Gemini Space Station Q3 Earnings Call Highlights

Key Points

• Revenue fell 19% year over year to $40.9 million as weaker retail trading and fewer large OTC transactions outweighed stronger institutional exchange activity. Operating expenses dropped 30% to $119.9 million, but the GAAP operating loss widened to $79 million.
• Net loss narrowed to $58.6 million, and adjusted EBITDA improved to an $11.6 million loss. The improvement was helped substantially by a swing to $25.7 million in crypto-related gains, which Gemini says can make results volatile.
• Gemini is broadening its platform with prediction markets, derivatives, stock trading and margin trading, and plans a measured marketing increase in Q4. It lowered its full-year marketing expense guidance to 7%–10% of revenue.

Gemini Space Station NASDAQ: GEMI reported lower third-quarter revenue as weaker retail trading and fewer large over-the-counter transactions offset stronger institutional exchange activity, even as the company reduced operating expenses for a third consecutive quarter.

Total revenue fell 19% from a year earlier and 10% from the second quarter to $40.9 million. Operating expenses declined 30% year over year to $119.9 million, but the GAAP operating loss widened to $79 million from $76.9 million in the second quarter because revenue fell faster than expenses.

Co-Founder Cameron Winklevoss said Gemini is working to turn its crypto exchange into a broader financial platform, with offerings that now include prediction markets, derivatives, commission-free U.S. stock trading and margin trading. He acknowledged that the company’s results do not yet fully reflect what it built during the year.

Institutional Trading Rises as Retail Activity Softens

Trading volume reached $4.5 billion, up 18% sequentially but down 73% from a year earlier. Exchange revenue increased 7% from the second quarter to $13.4 million, though it was 47% below the prior-year quarter.

Interim CFO Danijela Stojanovic said about 26% of trading volume involved transactions between external customers and Gemini’s affiliated market maker, which began operating during the quarter. Such activity generally generates lower consolidated exchange fee revenue per dollar of volume because fees charged to the affiliate are eliminated in consolidation.

Transaction revenue fell 40% year over year to $15.9 million. OTC revenue was $1.7 million, down 64% sequentially, as the company saw fewer large trades than in the first half of the year. Prediction markets revenue rose 52% from the second quarter to approximately $0.8 million, net of incentives.

Stojanovic said retail activity remained soft and that attracting new traders had become more challenging after Gemini substantially reduced acquisition spending. The company plans to use targeted marketing, re-engage existing customers and simplify its retail trading experience, while continuing to evaluate pricing.

Card Losses Improve, but Growth Faces Constraints

Credit card revenue rose 82% year over year to $15.5 million, though it declined 4% sequentially. Card transaction volume fell 10% from the second quarter, while interest revenue increased 3% as customers continued to carry balances.

The card business’s contribution after provision expense was a loss of $3.4 million, compared with a $10.6 million loss in the second quarter. The improvement primarily reflected a decline in provision expense to $9.2 million from $16.1 million.

Card charge-offs increased to $11.5 million from $3.4 million. Stojanovic said most of the increase related to a first-quarter fraud event, with Gemini accelerating charge-offs of the affected accounts. Total 30-plus-day delinquency fell to 6% from 9.4%, partly because of those charge-offs. Excluding identified fraud accounts, delinquency was 3.4%, compared with 3.3% in the second quarter.

Stojanovic said card account growth has been broadly flat for several quarters, constrained in part by available funding capacity and the corporate capital needed to support receivables. She said the company is prioritizing fraud controls, credit quality and returns as it considers expansion.

Loss Narrows as Crypto Gains Boost Adjusted EBITDA

Net loss narrowed to $58.6 million from $107.7 million in the second quarter and $159.5 million a year earlier. Adjusted EBITDA was a loss of $11.6 million, compared with a $74 million loss in the preceding quarter.

A major contributor to that improvement was a swing to $25.7 million in net gains on crypto assets and related-party crypto loans from $25 million in net losses in the second quarter. Stojanovic noted that Gemini’s adjusted EBITDA measure includes those gains and losses, which can create substantial quarterly volatility.

Adjusted operating loss narrowed to $39 million from $49.3 million in the second quarter. Assets on the platform increased to $13.4 billion from $8.4 billion, mainly because of appreciation in underlying asset prices. Gemini ended the quarter with $194.1 million in cash and cash equivalents and subsequently increased its credit facility with Galaxy by $35 million.

Gemini Plans Selective Marketing Increase

Gemini expects a measured increase in marketing investment in the fourth quarter to support adoption of its products. For the full year, it lowered its marketing expense guidance, excluding rewards and promotions, to approximately 7% to 10% of revenue from 10% to 15%.

The company narrowed its full-year stock-based compensation forecast to $100 million to $105 million from $100 million to $115 million. It also raised the low end of its technology and general and administrative expense outlook by $5 million, to a range of $160 million to $170 million.

Asked about regulatory risk to sports prediction contracts, Co-Founder Tyler Winklevoss said Gemini believes its federal licensing position will ultimately prevail. He added that sports is one of several prediction categories and that the offering could continue without it.

Co-Founder Tyler Winklevoss said Gemini will share its 2027 priorities and the measures it will use to track progress on its next earnings call.

About Gemini Space Station (NASDAQ:GEMI)

Gemini Space Station, Inc. operates a cryptocurrency platform offering services to individual and institutional customers. Its products include digital-asset trading and custody, along with tools and services for institutions. Founded in 2014 by Cameron and Tyler Winklevoss, the company is based in New York. Gemini also issues the Gemini dollar, a U.S. dollar–pegged stablecoin. Gemini serves customers in the United States and select international markets, with product availability varying by location and local regulations.

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