Coinbase(US:COIN)2025-05-08 20:17Part I - Financial Information Financial Statements (Unaudited) The company's Q1 2025 financial statements show total revenue increased to $2.03 billion, but net income sharply declined to $65.6 million due to a significant loss on crypto assets, with total assets slightly decreasing and operating cash flow turning negative Condensed Consolidated Balance Sheets As of March 31, 2025, total assets decreased to $21.7 billion, total liabilities decreased to $11.3 billion, and total stockholders' equity increased to $10.5 billion Balance Sheet Summary (as of March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Assets | $21,731,006 | $22,541,951 | | Cash and cash equivalents | $8,051,169 | $8,543,903 | | Customer custodial funds | $5,369,865 | $6,158,949 | | Total Liabilities | $11,262,766 | $12,265,109 | | Customer custodial fund liabilities | $5,369,865 | $6,158,949 | | Long-term debt | $4,237,090 | $4,234,081 | | Total Stockholders' Equity | $10,468,240 | $10,276,842 | Condensed Consolidated Statements of Operations For Q1 2025, total revenue increased to $2.03 billion, but net income significantly decreased to $65.6 million due to a substantial loss on crypto assets, leading to a drop in diluted EPS Statement of Operations Summary (Three Months Ended March 31) | Metric | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $2,034,295 | $1,637,570 | | Net Revenue | $1,960,319 | $1,587,677 | | Total Operating Expenses | $1,328,489 | $877,109 | | Operating Income | $705,806 | $760,461 | | Losses (gains) on crypto assets held for investment, net | $596,651 | $(650,429) | | Net Income | $65,608 | $1,176,245 | | Diluted EPS | $0.24 | $4.40 | Condensed Consolidated Statements of Cash Flows In Q1 2025, net cash used in operating activities was $182.7 million, a reversal from the prior year, with increased cash used in investing and financing activities Cash Flow Summary (Three Months Ended March 31) | Activity | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(182,727) | $411,485 | | Net cash used in investing activities | $(231,653) | $(125,681) | | Net cash (used in) provided by financing activities | $(893,802) | $1,927,721 | | Net (decrease) increase in cash | $(1,308,182) | $2,213,525 | Notes to Condensed Consolidated Financial Statements Notes detail revenue concentration, $4.24 billion in long-term debt, dismissal of an SEC lawsuit with ongoing state actions, and a subsequent agreement to acquire Deribit for $2.9 billion Revenue Breakdown (Three Months Ended March 31) | Revenue Category | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Total Transaction Revenue | $1,262,208 | $1,076,741 | | Total Subscription and Services Revenue | $698,111 | $510,936 | | Total Net Revenue | $1,960,319 | $1,587,677 | - As of March 31, 2025, the company had approximately $4.24 billion in long-term debt, consisting of various convertible and senior notes with maturities ranging from 2026 to 203164 - The SEC lawsuit filed in June 2023 was jointly stipulated for dismissal with prejudice in February 2025, however, the company continues to face legal actions from several U.S. state securities regulators regarding its staking services108109 - On May 8, 2025, the company signed a definitive agreement to acquire Deribit, a crypto derivatives exchange, for an aggregate purchase price of approximately $2.9 billion in cash and stock, expected to close by December 31, 2025122 Management's Discussion and Analysis (MD&A) Q1 2025 net revenue grew to $2.0 billion, but net income dropped to $65.6 million and Adjusted EBITDA decreased, despite growth in MTUs and trading volume, with expense adjustments planned for Q2 Key Business Metrics Q1 2025 key business metrics show MTUs increased 21% to 9.7 million and Trading Volume grew 26% to $393 billion, while Assets on Platform remained flat at $328 billion Key Business Metrics (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change % | | :--- | :--- | :--- | :--- | | MTUs (in millions) | 9.7 | 8.0 | 21% | | Assets on Platform (in billions) | $328 | $323 | 1% | | Trading Volume (in billions) | $393 | $312 | 26% | | Net income (in millions) | $66 | $1,176 | (94)% | | Adjusted EBITDA (in millions) | $930 | $1,014 | (8)% | - The growth in Trading Volume outpaced the overall U.S. spot market, indicating an increase in market share for the company141 Results of Operations Q1 2025 total revenue increased 24% to $2.03 billion, driven by transaction and subscription revenue growth, but profitability was significantly impacted by a $1.25 billion negative swing in crypto asset gains/losses - Transaction revenue increased by 17% YoY, driven by a 39% rise in consumer trading volume, although this was partially offset by a lower average blended fee rate due to a shift towards Advanced trading144147 - Subscription and services revenue grew 37% YoY, primarily due to a $100.2 million (51%) increase in stablecoin revenue and a $45.7 million (30%) increase in blockchain rewards146 - Sales and marketing expenses surged 151% YoY to $247.3 million, mainly due to higher digital advertising spend and a 277% increase in USDC rewards payouts to enhance customer acquisition and engagement157159 - The company recorded a $596.7 million loss on crypto assets held for investment in Q1 2025, compared to a $650.4 million gain in Q1 2024, a key driver of the sharp decline in net income166 Liquidity and Capital Resources As of March 31, 2025, the company maintained a strong liquidity position of over $10.2 billion in cash and USDC, with approximately $4.3 billion in long-term debt and compliance with $1.6 billion in regulatory capital requirements Liquidity Resources (as of March 31, 2025) | Resource | Amount (in thousands) | | :--- | :--- | | Cash and cash equivalents | $8,051,169 | | USDC | $2,225,054 | | Total Liquidity | $10,276,223 | - The company's primary contractual obligation is its long-term debt, which stood at an aggregate principal amount of $4.3 billion as of March 31, 2025179 - Certain subsidiaries are subject to regulatory capital requirements totaling approximately $1.6 billion, with which the company was compliant as of March 31, 2025185 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is crypto asset price volatility, with a hypothetical 50% price change impacting investments by $634.0 million as of March 31, 2025 - A hypothetical 50% change in crypto asset prices would result in a $634.0 million gain or loss on the company's crypto assets held for investment as of March 31, 2025194 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level196 - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting197 Part II - Other Information Legal Proceedings The company faces various legal proceedings and regulatory investigations, including ongoing subpoenas from the SEC and state agencies regarding its business practices and product offerings - The company is subject to ongoing regulatory oversight and has received investigative subpoenas from the SEC and various state agencies regarding its business practices, customer programs, and product offerings201 Risk Factors The company faces significant risks from crypto market volatility, revenue concentration, intense competition, operational vulnerabilities, an uncertain regulatory landscape, and concentrated voting control due to its dual-class stock structure Business and Financial Risks Business and financial risks include significant operating result fluctuations due to crypto volatility, substantial revenue dependence on Bitcoin, Ethereum, and USDC, and intense competition from less-regulated entities - Operating results fluctuate significantly due to the highly volatile nature of the crypto economy and crypto asset prices203 - Total revenue is substantially dependent on crypto asset prices and transaction volumes, with a meaningful concentration from Bitcoin and Ethereum transactions and USDC-related stablecoin revenue206209 - The company competes with unregulated or less-regulated companies that may have lower compliance costs and greater flexibility in product offerings236237 Operational and Security Risks Operational and security risks include cyberattacks, reliance on third-party service providers, the critical need for secure private key storage, and potential disruptions to the platform or blockchain networks - Cyberattacks and security breaches on the platform, or those impacting customers or third parties, pose a significant risk to the company's brand, reputation, and financial condition218 - The business relies on third-party service providers for payment processing, cloud computing, and customer service, making it vulnerable to disruptions from these partners265 - The theft, loss, or destruction of private keys required to access crypto assets held in custody is a critical risk, as such losses may be irreversible and could lead to significant financial liability284285 Regulatory and Legal Risks Regulatory and legal risks include operating in an uncertain landscape, potential classification of crypto assets as securities, exposure to material litigation and enforcement actions, and complexities of international compliance - The business is subject to a complex and uncertain regulatory landscape, where adverse changes or failure to comply with laws could significantly harm the business226 - There is a high degree of uncertainty regarding whether a particular crypto asset, product, or service could be deemed a "security," which could lead to penalties and require the company to cease offering the asset or service256261262 - The company is, and may continue to be, subject to material litigation and enforcement actions by regulators, which are expensive and time-consuming250 Ownership and Stock Risks Ownership and stock risks include concentrated voting control due to the dual-class structure, limiting Class A stockholder influence, and high volatility in the Class A common stock market price - The dual-class common stock structure concentrates voting control with a small group of stockholders, including the CEO, who controls a majority of the voting power, limiting the influence of Class A stockholders on corporate matters437 - The market price of the Class A common stock is highly volatile and can be influenced by factors such as crypto market performance, analyst coverage, and broad market fluctuations434 - The company's board authorized a $1.0 billion share repurchase program in October 2024, but there is no guarantee it will be fully consummated or enhance long-term stock value, with no shares repurchased as of March 31, 2025447457 Other Disclosures Other disclosures include no share repurchases under the $1.0 billion program as of March 31, 2025, and no Rule 10b5-1 trading plan adoptions or modifications by directors or officers during the quarter - As of March 31, 2025, no shares have been repurchased under the $1.0 billion Share Repurchase Program authorized in October 2024457 - During the first quarter of 2025, none of the company's directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan458