Coinbase Global (COIN) 3 Aug 232023 Q2 Earnings call transcript

Good afternoon. My name is Tamika, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coinbase Second Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions]

today’s to hand President, Gupta, now Relations. Investor would call Anil over Vice I

your conference. begin may You

Good welcome call. afternoon, XXXX quarter and to the second Coinbase earnings

and the and published Relations on Emilie Legal and which Officer. me today's was you've are on read Chief Armstrong, Joining website all our hope had letter, call Paul Grewal, Investor Choi, to earlier Alesia COO; Co-Founder President I Haas, opportunity today. CFO; our Brian CEO; shareholder

during like materially these I'd other we to Information started, today's get in that Actual vary call, could results make you may concerning we included is from our statements. forward-looking cause Before differ factors that and may filings. remind SEC statements. to risks, results uncertainties today's

financial financial the directly considered not our should Our substitute discussion today in are will measures IR measures for to, GAAP also shareholder non-GAAP Reconciliations comparable website. most measures. include letter GAAP be in addition certain references our included financial on a Non-GAAP to as measures. to

once again to safe our shareholders to post questions. enable are We technologies using

addition, live our questions some we will analysts. from In take

it I'll over Brian for opening and turn comments. that, With Alesia to

clarity get product Thanks, and we by we've and our more demonstrated QX second quarter $XXX on executing ended nearly to million on was efficient in size. marking reductions, us help operating employees, year-over-year. down at EBITDA started for QX, I'm as touching EBITDA. now Anil. in discipline, X,XXX of to I'll are the focused XX% this consecutive drive we discipline. ago, a with QX able company operational cost a year being a and expenses start industry. say We happy done About drove strong that a quarter QX, for lot positive regulatory been by We operational the excellence on of adjusted adjusted

touch because made we the let to trusted crypto use. easier excellence. product People Coinbase’s we're product use brand, Next, me on most and

user when thing design, weren't tried support. always cybersecurity, or we right on rules easy We've view decade, wasn't focused past experience the taken even and a it compliance, great the Over and do clear. the long-term customer to

ranked us. crypto platform this for most Today, across Coinbase differentiator is the multiple and huge a competitive is consistently markets, trusted as

product this and have three distinct retail, We in and groups: industry coverage customer serve developers. great institutions

and retail WebX. our and with moved for NFTs, customers, beyond save, an our And earn best-in-class customers protocols the these a access have primary over cases payments, functionality. increased via We Coinbase Coinbase use Coinbase goal of our larger now over a fraction For the will world, by become funds cases. use Wallet become use self-custody. Coinbase has decentralized this platform and first is retail applications broad way provides third-party a Coinbase make to customers their Wallet to in range access global for of third-party rewards, card way trading all while lives access help that time. a enabled become own of functionality the manage their people economy financial powerful storing set

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With that, our over hand about us to it I'll you, to more Alesia, QX tell performance.

Thanks, Brian.

efficient So good QX, as we build journey financially on shared, increasingly and an company. disciplined our Brian made to progress in

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trading in environment. which provides This declined the backdrop declined outperformed our XX% global Our spot transaction it revenue. gained volume the market, But quarter. XX% share as importantly, the market in we this to

environment transaction volume. a mix and average million, increase $XXX both The quarter-over-quarter. trading to was institutional which by in was low This contributed consumer driven shift increased The drove differ fees for fees Prime and volatility of blended retail, by training through down the revenue We and to institutional, quarter-over-quarter. the XX% a mix we platform fee shift exchange in offer the during an increase advanced rate quarter. in the offered trading experience fees and the product simple and of

and and was by revenue higher rewards Blockchain exceeded our was higher Rewards, services outperformance The million asset prices. notably and driven $XXX Subscription outlook.

in income. percentage of addition, higher cash accounts we invested interest a In that saw generate

and On operate continue the on to focus a cost expense side, heightened with we efficiency.

marketing, our XX% administrative, these we the are to started second nearly and of XXXX when quarterly recurring expenses sales focus and technology discipline. on development, financial quarter general Brian mentioned, are and really to down operating compared As

million. operating $XXX total expenses our QX, were In

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our July $XXX third transaction note to Lastly, to letter, our that approximately want In revenue was for outlook we I the turn quarter. million.

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questions. some take that, let's With to back Anil, you and

you, Thank both.

to turn let's So questions.

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Yes.

So that couple to themes think we big over there's next X years. about the a of X

crypto, on then scalability, each Coinbase. briefly about talk X clarity, and in in utility I'll of that's regulatory So role touch are nontrading, them. our driving these one

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use to going payments make It's more think unlock things viable. I new lot cases. to like of a it's going

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regulatory around my clarity, second I opening mentioned big in The which is here trend comments.

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I guess the is on about utility. here one touch last I'll

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things money think go much in friction world And these the for payments of messaging today. moves identity new of I as same the way types utility will and And this reduced. and built decentralized a still the around thing friction so way, higher of that there crypto-native various is lot the it in with types the demand is happened and with

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only I actually And crypto important around a internationally expertise has So that think thing really can do. that scale the the world we Coinbase the in the that's happen. the trust and company is this go and really to make

think milestones from many line give And of are at for the shareholders. time with question. you how remain should Recent actions enforcement litigation that top on update SEC? Next the What process the mind stake? To an end, the issues can Paul? we about key and here?

to litigation with Well, be the clear, Anil. we to Thanks, with I do very think want respect win. we the SEC, can

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legislation how of. We focused may speak while provide on other that outcome and that's particular the that's regardless also enforcement win action; the why that think clarity we we And case. I of we all focused of the on are are any efforts

for not on CFTC the whether the different of has or even Chair authorities like Coinbase. of security. apply have the Ethereum why reason pushing about the two the Chair law the at SEC More even regulatory US conflicting just very in are cryptocurrency are Take, and the from focused many these so SEC conflicting messages positions the clarity for status under regulatory very we years the that Internet Chair taken about fact the that consider example, of quo, there present, considering in last provides, that the statements exchanges well-before Now laws that the the written especially the is were here to is existed. what we on whether of

particular outcome that define in the as ultimately So clarity It's any winning. we case.

SEC efforts me we against bring whole, to let Now as to with did this us action the disappointed bit a as possible are with our Obviously, markets transparent talk that a earlier and about the faith despite choose case. the good be summer. efforts the an our as enforcement and commission

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process have a any of two, regulate digital Number which of undertaken. in we've that review that exactly exchanges, way authority that a to because when testified that May confidence the was Congress that in lot lacks whatsoever the acknowledged to We month never that suggested rigorous in effect And when in SEC statement asset asset declared he of of April requirement third, it the XXXX, register. to SEC XXXX. registration in any effective there our earlier, the

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Thanks, Paul.

more on-chain upcoming how trading Coinbase? platform? is, to the volumes Base Our encouraging from or next Does derive Coinbase question Brian? this directly revenue go users by away LX hurt plan does indirectly from to

this take I can Yes, one.

a So itself. question I in just to want misconception the first, correct

fully receiving we you allowed the on-chain. you is embracing various happen access through instance, So the decentralized is exchanges, from easiest platform. made XX been ago access will nothing to app on-chain everything Coinbase Coinbase to And allow to well. It's sent new. when main and people on-chain I go people be that do transactions, This was a would protocols to on easier it's easier And as and asked, those even -- in in when way actually live, think and the for on-chain. contract going you're long for time, way want Coinbase off when more years recent the smart question we've more actually, away Coinbase? years, sending retail we've that and Wallet users

way Coinbase of easiest this part important want to that to be is to are on-chain everything think going. going be the where do a So on We we very And is clear, just to chain. industry with access Coinbase. people

So those contradictory items. not are

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answer any what monetized is called time. fees. on fees can Coinbase sequencer and can Well, basically, -- how So of is transaction through sequencers earned the that short be monetize executed when others we over are run sequencer it? be Base are one can will as these These Base will

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it leave there. I'll So

Thanks Brian.

one live questions. Okay. We'll jumping take into more before

So, revenue question from how news, a custody Coinbase generate upcoming its the recent from shareholder based of Emilie? spot some ETFs. will on

can we'll with and then think revenue Well, some financial leaders. near-term way like AUCCs. monetize proud things we on generate deal down the of services. Sure. via line, the And settlement trusted journey of in to The is we're other ancillary the there's most be a from this we world's good primary that that

in expand The it into Should the reach and space. It is reason generally positive pie get to more some first create the we'll to the new the class. and excited that the reach the should for crypto for legitimacy time. eventually people seek biggest and broaden that should economy. to world and applications of approved, create really asset we're the class impacts assets broaden crypto these It institutions the of gain this other our bring Bitcoin should institutions will very asset exposure the of

many stability as diligence applicants increase classes, asset brand industry center it by opportunities these capabilities selected and of and And have other self-included. Coinbase for should market the know, increases many because We've are and participants We're processes. at ETF high-quality of we've applications. institutions the as is that been proud of liquidity we've you seen rigorous revenue also built. with the

due compliance pedigree have selected to applicants customer trust and Coinbase our scale. ETF

over how Coinbase settlement, term, and the issuers? ETFs So, these to their API economic to foremost, add drive first longer monetization advanced and And crypto does value via ways we'll secure reporting. We custody. and explore offer, trading

these that entering are process. approval also exchanges, and sharing and the the major [indiscernible]. registration important going agreements products bilateral and listing it's innings, in through NASDAQ We're to the including ETF into early We're definitely still with surveillance note

the ETFs the adoption, exciting just work future the potential the exciting. is I there's crypto is available, emphasize but very are approved want lot expand and to a that while even to So, opportunity to whole and has of

up the analysts. Tamika, and Thanks, open Okay. it take questions from Emilie. let's

with from the Ryan is Securities. line of question first Your Devin JMP Instructions] [Operator

guess Thanks on so just backdrop. the first question I good share Hey market much. evening.

XX% was quarter-over-quarter, think, mentioned. I were but global XX% the So, you volumes, spot trading down down which quarter-on-quarter, market

indicates obviously that So, some market gains. share

the I'd just competitive to about so love talk landscape. And

particularly, the to if share gain market share, quite market things it like you're a seems here, opportunity doing to the past? for And that just from bit and more here you firm did to Thanks capture the position just additional changing speaking that's to this just

Yes, I'll start then Felicia it in. to feel and free off jump

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may in the we I long-term not it's think everything so past. That offer said, And have the being be solution. that right offered to able competitors

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Okay. Terrific.

in judgment the or for Crypto or shoots the to of to in may market reenter an the the some indicate for Obviously, of we be need overhang, institutions follow-up summary active is market, a that build hear see comprehensive Summit challenges more your institutional are Just either about on actually beginning seeing from I'd maybe continue folks. step to a but this to state number the function love something or legislation some business just green to you're really was the a here takeaways seemingly regulatory confidence adoption. of help improvement? that here

offer some I'll comments there.

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growth shared As also platform in Prime seen we my remarks, our we've in quarter-over-quarter.

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much. so you Thank Okay.

question MoffettNathanson. Your line Ellis Lisa with from is of next the

utility-oriented afternoon. on I you the my beyond good maybe, you for priority question. scalability order other a over years. trading had Thanks Hey, use taking Brian, into in to in follow-up and for raised several these the question and crypto cases next driving next over around shift scalability

to of the break it that Layer was started happen back to is What now, Lightning freight? kind XXXX. thinking have think has X been in that Just I around solutions

kind of transaction faster payments cost or speeds, What's like been solutions just holding to and increase Layer back lower happening? things should progress speeds? identity, in for for usage the as things X this as these the you Like like scalability utility in crypto what that transaction said, more that of to of we Thanks. be sort space, see be just from observers signposts our watching like perspective, are may

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data And the things, be the of -- public and track you always bit blockchains lot so adoption it's way online a to of the the we're little are is because these have can a public we neutral, actually, but that themselves.

Ethereum on the go you happening at X. Layer can of So, for daily transactions instance, number look

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say, nice last, We pretty to X, I'd like growth in six have the Layer Ethereum just three seen months. in

to challenges usability of as lot well. comes a it so down And

payment. know doesn't don't Layer these bridge doing even maybe learn don't for you're to underneath, from want -- user, to X want to their “just about what to send like have it if They care to they pay it, X want to and is average they user like just the or to something Layer works”. So average an how really

to what we is needs is think I this Coinbase really the So can happen, in help and background. seamless make something on this can

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next line Your the Company. is & question John Needham from of with Todaro

Thanks taking my great. Hey, question. for

the looks highest it wanted like I just to expanded a because a little company. to it public more take level since bit First, the drill into rate

as rate off, goes first are to you the start room to market maybe migration before confident away? down, further then to there so, you to do can how follow-up you retail advanced that, guess is continue from spread it a some for lose increase So that here? if And kind share, expand I of some if mix

Thanks for the question, John.

as this mix we shift So was shared. in QX,

would simple think the entire because retail zero we you you trading and So math if for this would simple reflect about platform. had be say just scenario, then a blended average as higher advanced it fee

of concentration the meaningfully versus simple a So will number in change consumer period-over-period. advanced

prepared decline we on see what's driving is fee. is performance did what the remarks, said But on that just which advanced QX fee the greater the did As than simple blended of earlier that a see you in we we in quarter, is in math.

on on a behavior basis, QX, our business event. We and understand that was regular we your customers. we change with raise haven't in closely. seen just event, our that fees consumer Broadly to any in think very spread healthy a part experimented We question, as a building QX that meaningful and our that's we we of did shared pricing from monitored

So the platform mentioned have differentiated brand diversity we in market. premium and the we're product earlier, a trust the is we what we're is that experience, app our think that Product selling, Brian selling,

And so hoping appropriately. we to that are price

Bo line Pei Securities. of Your next from with the Tiger is question US

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for the Thanks it. color. appreciate I

to Okay. Well, for joining forward look it next we and that call. us, speaking does our today. you for on Thank to you again all

joining. This for concludes today's you Thank call.

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