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Coinbase Global (NASDAQ: COIN)
Q4 2023 Earnings Call
Feb 15, 2024, 5:30 p.m. ET

Highlights of the Earnings Call

• Company Achievements
• Financial Performance
• Expansion into Derivatives Trading
• Role in Institutional Trading
• Innovative Initiatives

Opening Remarks

Operator

Good afternoon. My name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coinbase fourth quarter and full year 2023 earnings call All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks, there will be a question-and-answer session. [Operator instructions] Anil Gupta, vice president, investor relations, you may begin your conference.

Anil Gupta — Vice President, Investor Relations

Good afternoon, and welcome to the Coinbase fourth quarter and full year 2023 earnings call Joining me on today’s call are Brian Armstrong, co-founder and CEO; Emilie Choi, president and COO; Alesia Haas, CFO; and Paul Grewal, chief legal officer. I hope you’ve all had the opportunity to read our shareholder letter, which was published on our investor relations website earlier today. Before we get started, I’d like to remind you that during today’s call, we may make forward-looking statements.

Actual results may vary materially from today’s statements. Information concerning risks, uncertainties, and other factors that could cause these results to differ is included in our SEC filings. Our discussion today will also include references to certain non-GAAP financial metrics. Reconciliations to the most directly comparable GAAP financial measures are provided in the shareholder letter on our investor relations website.

Strong Growth and Resilient Strategy

Brian Armstrong — Co-Founder and Chief Executive Officer

Thanks, Anil. I’m proud to say that in 2023, we cut costs by 45% year over year and managed to ship products faster with a lean team. This led to $95 million of positive net income for 2023, $964 million in positive adjusted EBITDA, and total revenue of $3.1 billion. Coinbase has always taken a long-term approach focusing on building in a compliant manner even when it wasn’t the popular choice.

Many of our competitors cut corners and broke laws to get big fast, and we’ve seen how that strategy played out. By contrast, Coinbase has now established itself as the trusted leader in crypto. I’ve always said that crypto adoption will happen in three phases, and I want to touch on what we did in 2023 to help drive each of those. In Phase 1, crypto is a new asset class that people want to trade.

Crypto trading has been a major revenue driver for the industry, and Coinbase is the leader in spot trading in the US But in 2018, derivatives trading became the majority of crypto trading volume. It took us longer to do it in a compliant way, but I’m happy to report that in 2023, we have now launched derivatives trading globally.

In Q2, we launched Coinbase International Exchange, which offers derivatives trading to non-US customers. And in Q4, we launched Coinbase Financial Markets, which offers regulated futures trading in the US. We also expanded our trading products around the world by getting new licenses. In 2023, we launched operations or received licenses or registrations in Bermuda, Brazil, Canada, France, Singapore, and Spain. Most of the world’s capital is held in institutions.

With Coinbase Prime, we grew our institutional financing products. We launched Coinbase Asset Management. We even played a key role in the approval of the Bitcoin ETF as Coinbase was selected as the custodian in 8 of 11. This will unlock new pools of capital to flow into the crypto space with Coinbase playing a key role here. We’re earning revenue, not just on custody, but also on trading and financing.

We’ve already seen great demand as Bitcoin is now the second largest ETF commodity in the US, surpassing silver. All of these improvements will continue to grow Phase 1, crypto as a new asset class. The second, Coinbase is not just a new asset class, it’s also powering new financial services. And in 2023, stablecoins began to be used in global payments.

We launched the ability to send free instant global payments on USD coin using base. We’re now in the process of integrating this into our products to make payments of a first-class experience. And in August, we entered into an arrangement with Circle to help expand the utility of USD coin, which is now launched on over a dozen blockchains and is the second largest stablecoin with a market cap of $28 billion. In the third phase and final phase, we believe crypto will also be a new application platform for the Internet.

Over time, the Internet has become more and more centralized with big companies. The Internet also didn’t start with a native form of money or payments or value built in. So we got credit cards bolted on as an afterthought. And the number of associated issues like fees, fraud, chargebacks, limited ability to send microtransactions or do cross-border commerce and that led to the rise of ad-based business models. Crypto is decentralizing the Internet with a new set of protocols for money, identity, messaging, social media, content, governance and even voting.

And Coinbase is trying to help accelerate this trend in a number of ways. In 2023, we launched our own Layer 2 solution called Base. This will help blockchain scale to $1 billion or more users, bringing down transaction costs and confirmation