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 fourth quarter and full year 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, simply press star one on your telephone keypad. Anil Gupta, Vice President, Investor Relations. You may begin your conference.

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, 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 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. Non-GAAP financial measures should be considered in addition to, not as a substitute for, gap measures. We are once again using safe technologies to enable our shareholders to ask questions. In addition, we will take some live questions from our research analysts. And with that, I'll turn it over to Brian for opening comments.

Thanks, Anil. I'm proud to say that in 2023, we cut costs by 45% year over year and managed to ship product 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 one, 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've 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. And in 2023, we also meaningfully improved our institutional trading products with Coinbase Prime. We grew our institutional financing product. We launched Coinbase asset management. We even played a key role in the approval of the Bitcoin ETFs, 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 U.S., surpassing silver. All of these improvements will continue to grow phase one, Crypto is 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 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 stable coin 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 a 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 really centralizing 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 two solution called Base. This will help blockchain scale to a billion or more users bringing down transaction costs and confirmation times, similar to the Internet going from dial-up to broadband. We also launched improvements in Coinbase Wallet. For instance, we made it easier to find and use decentralized applications or dApps. For instance, with one tap, you can now open a dApp, and you're already signed in, and you have your wallet connected. There's no sign-up process for each app or having to type your credit card details into each app. It's still early days for crypto as an application platform. Many of the early applications look like toys, but it has captured the imagination and hearts of developers, and Coinbase is one of the few companies who can bring together all the decentralized protocols into a compelling customer experience, which is what we're attempting to do with Coinbase Wallet. So that's how we see crypto evolving, first as a new asset class, second as a new set of financial services, and third as a new application platform. In 2023, I also said regulatory clarity was a top priority, and I want to give you a quick update on this. The majority of G20 countries now have crypto legislation either already passed or being drafted, and this is really great progress. In the US, there are even two bills going through Congress now with strong bipartisan support. Coinbase, along with other players in the crypto space, contributed to an $85 million super PAC designed to elect pro-crypto candidates in this upcoming US election. And we helped create StandWithCrypto.org, a grassroots movement for crypto advocates in the U.S. Their goal is to get to 1 million voters who want to stand for crypto in the 2024 elections. They're at 30% of that goal today with about 300,000 members, and it's growing every week. In the U.S., we're still working our way through the court system to get clarity there. But in the meantime, we're continuing to grow our business. Anecdotally, it's something our customers come up and thank me for most, leading the charge to get regulatory clarity in the U.S., We remain confident the U.S. will get this right, whether it comes from the courts creating new case law, Congress passing new legislation, or ultimately the 52 million Americans who've used crypto voting in this upcoming election. Looking ahead to 2024 for a moment, I'd like to share a few of our top priorities for the year in closing. Our first priority will be to drive revenue, especially growing our two largest revenue streams, trading fees and stablecoins. We'll do this with international expansion, growing derivatives and spot trading, and more deeply integrating USD coin into the crypto economy. By continuing to drive revenue growth, it allows us to fund some of our other priorities and the utility aspects of crypto. So our second priority is going to be to keep driving utility in crypto. This year, we'll be experimenting with payments as a use case. We're starting to see adoption of USD stablecoins in emerging markets, especially those with high inflation. And customers can now send USD coin for free instantly anywhere in the world on base. This has the potential to make global payments much lower friction, reducing fees. We'll also keep supporting developers building on base. For instance, just recently, we've seen a surge of activity on the decentralized social media protocol, Farcaster. And the majority of developers are now building what are called frames on Farcaster using base. We'll also be investing in Coinbase Wallet, our self-custodial app. where many of the early utility applications like decentralized social, identity, or messaging are starting to take shape. Crypto still needs to have its iPhone moment, where these decentralized protocols become easy to use for the average person, and we're hoping we can help make that happen. Lastly, we'll continue to drive regulatory clarity for the industry. We're supporting StandWithCrypto.org and its goal to activate a million advocates for crypto in this upcoming election, and we'll continue to engage with Congress to work towards new crypto legislation in the U.S., Finally, we'll continue the fight in the courtroom to get sensible case law passed. I'm very pleased with our financial position, operating efficiency, and the competitive landscape, and I think we're incredibly well positioned for long-term growth. With that, I'll hand it over to Alicia.