Gemini Space Station, Inc. (GEMI) Earnings Call Transcript

Good morning, everyone, and thanks for being with us on Gemini's earnings call for the third quarter of 2026. I'm Ryan Todd, and I lead Investor Relations here at Gemini. With me today are Gemini's Co-Founders, Cameron and Tyler Winklevoss, along with Danijela Stojanovic, our Interim CFO. We published our financial results for the third quarter of 2026 yesterday. On this call, we may make forward-looking statements, and those could differ materially from actual results, since they rest on management's current expectations, forecasts, and assumptions. You can find information about the risks, uncertainties, and other factors that might cause results to differ in our SEC filings. Today's discussion will also include certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures appear in the earnings presentation on our investor relations website and on the SEC's website. Non-GAAP financial measures should be considered in addition to GAAP measures, not as a substitute for them. We'll begin today's call with prepared remarks and then move to questions. With that, I'll hand the call over to our founders, Cameron and Tyler.

Thanks, Ryan, and good morning to everyone. Back when we launched Gemini 2.0 earlier this year, we described it as a super app built for the future of money and markets. The vision is a single destination where people can buy, sell, hold, earn, and spend, all running on regulated infrastructure that we own and operate ourselves. That vision remains the same. Building a platform with this kind of breadth takes time, and we think we are making genuine progress toward it. Across the past year, we have delivered a great deal of what we set out to do. We introduced a prediction marketplace of our own, and we set up a derivatives exchange plus clearing house of our own, which now clears all Gemini event contracts. Beyond that, we brought in U.S. stock trading with no commissions, margin trading, an advanced trading experience that was rebuilt, and fresh tools aimed at developers and AI agents. Everything here exists next to our core offerings, which we continue to enhance: our crypto exchange, custody, staking, and the Gemini Credit Card. Even so, we remain very clear-eyed regarding where the business stands at present and the road still in front of us. Revenue fell this quarter, and we think our results do not yet fully reflect what we built during this year. Turning a crypto exchange into a platform folks rely on for a bigger share of their financial affairs can't be done in ninety days, and it can't be done without rigor. It also demands a readiness to alter whatever isn't functioning, and that readiness is on display from us. Operating expenses fell for a third straight quarter, aided by holding marketing outlays down. While we put money into growth, a portion of that outlay should come back, and our aim is to stay rigorous about where it lands. We’re still concentrating heavily on distribution—using additional partners to extend our markets, along with the regulated exchange and clearing house supporting them, to a wider set of customers. In August, we disclosed a non-binding letter of intent with Apex Fintech Solutions, and right now we’re holding active talks with several other brokerages, FCMs, and trading platforms seeking regulated access to event contracts and derivatives—something we think we’re strongly positioned to deliver. Tyler, I’ll turn it to you.

Thanks, Cameron. Tyler here. For most of the last year, we saw our role as builders. That year was a demanding one, and we're grateful to our team, our customers, and our shareholders for sticking with us through it. Now that a great deal of the product and licensing effort is behind us, our attention moves away from adding products and toward strengthening ties with the people who use them; we want to earn a larger place in each customer's financial life. Concretely, that means more customers actively using more than one Gemini product and more customers proactively picking Gemini as the place where they want to keep their money and assets; we still believe that begins with trust. People bring their financial lives together at the institutions they depend on most, and building that trust has been fundamental at Gemini since 2014. That effort is never done, and we hold ourselves to that bar. This quarter, we made MPC infrastructure the standard for every new Gemini custody account and for exchange balances. It's another step toward becoming the account people can rely on for their money and assets; we know the true measure of all this is results, not just launches. On our next call, we'll lay out our priorities for 2027 and the measures we'll use to track how we're doing. With that, I'll hand the call to our interim CFO, Danijela, to take you through the quarter in more detail.

Thanks, Cameron and Tyler, and good morning, everyone. Our results for the third quarter show that we kept making headway on bringing operating expenses down, even as revenue remained under pressure. Total revenue came in at $40.9 million, which is 19% lower than a year ago and 10% lower than the prior quarter. We saw stronger activity on the institutional exchange side, but that was offset by weaker retail trading and a smaller number of large OTC transactions. Services revenue also fell, in part because the advisory warrant arrangement we talked about last quarter hit the end of its recognition period. Operating expenses fell for a third quarter in a row, coming in at $119.9 million. On a GAAP basis, our operating loss came in at $79 million, representing a 3% increase from $76.9 million in the second quarter, driven by revenue declining more than operating expenses. Our adjusted operating loss improved to $39 million — 42% better than a year ago and 21% better than the prior quarter. Let me now walk through the key drivers. Net revenue totaled $39.2 million. Transaction revenue was $15.9 million, a 40% drop from a year ago and 10% lower than the prior quarter. Exchange revenue climbed 7% sequentially to $13.4 million, but remained 47% below the same quarter last year. Trading volume reached $4.5 billion, up 18% from the second quarter yet down 73% from a year ago. Institutional trading volume grew sequentially, while retail volume fell. What that volume is made of matters. Roughly 26% came from transactions between external customers and our affiliated market maker, which started operating during the quarter; this activity supports liquidity and helps customers trade, but it generally yields lower consolidated exchange fee revenue per dollar of volume, because fees charged to the affiliate get eliminated in consolidation. OTC revenue was $1.7 million, up 60% year-over-year and down 64% sequentially. As we mentioned on our last call, this business can swing a lot depending on when institutional transactions happen and how big they are. We had fewer large trades this quarter than we did in the first half of the year. Prediction markets brought in about $0.8 million net of incentives, a 52% jump quarter over quarter. Relative to the larger business, that figure remains small, and we're concentrated on converting what we've invested in marketplace liquidity and infrastructure into greater participation and additional fee income. Turning to services revenue plus interest income, the two combined totaled $23.3 million, a 10% decline sequentially and 1% lower year over year. The bulk of that quarter-over-quarter decrease stemmed from advisory fee revenue, which fell from $2.7 million to $0.6 million; this reflects the anticipated conclusion of the compensatory warrant recognition period we mentioned last quarter; these revenue sources continue to account for 59% of net revenue, versus 47% a year earlier. Card revenue came in at $15.5 million — that's up 82% from a year ago, though it slipped 4% from the prior quarter. Transaction volume on cards dropped 10% quarter over quarter, but interest revenue on cards gained 3% as customers continued to hold balances. Receivables ended the quarter at $202.2 million, an 8% decline sequentially. Card pre-provision net revenue — card revenue less funding interest expense and crypto rewards — climbed 6% quarter over quarter to $5.8 million. Once provision expense is factored in, that contribution measure showed a loss of $3.4 million, versus a loss of $10.6 million in the second quarter. The gain mostly comes from a smaller provision expense, which dropped to $9.2 million from $16.1 million. When the quarter wrapped up, Card MTUs were about 102,000 — down 4% from the previous quarter but up 13% versus the same time last year. Staking revenue reached $4.2 million, a 29% year-over-year decrease, largely on account of weaker underlying asset prices, though it edged up sequentially. Custodial fee revenue totaled $0.9 million, 70% lower than a year ago, reflecting reduced average asset valuations along with net asset outflows. Sequentially, custodial fee revenue climbed from $0.6 million in the second quarter. Interest income dropped to $2 million, compared with $2.4 million in the second quarter. Turning to expenses: total operating expenses declined 2% quarter-over-quarter and 30% year-over-year, coming in at $119.9 million. Salary and compensation totaled $56.4 million, including $32.7 million in stock-based compensation. Stock-based compensation increased from $20.3 million in the second quarter because of annual equity bonuses granted to company employees during the quarter. Compensation excluding stock-based compensation declined 15% sequentially and 36% year-over-year, reaching $23.7 million, reflecting the continued benefit of our smaller headcount base. Sales and marketing expenses decreased 6% sequentially and 75% year-over-year to $8.3 million, reflecting an intentional reduction in broad-based acquisition spending and promotional costs. As discussed last quarter, we prioritized product development, marketplace liquidity, and regulated infrastructure while remaining selective about acquisition spending amid a softer trading environment. For Q4, we anticipate a moderate step-up in marketing spend to help drive uptake across the products we offer. Rewards on credit cards plus promotional and referral incentives came to $7.6 million, while acquisition marketing, brand spending, and other expenses totaled roughly $0.7 million. Transaction losses decreased to $10.6 million, compared with $20.1 million in Q2. Of that figure, credit card provision expense stood at $9.2 million, down from $16.1 million. Card charge-offs climbed to $11.5 million from $3.4 million. The bulk of that rise stemmed from the fraud incident in the first quarter. Those accounts drove higher fraud-linked delinquency during Q2, and we sped up charge-off of them in the quarter. Delinquency for accounts 30-plus days past due dropped to 6%, down from 9.4%, which partly reflects faster charge-offs of balances confirmed as fraud. If you set aside the fraud accounts we identified, delinquency held roughly steady at 3.4%, compared with 3.3% in the second quarter. Technology plus general and administrative costs combined came to $39.4 million, about in line with the second quarter. Turning to the bottom line, net loss shrank to $58.6 million, versus $107.7 million in the second quarter and $159.5 million a year earlier. Adjusted EBITDA posted a loss of $11.6 million, compared with a $74 million loss in the second quarter and a $52.4 million loss in the prior year. One big factor behind that quarter-over-quarter gain was the reversal from a $25 million net loss on crypto assets and related party crypto loans in Q2 to $25.7 million in net gains during Q3. Those gains and losses are part of our Adjusted EBITDA measure, and they can cause considerable volatility from quarter to quarter. Adjusted operating loss shrank to $39 million, down from $49.3 million in the second quarter, which reflects reduced operating expenses once you set aside the adjustments laid out in our non-GAAP reconciliation on the investor relations website. On the monthly transacting user side, we hit 577,000. Platform assets climbed to $13.4 billion, up from $8.4 billion when the second quarter ended — that increase mostly reflects appreciation in the prices of the underlying assets. We closed the quarter holding $194.1 million of cash and cash equivalents, compared with $188.6 million as of June 30th. Operating cash outflows for the quarter were offset by money we received from Bitcoin sales as well as our May PIPE financing. Subsequent to quarter end, we expanded our credit facility with Galaxy by $35 million, giving us more flexibility to back planned product expansion. Turning to outlook: we continue to anticipate that cash compensation — leaving out stock-based compensation and restructuring charges — will fall 15%-20% relative to 2025 levels. Now that we can see fourth quarter expenses more clearly, our full year stock-based compensation projection is $100 million to $105 million, versus the $100 million to $115 million we cited before. For full year tech and G&A expenses, the expectation is now $160 million to $170 million, which raises the bottom of our earlier range by $5 million and leaves the top where it was. Turning to marketing, we anticipate a moderate step-up in brand and performance outlays during the fourth quarter, and we'll remain picky about the returns we expect; excluding rewards and promotions, full year marketing expense guidance is coming down to approximately 7%-10% of revenue, compared with 10%-15% previously. Before handing things over to Ryan, I'd like to share some perspective. Gemini has undergone significant changes this year. Our cost structure has been reduced, our product lineup has been broadened, and a larger share of our market infrastructure is now handled internally. Converting those moves into lasting growth does not happen overnight. As we discover what is resonating, we continue to sharpen our areas of focus, our methods for reaching customers, and the places where we allocate resources. Certain investments will require additional time before their value is clear, and others might have to be adjusted. We treat our role as stewards of shareholder capital as a serious responsibility, and we plan to exercise discipline in those choices while being candid about how we are progressing. More work lies ahead, yet we have a wider range of capabilities to draw upon and a clear picture of the financial progress we are accountable for delivering. We really appreciate everyone tuning in, and we're grateful for your ongoing involvement—so please send us your questions. At this point, I'll turn things back over to Ryan so we can begin the Q&A.

Thank you, Danijela. At this point we'll move into the Q&A session. Written questions came in yesterday, following the publication of our third quarter results. Because of the Outlook outages that occurred yesterday, participation was unfortunately limited this quarter, so to round out the questions we'll take a couple of follow-ups from analysts. Michael Cyprys of Morgan Stanley has our first question. Regarding crypto trading and market share, crypto volumes have picked up, yet institutional activity accounted for most of that improvement, while retail declined during the quarter. Are you observing any stabilization in retail activity? In your view, what needs to change for that to start growing again?

Sure, I can handle that one. Thanks for asking. The sequential gain in volume came mostly from institutions, whereas retail activity is still on the softer side, as you pointed out. One encouraging signal, I would say, is that the share of existing traders who come back in the next quarter has stayed fairly steady. The bigger difficulty has actually been bringing in new traders, especially after the significant cut to acquisition spending during this year. Our answer, really, is to rebuild acquisition via targeted marketing, while also doing more to activate and re-engage the customers we already have. That covers customers with funded accounts who are not trading, plus card and prediction users who might gain from our wider offering. In the same way, the bulk of our retail exchange revenue comes from the simple trading experience, which gives us a clear focus for product improvements; we are working to make that experience simpler, and we will keep evaluating pricing to support conversion and repeat activity. Finally, naturally, a stronger market would help, but we have to drive customer growth and engagement without depending on a market recovery.

Michael, a follow-up if I may, and it's encouraging to see card revenue growth compared with a year earlier. The pace of bringing in new customers has eased. We've observed strain when it comes to fraud losses as well as delinquencies. What's your thinking on speeding up growth while keeping the economics appealing, and how much are you seeing the card drive additional activity throughout the wider platform?

Thanks, Michael. You're correct that account growth has been largely flat over the past few quarters. Expansion has been partly constrained by available funding capacity and by the corporate capital needed to support receivables. We also need to balance the capital committed to the card against investments in new products and the wider platform, and at the same time, fraud losses have strengthened the case for really prioritizing fraud controls, credit quality, and returns. Revenue growth largely reflects the portfolio expansion from last year, but revenue by itself does not necessarily establish attractive economics. We want to grow where expected revenue supports an acceptable return. That includes after rewards, funding costs, credit losses, and acquisition and servicing costs. As we said before, every cardholder is also a Gemini platform customer, and crypto rewards provide a natural link to our broader offering. We are evaluating how to make those rewards more competitive and effective at attracting customers, encouraging regular card use, and deepening engagement across Gemini while keeping rewards cost disciplined. Although we do not disclose specific cohort metrics, cardholders generally do show stronger retention and greater cross-product engagement than customers who do not have a card. Our priority remains to build on that engagement and to ensure those relationships generate attractive returns over the long run.