Coinbase Global, Inc.

Good afternoon. My name is Tamika, and I will be your conference operator today. At this time, I would like to welcome everyone to the Coinbase second quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise. If you would like to ask a question, you may press star 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again. I will now hand today's call over to Anil Gupta, Vice President, Investor Relations. You may begin your conference.

Good afternoon and welcome to the Coinbase second quarter 2023 earnings call. Joining me on today's call are Brian Armstrong, co-founder and CEO, Emily Choi, president and COO, Alicia Haas, CFO, and Paul Graywall, 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 measures. Reconciliations to the most directly comparable GAAP financial measures are included in our shareholder letter on our IR website. Non-GAAP financial measures should be considered in addition to, not as a substitute for, GAAP measures. We are once again using SAIT technologies to enable our shareholders to post questions. In addition, we will take some live questions from our analysts. With that, I'll turn it over to Brian and Alicia for opening comments.

Thanks, Anil. Q2 was a strong quarter for us as we demonstrated operational discipline, focused on product excellence, and helped drive regulatory clarity for the industry. I'll start by touching on operational discipline. We drove $194 million of adjusted EBITDA in Q2, marking the second consecutive quarter of positive adjusted EBITDA. About a year ago, we started executing on cost reductions, and I'm happy to say that in Q2, our operating expenses are now down nearly 50% year over year. We ended Q2 with 3,400 employees, and we've been able to get a lot done by being a more efficient company at this size. Next, let me touch on product excellence. People use Coinbase's products because we're the most trusted brand, and we make crypto easier to use. Over the past decade, we've focused on compliance, cybersecurity, great design, user experience, and customer support. We've always taken a long-term view and tried to do the right thing, even when it wasn't easy or the rules weren't clear. Today, Coinbase is consistently ranked as the most trusted crypto platform across multiple markets, and this is a huge competitive differentiator for us. We have great product coverage in this industry and serve three distinct customer groups, retail, institutions, and developers. For our retail customers, Coinbase and Coinbase Wallet have moved beyond our best-in-class trading use cases. We now help customers make payments, save, earn rewards, access NFTs, use Coinbase Card, and access third-party applications in Web3. Coinbase has become a platform for a broad set of first- and third-party use cases with an increased range of functionality. And our goal is to become the primary way people manage their financial lives all over the world, enabled by these powerful decentralized protocols that will become a larger fraction of the global economy over time. Coinbase Wallet provides a way for retail customers to access this functionality while storing their own funds via self-custody. Now, moving on to our institutional customers, we provide an integrated trading, custody, and financing solution through Coinbase Prime. And for our developer customers, we're building Coinbase Cloud, with a powerful set of APIs and native on-chain solutions like BASE that allow every business to integrate crypto technology. In Q2, we launched our derivatives exchange in select markets outside the US, and we were also selected as the custodian in a number of ETF applications in our institutional business. A big focus for us over the next year is how we're going to be driving utility in crypto that goes beyond just trading. The first 10 years in crypto were primarily about trading, but we've seen our customer base shift its activity over time where the majority of our active customers now do something with crypto other than trading. My belief is that the next 10 years in crypto will become predominantly about non-trading use cases. So what could some of those be? Well, payments is a big one. As the scalability of blockchains improves by moving to layer two solutions like Lightning, Optimism, and Base, we'll see payments emerge as a larger use case. Getting more scalable blockchains will be as important as the Internet moving from dial-up to broadband. We'll also see the rise of decentralized identity systems with decentralized messaging and social apps that will accompany those connected right into those decentralized identities. And we're working hard at Coinbase to make it easy to connect your Coinbase wallet to any third-party app or DApp, which stands for decentralized app. In the Coinbase app today, you can actually visit the Web3 tab at the bottom right of of our app and connect it to any third-party application out there in the ecosystem. More and more crypto utility will be happening on-chain, and at Coinbase, we like to say that on-chain is the new online, so we're fully embracing that. As we continue to make crypto trusted and easy to use with these new use cases, we'll help update the financial system globally and help a billion or more people benefit from this technology. So finally, I want to touch on how Coinbase is driving regulatory clarity for the industry. One of the biggest items holding back adoption of this technology is the lack of clear rules and, quote, regulation by enforcement that's taken place in the U.S. today. While the rest of the world has made great strides in embracing crypto and Web3 technology with clear legislation, the U.S. has struggled to keep pace. Coinbase has an important role to play here. When the SEC refused to engage in rulemaking and instead pursued a regulation by enforcement approach, we availed ourselves of the court to help bring regulatory clarity to the United States and help get case law created. We've also been actively engaged with Congress, where we've seen bipartisan support to pass crypto legislation. In just the past few weeks, the House Financial Services Committee and the House Ag Committee passed the landmark crypto market structure bill, 521, and the stablecoin bill with bipartisan support. These bills go to the House floor for a full vote later this year, and from there, advance to the Senate. Coinbase is committed to helping ensure America passes crypto legislation and is not left behind. We've also begun activating crypto users across the U.S. to ensure their voices are heard in our democracy. One in five Americans have now used crypto more than hold a union card as one point of comparison. And our Stand With Crypto campaign has signed up about 60,000 crypto advocates to date across all 435 congressional districts. As an example of how we're activating them, in New York City today, we're hosting an in-person gathering with representatives from the offices of Senator Gillibrand, Mayor Adams, and Governor Hochul, and hundreds of crypto enthusiasts. By the way, you too as an investor can help in this effort by visiting StandWithCrypto.org to sign up as a crypto advocate. If you want to ensure America embraces crypto technology and helps create clear rules around it, please help us by visiting StandWithCrypto.org. Congressional town halls are happening all throughout the August recess, and we're encouraging StandWithCrypto advocates everywhere to reach out directly to their policymakers to support innovation and clear crypto regulations. Crypto is even proving to be an important topic in the upcoming 2024 presidential election, with most of the challenger candidates staking out a positive position. In a democracy, the government is for the people and by the people, and the citizens of the United States have made it crystal clear that they want to use crypto and they believe in the potential of this technology. We will not allow America's leadership here to be destroyed by a few outliers in our government painting outside the bounds of the law. The various court cases being decided now, at a minimum, prove what we've been saying all along, that there is no regulatory clarity, new legislation is needed, and the underlying assets themselves, as decided in these cases, are not securities. In conclusion, although we're in a crypto bear market with volatility the lowest we've seen in years, Coinbase is financially healthy with our second quarter of positive adjusted EBITDA. We even generated $156 million in cash in Q2. We intend to hold headcount flat for now as we keep making progress on the above items that I mentioned. Meanwhile, we have the most trusted brand and the easiest to use products, and we're showing up day in and day out to do the hard work of running a trusted, secure, and compliant crypto platform. This is our competitive advantage. Our long-term focus on following the rules has proven to be the right strategy as regulators have closed in on companies who didn't, another competitive advantage for us. and we're driving regulatory clarity in the U.S. while expanding abroad in places where the rules are already clear. All of this sets us up to be the global leader across a variety of products and our three customer groups. Crypto is the most important technology we have to update the financial system globally, and Coinbase is the leading company in this space. With that, I'll hand it over to you, Alicia, to tell us more about our Q2 performance.