Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Coinbase Global Inc (COIN, Financial) reported its sixth consecutive quarter of positive adjusted EBITDA, showcasing strong financial discipline.
- Subscription and services revenue reached an all-time high, indicating successful diversification of revenue streams.
- The company saw significant progress in regulatory clarity, with major wins in both judicial and executive branches.
- Coinbase Global Inc (COIN) is investing heavily in building great products, including Layer 2 solutions like Base and smart wallets, to drive utility and adoption.
- The company has a strong balance sheet with $7.8 billion in USD resources, providing financial stability and flexibility for future investments.
Negative Points
- Total spot trading volume declined 28% quarter over quarter, primarily due to lower crypto asset volatility.
- Transaction revenue was down 27% quarter over quarter, reflecting the decline in trading activity.
- Operating expenses increased by $229 million quarter over quarter, driven by various factors including higher marketing spend and policy expenses.
- Net income was impacted by $319 million in pretax crypto asset losses, the majority of which were unrealized.
- The company anticipates modest headwinds in subscription and services revenue for the third quarter, due to factors like Ethereum price decline and expected interest rate cuts.
Q & A Highlights
Q: How does Coinbase view the potential impact of Base's partnerships with companies such as Stripe and Shopify as well as the impact of the newly launched smart wallet on increasing crypto adoption?
A: Brian Armstrong, CEO: Our goal is to shift crypto to power more utility beyond just being an asset class. We aim to bring 1 billion people onchain by making crypto transactions fast and cheap. Partnerships with companies like Stripe and Shopify, along with innovations like our smart wallet, which simplifies onboarding, are crucial steps. We are also focusing on integrating crypto into every part of the global financial system.
Q: What else is being done to support better regulation in the industry and how can shareholders help?
A: Brian Armstrong, CEO: Standwithcrypto.org is a key initiative where shareholders can sign up, contact representatives, and support pro-crypto candidates. We are also pursuing clarity through the courts and Congress, and supporting organizations like Fairshake to elect pro-crypto candidates. Shareholders can help by getting involved in these efforts.
Q: What level of revenue are you projecting for custody in funds of the crypto ETFs? Can you break that down between Eth and Bitcoin? Additionally, what types of revenue are you projecting for the base chain?
A: Alesia Haas, CFO: ETFs have generated a flywheel of activity across our product platform, benefiting trading, custody, and financing. We are not breaking out specific financial impacts yet. For Base, our focus is on driving developer activity and transaction volumes, which will eventually drive revenue through sequencer fees.
Q: Can you provide an update on your strategy and potential product road map for Coinbase asset management and how the political environment might influence this?
A: Brian Armstrong, CEO: Coinbase Asset Management offers institutional clients various strategies to access crypto markets. We hope to see a path for retail products like index funds in the future, but this will require a different policy environment. We are pushing for this through our policy efforts.
Q: How do you see the potential impact of regulatory clarity on institutional investment in crypto?
A: Brian Armstrong, CEO: Regulatory clarity is the biggest blocker for institutions to invest more in crypto. Clear rules would unlock new pools of capital and spur innovation. The approval of Bitcoin and Ethereum ETFs has already opened new capital pools. We expect more progress with regulatory clarity, which will benefit the entire industry.
Q: Could you please talk about the recent retail engagement and how it compares to earlier periods?
A: Alesia Haas, CFO: Retail engagement is different now as we offer more products like staking, USDC Rewards, and smart wallets. While retail traders behave similarly to past cycles, deeper engagement comes from the broader portfolio of products we now offer.
Q: Can you provide an update on your balance sheet strategy and thoughts on hedging interest income?
A: Alesia Haas, CFO: We use cash to support our prime financing business and have earmarked funds to pay off the 2026 convert. We maintain a strong balance sheet to be opportunistic for investments. Regarding interest income, we are prepared for rate declines and aim to grow native units around USDC to offset this.
Q: Can you elaborate on the increase in head count expected in the back half of the year?
A: Alesia Haas, CFO: We plan to increase hiring primarily in our consumer and international platforms, as well as to strengthen our product foundations. We are being prudent in managing fixed costs and investing in key growth areas.
Q: How do you view the potential competition from traditional financial institutions if crypto legislation is passed?
A: Brian Armstrong, CEO: Regulatory clarity would unlock new pools of capital and spur innovation. We see traditional financial institutions as potential partners rather than competitors. Clear rules would benefit everyone and drive the industry forward.
Q: What trends are you seeing with Fortune 500 companies experimenting with Web3 development?
A: Brian Armstrong, CEO: Many big companies are now experimenting at the application layer, leveraging core pieces like Layer 2 solutions and smart wallets. Coinbase is contributing by building a developer platform, CDP, to enable third parties to build onchain applications. We aim to integrate crypto into every part of the global economy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
