Coinbase(US:COIN)2021-11-09 16:00Financial Performance - In Q3, Coinbase reported total trading volumes of $327 billion, a 29% decline compared to Q2, while global crypto spot trading volumes declined 37% in the same period [248]. - Coinbase generated $1.2 billion in net revenue, including $1.1 billion in transaction revenue and $145 million in Subscription and services revenue, marking the third consecutive quarter of over $1 billion in net revenue [249]. - Net income for Q3 was $406 million, a 401% increase compared to $81 million in Q2 [273]. - Net revenue for the three months ended September 30, 2021, was $1,234.7 million, a 331% increase from $286.7 million in the same period of 2020 [303]. - Total revenue for the nine months ended September 30, 2021, reached $5,341.0 million, up 671% from $692.4 million in the prior year [305]. - Transaction revenue increased by $813.8 million (295%) for the three months and $3.9 billion (636%) for the nine months ended September 30, 2021, compared to the same periods in 2020 [305]. - Subscription and services revenue rose by $134.3 million (1,248%) for the three months and $279.8 million (1,151%) for the nine months ended September 30, 2021 [307]. - Other revenue, including the sale of crypto assets and interest income, represented less than 10% of total revenue for the three and nine months ended September 30, 2021 [290][291]. User Metrics - Verified Users grew to 73 million, and retail Monthly Transacting Users (MTUs) were 7.4 million, reflecting a decline of 1.4 million or 16% compared to Q2 [249][257]. - Monthly Transacting Users (MTUs) are defined as retail users who transact on the platform at least once in a rolling 28-day period, representing the potential revenue-generating base [276]. Trading Activity - The number of assets supported for trading increased to 103, with trading volume from Other Crypto Assets comprising 59% of total volume in Q3, up from 50% in Q2 [261]. - Retail Trading Volume was $93 billion for Q3 2021, up from $18 billion in Q3 2020, while Institutional Trading Volume surged to $234 billion from $27 billion [280]. - Other Crypto Assets accounted for 59% of total trading volume in Q3 2021, up from 50% in Q2 2021, indicating a growing diversification in trading activity [282]. Revenue Sources - Transaction revenue is primarily generated from transaction fees, which are directly correlated with Trading Volume on the platform [283]. - Subscription and services revenue includes custodial fees, blockchain rewards, and interest income, contributing to the overall monetization strategy [284][287]. Operating Expenses - Operating expenses totaled $1,020.1 million for the three months ended September 30, 2021, a 377% increase from $213.9 million in the same period of 2020 [313]. - Technology and development expenses increased by $282.9 million (386%) for the three months and $650.7 million (359%) for the nine months ended September 30, 2021 [316]. - Sales and marketing expenses increased by $93.4 million (8.5% of net revenue) and $385.8 million (8.6% of net revenue) for the three and nine months ended September 30, 2021, respectively, compared to the prior year [317][319]. - General and administrative expenses increased by $171.2 million and $429.7 million for the three and nine months ended September 30, 2021, respectively [320]. - Other operating expenses increased by $98.2 million and $529.3 million for the three and nine months ended September 30, 2021, respectively, driven by crypto asset sales and a cybersecurity incident [321]. Investments and Cash Flow - As of September 30, 2021, the company had cash and cash equivalents of $6.4 billion and customer custodial funds of $9.0 billion [335]. - The company announced plans to invest over $500 million into a diversified portfolio of crypto assets, allocating 10% of quarterly net income into this portfolio [337]. - Net cash provided by operating activities was $7.7 billion for the nine months ended September 30, 2021, with $4.9 billion related to changes in custodial funds due to customers [350]. - Net cash used in investing activities was $644.4 million for the nine months ended September 30, 2021, primarily due to investments in companies and technologies totaling $251.1 million [353]. - Net cash provided by financing activities was $3.4 billion for the nine months ended September 30, 2021, driven by proceeds from the issuance of Senior Notes and Convertible Senior Notes [355]. Market Risks - The company generates substantially all of its total revenue from transaction fees related to the purchase, sale, and trading of crypto assets, which are subject to market price fluctuations [376]. - Future profitability may depend on the market price of BTC and ETH, as well as other crypto assets, which have shown significant quarter-to-quarter fluctuations [376]. - Changes in interest rates primarily impact interest income due to the short-term nature of the company's investments [371]. - Market risk associated with derivatives is influenced by potential fluctuations in market prices and other factors [373].