Coinbase Global, Inc.

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 third quarter 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. And if you would like to ask a question during this time, please press star one on your phone. Anil Gupta, Vice President, Investor Relations. You may begin your conference.

Good afternoon and welcome to the Coinbase third 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 Grewal, chief legal officer. I hope you've all had the opportunity to read our shareholder letter, which was published earlier today on our investor relations website. 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 provided 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 SAID technologies to enable our shareholders to post questions. In addition, we'll take some live questions from our research analysts. And with that, I'll turn it over to Brian and Alicia for opening comments.

Thanks, Anil. Let me start with a provocative statement. On-chain is the new online. The internet was and is a game-changing technology that redefined our modes of communication, business, and social interaction. It broke down barriers. democratized access to information, and made knowledge universally accessible. Blockchain and crypto are doing the same thing today with a re-decentralization of the web and the introduction of a new building block, ownership. Instead of just reading and writing on the traditional internet, on-chain, you can now read, write, and own. On-chain is about digital assets, broader access to financial services, and even changes how we think about identity, governance, artwork, and non-financial services. Crypto leverages a Crypto creates a level playing field where everyone, irrespective of their socioeconomic status or geographic location, has access to more robust and transparent systems. Crypto creates a world with fewer middlemen, lower fees, faster transaction speeds, and greater protection and control over one's digital assets and identity. It is for all of these reasons that we believe that crypto is the greatest tool in increasing global economic freedom. We also think that on-chain will be as essential and impactful as the internet is today. If we look back to the early years of the Internet, the companies that ignored the noise and built for the future of the Internet now stand as tech giants. The on-chain companies of today will be the tech giants of tomorrow. Coinbase stands at the forefront of this technology and continues to build a responsible, compliant, trusted, financially strong, and innovative business that is building those linchpins products. Speaking of financial strength, Q3 has been another strong quarter for us. In Q3, we delivered positive adjusted EBITDA for the third consecutive quarter and demonstrated continued operational discipline. In fact, we're on track to deliver meaningful positive adjusted EBITDA this year, which reflects the direction we set at the start of this year to be a company that can generate adjusted EBITDA in all market conditions. We thought it may take us more time to get here, but through operational discipline, rigorous cost management, and more favorable interest rates, I'm very pleased with the results we've delivered. Our balance sheet remains strong and our financial position enables us to continue to invest in the future and deliver products and services that expand the utility of crypto. Which brings me to what we've built this quarter. We've obtained licenses that enable us to access new markets, continued to drive toward regulatory clarity for crypto, and built innovative products that expand the utility of crypto. This continues to be a year of international progress for Coinbase, starting with international expansion here. In 2023, we officially launched three key GoDeep markets, Brazil, Singapore, and this quarter in Canada. Country launches are a significant investment for Coinbase. When we launch in a country, we hire local leadership, we work with local regulators, and we establish new payment rails to enable seamless fiat to crypto transfers. In Q3, we also obtained key licenses or registrations in Singapore and Spain and continue to pursue and obtain licenses and registrations where it's clear that we need them to serve our customers. Speaking of licenses, Let's talk about derivatives. Unlocking the ability to offer derivatives products to users is a huge opportunity for Coinbase as the global derivatives market for crypto represents 75% of all trading volume. Trading volume that up until now was largely going through unregulated offshore exchanges. Derivatives products are an important tool as the ability to trade crypto using margin, essentially giving traders the ability to use margin, increases their capital efficiency and access to the crypto market with less upfront investment. In Q3, Coinbase International Exchange received regulatory approval from the Bermuda Monetary Authority to enable perpetual futures for eligible non-US retail customers, which we began offering just last month. And Coinbase Financial Markets also received regulatory approval from the National Futures Association to offer futures to eligible US customers via advanced trading. And as of yesterday, we now offer regulated futures to US customers via Coinbase Financial Markets. Customers seek to do business with trusted counterparties, when they trade complex levered products such as derivatives and perpetual futures. And Coinbase Financial Markets and Coinbase International Exchange are best positioned to be that trusted partner. We're just getting started and plan to roll out additional products and expand to more markets over time with derivatives. Speaking of launching new products, in Q3 we launched our new Layer 2 solution called BASE. As I touched on last quarter, most blockchain transactions today are happening on what are called Layer 1, and Layer 1 networks are slow, they're inefficient, and expensive to use. Think of the jump from L1s to L2s as the jump that the internet made when it went from dial-up to broadband. Layer 2s are built on top of Layer 1s to make them faster and more efficient, and they result in lower transaction costs and higher confirmation speeds. Our base platform enables developers to harness the full power, efficiency, and cost savings of a Layer 2 network with the convenience of it being built in right into the Coinbase ecosystem. In August, we moved BASE onto Mainnet, which means it's now available to everyone. And to celebrate the launch, we created an on-chain movement this summer for developers in the crypto community called On-Chain Summer. During that campaign, we saw over 10 million NFTs minted across more than 1 million wallets on BASE. This momentum helped drive rapid growth of BASE, including more than $500 million in assets that are now on the platform. While early, we are encouraged by the early utility of BASE and are optimistic about the role Layer 2s can play not only for Coinbase, but also for the growth and development of the entire crypto economy. Finally, I just 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 regulation, most notably in the U.S. We're actively involved in U.S. legislation with a variety of bills that are in development, and we're still confident that the U.S. will get this right, embrace innovation and propose clear rules. American crypto holders are owed clarity, and they are an increasingly expanding voter base. There are 52 million crypto holders in the United States. To put that into context, that's more than the owners of electric vehicles and more than all collective members of US unions. The American people are embracing crypto as more Americans grow unhappy with the traditional financial system. Only 9% of those surveyed say that they are satisfied with the current US financial system, and only 22% of people think that it's better than any other countries. And nearly two in five younger people, that's 38%, say crypto and blockchain can increase economic opportunities for them in ways traditional finance can't. To aid in the mission of driving for crypto regulation, Coinbase is a proud supporter of an independent movement known as Stand With Crypto. It now has more than 100,000 advocates and continues to stand with the American people to drive towards clarity in the U.S. While the U.S. continues to struggle to keep pace, the rest of the world has made great strides in embracing crypto and on-chain technology with clear legislation. We're seeing global efforts to bring crypto into regulatory scopes as 83% of the G20 nations are adopting crypto regulations. Most recently, we've seen this with MECA legislation in Europe, and it's incredibly encouraging to see that now 27 countries stand together with one unified set of rules for crypto, something the U.S. desperately needs. In response to this groundbreaking regulation, Coinbase moved quickly and recently announced that Ireland will be our MECA hub. We continue to work with regulators around the world on laws for cryptocurrencies and act quickly to embrace new regulation when it's developed. In conclusion, although we continue to be in a down market with volatility the lowest we've seen in years, Coinbase is financially healthy with our third consecutive quarter of positive adjusted EBITDA. Meanwhile, we have the most trusted brand and the easiest to use products and continue to build innovative key technologies that expand the utility of crypto and best position Coinbase to take advantage of the next bull market. We continue to do the work of running a trusted, secure, and compliant crypto platform, and this is our competitive advantage. We have a long-term focus on building and on following the rules, which has proven to be the right strategy. We believe on-chain is the new online, and that on-chain technology represents the same opportunity that the internet did before it. With compliant and responsible companies like Coinbase leading the charge, on-chain applications are set to become the foundational pillars of the future financial system and more. With that, I'll hand it over to you, Alicia, to tell us more about our Q3 performance.