 2026, $20.8 million in 2027, $20.8 million in 2028, and $20.2 million in 2029. Management expects these obligations to be funded through existing cash balances, digital asset holdings, and cash generated from operations.

Critical Accounting Estimates

Except as described below, there have been no material changes to the critical accounting estimates disclosed in the Company's Annual Report on Form 10-K in the section titled "Critical Accounting Estimates" set forth under "Item 7. Management's Discussion and Analysis of the Financial Condition and Results of Operations".

Business Combinations

During the second quarter of 2026, the Company completed the acquisitions of Monavate and Baanx. The accounting for these acquisitions required significant estimates and assumptions in determining the preliminary fair values of the assets acquired and liabilities assumed, including acquired intangible assets and their useful lives, deferred consideration, and goodwill. These estimates are preliminary and may be revised during the measurement period as additional information becomes available.

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 $3.7 million and $15.6 million as of June 30, 2026 and December 31, 2025, respectively.

Foreign currency risk

Foreign currency transaction risk

Revenues, expenses, and financial results of our foreign subsidiaries are recorded in the functional currency of these subsidiaries. Our foreign currency exposure is primarily related to transactions denominated in Swiss Francs, Great British Pound, and Euro attributable to cash and cash equivalents, and other intercompany transactions where the transaction currency is different from a subsidiary’s functional currency. Changes in foreign exchange rates, and in particular a weakening of foreign currencies relative to the U.S. dollar may negatively affect our results of operations as expressed in U.S. dollars. We have experienced and will continue to experience fluctuations in our results of operations as a result of gains or losses on the settlement and the remeasurement of monetary assets and liabilities denominated in foreign currencies that are not the functional currency.

We recognized net foreign currency losses of $0.9 million and net foreign currency gains of $1.9 million for the six months ended June 30, 2026 and 2025, respectively, in general and administrative expense in the condensed consolidated statements of operations and comprehensive (loss) income. If an adverse 10% foreign currency exchange rate change was applied to total monetary assets, liabilities, and commitments denominated in currencies other than the functional currencies at the balance sheet date, it would not have a material impact on our financial results.

We have not, but may in the future enter into derivatives or other financial instruments in an attempt to hedge our exposure to foreign currency exchange risk. It is difficult to predict the impact hedging activities would have on our results of operations. Additionally, the volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Our international operations increase our exposure to exchange rate fluctuations and, as a result, such fluctuations could have a material impact on our future results of operations and cash flows.

Foreign currency translation risk

Fluctuations in functional currencies from our net investment in international subsidiaries expose us to foreign currency translation risk, where changes in foreign currency exchange rates may adversely affect our results of operations upon translation into U.S. dollars. We recognized losses on translation adjustments, net of tax, of $2.2 million for the six months ended June 30, 2026, compared to losses on translation adjustments, net of tax, of $1.3 million for the six months ended June 30, 2025, in the condensed consolidated statements of operations and comprehensive (loss) income. As of June 30, 2026 and 2025, a 10% increase or decrease on foreign currency exchange rates for translation purposes would not have a material impact on our financial results.

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

During the three months ended June 30, 2026, the Company completed the acquisitions of Monavate Holdings Ltd., Baanx.com Ltd., and Baanx US Corp. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company. As part of our post-closing integration activities, we are integrating the acquired businesses into our financial reporting and internal control environment and continue to evaluate the impact of related changes to internal control over financial reporting. Except for changes in internal controls related to the integration of the acquired businesses, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are subject to various risks and uncertainties in the ordinary course of our business. Risk factors relating to us are set forth below and under Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The following risk factors are in addition to our risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2025, which could affect our business, financial condition and results of operations. We may be subject to additional risks and uncertainties that we currently consider immaterial or that are unknown to us but may have a material impact on our business, financial condition and results of operations.

Our recent initiatives to improve our cost structure, including a significant workforce reduction, may not result in the anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.

In July 2026, we announced an operating realignment that includes a reduction in force affecting approximately 25% of our global workforce, undertaken to better align our cost structure and organizational priorities with our strategy to build a full-stack card issuance and payments platform, while maintaining expense discipline and continuing the integration of Monavate and Baanx. In connection with this reduction in force, we expect to recognize approximately $4.6 million to $5.7 million of costs, consisting primarily of personnel expenses such as salaries and wages, severance payments, and other benefits. We expect this reduction in force to generate approximately $9 million to $11 million of annualized cash operating expense savings, with the full benefit of these savings expected to be realized in 2027. However, we may incur additional charges or expenses not currently contemplated due to events associated with the reduction in force, and our actual charges and savings may differ materially from our current estimates. The estimated charges and annualized cost savings are based on a number of assumptions, and actual results may differ materially. We may not realize, in full or in part, the anticipated benefits and savings from this reduction in force due to unforeseen difficulties, delays or unexpected costs, and we may not achieve the full benefit of any savings within the anticipated timeframe. If we are unable to realize the expected operational efficiencies and cost savings from the reduction in force, our operating results and financial condition would be adversely affected. In addition, as we continue to evaluate our combined cost base and operating model following the Monavate and Baanx acquisitions, we may need to undertake additional workforce reductions or restructuring activities in the future. Furthermore, our initiatives to improve our cost structure, including the reduction in force, may be disruptive to our operations. For example, our workforce reductions could yield unanticipated consequences, such as attrition beyond planned staff reductions, the loss of institutional knowledge and expertise, increased difficulties in our day-to-day operations, reduced employee morale and diversion of our management’s and employees’ attention from other business priorities. If employees who were not affected by the reduction in force depart, we may need to seek contractor support at unplanned additional expense or suffer harm to our productivity. In addition, we may be unsuccessful in distributing the duties and obligations of departed employees that are necessary to our operations among our remaining employees or to contractors, which could result in disruptions to our operations. Our workforce reductions could also harm our ability to attract and retain qualified personnel who are critical to our business, and make it difficult for us to pursue new opportunities and initiatives and require us to hire qualified replacement personnel. Any failure to attract or retain qualified personnel could prevent us from successfully developing or selling our products, which would adversely affect our business, financial condition, and results of operations.

Our success depends on our ability to attract and retain a sufficient number of key technical, user support and management personnel while supporting the onboarding and career development of our team members.

Our ability to successfully execute on our business plan depends on the contribution of our management team as well as other key talent including platform development, operations, user support, general administrative functions and our creative and engineering teams. We have previously and may continue to experience increasing competition for available talent in the workforce as reflected by the low unemployment rate, shortages of available industry talent and increasing costs to retain team members. As a result, we could experience inefficiencies or a lack of business continuity due to team member turnover, including loss of historical knowledge, new team members' lack of historical knowledge and lack of familiarity with the business processes, operating requirements, purpose and culture, policies and procedures and key information technologies and related infrastructure used in our day-to-day operations and financial reporting. We may also experience additional costs as new team members learn their roles and gain necessary experience and training, including as it relates to the complex regulations applicable to our business, in addition to the cost of hiring new individuals.

Our future performance will depend, in part, on the successful transition of our workforce to our new operating and organizational structure following our recent reduction in force. If we do not successfully manage these transitions, it could be viewed negatively by our customers, employees, investors, and other third-party partners, and could have an adverse impact on our business and results of operations.

We are dependent on our co-founders Jon Paul Richardson and Daniel Castagnoli, the loss of whose services may adversely impact the achievement of our objectives. If we were to lose the services of members of our management team or other key talent, whether due to death, disability, resignation or termination of employment, our ability to successfully implement our business strategy, financial plans, marketing and other objectives could be significantly impaired. In addition, if we are unable to attract and retain qualified key talent, we may not be able to effectively and efficiently manage.