Coinbase Global (COIN) Q3 Earnings call transcript Oct 30, 2024

In Coinbase's third quarter 2024 earnings call, executives shared a positive outlook on the company's financial health and strategic initiatives. The call highlighted several key themes, including a focus on revenue diversification, driving utility in the crypto space, and regulatory clarity.

Revenue Diversification

Coinbase reported a seventh consecutive quarter of positive adjusted EBITDA and a fourth consecutive quarter of positive net income. The company has made significant progress in diversifying its revenue away from transaction fees, which are more volatile and market-dependent, towards subscription and services revenue. This shift has enabled Coinbase to surpass $2 billion in subscription and services revenue in 2024, up from $1.4 billion in 2023. This diversification has given the company the financial flexibility to invest in future initiatives, such as utility and regulatory clarity.

Driving Utility in Crypto

One of Coinbase's primary goals is to drive utility in the crypto space, making it a part of people's daily lives beyond just trading. The company has been focusing on building blocks such as stablecoins, smart wallets, and Layer 2 solutions like Base. These initiatives aim to make crypto transactions faster, cheaper, and more accessible to a broader audience. For instance, stablecoins are proving to be a significant driver of payment volume, with $20 trillion already surpassed in 2024, up from $10 trillion last year. Smart wallets have also simplified the onboarding process for users, reducing network fees and eliminating the need to remember complex recovery phrases. Layer 2 solutions like Base are enabling transactions to occur under 1 second and $0.01 anywhere in the world, making crypto a more practical payment rail.

Regulatory Clarity

Regulatory clarity is a critical issue for Coinbase, as it impacts the company's ability to grow and innovate in the crypto space. The company has been actively advocating for pro-crypto policies and has seen significant progress in the U.S., with both presidential candidates acknowledging the importance of crypto and the House passing procrypto legislation with strong bipartisan support. Coinbase has also been investing in grassroots advocacy efforts, such as supporting FairShake and Standwithcrypto.org, to promote pro-crypto policies. The company plans to continue these efforts post-election, aiming for regulatory clarity that would unleash new sources of capital and innovation in the crypto industry.

Strategic Investments and Future Outlook

Coinbase's strategic investments, such as acquiring a MiFID license and integrating Base into its product suite, are positioning the company to expand its reach and offer a more comprehensive suite of crypto services. The company is also exploring M&A opportunities, particularly in the international market and on the utility front, to drive new use cases and enhance its position in the crypto space. Looking ahead, Coinbase aims to hit its stride in 2025, as it continues to scale its derivatives offering and onboard more advanced traders. The company's long-term competitive advantage lies in its trusted, compliant, and regulated approach, which is crucial for attracting a wider customer base and driving adoption of crypto as a mainstream payment rail.

Overall, Coinbase's third quarter earnings call painted a picture of a company that is well-positioned for growth, with a clear focus on revenue diversification, driving utility in the crypto space, and achieving regulatory clarity. The company's strategic initiatives and investments are aimed at positioning it as a leader in the crypto industry, enabling it to tap into the vast potential of this emerging market and create value for its users and shareholders.