Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Coinbase Global Inc (COIN, Financial) achieved its seventh consecutive quarter of positive adjusted EBITDA and fourth consecutive quarter of positive net income.
- The company has successfully diversified its revenue streams, with subscription and services revenue on track to surpass $2 billion in 2024, up from $1.4 billion in 2023.
- International expansion efforts have been fruitful, with revenues in four new markets exceeding their direct operating costs.
- Coinbase Global Inc (COIN) has a strong balance sheet with $8.2 billion, providing financial flexibility and enabling a $1 billion stock buyback authorization.
- The company is making significant strides in driving utility in the crypto space, with innovations like stablecoins, smart wallets, and Layer 2 solutions such as Base.
Negative Points
- Coinbase Global Inc (COIN) experienced a decline in total trading volume, down 18% quarter-over-quarter, due to lower crypto asset volatility and average asset prices.
- Total transaction revenue decreased by 27% quarter-over-quarter, impacted by a shift towards stablecoin pair trading, which generates little-to-no fees.
- Subscription and services revenue fell by 7% quarter-over-quarter, affected by lower average crypto asset prices.
- The company faces regulatory challenges, with ongoing efforts needed to achieve clarity and fair treatment in the US regulatory environment.
- There is a risk of increased competition in the derivatives market, which is highly competitive and requires strategic steps to increase adoption and scale.
Q & A Highlights
Q: Would Coinbase consider a Bitcoin, Ethereum, or other reserve strategy like MicroStrategy?
A: Alesia Haas, Chief Financial Officer, explained that Coinbase does invest in crypto, with a portfolio valued at approximately $1.3 billion at the end of Q3. This portfolio includes Bitcoin, Ethereum, and other crypto assets, representing about 25% of their net cash balance. However, Coinbase is primarily an operating company, not an investment company, and maintains cash for capital requirements, M&A opportunities, and operational hedging.
Q: How are Base, Smart Wallet, and cbBTC driving revenue for Coinbase, and what are the plans for user adoption?
A: Brian Armstrong, CEO, stated that Base earns revenue through sequencer fees, which are kept low to scale. Smart Wallet simplifies onboarding, potentially increasing user growth, while cbBTC drives usage of Base and brings more assets on the platform. Base is now the number one Layer 2 solution by transactions and total value. Coinbase Developer Platform (CDP) could become the AWS of crypto, helping integrate crypto into various applications.
Q: Are there any plans to provide dividends to shareholders in the future?
A: Alesia Haas mentioned that while there are no plans for dividends, Coinbase has authorized a $1 billion share repurchase program as a way to return capital to shareholders. The focus remains on investing in the business, including new products, international expansion, and scaling the lending business.
Q: How does Coinbase view its share of other crypto assets, particularly altcoins, and any shifts in trading volume?
A: Alesia Haas noted that trading volume, especially for altcoins, is often correlated with volatility. The focus on Bitcoin and Ethereum has increased post-ETF approvals, impacting altcoin trading volumes. However, Coinbase's share of fiat-to-crypto trading volume in the US remained steady.
Q: What impact could a more friendly US regulatory environment have on Coinbase's operations?
A: Paul Grewal, Chief Legal Officer, emphasized that clarity and fair treatment, rather than accommodation, are crucial. A friendlier regulatory environment could unlock innovation, increase trading confidence, and allow for the listing of cryptosecurities. It would also positively impact state-level regulations and enable growth in areas like stablecoins, staking, and crypto integration in various platforms.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
