Bitcoin Depot: A Cleaner P&L, Yet Market Wants More Than Profit Growth

Summary Bitcoin Depot posted strong Q1 results, flipping to positive net income and expanding gross margins to 20.2% through pricing power and bigger transactions. Operating leverage is kicking in: revenue rose 19% while operating expenses fell, thanks to kiosk optimization and tight cost controls, driving cash flow positive results. Valuation looks cheap versus fintech peers, but regulatory risks and limited growth beyond the cash-to-crypto niche keep the market skeptical of a sustained re-rating. Bitcoin Depot’s ( BTM ) Q1 numbers were solid. Net income flipped positive; margins kept climbing. Feels like Bitcoin Depot is finally out of the heavy spending phase and just letting the model do its thing. Gross margin? 20.2%. A year ago, it was 12.5%. That’s a big jump. Volume helped, sure. But pricing power played an even bigger role. And here’s the kicker—they didn’t dump in fresh capital to make it happen. No big CapEx. No mad rush to add kiosks either. They’ve got about 2,000 already in inventory, so they can grow 2025 without burning cash. Most crypto companies are still cash incinerators. Not these guys. They’re already throwing off cash. So, What’s Pushing Margins Up? Two things. First, pricing. They hiked markups and kiosk fees , and it went straight to the bottom line. CFO David Gray even admitted they “deliberately widened spreads” on the call. Result? A 7.7-point bump in gross margin YoY. Second, bigger transactions. Average purchase size climbed 6% to $300. And since fees are part flat, part percentage, larger tickets—especially ones over the $200 KYC cutoff—drive more revenue. Above that, the flat fee’s almost irrelevant. It’s the percentage markup that pulls weight. Bitcoin Depot Operating Leverage Revenue jumped 19% to $164.2M in the quarter. Solid. But the real story was on the cost side—operating expenses actually fell 7% over the same period. CFO David Gray chalked it up to “leverage on the significant revenue outperformance.” Translation: Revenue went up, but the fixed cost base didn’t budge. A few things drove that. Depreciation dropped by $1M YoY—from $2.9M to $1.9M—as older kiosks fully depreciated. More kiosk activity, sure, but barely any added operating expense to support it. That’s the beauty of a year like 2025, when they’re not rolling out tons of new machines but instead squeezing more from the network they already built. There’s also the kiosk shuffle. Bitcoin Depot pulled underperforming units from weak spots and dropped them into busier locations. More traffic per machine equals higher transaction volume. It’s a cheap way to juice performance without sinking cash into new hardware. Gray called it a “continued process of relocating underperforming kiosks to optimize fleet profitability.” That’s corporate speak for “move the laggards where people actually use them.” They also tightened up day-to-day spend. Armored cash collection costs fell from $2.0M to $1.6M YoY. Wireless and maintenance expenses stayed flat or ticked down. Finally, crypto acquisition costs—the big swing factor in COGS—still move with market prices. But most other expenses are fixed or semi-fixed. So, as volumes and average ticket sizes rise, more of that growth falls straight to the bottom line. That’s why margins keep widening. Valuation Peer Set for Bitcoin Depot Valuing Bitcoin Depot? Honestly, there’s no straight answer. You could argue Coinbase or Robinhood are decent comps because they’re onboarding people into crypto, but then again, they’re not exactly the same—they’re purely digital. On the other side, maybe Western Union or Green Dot make more sense, at least for the physical network part. I don’t know… none of these fit perfectly. But together? It gives you some idea of where Bitcoin Depot might land. YCharts BTM’s operating margin has finally flipped into positive territory, and it’s been trending up. It’s still nowhere near the levels you see at high-margin fintech names like Robinhood or Coinbase, but it’s already doing better than Green Dot ( GDOT ) and Bakkt ( BKKT ). Even compared to an old-school player like Western Union ( WU ), it stacks up reasonably well. Going forward, margin growth is probably going to be one of the big levers for any sort of valuation re-rating. YCharts Honestly, BTM feels way undervalued. It’s trading at less than a third of Green Dot’s price-to-sales—wild—and even further behind fintech darlings like Robinhood ( HOOD ) and Coinbase ( COIN ). Why? Probably a cocktail of reasons: slimmer margins vs. app-native players, being small-cap (which never helps), and lacking that crypto-exchange hype that lets Coinbase pull insane multiples. And yeah, on the surface, the forward P/E looks scary-high. But that’s mostly optics. They’re still early in profitability; earnings are thin because they’re just now scaling. Worth noting: net income swung from a $4.2M loss to $12.2M gain YoY. If they can keep up that pace, P/E will compress fast. Feels like BTM fits more with growthy fintechs like Robinhood than dinosaurs like Western Union ( WU ). Right now, price-to-sales says “cheap” despite strong top-line growth and positive cash flow. Ops metrics aren’t flashy, but they’re moving up. The key? Margin expansion—especially gross margin—and getting more out of those ~3,200 active kiosks. If they nail that, re-rating becomes a real conversation. Next 2–3 quarters could be pivotal for closing the gap with GDOT and maybe even inching toward the low end of fintech comps. Risks Honestly, regulation might be the biggest wildcard for Bitcoin Depot. The BTM space is drawing more heat than ever— California’s crackdown in 2024 wiped out 80% of their kiosks in the state. FinCEN is leaning harder on AML/KYC too, and let’s not forget the risk of Congress taking a swing at cash-to-crypto onramps because of money laundering fears. Oh, and New York? Still off-limits unless they manage to lock down a license—not a given. For now, compliance is a moat for them. But if regulators keep tightening the screws, that “moat” could easily flip into a cost anchor. Then there’s the whole Bitcoin price dynamic. Management likes to say kiosks pay back no matter what BTC does, but let’s be real—demand still swings with crypto cycles. When prices spike, people transact more (median ticket jumped 46% last year during the bull run). But in a prolonged bear market? You’d probably see volumes sag. BTM isn’t a pure BTC trade like miners or exchanges, but consumer excitement for crypto is still a big piece of the demand puzzle. Tech-wise, they don’t have a killer app or proprietary hardware. Scale and relationships are their edge, but as apps like Cash App, Coinbase, and PayPal keep upping their game, that advantage could erode. Plus, the pool of cash-first users they target may naturally shrink as financial digitization keeps advancing. And let’s not forget the physical kiosk issues like vandalism and service downtime. They need regular maintenance—cash loads, connectivity fixes—and high density in some regions leaves them exposed to local downturns. Wrapping Up Bitcoin Depot’s scale leadership gives it a clear edge in the market. With a larger network than rivals, it benefits from lower per-unit costs, better retail placement, and the kind of network effects that are hard for smaller players to replicate. On top of that, its ability to generate free cash flow provides the firepower to pay down debt and potentially return capital to shareholders—without resorting to dilution. There’s also significant embedded growth in the existing kiosk base. Many of the ~3,200 recently deployed units are still ramping, and as utilization improves, they should drive both top line growth and operating leverage. Expansion into international markets and restricted states like New York could unlock entirely new revenue streams, and the kicker is that much of this can happen with minimal incremental CapEx. Regulation, while often viewed as a headwind, could actually strengthen Bitcoin Depot’s position. Their compliance infrastructure creates a moat that weaker competitors struggle to match, effectively forcing them out of the market. And finally, Bitcoin Depot’s focus on the cash-to-crypto niche fills a gap that digital-only platforms like Cash App or Coinbase can’t reach as effectively—serving cash-preferred and underbanked users who remain a large and underserved segment. That said, the problem lies in the fact that the market does not see a growth outburst outside the placement of a few thousand more kiosk units. Seeking Alpha Unless the company is capable of devising a strategy beyond its Bitcoin to cash niche, the market will keep shrugging it off as just a growth flare followed by stagnation, and that way, the company will not earn a valuation re-rating. Mainly because of this, I will remain on the sidelines on this stock.

Source: Seeking Alpha