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Coinbase(COIN) - 2024 Q3 - Quarterly Report
COINCoinbase(COIN)2024-10-30 20:15
Transcript

Revenue and Net Income - Net revenue for the three and nine months ended September 30, 2024 was 1.1billionand1.1 billion and 4.1 billion, respectively, with net income of 75.5millionand75.5 million and 1.3 billion[159] - Net revenue for the three months ended September 30, 2024, was 1,128.6million,representing941,128.6 million, representing 94% of total revenue, compared to 623.0 million (92%) in the same period in 2023[194] - Total revenue for the nine months ended September 30, 2024, was 4,292.4million,a994,292.4 million, a 99% increase from 2,154.6 million in the same period in 2023[194] - Net income for the nine months ended September 30, 2024, was 1,287.9million,comparedtoanetlossof1,287.9 million, compared to a net loss of 178.6 million in the same period in 2023[194] - Total revenue increased by 2.1billionfortheninemonthsendedSeptember30,2024,contributingtohigheroperatingcashflow[251]TradingVolumeandUserGrowth−MonthlyTransactingUsers(MTUs)increasedby162.1 billion for the nine months ended September 30, 2024, contributing to higher operating cash flow[251] Trading Volume and User Growth - Monthly Transacting Users (MTUs) increased by 16% to 7.8 million for the three months ended September 30, 2024, compared to 6.7 million in 2023[161] - Trading Volume for the three and nine months ended September 30, 2024 was 185 billion and 723billion,respectively,representinga143723 billion, respectively, representing a 143% and 131% increase compared to 2023[161] - Consumer Trading Volume increased by 209% to 34 billion for the three months ended September 30, 2024, while Institutional Trading Volume grew by 132% to 151billion[167]−ConsumertransactionrevenuefortheninemonthsendedSeptember30,2024,roseby141151 billion[167] - Consumer transaction revenue for the nine months ended September 30, 2024, rose by 141% to 2,083.2 million, compared to 865.1millionin2023,duetoa176865.1 million in 2023, due to a 176% increase in consumer trading volume[197] - Institutional transaction revenue for the nine months ended September 30, 2024, increased by 282% to 204.3 million, compared to 53.4millionin2023,drivenbya12353.4 million in 2023, driven by a 123% increase in institutional trading volume[197] Crypto Asset Performance - Bitcoin accounted for 37% of Trading Volume for the three months ended September 30, 2024, down from 38% in 2023, while Ethereum's share decreased from 19% to 15%[167] - Crypto Asset Volatility increased by 78% and 36% for the three and nine months ended September 30, 2024, respectively, contributing to higher Trading Volume[168] - Transaction revenue from Bitcoin decreased to 35% for the three months ended September 30, 2024, compared to 37% in 2023, while Ethereum's share dropped from 18% to 16%[167] - Losses on crypto assets held for investment, net were 120.5 million for the three months ended September 30, 2024, due to the remeasurement of the fair value of crypto assets, mainly Bitcoin and Ethereum[221][222] - Gains on crypto assets held for operations, net were (142)thousandforthethreemonthsendedSeptember30,2024,resultingfromnetreceiptsofcryptoassetsduringaperiodofrisingcryptoassetprices[214]−Ahypothetical50(142) thousand for the three months ended September 30, 2024, resulting from net receipts of crypto assets during a period of rising crypto asset prices[214] - A hypothetical 50% increase or decrease in crypto asset prices as of September 30, 2024, would result in a 630.4 million impact on the value of crypto assets held for investment[263] Subscription and Services Revenue - Subscription and services revenue includes stablecoin revenue from USDC, blockchain rewards, interest and finance fee income, and custodial fee revenue[173] - Subscription and services revenue increased by 221.7million(66221.7 million (66%) for the three months and 634.6 million (62%) for the nine months ended September 30, 2024, driven by growth in stablecoin revenue, blockchain rewards, and custodial fee revenue[199] - Stablecoin revenue grew by 74.5million(4374.5 million (43%) for the three months and 161.9 million (31%) for the nine months, primarily due to higher on-platform USDC balances and increased USDC market capitalization[199] - Blockchain rewards revenue increased by 80.4million(10880.4 million (108%) for the three months and 255.1 million (108%) for the nine months, driven by higher average prices for Ethereum and Solana, and increased native units staked[199] - Custodial fee revenue rose by 15.9million(10115.9 million (101%) for the three months and 48.7 million (98%) for the nine months, due to growth in average crypto assets held under custody of 62.4billionand62.4 billion and 72.6 billion[199] Expenses - Transaction expenses as a percentage of revenue vary based on revenue composition, with blockchain rewards increasing transaction expenses as a percentage of net revenue[179] - Technology and development expenses include personnel-related costs for platform maintenance, new product development, and website hosting[180] - Transaction expense grew by 81.2million(9081.2 million (90%) for the three months and 285.5 million (97%) for the nine months, primarily due to higher blockchain rewards fees and payment processing fees[204][207] - Technology and development expenses increased by 54.7million(1754.7 million (17%) for the three months and 98.1 million for the nine months, driven by higher personnel-related expenses and website hosting costs[208] - Sales and marketing expenses rose by 86.6million(11186.6 million (111%) for the three months and 202.6 million (90%) for the nine months, primarily due to higher USDC rewards expense and brand spend[204] - General and administrative expenses increased by 77.8million(3177.8 million (31%) for the three months and 177.4 million (23%) for the nine months, reflecting higher personnel-related costs[204] - Sales and marketing expenses increased by 86.6million(11186.6 million (111%) for the three months ended September 30, 2024, compared to 2023, driven by higher digital advertising spend and USDC rewards payouts[209][211] - USDC rewards payouts increased by 50.9 million (474%) for the three months ended September 30, 2024, compared to 2023, due to higher reward rates and on-platform USDC balances[209][211] - General and administrative expenses increased by 77.8million(3177.8 million (31%) for the three months ended September 30, 2024, compared to 2023, primarily due to higher personnel-related and customer support costs[212] - Customer support costs increased by 9.3 million (24%) for the three months ended September 30, 2024, compared to 2023, driven by increased capacity needs following higher trading volumes[212] Operating and Net Income - Operating income for the nine months ended September 30, 2024, was 1,273.1million,asignificantimprovementfromanoperatinglossof1,273.1 million, a significant improvement from an operating loss of 277.3 million in the same period in 2023[194] - Gains on crypto assets held for operations, net, were 55.5millionfortheninemonthsendedSeptember30,2024,comparedtonogainsinthesameperiodin2023[194]−AdjustedEBITDAforthethreemonthsendedSeptember30,2024,was55.5 million for the nine months ended September 30, 2024, compared to no gains in the same period in 2023[194] - Adjusted EBITDA for the three months ended September 30, 2024, was 448,624 thousand, a significant increase from 178,332thousandin2023[234]−AdjustedEBITDAfortheninemonthsendedSeptember30,2024,reached178,332 thousand in 2023[234] - Adjusted EBITDA for the nine months ended September 30, 2024, reached 2,058,468 thousand, up from 653,696thousandin2023[234]CashandDebt−AsofSeptember30,2024,thecompanyheld653,696 thousand in 2023[234] Cash and Debt - As of September 30, 2024, the company held 7,723,806 thousand in cash and cash equivalents, a substantial increase from 5,139,351thousandasofDecember31,2023[237]−Thecompany′stotalUSDCholdingsasofSeptember30,2024,were5,139,351 thousand as of December 31, 2023[237] - The company's total USDC holdings as of September 30, 2024, were 871,425 thousand, compared to 576,028thousandasofDecember31,2023[237]−OnMarch18,2024,thecompanyissued576,028 thousand as of December 31, 2023[237] - On March 18, 2024, the company issued 1.3 billion in aggregate principal amount of convertible senior notes maturing on April 1, 2030[238] - As of September 30, 2024, the company held 4.3billioninaggregateprincipalamountofdebt[238]−NetcashprovidedbyoperatingactivitiesfortheninemonthsendedSeptember30,2024,increasedby4.3 billion in aggregate principal amount of debt[238] - Net cash provided by operating activities for the nine months ended September 30, 2024, increased by 664.1 million to 1,592,226,comparedto1,592,226, compared to 928,137 in 2023[251] - Net cash used in investing activities for the nine months ended September 30, 2024, increased by 147.9millionto147.9 million to 232,969, compared to 85,117in2023[253]−NetcashprovidedbyfinancingactivitiesfortheninemonthsendedSeptember30,2024,increasedby85,117 in 2023[253] - Net cash provided by financing activities for the nine months ended September 30, 2024, increased by 2.4 billion to 682,663,comparedtoanetcashusedof682,663, compared to a net cash used of 1,734,128 in 2023[254] - Customer custodial cash increased by 798.9millionduetohighertradingvolumefortheninemonthsendedSeptember30,2024[254]DerivativesandFinancialInstruments−GrossFinancingDerivativesasofSeptember30,2024,totaled798.9 million due to higher trading volume for the nine months ended September 30, 2024[254] Derivatives and Financial Instruments - Gross Financing Derivatives as of September 30, 2024, totaled 265,259, compared to 62,980asofDecember31,2023[270]−GrossFinancingDerivativesgainsforthethreemonthsendedSeptember30,2024,were62,980 as of December 31, 2023[270] - Gross Financing Derivatives gains for the three months ended September 30, 2024, were 25,378, compared to a loss of 325inthesameperiodin2023[271]−GrossFinancingDerivativeslossesfortheninemonthsendedSeptember30,2024,were325 in the same period in 2023[271] - Gross Financing Derivatives losses for the nine months ended September 30, 2024, were 56,529, compared to gains of 6,677inthesameperiodin2023[271]−GrossOtherDerivativesexposuresasofSeptember30,2024,were6,677 in the same period in 2023[271] - Gross Other Derivatives exposures as of September 30, 2024, were 46,523, down from 65,082asofDecember31,2023[274]−GainsonGrossOtherDerivativesforthethreemonthsendedSeptember30,2024,were65,082 as of December 31, 2023[274] - Gains on Gross Other Derivatives for the three months ended September 30, 2024, were 4,712, compared to 12,639inthesameperiodin2023[274]−LossesonGrossOtherDerivativesfortheninemonthsendedSeptember30,2024,were12,639 in the same period in 2023[274] - Losses on Gross Other Derivatives for the nine months ended September 30, 2024, were 9,921, compared to gains of 13,738inthesameperiodin2023[274]−Ahypothetical5013,738 in the same period in 2023[274] - A hypothetical 50% change in the fair value of Gross Financing Derivatives would not materially impact the company's financial statements[271] - A hypothetical 10% change in the fair value of Gross Other Derivatives would not materially impact the company's financial statements[274] Other Financial Metrics - The company generated 86% of total revenue in the U.S. for the three months ended September 30, 2024, compared to 90% in the same period in 2023[196] - Other revenue for the nine months ended September 30, 2024, increased by 48% to 196.2 million, compared to 132.7millioninthesameperiodin2023[196]−Otherrevenueincreasedby132.7 million in the same period in 2023[196] - Other revenue increased by 25.5 million (50%) for the three months and 63.5millionfortheninemonths,reflectinghigheraveragecorporatebalancesandincreasedearnedinterestrates[200][202]−Otheroperating(income)expense,netdecreasedby63.5 million for the nine months, reflecting higher average corporate balances and increased earned interest rates[200][202] - Other operating (income) expense, net decreased by 12.1 million (344%) for the three months ended September 30, 2024, compared to 2023, due to gains on certain derivatives in 2023 that did not recur in 2024[217] - Interest expense decreased by 0.3million(10.3 million (1%) for the three months ended September 30, 2024, compared to 2023, with no material changes noted[220] - The change in (Benefit from) provision for income taxes for the three months ended September 30, 2024, was (43,840) thousand, a decrease of 119% compared to 2023, primarily due to tax benefits from stock-based compensation[225] - For the nine months ended September 30, 2024, the provision for income taxes increased by 189,010thousand,a607189,010 thousand, a 607% rise compared to 2023, driven by higher pretax income partially offset by stock-based compensation tax benefits[225] - The company authorized a share repurchase program of up to 1.0 billion of Class A common stock in October 2024[248] - Effective January 1, 2024, the company adopted ASU 2023-08, resulting in a fair value adjustment of 739.5milliononcryptoassetsheldatthattime[240]−Thecompany′scryptoassetsheldforoperationsareconsideredlessliquidthancashandcashequivalents,particularlyduringmarketinstability[242]−CryptoassetsborrowedasofSeptember30,2024,totaled739.5 million on crypto assets held at that time[240] - The company's crypto assets held for operations are considered less liquid than cash and cash equivalents, particularly during market instability[242] - Crypto assets borrowed as of September 30, 2024, totaled 252.9 million[261] - Crypto assets held for investment as of September 30, 2024, amounted to 1.3billion[261]−RestructuringexpenseswereimmaterialforthethreemonthsendedSeptember30,2024,comparedto1.3 billion[261] - Restructuring expenses were immaterial for the three months ended September 30, 2024, compared to 142.6 million for the nine months ended September 30, 2023, related to workforce reduction[216]