Gemini Third Quarter 2026 Earnings Call - GEMINI SPACE STATION INC

Financial Performance:

• Net revenue declined 10% sequentially to $39.2 million, with transaction revenue down 40% YoY ($15.9M) and services revenue down 10% sequentially ($23.3M).
• Technical revenue was $40.9 million (down 19% YoY), while credit card revenue rose 82% YoY to $15.5 million despite a 4% sequential drop.
• Total operating expenses fell 30% YoY and 2% sequentially to $119.9 million, driven by reduced headcount and minimal marketing spend.
• GAAP operating loss was $79 million (up from $76.9M in Q2), while adjusted operating loss narrowed 42% YoY to $39 million.
• Net loss narrowed to $58.6 million from $107.7 million in Q2 and $159.5 million a year ago, significantly aided by a $25.7 million swing to net gains on crypto assets.
• Adjusted EBITDA loss improved to $11.6 million from $74 million in Q2.
• Transaction volume was $4.5 billion (down 73% YoY, up 18% QoQ); institutional volume rose sequentially while retail volume declined.
• Card MTUs stood at ~102,000 (up 13% YoY, down 4% QoQ); card contribution after provisions was a loss of $3.4 million, improving from a $10.6 million loss in Q2.
• Card delinquencies (30+ days) dropped to 6% from 9.4%, excluding fraud accounts where delinquency remained stable at 3.4%.
• End-of-quarter cash and equivalents were $194.1 million; total assets on platform grew to $13.4 billion, primarily due to price appreciation.

Guidance and Future Outlook:

• Full-year stock-based compensation guidance revised to $100–$105 million (previously $100–$115 million).
• Full-year tech and G&A expenses guided to $160–$170 million.
• Full-year marketing expense (excluding rewards/promotions) guidance lowered to 7–10% of revenue (previously 10–15%).
• Management expects cash compensation (excl. SBC) to decline 15–20% from 2025 levels.
• A measured increase in marketing spend is anticipated for Q4 2026 to support adoption across new product offerings.
• Future focus shifts from product launches to deepening customer relationships and increasing multi-product usage.

Business Segments and Product Lines:

• Derivatives & Prediction Markets: Launched own clearinghouse and derivatives exchange; prediction market revenue up 52% QoQ to $0.8 million.
• Equities & Trading: Introduced commission-free U.S. stock trading and margin trading; advanced trading experience rebuilt.
• Credit Card: Revenue up 82% YoY; card transaction volume down 10% QoQ; interest revenue increased 3% as balances carried.
• Custody & Staking: Staking revenue down 29% YoY ($4.2M) due to lower asset prices; custodial fees down 70% YoY to $0.9 million.
• Infrastructure: NBC Infrastructure implementation standardized for all new custody and exchange accounts to enhance trust.
• Distribution: Announced non-binding LOI with Apex FinTech Solutions to distribute event contracts; active discussions with other brokerages and FCMs.

Market and Competitive Landscape:

• Institutional trading volume increased sequentially, whereas retail volume declined; retail volume composition is critical for consolidated fee revenue.
• Approximately 26% of exchange volume involved transactions between external customers and Gemini's affiliated market maker, which generates lower consolidated fee revenue per dollar due to consolidation eliminations.
• Management views the transition to a "super app" as a long-term build requiring discipline, aiming to become the primary institution for customers' financial lives.

Risks and Challenges:

• Revenue pressure persists due to lower retail trading activity and the end of the advisory warrant recognition period.
• Credit card growth is constrained by available funding capacity and corporate capital requirements; fraud-related charge-offs increased to $11.5 million.
• Regulatory risk exists regarding sports betting prediction markets in certain states, though management remains confident in their CFTC licensing.
• Market volatility continues to impact staking and custodial fee revenues.

Management Commentary and Tone:

• Tone was pragmatic and candid, acknowledging that revenue declines did not yet reflect the full value of the year's product builds.
• Management emphasized a shift from "builder" mode to "operator" mode, prioritizing trust, discipline, and customer retention over rapid expansion.
• Cameron and Tyler Winklevoss stated that broadening the exchange into a full financial platform is a multi-quarter/multi-year effort that has not yet fully yielded revenue results.
• Management highlighted a willingness to change underperforming strategies and maintain strict cost discipline while selectively reinvesting in growth.

Analyst Questions and Answers:

• Retail vs. Institutional Volume: Retail activity remains soft; growth strategy focuses on rebuilding acquisition through targeted marketing and re-engaging existing funded accounts.
• Credit Card Economics: Growth is balanced against capital constraints and credit quality; management prioritizes customer retention and cross-product engagement over pure acquisition speed.
• Prediction Markets Regulation: Management expects favorable legal outcomes regarding sports betting licenses but notes the product offering is diversified across politics, crypto, and economy, mitigating sports-specific risks.
• Efficiency Levers: Future efficiencies may come from cloud optimization, process simplification, and strategic partnerships; marketing spend must be reinvested selectively to drive ROI.
• Key Adoption Metrics: Investors should monitor funded accounts, platform balances, net inflows, and repeat usage of multiple products rather than just account openings.

Other Key Points:

• Post-quarter end, Gemini increased its credit facility with Galaxy by $35 million to support planned product expansion.
• The affiliated market maker activity, while supportive of liquidity, dilutes consolidated exchange fee revenue per dollar of volume.
• The company is actively exploring partnerships to distribute its regulated exchange and clearinghouse capabilities to a broader customer base.