管理層發言
Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to BitGo's Second Quarter 2026 Earnings Conference Call. I will now turn the conference over to Rachel Dye, Head of Investor Relations. You may begin.
Thank you, and good afternoon, everyone. Our remarks today will include forward-looking statements. These include statements about our operating outlook, financial condition, business strategy, market opportunity and future plans. Actual results may differ materially from these statements. Information about risks and uncertainties appear in our SEC filings under the heading Risk Factors in our annual report on Form 10-K and our quarterly reports on Form 10-Q. The forward-looking statements we make today reflect our views only as of today. We undertake no obligation to update them, except as required by law. We will also discuss GAAP and non-GAAP financial measures. A reconciliation of each non-GAAP financial measure to the most directly comparable measure calculated in accordance with GAAP is contained in our earnings release and investor presentation, each of which is available on the Investor Relations section of our website at investors.bitgo.com. Non-GAAP measures should be considered in addition to and not as a substitute for GAAP measures. Joining me today are Mike Belshe, Co-Founder and Chief Executive Officer; and Ed Reginelli, Chief Financial Officer. Mike, over to you.
Thank you, Rachel, and thank you all for joining us today. BitGo continued strengthening its institutional platform during the second quarter. We grew our assets on platform, deepened client relationships and sharpened our operating model to support continued investment in the capabilities that make our infrastructure more valuable to clients and the broader digital asset ecosystem. That said, our Q2 financial performance fell short of our expectations. While we delivered revenue growth, profitability was impacted by lower margins and an unfavorable revenue mix. In digital asset sales, gross trading increased, but lower spreads on certain spot transactions and a lower contribution from derivatives reduced overall margin. In staking, revenue increased sequentially as a large institutional client added significant activity at a lower take rate. At the same time, high-margin transaction-based revenue from another large client declined, resulting in lower overall take rate. While these factors impacted our financial results this quarter, they do not change our long-term conviction in the business or the opportunity ahead. Our priority now is to translate that continued platform growth into stronger financial performance. We took actions in the areas that we can control. We lowered our cost base, we sharpened our investment priorities and concentrated resources on the capabilities with the clearest client demand and economic potential. At the same time, we remain committed to innovating in areas that we believe will support BitGo's long-term growth. Ed will discuss the financial drivers in more detail in his section. Looking at the next slide, I want to focus on the growth of the underlying platform. And to provide context, let me frame the market that we operated in. The second quarter was difficult across all of crypto. Total crypto market capitalization fell 13% from about $2.4 trillion to about $2.1 trillion in a third straight quarterly decline in the lowest level since September 2024. Additionally, Bitcoin was down about 14%. Industry-wide trading volumes declined more than 20% and volatility held at multiyear lows. Our results reflected that backdrop. While revenue grew, lower margins and unfavorable revenue mix pressured profitability, and Ed will walk you through how that impacts BitGo going forward. But the story of the quarter is the platform. And while the market contracted in a quarter when the industry shrank, we gained market share, expanded our client base and grew both normalized assets on platform and normalized assets staked on a sequential and year-over-year basis to approximately $65 billion and $12 billion, respectively. These metrics are important because they reflect continued adoption of the BitGo platform. As assets on platform increase, they create more opportunities to expand the number of services and workflows they rely on over time. That expansion is central to our land and expand strategy. Custody is typically where the relationship begins. From there, clients increasingly adopt additional capabilities such as trading, staking, financing, settlement, treasury services and other workflows that allow them to operate on a single institutional-grade platform. Every additional workflow strengthens the client relationship, increases wallet share and expands the long-term value of that customer relationship. While they don't always translate into revenue on a one-quarter basis, they provide the foundation for long-term growth. The other area I want to highlight is the discipline we brought to the operating model during the quarter. We focused our investment priorities and resources behind our highest value growth initiatives. As part of that effort, we reduced our workforce in June and streamlined the organization. We have also identified other cost reduction initiatives, including the repatriation of node infrastructure to reduce public cloud costs. Together, these savings are expected to generate approximately $15 million of annualized cash savings beginning in Q3. We expanded the use of AI across our entire business, particularly in engineering and operations, where we're already seeing measurable productivity gains. Today, autonomous AI agents are fully resolving approximately 20% of engineering issues each month with every single change still reviewed by our human engineers. In client support, AI now provides the first response to roughly 17% of all inbound support tickets, improving response times and reducing support costs. We're also increasingly using AI assistant development to build internal software tailored specifically to BitGo's needs. Based on vendor assessments, more than 40% of code is AI generated or assisted. We got there deliberately with human review and custody-grade controls at every step, and the pace is accelerating with throughput up 220% in the last quarter alone. We believe, over time, this will drive more top line results and maintain a better cost structure that will increase BitGo's earning power. Looking ahead, building a more efficient and high-performance organization is an ongoing process, and we'll continue looking for opportunities to improve our operating leverage over time. Together, these actions strengthen our cost structure, improve execution and allow us to continue investing behind our highest priority strategic initiatives. Importantly, while we have strengthened our operating model, we've continued investing in the capabilities that make our platform more valuable to clients. A good example is our recently announced quantum risk management capabilities for Bitcoin wallets. As institutional adoption continues to accelerate, quantum risk has emerged as a major area of concern for many institutions. While much of the industry remains focused on future standards, BitGo has already moved from discussion to execution, delivering quantum risk solutions that institutions can deploy today. At BitGo, security is much more than just a feature. Every improvement we make to security strengthens the value proposition of our entire platform. It reinforces client trust, differentiates BitGo in the market and makes custody an even more compelling entry point for new institutional relationships. That philosophy extends well beyond quantum security. Every investment we make, whether in security, compliance, operations or new capabilities is designed to strengthen the full platform because a stronger platform helps us win more clients. And as those clients deepen their relationship with BitGo, they increasingly adopt additional services that can help them securely access and participate in the digital asset ecosystem. That's the land and expand flywheel that drives our business. Everything I've shared so far reflects how we're strengthening the BitGo platform today. Looking ahead, we see three important trends reshaping the future of financial infrastructure. First, regulatory clarity continues improving across many of the markets we serve, enabling institutions to move from evaluating digital assets towards deploying capital and building products. Second, stablecoins are increasingly becoming mainstream. Today, U.S. dollar stablecoins represent more than $300 billion of circulating value and continue expanding into payments, settlement and treasury applications. Third, tokenization is moving from concept to production. More than $35 billion of real-world assets have already been tokenized, and we believe we're still in the very early stages of that adoption curve. These aren't independent trends. As regulatory frameworks mature, stablecoins scale and tokenized assets become more widely adopted, they enable a more global always-on 24/7 financial system where value moves seamlessly across institutions and jurisdictions on digital rails. For BitGo, every dollar that moves on to digital rails expands the need for our critical regulated infrastructure. That's why we believe our addressable market will continue to grow significantly. As this slide illustrates, BitGo sits at the intersection of these three rapidly developing markets. Every institution entering these markets will require trusted regulated infrastructure to securely custody assets, move value and perform financial activity. That is what underpins the long-term opportunity for BitGo. No one can predict precisely which networks, protocols or business models will ultimately emerge as leaders. We have deliberately built BitGo so our success does not depend on making that prediction. As institutions continue to adopt digital assets, stablecoins, tokenized markets, they will require secure custody, compliant asset movement and trusted settlement infrastructure. Our role is to provide that critical infrastructure regardless of which assets, networks or applications ultimately succeed. This positions us to capture growth and serve clients across multiple potential market outcomes. We are already supporting institutions as these markets move from experimentation towards production. Across different networks and issuance models, we provide the qualified custody, compliant asset movement, trading, collateral and settlement capabilities they need to operate at scale. One example is our work with the DTCC, one of the world's most important financial market infrastructure providers and the backbone of U.S. securities market. Its move towards tokenized securities represents an important milestone for the broader adoption of digital financial infrastructure. We're proud to provide the wallet infrastructure supporting the DTCC tokenization initiative. In July, the first U.S. transactions using DTCC tokenized assets were successfully processed, marking an important step ahead of the platform's full production launch. This is not an isolated example. BitGo also serves as the sole qualified custodian for the Canton Network, supporting DTCC's tokenized equity initiative and the sole custodian for Figure's open network tokenized equities platform as additional examples. These partnerships demonstrate that institutions are increasingly selecting BitGo's regulated infrastructure as they move digital assets, stablecoins and tokenized securities into production. Everything we discussed today ultimately comes down to one thing, continuing to strengthen the BitGo platform and extending our leadership in institutional digital asset infrastructure. Our approach to product development has always been disciplined. We don't build products to chase headlines or every new trend. We invest where we see durable client demand and where we believe we can meaningfully strengthen our platform over the long term. To make that more tangible, I'd like to walk through two examples. Before I begin, I want to note that the following demonstrations are for illustrative purposes only and do not constitute an offer to sell or a solicitation to offer or buy any security. The availability of these capabilities may be subject to applicable securities laws and regulatory approvals. First, I'll demonstrate how BitGo is building the underlying infrastructure for tokenized equities, bringing together regulated custody, on-chain ownership and capital markets infrastructure in a way we believe will become increasingly important as traditional financial assets move on to digital rails. Then I'll highlight our recently announced quantum-resistant wallet capabilities. Quantum computing has been a growing concern for our institutional Bitcoin holders. And rather than waiting for future standards, BitGo's already introduced tools to help clients identify, measure and reduce quantum exposure today. Together, these examples illustrate how we're continuing to expand the BitGo platform, not by adding features for the sake of it, but by solving real customer problems for institutional clients and reinforcing the foundation for our next generation of financial markets. To show how these capabilities come together, let me walk you through something live. For most of our financial history, owning a share meant holding a piece of paper, and whoever held the paper owned the equity. That worked at small scale and it broke catastrophically at large scale. Today, stocks are moving on chain for the same reason money and everything else is going digital. The real question is, what structure wins when they do? What I'm about to show you is our answer. And it brings together several things that until now have lived in separate worlds: a real publicly listed security, qualified custody at a federally regulated U.S. trust bank and self-custody on-chain entitlement that you hold yourself assembled in real time on one platform. To our knowledge, no one has put all of these together on a real listed stock live until today. What you see in front of us is my logged-in account in BitGo. I'm going to place an order to buy 100 shares of SpaceX, our tokenized entitlement representing SpaceX shares that are held at BitGo Bank & Trust. Once submitted, the trade occurs on the open public market at competitive pricing through our clearing relationship. The trade is executed, and now we have an additional 100 shares of SpaceX represented as goSPCX tokens in my account. BitGo Bank & Trust has a fiduciary duty to hold the underlying share on your behalf. I can always direct BitGo to sell the underlying shares on my behalf using the order type of my choice. From here, I can hold it, move it amongst my own wallets or, as I'll show next, I'll put it to work as collateral. So let's go apply for a loan. Instead of selling my SpaceX position, I will borrow using it as collateral. For this demonstration, I'm going to choose to borrow SoFi Dollar, a stablecoin issued by SoFi Bank in partnership with BitGo. I'm going to borrow $20,000 and submit my request. BitGo Prime evaluates the loan, pricing the collateral against current market conditions and then returns these terms. All right. The loan is approved. I now need to pledge a certain amount of goSPCX as collateral, and it looks like 203 is required. I then enter my password here and pledge it. We'll receive our SoFi USD shortly as a deposit into my account without ever selling the underlying position. And we've now received our SoFi USD. Let's take a look at our balances. Here's that SoFi dollar that we just received. All right. So I think what we've done here is pretty amazing. In just a few clicks, we've orchestrated a complex financial transaction across three different financial systems. First, we access the capital markets to tokenize a stock purchase in real time. Second, we put that tokenized asset into qualified custody at a regulated U.S. national bank. And third, we issued a loan against that asset in the form of a regulated U.S. stablecoin from SoFi. That's the core Go Stocks loop: buying, holding in your own wallet and borrowing against it—real ownership made usable. Go Stocks are entitled to the full economic benefit of the underlying share, including corporate actions, dividends, voting and more, so that holding a Go Stock never means giving up the rights that come with owning the real thing. And this is just the foundation. We're building towards a much broader set of capabilities on top of it: off-market transfers, letting enterprises move Go Stocks directly to one another over BitGo's Go Network; permissioned DeFi, so self-custody holders can access on-chain liquidity and lending without routing through a centralized exchange; and a global token layer extending the same real ownership model to non-U.S. holders through synonymous tokens, all while keeping a regulated custodian in the chain, never sacrificing the entitlement for openness. Today's demo is buy and borrow. Tomorrow, it's a completely on-chain equity platform built on real ownership from the ground up. The second example focuses on a very different challenge, but one that's been increasingly important. As we've discussed, security remains foundational to digital assets and quantum computing has become a growing area of focus for institutions with long-term Bitcoin holdings. Rather than waiting for future industry standards to emerge, BitGo has taken a different approach. At the core is our quantum resistance score, which allows clients to measure how much of their Bitcoin may be exposed to future quantum risk using publicly verifiable blockchain data. Where exposure exists, clients can remediate it with a single action by moving assets to fresh addresses while preserving the same ownership, policies and security controls. Behind the scenes, we've also redesigned how Bitcoin transactions are constructed. Every transaction is quantum aware by default, automatically reducing exposure over time without changing the client experience. In our view, the best security enhancements are the ones that clients don't have to think about. Importantly, we're not stopping there. We're continuing to invest in post-quantum cryptography, next-generation MPC infrastructure and future blockchain security standards so that BitGo remains prepared as the industry evolves. What makes this significant is that quantum readiness is increasingly becoming part of the due diligence process for ETF issuers, corporate treasuries and other long-term institutional Bitcoin holders. That's another example of how we continue strengthening the BitGo platform, solving tomorrow's institutional challenges before they become today's requirements. The two examples we just walked through aren't really about individual products. They're examples of what becomes possible after more than a decade of building institutional digital asset infrastructure. Neither tokenized equities nor quantum-resistant wallets could exist as stand-alone applications. They require regulated infrastructure, secure custody, deep engineering expertise and an institutional platform that brings all those capabilities together. That's what drives BitGo's platform advantage. Our advantage isn't any single product. It's the combination of regulatory infrastructure, technology and institutional network that allows us to earn client trust, continuously expand client workflows and create stronger economics over time. That's the business model. Everything I've discussed today is ultimately designed to support one objective: building deeper institutional relationships over time. Institutions typically begin with custody, but they rarely stop there. As their digital asset businesses grow, they need trading, settlement, financing, staking, stablecoin infrastructure, tokenization and other capabilities. Because those services are built on the same integrated platform, each individual workflow strengthens the client relationship while increasing the revenue per client, improving retention and creating operating leverage. The digital asset industry has never developed in a straight line. We've now operated through multiple market cycles, and each one has expanded institutional adoption, strengthened the ecosystem and created new opportunities for infrastructure providers. Throughout those cycles, BitGo has continued to grow its clients, assets on platform and product capabilities, positioning us to benefit as institutional participation continues to accelerate. We believe BitGo is uniquely positioned to not only participate in that long-term growth, but to help define the infrastructure that enables it. Before I turn it over to Ed, I'd like to share an update regarding our leadership team. You may have already read in today's earnings release, Ed will be transitioning from his role as Chief Financial Officer during the coming quarter. On behalf of everyone at BitGo, I want to thank Ed for his leadership and the many contributions he's made to the company. He's been an important part of our growth and our evolution. Ed will remain with the company to help ensure a smooth and orderly transition, and we'll provide an update on our succession plans at the appropriate time. With that, I'll turn it over to Ed to walk through our financial results in more detail and our Q3 outlook.
Thank you, Mike, and good afternoon, everyone. I'll start with the consolidated results, then cover our major offerings, the balance sheet and then the outlook for Q3. Total revenue for the quarter was $4.3 billion, increasing 14.7% sequentially and 79.6% year-over-year. Direct costs were approximately $4.3 billion, up 15.1% sequentially and 80.8% year-over-year. GAAP net loss was $19 million compared with a net loss of $60.7 million in Q1. The sequential improvement primarily reflected a smaller unrealized mark-to-market loss on digital assets and lower compensation and benefits expense. Q2 included an $18.8 million unrealized loss on digital assets compared with a $53.7 million unrealized loss in Q1. Share-based compensation expense was $3.6 million compared to $11.2 million in the first quarter primarily reflecting the absence of the one-time IPO-related share-based compensation expense recognized in Q1. Adjusted EBITDA was a loss of $4.2 million compared with a loss of $1.7 million in the first quarter and a profit of $3 million a year ago. The sequential decline primarily reflected lower economic contribution from digital asset sales and staking as a result of lower overall margins and take rates, partially offset by lower cash compensation and professional fees. Breaking those results down by offering, I'll begin with digital asset sales. Revenue was $4.2 billion, up 14.7% sequentially and 84.3% year-over-year. After removing digital asset sales costs, overall quarterly margin was approximately $7.1 million. While overall digital asset sales volume increased during the quarter, we experienced lower trading margins and a lower derivatives volume. As we discussed on last quarter's earnings call, spot trading revenue is recognized on a gross basis, whereas derivative revenue is recognized on a net basis. Changes in the product mix between spot trading and derivatives can have a meaningful impact on reported digital asset sales revenue and the associated margin. As a result, our overall digital asset sales margin decreased to 17 basis points compared to 32 basis points in the first quarter and 19 basis points in the prior year period. Turning next to staking. Our revenue was $64.7 million, up 30.9% sequentially but down 28.8% year-over-year. Staking fees were $60.8 million, resulting in a take rate of 6% compared to a take rate of 16.1% in Q1 and 10% a year ago. Normalized assets staked increased 3% sequentially and 36.1% year-over-year. The sequential increase in revenue was driven primarily by substantial new staking activity from a large institutional client. While this relationship contributed meaningfully to revenue growth, it carries a lower contractual take rate compared with our historical average. In addition, we experienced softer revenue contribution from another large client, which also weighed on overall margins. Staking economics will continue to vary based on client, token, validator and transaction mix. Our focus is on continuing to grow the asset base while improving the mix of higher-value activity over time. The next component is subscriptions and services, where revenue was $27.5 million, up 7.7% sequentially and up 8.5% year-over-year. The sequential increase reflected continued client growth and activity, together with increased project-based ecosystem and implementation work. Our custody and wallet relationships remain the foundation of the platform. Our priority is to convert more of those relationships into recurring multiproduct revenue. Rounding out our business line review is Stablecoin-as-a-Service, where revenue was $38.8 million, up 1.7% sequentially and 148% year-over-year. Stablecoin sponsor fees were $35.7 million, resulting in a take rate of 8% compared to 7.4% in Q1 and 2.6% a year ago. Sequential growth was supported by higher reserve balances and fixed monthly fees from newly supported stablecoin programs. The pipeline is healthy, and we continue to see opportunities to expand the number of stablecoin programs supported by the platform. Turning now to expenses. Expenses, excluding direct costs, were $59.9 million, down 13% sequentially and up 38.9% year-over-year. The sequential decline was primarily driven by a 27.6% decrease in compensation and benefits expense from $40.8 million to $29.5 million, reflecting the normalization of IPO-related share-based compensation, together with lower cash compensation. Professional fees also declined sequentially. Compared to the prior year, operating expenses increased primarily due to higher employee-related costs to support platform growth as well as additional legal and administrative expenses associated with becoming a public company. During the quarter, we also recorded a $1.3 million restructuring charge related to the workforce reduction implemented at the end of Q2. The $9 million of annualized cost savings from this restructuring and the additional $6 million of annualized cost savings from other initiatives are expected to begin benefiting our operating results starting in the third quarter. On the balance sheet, our positioning remains strong. We ended the quarter with $159 million of cash and cash equivalents and continue to maintain a balance sheet with no corporate level debt. In addition, our corporate treasury held 2,523 company-owned Bitcoin with a fair value of approximately $148 million as of the end of the quarter. Our capital allocation priorities remain maintaining regulatory and operating liquidity, supporting client activity, funding selected organic investments and strategic opportunities and returning capital when appropriate. In June, our Board authorized a share repurchase program of up to $50 million. Repurchases are discretionary and will depend on market conditions, liquidity, regulatory capital requirements and other uses of capital. Finally, before moving on to guidance, I'd like to clarify that all IPO lockup restrictions expired on May 15, 2026. To close, I'll review our outlook for the third quarter. Digital asset market conditions remained challenging entering the quarter. Our outlook assumes that the market activity and digital asset prices remain broadly consistent with recent levels. For digital asset sales, we expect reported revenue to be relatively flat versus Q2 performance, reflecting a similar product mix between spot and derivatives. For staking, we expect revenue to remain broadly consistent with the second quarter. For subscriptions and services, we expect sequential growth, supported by continued client activity and project-based ecosystem and implementation work. For Stablecoin-as-a-Service, we expect modest sequential growth, supported by increased reserve balances from existing issuer programs and continued client adoption. We expect expenses, excluding direct costs to decline sequentially, reflecting the benefit of the workforce reduction and other cost reduction efforts across the organization that Mike highlighted earlier. Before we open it up for questions, I want to say how grateful I am for the past six years. It has been a privilege to help build this company, and I'm proud of what our team has accomplished together. BitGo's journey is far from over, and I look forward to continuing to work alongside this team through the transition and supporting the company's next chapter. With that, operator, please open the call for questions.
分析師問答
We will now open the call for questions. Our first question comes from the line of James Yaro with Goldman Sachs.
Mike, I was hoping you might be able to talk a little bit about custody business market structure and digital assets going forward. Do you expect to see substantial consolidation in crypto custody providers? Do you think we should see only a few custody providers over time like we have in traditional securities markets, a different market structure or something else, and perhaps why?
Thanks, James. Good to hear from you. In terms of number of custodians, I think it's too early to call how many there will be. Right now, it does seem like a lot of firms want to get into the space and provide digital asset custody directly. As market structure comes in, it is likely to consolidate to a few major players. But this is a global market, so it will be regulated differently across jurisdictions. From BitGo's point of view, this is why we are excited and happy to be an infrastructure provider at multiple layers of the stack. We have clients that take our technology in a self-custodial manner, but then they can put it into a custodial model under their licensing in their jurisdiction. We can provide custody direct. We can provide sub-custody to another custodian, and so on. How this shakes out over time is uncertain, and it's probably too early to call. The other thing that's happening is we're digitizing everything. We have had a lot of excitement about crypto over the last decade, and now we're talking about real-world assets, which have grown tremendously—$30 billion to $40 billion in size today. We also have the potential for U.S. equities and other assets coming on chain. Exactly how that's going to shake out globally, I don't know. BitGo's technology and business should be well poised in all of those scenarios.
Excellent. Just maybe one other on regulation. The CLARITY Act does appear less likely to pass in the very near term. We do have the SEC innovation being discussed recently. Could you discuss your view for how tokenization could evolve if we don't have a CLARITY Act that passes in the near term and what the SEC's innovation exemption would mean for tokenization and growth?
Sure. First, I think BitGo might be, in some ways, better off without CLARITY, because we know how to operate in this space and we understand the risks we are taking. We've been doing this for a dozen years, and we feel very comfortable with what we're doing. We're working with strong regulators in the U.S. and abroad who are comfortable with our approach. So we think we can continue to operate. The downside of not getting clarity is for consumers and investors—it means fewer participants and it may delay some traditional players from entering until clarity is provided. I think that delays overall progress and is negative for U.S. markets if it can't get done. I'm still optimistic it will get done, but I won't weigh in on the political dynamics. Globally, remember there are custodians who operate around the planet. It could be that other jurisdictions become more favorable for digital assets and markets will move there. Prior to the current administration providing pathways for digital assets, we have been building outside the U.S., which is part of why our trade accelerated in 2026. Either way, the digital asset industry will continue to move forward; it's happening at a large scale right now.
Our next question comes from the line of Peter Christiansen with Citi.
Nice demo, Mike, that was sharp. I wanted to ask about the quantum-resistant wallet. How much do you see this as a competitive feature? Is this something that is an upsell type of product? Or is it more broadly available across the BitGo platform? Just trying to get a sense of how this could help drive incremental share.
Look, it's inspired in part by investor conversations. During the roadshow last year, I heard many investors ask about quantum. My personal fear about a quantum threat is low, but it's imperative for industry participants to pioneer mitigations and help people understand the risk. This approach is straightforward and we would be happy to have every custody provider implement something similar. In terms of competitive advantage, it's not intended to be an exclusive advantage; we believe all wallets should adopt these mitigations. BitGo is well positioned to do this because of our experience with Bitcoin spending mechanics. The technical details are deep, but essentially we've prioritized quantum resistance rather than minimizing fees; the fee difference is minimal. If you put your assets into a BitGo wallet and you monitor your quantum resistance score, you are not vulnerable if a quantum computer were to come online tomorrow. There's more work to be done, but this basic approach materially reduces exposure today.
That's helpful. And then I was just curious if you could take us through some of the puts and takes on the Stablecoin-as-a-Service take rate. Is that transaction activity, mint and redemption fees, or is that just a larger flow balance? Just help us parse through those dynamics.
On stablecoin, we primarily generate fees off of the balances held in reserve. The signals across the industry look positive, and while it's competitive with other stablecoins not on our platform, we're growing at a reasonable rate and seeing continued adoption and growth.
Our next question comes from the line of Steven Wahrhaftig with Wedbush Securities.
I specifically want to talk about the competitive landscape because we're starting to see a lot more competitors really go after the custody market, the stablecoin market overall, and tokenized equities. How are you looking to position against some of these newer competitors and also some of the existing competitors that are starting to really expand across their portfolios as well?
Thanks for the question. Overall, I think we're well positioned. Our normalized assets on platform are growing and we've added billions of dollars of assets quarter-over-quarter for several quarters. BitGo isn't just custody; we provide a full stack. At the bottom of the stack, we support self-custody plus custody; at the top of the stack, we have trading, staking, lending and settlement services. New entrants will have to build many of these components. BitGo has been doing this for a while and is proven. On tokenized equities, we took time to build a financial foundation. Early entrants have often used offshore vehicles that are non-tradable in the U.S., which limits usability. BitGo's model uses entitlements and qualified custody, leveraging well-established legal constructs like UCC Article 8. These are actual shares you can use as collateral; the custodial and regulatory plumbing matter. Our OCC National Trust Bank charter experience and the work we've done since 2017 give us a lead. Building the technology and business takes time and expertise, which provides us a meaningful advantage against many newer entrants.
Okay. I understand. Just a quick follow-up on the investment strategy moving forward because you have about $155 million to $160 million in cash on the balance sheet and a decent amount of Bitcoin as well. But you also have the $50 million share buyback. I want to get an idea of what the investment strategy is over the next six to 12 months. How much of it is allocated toward AI investments you talked about on the call? How much is going toward reinvestment into new products on the platform?
From my view, cash and cash equivalents plus our Bitcoin gives us over $300 million of resources. The $50 million is earmarked for the share repurchase program we announced. Typically, I'm cautious about buybacks, but in our circumstances it makes sense and we will proceed. On AI investments, those largely fit within our operating costs and product development. We consider AI a core part of how we develop products and amplify engineering productivity, so it's integrated into our operating budget rather than being a separate line item carved out of the cash pile.
Our next question comes from the line of Cassie Chan with Wells Fargo.
I wanted to dig a little deeper on the digital asset margin. You said that was 17 basis points in Q2, which decreased due to the mix of spot versus derivatives. Where does the derivatives mix stand relative to the nearly $3 billion notional disclosed in Q1? How should we think about digital asset margins more broadly in the future? Is pricing or competition playing a part in that margin as well?
In Q2, notional volume of our derivatives was roughly around $1 billion, compared to almost $3 billion in Q1. Overall, we would expect derivatives volumes to continue to grow. We had a shift in what clients were doing; spot trading grew nicely during the quarter, which affected mix and margins. It was a difficult quarter overall in the industry. We've already seen some recovery in margins in July, and I would expect margins to move back toward our historical averages where we were probably in that 20 to 25 basis point range.
Got it. Super helpful. A follow-up on margins: what are the key levers to return to positive adjusted EBITDA from here? You mentioned $15 million of annualized cash savings and additional initiatives. How should we think about flow-through to the bottom line versus reinvestment in growth areas? Is it possible to reach breakeven adjusted EBITDA in Q3?
The primary driver is growing revenue as we add more assets on the platform, more assets staked, bring on more clients and users. That's the first lever to drive incremental profit. We've also implemented cost measures, reducing headcount by roughly 15% and identifying another roughly $6 million of annualized cost savings. Those benefits will begin in Q3. The goal is to get the business closer to breakeven and slightly profitable in Q3.
To answer slightly differently, quarters are 90-day increments while market cycles move on their own patterns, which can create timing mismatches between quarterly performance and underlying trends like derivatives versus spot mix. Our goal is to ensure the business is profitable over the near term by driving product growth and controlling costs. Client counts are up, normalized assets on platform are up quarter-over-quarter, and normalized assets staked also increased. As long as those KPIs continue to trend up and you believe in a long-term positive trajectory for digital assets, BitGo will benefit.
Our next question comes from the line of Dan Dolev with Mizuho.
Really nice results despite everything going on with Bitcoin and crypto. Two questions: First, it was impressive to see client growth 5% quarter-over-quarter and stronger year-over-year. Can you talk about where those clients are coming from and what you're doing to get those clients, U.S. versus international? Any color would be great. Second, a quick follow-up after that.
I don't have detailed public breakdowns for specific international splits to give here. Generally, client growth reflects our focus on onboarding and creating network effects from having many counterparties settle across our platform. We've worked to make onboarding easier, and AI has further improved institutional onboarding and operational processes. Internationally, our regulated entities are relatively new and will grow as they become more established and known. We continue to focus across product managers and sales teams to grow client numbers, and we expect that to continue supporting our KPI improvements.
Great. As a follow-on on Stablecoin-as-a-Service, how do you think about stablecoins over the next five to 10 years? Will there be a cohort of winners? Given BitGo's exposure and initiatives, how do you view the long-term market?
Stablecoins benefit from network effects—the larger and more widely accepted they are, the more utility they have. There will likely be a few dominant stablecoins, but how many is uncertain. Many banks and traditional financial firms are launching or exploring stablecoins for their distribution channels, so some institutions may choose to create their own stablecoins to capture economic benefits rather than relying on third parties. Regulation also plays a big role. For example, current U.S. rules limit retail access to yield from stablecoin reserve activities, which can incentivize institutions with distribution channels to issue their own stablecoins. I expect continued technical innovation that will make it easier for institutions to launch and manage their own stablecoins if they choose. Overall, stablecoin payments are much easier and faster than traditional rails, and given investments and interest from major payments firms, I believe stablecoins will continue to grow even if the ultimate market structure evolves.
Our next question comes from the line of George Sutton with Craig-Hallum.
Mike, you've been in this market a while and seen a lot of volatility. We're talking about headwinds now, but there will be a moment with tailwinds. Can you give perspective on how going through volatile times influences your work and any thoughts on the eventual tailwinds?
I look forward to the tailwinds too. Anyone doubting the future should think about first principles. Bitcoin provides a unique, scarce asset not controlled by any single party, and it will have a role in the future. Even if price moves quarter-to-quarter, over the long arc it will likely appreciate relative to fiat currencies, which have declined in purchasing power over time. Bitcoin is transportable and usable in payments in ways gold is not. Beyond Bitcoin, new use cases are compelling. Stablecoins are scaling and are in a growth phase. Tokenized equities are moving toward production, with major infrastructure players like the DTCC supporting that transition. DeFi's promise is still real—smart contracts can encode financial rules and automate verifiable processes. These combined trends—stablecoins, tokenization, and DeFi—create strong long-term tailwinds for digital asset infrastructure providers like BitGo.
You earlier challenged Anthropic and others with a 100 Bitcoin wallet. Can you give an update on how many of those Bitcoins you still have?
We still have all the Bitcoin. For those who didn't see the challenge, there's been a lot of discussion about AI risks. I said, if these companies believe their models are so dangerous they need regulatory oversight, here's a wallet with 100 Bitcoins—go for it. We haven't had any successful exploit. This initiative also spurred industry focus on defensive AI to strengthen security. At BitGo, we've long used AI to detect issues rather than enabling attacks, and it's an ongoing effort to keep defenses strong. So far, there has been no negative outcome from that challenge.
Our next question comes from the line of Nathan Frankovitz with Cantor Fitzgerald.
I wanted to touch on prediction markets. You've talked about expanding workflows around custody relationships. Where do prediction markets fit within the strategy going forward, and can you give any color on institutional demand for those products?
We announced a few months ago that clients can place investments on prediction markets through the BitGo OTC desk. There's been some activity. For larger institutional sums, participants need custody and trusted infrastructure to hold assets, and BitGo provides that capability. Prediction markets face regulatory scrutiny and debate, and we'll see how market structure evolves. I expect growth and that the industry will determine an appropriate market structure over time.
Our next question comes from the line of Edward Engel with Compass Point.
Congrats, Ed, on a good run. I had a question on the DTCC launching tokenized equities this year. How do you think about the monetization opportunity of equities in general? It sounds like you're doing trading, custody and borrow. How do you think about the fee structure on tokenized equities versus typical digital assets?
There are multiple models for tokenized equities: the DTCC model, Figure's model, BitGo's model, and various exchange or platform models. All these token types can be held at BitGo for custody and movement. Equities are securities, so trading them requires broker-dealer plumbing. In my demo, we executed through a clearing partner; BitGo is not acting as the broker-dealer for that trade. We aim to enable new use cases that didn't exist before. For example, the demo showed tokenized stock used as collateral to borrow without selling the underlying position. Historically, lending against stock is primarily available to high-net-worth or institutional holders; many retail investors cannot access it. BitGo's approach can enable broader access to lending against tokenized equities in 24/7 markets, using the same kinds of custody and settlement mechanics we use for digital assets. Fee structures will vary depending on model and partners; our priority is to build the foundational infrastructure that enables many types of monetization and new products.
Quick follow-up: do you have plans longer term to seek a broker-dealer license or use one internally?
Technically, we do have a broker-dealer, but we do not utilize it for trading at this time.
Our next question comes from the line of Chris Brendler with Rosenblatt Securities.
Ed, sorry to see you go. Congrats. I want to focus on staking. There's been pressure across staking for many firms. You grew staking sequentially, which is impressive. Can you talk about the moving parts and the outlook? Is there a reason you're gaining share and can that continue?
We saw significant growth from an existing client that we onboarded through custody and trading and then won their staking business, primarily around Ethereum. There's an opportunity to deepen relationships within our customer set and grow staking that way. As more tokens and ecosystem projects come to market, we'll have more staking opportunities. Margins were impacted because with a larger client we discounted rates due to volume. We expect absolute dollars to grow as token prices increase and anticipate recovery from softer volumes we saw from another large token in Q2 into Q3 and Q4.
Directionally, staking and custody go hand in hand. Large funds and businesses seek qualified custodians and often want staking to earn yield while managing liquidity. These services complement each other and as the industry matures, staking will consolidate toward qualified custodians and independent staking providers will shrink in number.
Last quarter, we saw a significant lift from the Canton Network. Any update there? It seems like a big growth opportunity given your relationships.
We believe the Canton relationship is strong. We were processing volumes as validator and saw some drop off in the second quarter, but there's good communication between teams and we expect the business to continue to grow and recover toward levels seen in Q1.
One point about Canton is that BitGo supports many coins and chains; we've invested heavily in supporting new chains and tokens. Canton hit the institutional market with features institutions need—private permission ledgers and privacy components. BitGo is proud to be the only qualified custodian on Canton today, and our technology layer enables us to add services on top efficiently, giving us an advantage.
Our final question comes from the line of Brian Dobson with Clear Street.
You mentioned converting custody relationships into multiproduct relationships. Which products are you seeing the highest attach rates today, and where is the biggest open space to run?
Usually relationships start with custody. We see significant opportunity in trading and staking as the biggest attach drivers. In addition, our lending product attracts clients looking for leverage or to borrow dollars or coins. So trading and staking are likely the biggest drivers of incremental revenue.
I'd add settlement services as another growth area even if it's not yet a large revenue driver. Our Go Network has a large client base and we've added a stablecoin mint and burn center. Clients can get direct access to mint and burn stablecoins, convert stablecoins and make settlement easier. Volumes have been growing there and that can become a significant product over time.
This concludes today's call. Thank you for your participation. You may now disconnect.