COIN earnings call for the period ending December 31, 2024.
Image source: The Motley Fool.
Coinbase Global (COIN 8.44%)
Q4 2024 Earnings Call
Feb 13, 2025, 5:30 p.m. ET
Agenda for the Earnings Call:
- Key Prepared Remarks
- Interactive Questions and Answers
- List of Call Participants
Key Prepared Remarks:
Operator
Good afternoon, everyone. My name is Sarah, and I will be your conference operator for today. I would like to extend a warm welcome to all participants joining the Coinbase fourth quarter and full year 2024 earnings call. [Operator instructions] Anil Gupta, vice president of investor relations, you may proceed with the conference.
Anil Gupta — Vice President, Investor Relations
Thank you, Sarah. Good afternoon, and welcome to the Coinbase fourth quarter and full year 2024 earnings call. Joining me today are: Brian Armstrong, our co-founder and CEO; Emilie Choi, our president and COO; Alesia Haas, our CFO; and Paul Grewal, our chief legal officer. I trust everyone has had a chance to review our shareholder letter, which was made available on our investor relations website earlier today.
Before we dive in, I want to remind you that during this call, we may share forward-looking statements that could differ materially from our actual results. For a detailed discussion of the risks, uncertainties, and factors that might cause such differences, please refer to our SEC filings. Additionally, we will discuss certain non-GAAP financial measures, with reconciliations provided in the shareholder letter on our investor relations website.
Non-GAAP financial measures should be viewed as supplementary to GAAP measures, not replacements. We are excited to utilize Say for enabling our shareholders to ask questions, and we will also be taking live questions from our research analysts. With that, I’ll hand it over to Brian for his opening comments.
Brian Armstrong — Co-Founder and Chief Executive Officer
Thank you, Anil. I appreciate that. The voice of crypto was prominently heard during the recent U.S. elections, marking what I believe to be the start of a significant transformation for the crypto industry.
President Trump is actively working to realize his vision of establishing the U.S. as the global crypto capital. We now have the most pro-crypto Congress we’ve ever seen, which is pushing for crucial legislation concerning stablecoins and market structure. The U.S.’s leadership in these matters has caught the attention of the international community, prompting other nations to consider adopting crypto technologies.
The importance of these changes that have transpired over recent months cannot be overstated. We are presented with numerous new opportunities to innovate and grow in 2025. But first, let’s review our financial performance for 2024, which is simply remarkable.
2024 was a stellar year for Coinbase. Our total revenue surged more than double to a stunning $6.6 billion, alongside an adjusted EBITDA of $3.3 billion, marking two consecutive years of positive adjusted EBITDA. If you look back, we have recorded positive adjusted EBITDA in five out of the last six years.
We are transitioning effectively into a resilient company capable of demonstrating a positive adjusted EBITDA. Our revenue from subscriptions and services saw an impressive 64% year-over-year increase, reaching $2.3 billion, primarily driven by USDC, staking, and Coinbase One. Our international revenue share hit 19% in Q4, thanks to enhanced payment systems and localization efforts. We have developed a repeatable playbook that allows us to enter new markets and achieve contribution margin positivity.
We are determined to expand into additional markets. Furthermore, we are uniquely positioned to leverage new regulatory advantages, validating our long-term strategy of becoming the most trusted and compliant player in the industry, and it is starting to yield substantial results.
Now, let’s discuss the mainstream emergence of crypto and the evolving regulatory landscape. This clarity signals an expansion of our Total Addressable Market (TAM). Coinbase aims to be the platform of choice for numerous businesses seeking to integrate crypto solutions. We often say that on-chain is the new online.
Much like the early 2000s, when every company was compelled to adapt to the Internet, we anticipate that by the decade’s end, as much as 10% of global GDP could be operating on crypto rails. Coinbase aims to be the preferred partner for this transformation, given our trusted, scalable infrastructure and extensive experience.
Looking ahead to 2025, our focus will be on growing revenue through our existing products. We plan to enhance utility in new categories where crypto is gaining traction and lay the groundwork for the upcoming decade of growth. First, we will concentrate on increasing revenue in our core businesses, starting with trading.
Trading has been the cornerstone of our business since our inception in the crypto sector, and we will continue to solidify our leadership in this area. We will offer best-in-class derivatives trading as part of our global offerings and will accelerate our asset additions as regulatory clarity emerges.
We are consistently attracting more advanced traders to our platform, and I am proud to announce that we achieved an all-time high for both U.S. spot and global derivatives market share in Q4, a fantastic achievement resulting from the team’s dedication and hard work. Thus, 2025 is shaping up to be a promising year.
We also have an ambitious goal to position USDC as the leading dollar stablecoin. We hold a very positive outlook for stablecoins.
We believe that USDC benefits from a network effect, and its compliant approach will likely prove defensible in the long run. Our strategy includes accelerating the market capitalization growth of USDC through increased partnerships and exploring new use cases, including payment support across our product range. We will also enhance our international expansion by replicating the successful strategies mentioned earlier in high-growth markets, while increasing subscription service revenue by proactively promoting in-store and retail staking and growing our assets under custody.
I expect significant success for Coinbase One, particularly in our international markets. This marks a comprehensive plan for enhancing revenue with our existing product suite. Next, we are committed to driving utility to catalyze the next wave of mass crypto adoption. We envision crypto as far more than an asset class that people trade; it is poised to become an integral part of daily life as it revolutionizes the global financial system.
A key area where we see great potential is in payments. We are already achieving scale with stablecoin payments, with $30 trillion in crypto stablecoin volume recorded last year, representing a threefold increase year-over-year. Therefore, we are moving rapidly to integrate crypto payments throughout our entire product line.
We anticipate this will evolve into a significant revenue stream over time. Additionally, we are solidifying Base’s position as the premier chain for startups seeking to build on-chain applications. We will continue to reduce transaction fees on Base.
We aim to accelerate user engagement among retail users, and there is a strong synergy with our CDP (Coinbase Developer Platform), which will provide essential tools for companies integrating with Base. We are committed to ensuring that CDP remains the leading platform for businesses looking to develop applications on-chain. This will hopefully empower thousands of companies to leverage our infrastructure behind the scenes.
So, we have discussed our plans for growing revenue and enhancing utility. The third pillar for 2025 is scaling our foundational capabilities.
We are fortunate to have a world-class policy team that is focused on advancing landmark crypto legislation. We will continue to support Stand With Crypto.org in hopes of rallying 4 million advocates by the 2026 midterms. Our commitment to this initiative remains steadfast.
We have also announced additional donations to the Fair Shake Super PAC to support pro-crypto candidates for the 2026 elections and beyond. Our policy efforts will not be confined to the U.S. but will extend to multiple countries as we advocate for favorable regulations. Furthermore, we will continue to enhance our back-end services as crypto reaches new all-time highs in transaction volumes. Each time we achieve a new order of magnitude, we must rearchitect our back-end systems, which not only support our own products but also cater to many third parties.
This comprehensive plan outlines how we aim to maintain our leadership position and shape the future of crypto.
Before I conclude, I want to emphasize the exciting times ahead. We are entering a golden age for crypto, with unprecedented opportunities to modernize the financial system and enhance economic freedom globally.
The regulatory hurdles are diminishing, and governments are becoming increasingly supportive. We are enthusiastic about defining the next chapter of crypto, encompassing trading, payments, consumer applications, and much more. The year 2025 promises to be significant, and I will now turn it over to Alesia.
Alesia Haas — Chief Financial Officer
Thank you, Brian, and good afternoon, everyone. As Brian mentioned, the fourth quarter was exceptionally strong for Coinbase, and we concluded a remarkable year. I take pride in our success across our three financial priorities: diversifying our revenue streams, generating positive adjusted EBITDA, and maintaining operational discipline while strategically investing to achieve our objectives. Let’s delve into our results.
All comparisons will be made on a quarter-over-quarter basis unless otherwise noted. To start, the macro backdrop is noteworthy. Following the U.S. elections, the crypto markets experienced a rally, driven by the election of the most pro-crypto Congress and president in history.
During this quarter, we observed a 33% increase in the average crypto market cap, and crypto asset volatility rose by 27%. Against this backdrop, our Q4 total trading volume reached $439 billion, marking a remarkable 137% increase. Our consumer trading volume soared to $94 billion, up 176%, significantly outperforming the U.S. spot market, which grew by 126%.
As Brian highlighted, this was an all-time high. Consumer transaction revenue reached $1.3 billion, reflecting a 179% increase. We also witnessed strong growth in both simple and advanced trading volumes. Our mix of consumer trading volume in Q4 was consistent with Q3.
In this quarter, we listed 13 new assets, including popular memecoins like PEPE and WIF. Additionally, we invested in enhancing the trading experience and platform stability. These efforts, combined with favorable market conditions, led to a nearly 24% increase in our Monthly Transacting Users (MTUs), reaching 9.7 million. Nearly half of our trading customers in Q4 were either new to Coinbase or had returned after being inactive for over a year. We are thrilled to see these market participants re-entering the space. Our institutional trading volume hit $345 billion, a 128% increase, also surpassing the U.S. spot market.
Institutional transaction revenue reached $141 million, reflecting a 156% growth. In the fourth quarter, we observed robust adoption of our prime product suite, which encompasses custody, trading, financing, and staking. Our top clients effectively utilized most of these products throughout 2024, and our onboarding pipeline remains strong.
Our prime financing product achieved all-time high loan balances in Q4 due to favorable market conditions, with increased trading activity from clients utilizing financing options. Now, turning to our subscription and services revenue, which reached $641 million, representing a 15% increase. This growth was fueled by rising asset prices and the expanding market cap of USDC, as well as native unit inflows across staking, custody, and USDC within our services.
There are two key points within the subscription and services revenue I want to highlight. First, we recorded a decline of $21 million, or 9%, in our stablecoin revenue. While we are pleased to see the USDC market cap increase and on-platform balances grow significantly during the quarter, the lower interest rate environment and the emergence of new USDC ecosystem participants more than offset this growth. Second, other subscription and services revenue increased by $33 million, or 56%, primarily driven by the success of Coinbase One.
In early December, we shared that Coinbase One surpassed 600,000 paid members, and we have continued to see strong growth since then. Shifting focus to expenses, our total Q4 operating expenses amounted to $1.2 billion, reflecting a 19% increase. This expense growth was largely driven by higher transaction expenses associated with increased trading activity.
Technology and development, general and administrative, and sales and marketing expenses collectively increased by over $84 million, or 10% quarter-over-quarter, due to heightened performance marketing spend, increased USDC rewards, and some policy-related expenditures as we advanced our advocacy efforts within the crypto sector. Our fourth quarter adjusted EBITDA stood at $1.3 billion, with net income also at $1.3 billion. Net income was bolstered by $476 million in pre-tax gains from our crypto asset investment portfolio, with the majority of this gain being unrealized.
On an after-tax basis, this represented $357 million in gains. Lastly, our USD resources grew to $9.3 billion by the end of the quarter. Our strong balance sheet provides the resources and flexibility needed to invest in the business, pursue acquisitions, invest in more crypto assets, or opportunistically adjust our capital structure through share or debt repurchases. We believe that building a robust balance sheet maximizes our ability to seize opportunities as they arise.
Before we discuss our outlook, I want to highlight an important change in our disclosures. In January, the SEC issued Staff Accounting Bulletin 122, which rescinded the Gensler-era SAB 121, requiring us to report customer crypto assets and liabilities on our consolidated balance sheet. We have early adopted SAB 122, which eliminated that requirement. As a result, we are no longer disclosing safeguarded customer assets and liabilities on our balance sheet.
Instead, we have reintroduced assets on the platform as a key business metric, indicating the amount of crypto and USDC we securely store for our customers. The only significant change is the location of where we disclose customer assets in our audited financial statements. There are no changes to our operational processes for securely storing customer assets or our obligations and associated risks. As of December 31st, we had $404 billion in total assets on our platform, accounting for approximately 12% of the total crypto market cap.
You can find our assets on the platform included in an audited footnote within our 10-K filing. Moving on to our outlook for Q1, we have had a robust start to the year, generating approximately $750 million in transaction revenue year-to-date. We anticipate Q1 subscription and services revenue to grow sequentially, projected to be in the range of $685 million to $765 million.
This growth is expected to be driven by higher stablecoin revenue, continued growth in Coinbase One subscribers, and the rising average prices of crypto assets observed so far in the quarter. Regarding stablecoin revenue, Brian mentioned earlier our goal to position USDC as the leading dollar stablecoin, which we aim to achieve over the coming years.
We expect Q1 technology and development expenses, as well as general and administrative expenses, to be in the range of $750 million to $800 million. For sales and marketing, we expect a range between $235 million to $375 million. Our position within this range will largely depend on the ongoing performance of our marketing strategies and the product USDC balances, which influence USDC rewards. With that, Anil, let’s open the floor for questions.
Anil Gupta — Vice President, Investor Relations
We’ll begin with the top three questions from the Say portal. The first question is regarding the liquidation event that occurred in early February and its impact on Coinbase users. Are Coinbase users primarily buyers, or have we lost users due to the volatile price movements? Alesia, your insights?
Alesia Haas — Chief Financial Officer
It’s amusing to address this question because volatility is inherently part of the crypto landscape. The price movements we observed in February are consistent with the fluctuations we typically see in a standard week or month in this industry. Fortunately, the markets rebounded quickly. It’s essential to highlight that our retail users are generally long-term holders.
We tend to see them maintain their positions for extended periods, re-entering the market when they identify favorable conditions. Consequently, there was no significant impact on our business resulting from the volatility and market disruptions we experienced in February.
Anil Gupta — Vice President, Investor Relations
The second question pertains to the shift in regulatory headwinds to tailwinds, with Base advancing as the top layer for widespread USDC adoption. The international purpose business is thriving, and CDP is becoming the AWS of crypto, with Coinbase potentially joining the S&P 500 soon. Brian, any additional promising growth drivers to mention?
Brian Armstrong — Co-Founder and Chief Executive Officer
Thank you for the question. I assure you that I did not plant this inquiry. The essence of the question highlights our diversified product offerings. I take pride in the transition we’ve made towards a multiproduct business model, incorporating retail, institutional, and developer platforms.
This diversification positions us favorably for future growth. While I prefer to discuss tangible developments during these earnings calls, I can assure you that we are actively working on numerous initiatives internally, although I am not prepared to disclose specifics today.
What excites me is the evolution of crypto. It is rapidly becoming more than just an asset class; it’s increasingly utilized for daily transactions.
Base is facilitating crypto utility across a wide array of applications, while stablecoin payments are gaining traction. Additionally, prediction markets offer real-world utility, attracting individuals who may not have previously engaged with crypto or trading.
Our international expansion also presents exciting opportunities, and we have numerous M&A possibilities on the horizon. We believe that our playbook has successfully led to positive contribution margins across all the countries we’ve launched in thus far.
Anil Gupta — Vice President, Investor Relations
The final question addresses the initiatives now possible under the new regulatory framework. Brian, could you elaborate?
Brian Armstrong — Co-Founder and Chief Executive Officer
Certainly. We are experiencing a significant shift, and it’s encouraging. We now have access to key decision-makers within government. While they may not always align with our views, we can at least engage in discussions and provide input.
One area that excites me is the potential for perpetual futures. Much of the crypto trading occurs with perpetual futures outside the U.S., and until now, the U.S. lagged behind in this regard.
We have raised this issue with multiple administrations, but previously lacked the approval to implement it domestically. I am hopeful that we can now navigate a path forward to bring this trading volume back onshore within this new regulatory landscape.
I am also intrigued by the potential of tokenized securities and equities, which could revolutionize how consumers trade. By enabling 24/7 trading and fractional ownership, we can streamline clearing and settlement processes, reducing risks and inefficiencies.
The emergence of prediction markets also addresses the growing distrust in traditional media and institutions. These markets provide a credible source of truth for various inquiries, not just elections.
We are witnessing a surge in partnership opportunities, with traditional financial firms and tech companies reaching out in 2025 as the regulatory environment shifts. M&A activity is resuming in the U.S., and there is a robust pipeline of acquisition targets that could align with our strategic goals.
Anil Gupta — Vice President, Investor Relations
Thank you. Let’s proceed with the first question from the line, Sarah.
Interactive Questions & Answers:
Operator
Thank you. Our first question comes from Owen Lau with Oppenheimer. Your line is open.
Owen Lau — Analyst
Good evening, and thank you for taking my questions. Congratulations on an impressive quarter. Observing your December and January market shares for U.S. spot crypto, it appears you’ve started to reclaim market share from competitors. Given the emergence of lower-cost products since 2021, including FTX and now spot ETFs, can you elaborate on how you plan to maintain and grow this market share through varying market cycles? What distinguishes Coinbase from other platforms?
Brian Armstrong — Co-Founder and Chief Executive Officer
Thank you for your kind words. We are proud to have achieved an all-time high for both U.S. spot and global derivatives market share in Q4.
As crypto gains momentum, numerous companies will seek to integrate it into their operations. This trend is beneficial for the entire ecosystem, as we aim to facilitate the transition of global GDP onto crypto rails.
While we view our market share growth as a testament to the trust users have in Coinbase, we do not perceive this as a zero-sum game.
Our goal is to expand the overall market, growing it significantly for everyone.
Alesia Haas</strong
