Coinbase Global, Inc. Q1 FY2025 earnings call

• Core businesses: Gained share in spot and derivatives trading, acquired Deribit (world’s leading crypto options exchange), launched portfolio margin 2.0, and made strides in making USDC the number one dollar stablecoin. Accelerated international expansion with licenses in Argentina and registration in India.
• Emerging products: Focused on driving utility for crypto adoption, including stablecoin payments business with B2B features in pilot, on chain lending with Bitcoin backed USDC borrowing, and acquisitions of Spindle (on chain ad platform) and Iron Fish (private transactions on Base).
• Foundations: Achieved regulatory wins, including SEC lawsuit dismissal, executive order on strategic Bitcoin reserve, and bipartisan legislation progress for stablecoins and crypto market structure.

In Q1, Coinbase had total revenue of $2 billion. Transaction revenue was $1.3 billion, down 19% QoQ. Trading saw growth in market share across spot and derivatives; USDC hit a market cap all-time high of $60 billion in Q1 with average USDC held in Coinbase products increasing 49% QoQ to $12 billion. Subscription and services revenue grew 9% to $698 million, with stablecoin revenue up 32% QoQ to $298 million. Base stablecoin balances reached $4 billion in Q1, up 12% QoQ.

• Q2 outlook: Macro uncertainty may lead to softer crypto trading markets. April transaction revenue ~$240 million; spot transaction volume down ~12% MoM in April. Institutional transaction revenue expects $30-40 million QoQ impact. Subscription and services revenue expected $600-680 million. Stablecoin revenue affected by price declines in Q2. Technology and development and general and administrative expenses expected $700-750 million. Sales and marketing expected $215-315 million depending on performance marketing and USDC balances.

• Macro uncertainty including around global trade policy may contribute to softer crypto trading markets and lower asset prices. - Regulatory changes could impact business operations and product rollouts.

Q: Any plans on share buybacks?

A: Last year, Board authorized $1 billion share repurchase program, but balanced with other uses of cash like M&A and RSU withholdings.

Q: What are Coinbase's future plans similar to strategy regarding diluting or levering to accrue hard crypto reserve assets for its equity?

A: Allocate percent of net income to strategic investments in crypto assets, bought ~$150 million of new crypto investments in Q1, predominantly Bitcoin.

Q: You've said that you welcome new entrants into the crypto space and that you view it as a positive for Coinbase. At times, it sounded complacent. Can you elaborate on what opportunities you see from a growing TAM perspective and why you have confidence it will offset pressure from competition?

A: 100% focused on crypto, solved hard problems to build crypto infrastructure, will power infrastructure for new entrants, and there are emerging opportunities with regulatory clarity like perpetual futures in US, tokenizing assets, etc.

Q: Can you talk about the cross-sell opportunity and how the Deribit acquisition strengthens Coinbase's existing franchise?

A: Offering options alongside spot and perps allows commanding greater share of trading volume, providing capital efficiency to clients, and supercharging international derivatives franchise. Deribit is global leader in options, consistently profitable.

Q: USDC comprises an increasing percentage of overall stablecoin market cap. Perhaps you could just speak to some of the logic behind Binance being added into the USDC partnership along with Circle and what this means for the USDC TAM?

A: Commercial arrangement with Circle provides 100% underlying reserve income for USDC in eligible products, shares economics with Binance to drive liquidity and global adoption, network effects drive growth of USDC TAM.

Q: A question just around momentum in allowing kind of traditional banks to enter the industry in different capacities, obviously kind of moving towards that. And on one hand, some could be competitors in certain places and that gets a fair amount of press. But on the other side, it seems like there's still a fair amount that Coinbase can do with this potential customer cohort or partner with and even potentially even through the partnership with Circle.

A: Coinbase can power infrastructure for traditional banks, 100% focused on crypto, has over 200 institutions relying on its rails, and sees traditional financial services moving onchain.

Q: Could you please give us an update on what Coinbase aspires to be in 5 years to 10 years?

A: Aspires to be number one financial services app in the world across customer segments, focused on building onchain and crypto eating financial services.

Q: Maybe just on the recent rumor that there could be a change of control with Circle. Is there any change of control clause with Circle where that provides over would acquire Circle and out? Or what would happen in a scenario where Circle get acquired?

A: Contract with Circle persists through acquisition, no change to commercial arrangement.

Q: I am just curious how do you juxtapose doing all these different services, servicing different sorts of customers against potential legislation down the line where you may be limited in certain functions.

A: No current plans to pursue bank charter, legislation draft not requiring it, fully reserved model better for customers, and bank charter limits product velocity.

Q: Maybe a follow-up on Deribit. I'm kind of just curious if you could talk about options and crypto more broadly. It almost, in a way, looks like the futures market in TradFi where there's sort of incumbents, although obviously quite a bit different as most of the products traded there are different from the products on which options are written. So any kind of -- just curious about the history, like why is it that there's really only 1 crypto exchange that has such meaningful market share?

A: Relatively nascent products in crypto, Deribit focused and built product expertise, seen growth due to being best player, users are prosumers with diverse institutional and retail base ex U.S.

Q: Maybe one for Emily or Brian, M&A. Just are there any sort of other large deals that we should think about Coinbase pursuing in an effort to command global leadership maybe just categorically speaking?

A: Been most active in crypto M&A historically, Deribit is large acquisition, looking for additional opportunities to accelerate growth in key areas with strong balance sheet and regulatory clarity.

Q: Given the current macroeconomic uncertainty and volatility, the crypto asset price, how flexible is Coinbase strategy across different market environments? Are there specific strategy areas you plan to emphasize more in bearish versus a bullish market?

A: Strategy is thoughtful about worst and best case scenarios, plans for worst, and emerging into bear market doesn't materially change strategy; confident in navigating through bear market with current strategy.