Patrick McCann: Great. Thanks so much for the answers. That’s all I have.
Brandon Mintz: One other point I wanted to make for you, Pat, is regarding the competitive landscape. So we looked back at Coin ATM Radar a year and a half ago, and there is about a 20% reduction in the number of Bitcoin ATM operators in the US. We think a lot of those were very small and weren’t noticeable, but it’s helping us display the value in our franchise program, because as it gets more expensive to operate this business with a smaller number of kiosks, someone could potentially join our franchise program and not have to run the business and make the same, if not more money just due to our operational scale and efficiencies. So that’s why we really wanted to point out the franchise program this quarter. And we’re very excited about everyone we’re talking to about that. We have a lot of interest. We think it’s going to have pretty noticeable growth over the next few months.
Operator: Our next question comes from the line of Mike Grondahl with Northland Securities. Your line is now open.
Mike Grondahl: Hey, guys. Just digging into 4Q revenue a little bit more. When you guys gave guidance November 13th, the midpoint was $715 million for the year and you ended up doing $689 million. What did you observe different? Like what came in short?
Scott Buchanan: Yes, Good question, Mike. A couple factors. I mean we removed way more kiosks than we thought we would in Q4 as one of the biggest drivers, right? So we removed over 500 kiosks in Q4, which is the most we’ve ever done. And we did that, as Brandon talked about, because we expect it’s going to be the right decision long-term as we reinstall those and get better performance per location. But that did cause revenue to decline. And then also we saw a lot of installs from competitors in Q4 as well. And so, Brandon just talked about how from Q1, 2023 to Q1, 2024, there’s been about a 25% increase in the number of kiosks in operations in the US. And so, that also was much higher installation rate in the past six months or so than we would have expected. And so, that increased competition also affected volumes. So let’s say those are two of the biggest factors that caused revenue in Q4 to be lower than we originally would have anticipated.
Mike Grondahl: Got it. And then just making sure I’m understanding 1Q, basically the year-over-year differences you’d call out less kiosk and the California impact. That’s why Q1 is coming in $137 million, $138 million, those two reasons?
Scott Buchanan: Yes, those are the two biggest reasons. We’ve seen — it’s just also that extreme seasonality, right? So like within Q1, March is already substantially better than January and February were. And so, we’re already starting to see that improvement going into Q2. But yes, the California issue is the biggest driver and the lower number of kiosks, but specifically how many kiosks are brand new heading into Q1 as well. Because we installed 550 in Q4, so those are all pretty new. Those are the biggest factors, yes, about Q1.
Mike Grondahl: Got it.
Brandon Mintz: One way to also look at it is, if you look at Q4 year-over-year, we had a 3% decline in terms of the number of active kiosks, but only a 1% drop in revenue. So you can kind of look at it as a slight improvement year-over-year.
Mike Grondahl: Got it. At a high level, guys, how are you feeling about 2024? I’m at $125 million of revenues. A couple other analysts are right there. How are you feeling about the whole year at this point?
Brandon Mintz: Well, obviously, we have you know the headwinds from California. We are hopeful though that we can make some changes there and maybe get some of that back at the end of the year. If not, they make it effective a few months later, it’s still a positive thing. But we have so many exciting opportunities in front of us. We have the potential for New York. We’re already ahead of schedule in terms of our installed kiosk count right now. And we’re not even halfway installed with that large retailer we signed. I think outside of that large retailer we are also ahead of schedule in terms of our other locations we are signing up. We think this franchise program is going to grow as well, and that’s going to add some good margin for us.
And one thing about the franchise program is, we’re not taking on costs of CapEx, so it’s just pretty immediate profits being added to the business. And then we’re also purchasing kiosks for less than we were in the past. There’s other opportunities outside of just our manufacturer to purchase kiosks as well that we’re evaluating for reduced prices. And then we’re expanding into new geographies. One thing people might not have noticed before is, we didn’t have any machines in Hawaii. We’re growing there. It’s not a huge state in terms of population. It is a brand new geography. We hired a sales rep in Vermont. That’s a state that was virtually untouched by us and doesn’t have a lot of competition because of the money transmitter licensing requirements.
We’re also evaluating Puerto Rico as well, which is another 2 million people on that island. And we’re taking international expansion and those opportunities more seriously right now. We’re actually narrowing down the next country that we’re looking to expand into. And we don’t have the specifics yet, but that could be a very, very large population compared to these other geographies that I mentioned and could potentially be even larger than New York. So I think combined with everything in front of us, with the headwinds we’re facing, I think getting to around where you guys are on the analyst side in terms of EBITDA, I would say it would be really impressive with the headwinds from California, because we have a good chunk of revenue to make up to be able to get there, but with the opportunities in front of us we think it’s possible.
Mike Grondahl: Fair enough. Okay. Thank you.
Operator: Our next question comes from the line of Michael Kupinski with Noble Capital Markets. Your line is now open.
Michael Kupinski: Thank you for taking my question. I just wanted to follow up because franchising seems like a huge opportunity. And I know you touched on it. I was wondering if you can provide maybe a little bit more color there about the competition for franchises in the space? What are your differentiating factors that you offer versus the competition? And then do you have thoughts on how fast you can grow the franchise business? Like maybe give us some, what are the limiting factors for instance? And then finally, what are the terms for the franchisees? And how are you getting the franchisees?
Brandon Mintz: Great question. So on the franchise program in terms of the competitive environment, we’re really only aware of two other companies doing this, but one of them isn’t very public about it. I think for us, the angle that we’re focused on right now is not only contacting kiosk operators and ATM companies about joining the Bitcoin Depot franchise program versus operating a Bitcoin ATM fleet on their own, but we’re also approaching high net worth individuals and family offices who seem to have quite a bit of interest in this, because it’s the way to play crypto without necessarily being tied to the price. And then someone purchases the kiosk, they have the ability to get nice depreciation as well. So a lot of these family offices and high network individuals were really focused on Bitcoin mining a couple of years ago.
And I think they really didn’t realize how tied to the price it was. And they liked the depreciation and the passive income aspect of it. There were a lot of comparisons to rental real estate at that time. But I think this could be the new wave for those type of investors, because it offers more stability. You still get the depreciation. And of course, it’s completely hands off. So typically, if someone is buying the machine and they may put up some float capital for us to run the machine. And we are making about 30% to 50% of the profit. And we are doing either a profit share or revenue share depending on the franchisee. But bottom line, it comes out to about 30% to 50% without having to buy the kiosks, incurring interest if we were to finance those kiosks.
And some of the franchisees are also bringing locations to the table where they were existing, let’s say, ATM operator, and they have a bunch of relationships with locations where they have their cash ATMs. So it’s another way for us to expand geographies as well. So there’s a number of benefits. If you guys have followed the cash ATM companies over the last 15 years, this is really how they evolved as well, where they operated a fleet of their own ATMs, and then they would also provide processing and other services and models to other operators. And it was because they could add incremental profitability without having to take on the risk of purchasing a lot more hardware.
Michael Kupinski: Terrific. Thanks for the call. That’s all I have. Thank you.
Operator: At this time, this concludes our question-and-answer session. I’d now like to turn the call back over to Brandon Mintz.
Brandon Mintz: Thanks everyone for joining the call today and for your interest in Bitcoin Depot. We look forward to providing you with further updates in the future and just working on bringing Bitcoin to the masses as always. Thanks everyone.
Operator: Thank you for joining us today for Bitcoin Depot’s conference call. You may now disconnect.
