Q4 2021 Coinbase Global Inc Earnings Call

We are once again using say technologies to enable our shareholders to pose questions to management. In addition, we will take some live questions from our research analysts.

Before we get started with opening comments.

I wanted to start with a question for Brian .

Brian looking back at 2021, it was an incredible year of growth for crypto and for Coinbase and looking ahead. Some people are suggesting we might be entering a crypto winter.

So what's your view of the crypto market today, and whats corn basis position broadly.

Yes, thanks Neil.

So I don't think we're entering a crypto winter in fact, we don't really think about it like that anymore. I think early on and Cryptos history. There was this trend of going through <unk>.

Summers and winters and the thing crypto is kind of working now and so.

I don't expect it to be anything quite that pronounced over time I.

I think we basically have no idea, what's going to happen in the next quarter or the next couple of quarters at any moment in our history with crypto, it's like trying to predict what the S&P 500 going to be next quarter or something like that and so what we do in the absence of that as we consistently build great products and grow the business because long term, we're incredibly bullish about the potential of this.

Industry and I think we're just in the very earliest days of this industry and it has a massive potential Tam there is a ton of capital being injected into this industry and a lot of the smartest young people are all rushing into build companies in this space.

And then with all of those thousands of new companies I think youre, just going to see a ton of innovation. So I guess, unlike in past crypto cycle, where we might've had summers winters crypto is working we've got major use cases now outside of people just trading at <unk> has tens of billions of dollars locked up in it <unk> has been a massive trend and continuing to grow.

People are building gaming and social media apps and dollars and identity systems.

I think what we're really seeing is that web three is kind of the future of how people are going to build all kinds of application on the internet, even non financial services applications. So the biggest problem. We have is not to think about kind of what's going to happen in any given quarter. It's how do we actually capture the size and scale of this opportunity in front of us when theres. So many kind of multibillion dollar.

Opportunities around us and so honestly, we would love a chance to catch our breath right if things weren't growing quite so quickly that would almost be better because we have to focus all of our time on scaling when things grow so quickly.

Having a chance to invest more in some of these upcoming business opportunities would be the best outcome. So hopefully that gives you a little bit of a sense of how we think about it.

Great. Thanks helpful perspective.

So let's start off the call with some opening comments about our results Brian back over to you.

Yes, so ill give a quick summary of the letter and then I'll turn it over to Alicia to give more detail. So.

Obviously 2021 was just an incredible year for clean base that kind of thing that you see very rarely in your lifetime in a in a business career.

Not only did crypto, obviously do well and we can talk about that.

We had a three trillion dollars of total market cap bitcoin and east at all time highs now one in four U S households, According to some third party research now own crypto. So this is becoming mainstream and of course going basis, not just in the U S. So.

So the crypto did well, but I think coinbase did incredibly well also and maybe even better and we're really helping drive this adoption I think by making crypto safer and easier to use for people all of the world just to give you one metric at least will go into more details. So we hit an all time high and our monthly transacting users of $11 4 million, which is forex.

Over year.

400% in pretty incredible and we're continuing to add assets really quickly we have a diligent process that we go through to look at what assets. We can we can add from a cyber security legal point of view, we cannot at all of the ones that are out there, but the ones that we can add we added 95, new ones for trading <unk> 72 per custody more than 50% of all of our trading volume this year.

But other than bitcoin and ethereum. So we just saw this industry really flourish last year, and it's really I think capitalize on that opportunity.

And help lead it so looking ahead for 2022.

The opportunity is just as big if not bigger I think we're continuing to invest in our suite of products. So we are a multi product company.

We do have 70010 resource allocation with 70% on our core 20% on the strategic debt and 10% on the venture bets and kind of bigger moonshot efforts.

A more ambitious moonshot efforts in one building that suite of products and thinking about how they can all be tied together is really powerful and I think our fundamental belief is that crypto, it's not just going to be an investment. Although that's a massive use case in the first pillar of our strategy. It's not just going to be a new financial system, which is the second pillar of our strategy and we have lots of products.

We can make that happen.

Also going to be the new default way that people build applications on the internet. It's the new application platform. That's what people are calling web three and they're going to be building all kinds of application.

Not just financial services application. So we believe claim basis is the best positioned company in the world to help drive that change and our goal is really to be the primary account where people assets particular economy and web three and we have this really great.

<unk> based in brand and infrastructure that integrates and we can make crypto easy and trusted and safe to use so with that Alicia let me turn it over to you to give a bit more detail on our 2021 results and the outlook for 2020.

Thanks, Brian .

So we put a lot of inherent to our shareholder layer and then encourage you also hurrying up and I wanted to highlight a few highlights.

Ryan can we have a lot of.

Great wins and client timeline.

First of all I want to chronically expanded our trading volume market share.

Trading volumes increased $8 five times versus 2020.

And it's a higher growth in crypto spot markets, which grew at seven five times.

This means that our trading volume market share increased in virtually every asset that we support on our platform.

Second we made significant progress.

Diversifying our revenues and we significantly increased our revenues.

Our 2021 transaction revenue increased more than six times year over year to $6 8 billion, including $2 3 billion so far.

Our emerging revenue streams, which we call our subscription and services revenue became more significant we generated more than $500 million of subscription and services revenue this year, including $214 million in the fourth quarter.

This is a 10 times increase from 2020 and importantly, this now compromise comprise 7% of our net revenue in 2021, 4% in 2020.

We're anticipating massive industry growth to continue over the long term and it's really informs the backdrop of our 2020 are investment plan.

Here's some training in March with our outlook.

Let's start with Q1.

So we noted in our letter that Q1 is trending soccer Sir. Thank you for and this is driven by lower crypto asset prices and lower volatility than we saw last quarter, both of which are significantly correlated with our monthly transacting users and our trading volume.

Year to date, our retail empties have averaged roughly $10 million.

On our trading volume coordinate we've seen approximately 200 billion and so we expect Q1 to have lower <unk> and lower trading volumes in Q4 of 2021.

In terms of subscription and services revenues, we do anticipate the price effects I E lower crypto prices will drive a lower revenue in Q1 as compared to Q4.

We're excited about the prospect of this revenue stream, nonetheless, and continuing to build new products and grow our native units.

On the expense on the expense side, we are anticipating transaction expenses to be in the low to mid <unk> driven primarily by the growth of blockchain rewards revenue.

And our operating expenses.

Excluding other expenses and there is more detail about this in the letter will be in the range of one two to $1 3 billion.

Turning to full year 2019.

I wanted to start with it.

Very difficult to forecast our business and we're entering this year with more unknowns, which make it even more difficult to forecast than what I would've said last year and so it is too early in the year to take a very precise SKU.

This informs our approach where we said we will be transparent with you all that we've provided for an average annual retail empty arrange that spans from $5 million to $15 million for 2020.

And importantly, we are prepared to manage our business to either end of this range through any of the outcomes and permutations in between.

Our 2022 expense outlook reflects an ambitious head count going to plan to build the product experiences and infrastructure to drive user adoption higher throughout the world through increased marketing investments in international expansion and as Brian alluded to earlier, we are really excited about the options ahead of us.

Given this wide range of <unk> $5 million to $15 million.

And in turn drive a wide range of revenue outcomes I wanted to provide some more color on what you might expect.

If we performed the middle or the high end of this range, we expect to be profitable.

If we perform on the low end of this range, we plan to manage our business such that our adjusted EBITDA loss will be no more than $500 million.

Against our $7 billion of cash that we ended the year with we think this is a very manageable loss, which you should take it because the investment for the long term is the most important thing we can do to bring that early days have crept down.

So notwithstanding short term lack of predictability. We are so excited at the progress we made in 2021 and our plans for building out further this year with that I'll turn it to Neil and we can take some questions.

It sounds good so before getting into Q&A I wanted to clearly lay out some principles for our Q&A session today similar to last quarter.

First we will answer the most updated questions determined by the number of shares and we May group some questions together that touch on the same themes.

Second we don't plan on answering questions related to the potential listing of new assets and third we will avoid answering questions that we have done so in the past if there are no updates.

For example, we still do not plan to issue a dividend.

So with that we'll go to the first question. The first question comes from several users, including a cash as to express concern about our share price performance recently instance, coinbase and went public.

How can we have some context for investors about our share price performance to date.

Thank you for your costs for the question and I think this is something a lot of investors have questions about I'm glad you gave us the opportunity to respond.

<unk>, so let's start with a textbook answer.

A number of factors at play with regards to Mclane stock price right now first that's been a significant selloff in the market since the November <unk> for many high growth companies and claim basis not exception. This was driven by broad macroeconomic factors at play.

<unk> interest rate concerns and geopolitical tension that we unfortunately, some headlines this morning.

So beyond macro.

Scott Terry we've also observed that our stock has been highly correlated with crypto prices, which are down roughly 20% year to date.

We honestly don't truly understand that is this correlation does not take into account the growth in our market share that I spoke about previously the diversification of our business beyond investing and let alone the future potential of our business as we expand into new assets and new product streams.

Our focus on building towards revenue diversification and we think this will trend would decouple over time, but that is a little bit of what's impacting our stock at this moment.

The non textbook answer now when I look at the market today I cannot help but reflect back on prior risk off markets, where we saw investors new capital on a risk assets and those historic Windows honestly with the best time to invest in my lifetime.

So when I look at the crypto market today, and we see the innovation the diversification that growth factors. There's just so much to be excited about and I'm really optimistic about the opportunities to enter crypto asset investments at these price levels. In fact, we just increased our own corporate crypto investments by nearly $350 million in the last few weeks.

Brian you want to add anything here before I go on.

Yes, I think that was a grade that was the right answer I mean look I mean, the same builder has discretionary head a little bit looking at some of the revenue multiples and.

I think we're very bullish about the future I think it's really rare to see a company that has high growth profitability and a massive tam in front of it that's kind of a trifecta.

It's really hard for me to imagine an industry that has more growth potential in front of it if I look at the next decade and so absolutely.

Look I think a lot of this is just human psychology, I think even just a few months ago. There was people I saw lamenting like Oh, I wish I'd bought crypto sooner or clean dark sooner.

They didn't think they would ever get a chance to buy something like at these prices again, and then of course by some stroke of luck when that opportunity does arise that David.

If youll pessimistic or something on it so I think it just human psychology.

Alicia said this is kind of unfortunate the native people.

Some are greedy when others are fearful, but honestly I think we try to ignore this stuff I think a lot of it is just short term effects that are macro things happening out there in the world.

95% of our efforts should just be on building great products that help our customers and help grow this industry and I think the next 10 years are going to be great. So we really trying to think about it too much and just have a long term view.

I just want to reinforce that point I think one of the questions is what are we doing about that and personally I think we are in good company as I think many companies are asking this question of themselves right now watching the stock price declines over the last few months, the crypto has prepared us well for volatility.

And as Brian said, we've learned to focus on what is in our control and for us that means building safe trusted and easy to use products for our customers investing in innovation and trying to clearly articulate our story in our business value to our employees and to you our investors and we believe if we continue to focus on these basic principles that will drive our long term business success and in stock.

We will take care of itself.

Alright. Our next question comes from Milton M and Geoff <unk>, who are both focused on our revenue mix. What avenues of revenue are we exploring beyond trading and do we have any ambitions to help businesses with NFC is for example.

And while diversification of revenue help decouple the share price from the price of crypto assets.

Great questions Nelson depth, a little time pack here. So you are right that the transaction revenue has historically made up the lion's share of our revenue, but as I shared in my comments earlier, we're taking steps to diversify this revenue and also grow our non transaction revenue stream.

The big takeaways up last year with the increasing amount of utility in the crypto economy beyond investing in the growth of the subscription and services I spoke about earlier reflects that we saw <unk> growth year over year.

Three 6 million users, earning yield on their assets at year end, which is more than five times. The number that we're doing in 2020.

A lot of these users sticking their assets many of them last year and so we plan to open up assets like these two institutions. Later this year and we also plan to add more assets more proof of state change leases to participate in.

Beyond that we're really excited to launch our NFC platform. We view this as a very large total addressable market with new and existing users are clamoring for a different FTE experienced a simpler NFC experience it still tends to be a little bit complex.

And what we liked right now we were absorbing the market as the NFC volume and price.

Less correlated with other crypto assets and so youre seeing new crypto projects that have less correlation and it's just that general theme of diversification weather and a key part of our transaction revenue or not you can see just rent trends that will lead to a more sticky revenue stream with time.

And I commented on this earlier, but as far as share price goes it's difficult to predict the future, but we do hope to see that investors recognize that we are diversified platform and start to see our price decouple from overall crop prices.

And now back to you.

Alright next question comes from Tom <unk>, who asked about the timing of the ability to trade <unk>.

Great. Thanks for the question Tom generally we don't comment on the listing of new assets, but this is a unique case, because we already lift east and then we allow staking for east tail trading of eight two is dependent on the merge which is going to combine the original <unk> blockchain, which is proof of work with the <unk> two chain, which is triple a stake.

The timing of this merger is out of our control and it will be driven by the <unk> community, but we expect to see it at some point later this year.

We think this is a really exciting events for the <unk> community and are working to support our customers before and after the merge we recognize that customers are seeking liquidity on their east too and we're working on solutions to provide us such as Iraq East token and advance of emerge and we believe that once these two has liquidity available it is going to drive more demand for <unk>.

<unk>. We're also working to extend this capability to institutional clients for the first time later this year.

Thank you Emily next question. It comes from Gerardo <unk>, who asks if there is a roadmap for coin base to support traditional securities such as stocks.

Not at this time.

Over the long term our view is that everything will eventually migrate to blockchain technologies, who will see security tokens as an example, and we're excited to support those in the future we're investing in infrastructure power that future, but we do not see that as a near term roadmap item.

Yes, just to add to that I think there's so much greenfield opportunity in front of us with the crypto economy and web three and frankly, we've got a handful I think just trying to keep up with all the various opportunities emerging there. So to me it would be a little bit of a step backwards to try to launch maybe a traditional brokerage or something like that I think there is.

Good companies out there already serving that use case, so I would rather lean into the future and kind of build to where things are going.

Great.

Next question comes from Kyle <unk>, who asked about how we plan to beat open sea for the NFC market share.

Yes. This is an important question.

So clearly there is a significant and growing amount of volume across an FTE marketplaces today, but the industry is still sound Nathan that we see a lot of opportunity for innovation.

We definitely don't believe that this is a zero sum game, where our huge fans of our P&C and in fact, we've been investors in our platform.

As members of quantity of centers and we're always going to ultimately as Quinn based double down on the value props that got us to the place where I'm today, which are based on ease of use trust and safety.

For our own NFC marketplace. We're also focused on a social experience and building our communities of the person who is architected NES came from Instagram and has social rich exclusive content and partnerships and then distribution. So today people can buy on coinbase transfer to a wallet and then go to the marketplace.

If they can do that all in one app with a few clicks that's a win and it feeds into the ease of use that we think we're quite good at Bryan anything to add on that.

Yes, I agree with that 1% I think look.

It's not really about beating <unk> I think this is a new market theres going be a lot of winners.

Oftentimes if you put out a product and another product look similar in the early days they tend to diverge over time and find their own niches offer at some point. So I think just generally we're really bullish on it appears it's going to be much larger than just argued.

Our digital art work or something which a lot of people are thinking of it as.

There's going to be all kinds of in game items in the meta versus theirs.

Domain name in lights, E&S named type assets that are being created out there.

Citizenship and governance and.

Various novel fundraising mechanisms so.

This segment is going to be really dig in.

So early I think it's not really about beating any of the other smaller players or we're a.

Small player today too so I think it's all about building the future how do we how do we 100 X the size of the opportunity.

Our next question comes from Ashwin, <unk>, who asks when coinbase will release infrastructure and tooling for buildings for building like AWS for crypto.

And similarly, John D asked how our offering in market share stack up to services like alchemy and PURA.

Great question so.

Just for context in many cases, we are offering Apis and tools that we initially built to use for our own products.

And we're competing by offering tools that can operate at significant scale in this in many ways mimics the path of AWS, So quantities cloud as our product suite to provide infrastructure and tools for web three builders and other companies to accelerate building their own crypto products and we see strong adoption of our seeking services, which has reached tens of billions in assets.

Staked across 25 protocols, we now support more than 60000 nodes for participate delegate barium transact products and in Q4, we launched a prime API, which augments and unify as existing services for state gang exchange Commerce and other products.

We're definitely in the early days and we see meaningful opportunities to expand our suite of developer focused products.

And then to comment on the competition and our product offerings like I shared earlier, when we talked about <unk>. We don't believe this is a zero sum game in fact, <unk> based ventures with an early investor in alchemy. So we think that this is an area that's ripe for development and growth and again are at the beginning of <unk>.

The kind of true.

Trajectory of that Bryan anything to add on that.

No I think Thats right I mean, the question really asked about when we released these infrastructure and developer tools and.

I think what Youre hearing is some.

Some of those are already live today, and there's a lot more we're going to add in the future.

Next.

It's from John D, who asked about our progress internationally, he called out Singapore, and Japan, specifically, noting that it feels like coinbase as behind any thoughts here to share.

Thanks, John for the question I think it's a valid observation.

At the same time, we Werent first movers in these markets and our strategy is not necessarily to be the first to launch in every market, but we want to be the first to do it right.

Now that said global expansion is a top priority for us as a company historically, we felt products for U S. First International's second and now we are transitioning to a new model and mindset, where we ship products globally by default.

We made a big higher this past quarter by hiring non emricasan and he is the VP of international operations and business development last week, we did a blog post about lighting up the map, which is a new two pronged approach to how we are going to go after a global expansion. So one is going broad we're going to launch.

Foundational products that are a gateway to web three in crypto in every country and then also we're going deep so we're going to launch localized infrastructure and public facing products with a full suite of services specifically.

With respect to your question on Singapore, and Japan, We have started to build local teams we've hired our local country directors based in Singapore, and Japan, we have setup engineering hubs in APAC to help localize our products for the region and in Japan. We've made good progress working with regulators and have secured our license we launched an early version of.

A retail product and now we're in the testing phase we.

Our strong early foundation, we were the only crypto player to provide a banking rail with the nation's largest bank and USG.

And then Singapore, we're focusing on institutional and are already seeing substantial interest in adoption. Our Singapore team is also focused on developing the large retail opportunity in Indonesia, Philippines, and the broader southeast Asia region. So we have a long term strategy in place and winning markets takes time, we expect it's going to take several years to build a market leading.

Position across the markets in the Americas, EMEA and APAC, just like we've done and are you asking European businesses.

Brian anything to add.

Yes, I'm glad you asked about international expansion, it's definitely something I'm really passionate about if we just go back to our mission about increasing economic freedom.

A lot of places in the world certainly outside of the U S.

These are challenges around economic freedom and Thats something that we feel like crypto has this incredible invention that can be creating this means more global more free more fair financial system for the world. So international expansion is a big priority for us you're going to see us.

There is really it's really.

A two pronged approach because if youre going to large markets that have as a regulated financial service business like we're doing in Japan, youre going to see that move slower because it's a lot about getting the right licenses and the right thing partners.

Localizing the product and that's that's a country by country.

Lower approach, but it's great when you can land it.

When you wanted to if you want to go for more of a self custodial wallet or that product can be distributed globally quicker you don't have to go country by country. It's more of a software product and so we're seeing that product do well in some emerging markets and so I think we're going to have our custodial products do well in regulated markets, we're going to have.

Major markets, we're going to have ourselves custodial wallets do better in a bunch of emerging markets and I think we'll get a lot of global coverage out of that two pronged approach. So.

While they were getting more and more people in crypto on on our platform globally and I think from a <unk>.

Economic Freedom point of view a lot of barriers happened when people try to do remittance and FX and things like that and so that's kind of the dream up the vision behind this crypto generally is helping the world have won.

Decentralized global Trans National financial system, that's more efficient more fair Mark right.

Great. So we'll take two more questions before opening up to the analysts. The next one comes from Jason K and John D.

Who both have observed that many competing platforms are offering attractive yields on assets through is taking our lending.

So what our coin business plans to offer yield generating products and is coinbase facing more regulatory scrutiny around these features or is it simply just not a priority right now.

Thank you for the question I'll take this one so yes yield products are one of the top requested products by our customers and today, we do offer staking products, which are compelling yield generation opportunities, we drove more than $200 million of blockchain rewards this year, which really prudent largely in our staking revenues as we added a number of proof is take assets, notably.

In particular in mid 2021.

We hope to support more users to generate rewards for many more prudent stake assets. This year and we will be looking to make that a large growth area for our customers and for our revenue stream.

You are right to note that Youll products are also a significant area of focus by regulators.

So.

There was some noise earlier this year about our lending product that we had in market. We've talked about on prior calls and we have always taken the approach to embrace regulation and think of that as a thoughtful.

We have done it as a business enabler. So we've seen recent actions in the market that have taken both of the state and federal level to curtail certain products offered yield, but there appears to be a path to registration as a result of some of the recent enforcement actions and so we will see how that plays out but our objective is to continue to offer more and more choice to consumers and institutions as we possibly can while remaining.

Client with regulations in each market that we operate in.

Alright. So the last question, we'll take from say today before going to the analyst is from Scott <unk>, who asked a great question. He's curious about doubts how did doubts figure into the coin based product roadmap for our retail and institutional users.

Thanks for the question Scott, Let me start by quickly to finding a Dow Dow is a decentralized autonomous organization and it's currently being used as a catch all term that describes the broad range of emerging organizations that are powered by crypto. It. Therefore, it's one of the more exciting ideas in the correct that community right now.

These range from investment Dallas that buy assets to social <unk> create communities to protocol Dallas that manage the infrastructure of the crypto economy, and Dallas unlock new ways of working that weren't previously possible and they offer the potential to improve organizational efficiency.

This is innovation that could disrupt the long established business forms of organized organizing D. C Corp, an LLC.

So taking a step back for Quinn base, we're building a platform to create trusted easy to use crypto experiences for customers across our entire crypto journey and this would include developers who are creating Dallas or users transacting with Dallas, we're making some early investments here and building the picks and shovels for Dallas that can help them succeed and our initial focus is unlocking.

Existing products like Queen based cloud and prime to surface New segment over time, we hope to better explore these innovations.

To expand our products to meet the evolving needs of our customers, but it's very early days Bryan anything on Dallas, you want to add.

Yes, I mean, we think those are very exciting.

Essentially the Delaware C Corp of the crypto economy right.

I think in terms of what products, we can offer our retail and institutional users yes.

We would follow the same approach that we do with all of our products, which is how do we make it the most trusted and easier to use.

So you can imagine many scenarios, where a retail user or a business institution.

Wants to go create a DAU, we could help them do that we could help them provide ancillary services to participants in the Dow like around how to conduct votes and how people submit proposals and maybe how.

Payroll happens on the Dow tax.

Taxes like you name it so I think theres going to be a lot of opportunities to help people create DAU.

And to manage them.

Yes, we look to build that up.

Great.

Okay. So with that we will switch and take a few live questions from our analysts Mel I'll turn it over to you for the first question. Please.

Thank you Sir your first question comes from the line of Ken Worthington of Jpmorgan. Your line is now open you may ask your question.

Hi, Good evening. Thank you for taking my question.

Claim basis plans are ambitious and increase in investments investment spending guidance is significant compared to the fourth quarter run rate I.

I guess can you help us feel more comfortable with your comments at the pace of investment could in fact drive claim base to be unprofitable in 2022.

Help us feel confident in the investments youre, making in the new products, New services and new geographies that are driving the G&A and technology costs.

So much higher.

And how much of the 2022 investments that youre, making.

Could actually result in higher 2022 revenue versus the investments youre, making today that's going to.

Benefit the business over the next five to 10 years.

Let me take a start at this and then Brian and Emily feel free to add on so Ken just to unpack that a little bit yes, 22, as an investment year as we shared in our outlook.

Early to call with precision, where we think the revenue.

A 2022 will land, which is why we gave a range of $5 million to $15 million as I said in my earlier remarks, if we're in the midpoint or the high end to that range, we'll continue to be profitable, but then the scenario where if we're at the low end of that range that we're prepared to generate to drive a loss of up to $500 million loss in adjusted EBITDA.

We believe that many of the investments that we're making this year are going to the products that we articulated in our looking ahead the investments that we're making in our investment platform for example of adding new assets, adding payment rails. Those we expect to impact our 2022 revenue as we've seen the continued diversification of assets on our platform contribute very near term to the revenue that we've been able to generate.

Example, in 2021, where we saw more revenue come from the long tail of crypto them from decline in that scenario.

Other investments that we're making for example.

And the gap from entities I think that that's going to not have as material of an impact in 2022 and those are more long term bets that we think will have significant impact on the longer term revenues of our company similar with international It will take us as Emily said earlier quarters or years to see those investments turn into meaningful revenue streams. So we think are the right long term investments to make.

Last we're putting a lot of effort into just increasing the reliability of the stability and the infrastructure on our platform.

As Brian said in his comments earlier.

The volume pickup from 2020, 2021 with extraordinary it sort of you don't see these moments very often in your business career, where you have <unk>.

IDEXX Tenex kind of volume multiples on your users on your volume on your platform and what we've seen encrypt everything you do sort of step function in growth until we want to make sure that we can offer great experiences to our customers and need the volume that is coming to our platform. So that requires investment in infrastructure. So it's investing in near term revenue opportunities are long term as well as infrastructure palleted bucket that.

Investments.

Yes, I think that was great and you remind me of just when we did the direct listing I think we were we've repeated that message a handful of times that we're going to continue to invest through up and down cycles, but roughly we feel like we're so early in this stage of this industry, we roughly want to operate the business at breakeven.

Moved out over multiple years is up and down cycle. So far we've been profitable every.

Quarter of the company.

We just want to repeat that message again that we're going to continue to invest through up and down cycles. Because it's the early days, we're investing for the long term.

Hopefully that gives good context on our thinking.

Great. Thank you very much.

Thank you. The next question comes from the line of will Nance from Goldman Sachs. Your line is now open you may ask your question.

Hey, guys. Thank you for taking my question.

Wanted to I was asking if there is another question on the investment spending you're seeing a lot of the competitors like the large but those changes made pretty significant investments in your kind of brand advertising stadiums and things like that everyone was that the Super Bowl this year.

And I guess when you look at the competitive environment and the amount that your competitors are spending or maybe the less visible things that we can see from the outside how much of the investment that youre, making this year.

What did you say the response.

You guys trying to keep up with the market or you guys feel like Youre pulling ahead of the market in terms of the amount of money that you're spending on the ecosystem.

Thanks, Paul for the question.

I'll try to tackle this and Alicia Brian Please add on so I think that.

We are going to probably just take a different approach to the way that we do marketing and for US we want to do things in an authentic way that we feel is referencing <unk> historically, we had a lot of organic growth and then.

On top of that with Greg.

The product marketing and then you saw our Super Super Bowl AD.

In general we like to be a very ROI driven company and so to that end the marketing efforts that we.

He embarked upon are going to be very kind of quantitative measure it as with the Super Bowl AD I think thats one of the first Super Bowl ads that ever was kind of in that direct response mode.

No.

We're going to be things that are natural to coin base, we're going to do things that are that we think are differentiated to clean base and we feel like that's the only way for us to operate Brian Alicia anything else to add on that.

Not too much to add I think I think you nailed it I mean.

I think the number one thing we're focused on building great products and we're at a scale now with number of users and brand awareness, where do you think it makes sense to invest in marketing, but youre, probably going to see us do it a little differently than other companies.

We want to do something that's more authentic to us we want to be one of the rigorous about it as Emily mentioned and I think we have opportunity to kind of go tell the world more about the vision for the company. The mission of the company. What we're all about why are we doing this why do we think this is good for the world with kind of brand campaigns, we have an opportunity to do.

Can you just talk about the product with great product marketing.

And the performance marketing and we might do some just create a fund of funds up to that let's creative but youre not going to see us probably do really.

I don't know I don't know what you'd call the rest of it but.

It's going to look a little different so Alicia if you want to add.

I think it is a nail the marketing and the only other comment realizing that pattern a little in your question about how much of our spend is doing things to catch up with what others are doing versus staying true to our own roadmap and I think most of US are spend is trained to do our own roadmap and thats beyond marketing, but that's also in we want to offer products to our customers that we see customer demand force, we're not always going to first.

Market with the product, but once we see customer demand, we're going to ask Paul and make sure. We can leverage the strength of our platform was with distribution, which is the security and trusted nature of the products, we dealt to tack on more and more product experiences to create a better experience for customers.

Got it really helpful. Thanks, everyone and then just maybe as a follow up if I could.

Just ask a little bit more about the institutional business.

From a revenue contribution is relatively small today, but obviously that I think that kind of understates the scale of the business.

When you think about new product initiatives for the institutional side do you guys envision a scenario, where the institutional business can contribute a much larger share of the revenues over time and I'm thinking specifically about product initiatives around derivatives and client financing I think you've made a couple of moves recently in terms of acquisitions and licensing around <unk>.

Riveted how significant do you think that could be and could we be.

Looking at a step function in institutional revenues at some point when those things come to my mind.

Okay.

Oh, sorry go ahead.

We're very excited about institutional as well I think it's got a ton of potential.

There are some synergies there with retail and institutional so.

I expect it to grow quite a bit over time, but yes go ahead Ben.

Sure I think the plan is for our entire business to grow and institutional will grow as a part of that and we think it's going to be a large part of it I think what the contribution is going to over time is still TBD, but.

Remember that we only kind of.

Began building thats about two years ago, and it's already showing such promise and legs I think the cool thing about the institutional business is that.

There is a bit of a roadmap in terms of what your traditional institutional world and so our team is building. This can kind of look to that and see the products that existed in that traditional world and say how can we envision that in a crypto oriented world and to your point well things like financing and other products that are just.

Loved by by institutions, including derivatives are areas that are just no brainer and that's why we're making big investments alere.

Alicia anything to add on that.

Adding the names at the time, we can go the next question.

Awesome well, thanks for taking all my questions today.

Alright. Thank you and next question comes from the line of Richard <unk> of Piper Sandler. Your line is now open you may ask a question.

Yes, good evening, Brian and Alicia Emily.

This sort of goes back to an earlier question when you talked to Alicia about.

Near term investments.

Moderate term and long term, but.

Obviously, Mike do you have a lot of opportunities that Brian has laid out.

And the strategy section of the pillars. So I guess could you help us.

At least identify some of the shorter term things that we could see that could actually contribute to revenues while on the short term basis.

Sure. Thanks for the question rich.

And Brian also showed earlier one of the things that we look at it as a 72010 model where 70% of the investment goes from a core of 20% to Adjacencies and 10% debentures. That's not somewhat closely also to the way that we think about our pillars of our strategy with a bulk of our investment is still going into the investment platform, adding assets, adding payment rails going global.

Adding marketing and a lot of innovation there and then the ventures is more of a 10% side. What you think the newer newer products. So when we think of that I think what youll see a lot of growth from in the near term as we extend back a lot of growth in <unk> subscription and services speaking is going to see a lot of growth for adding institutional access to <unk> to this year, we're adding new staking pro.

And we see a lot of user interest and the yields generated by sticking.

Great.

So I expect that as more near term type revenue and I think that we're excited about the potential of <unk> and derivatives. These are going to take a while to get right in to add meaningfully to our revenue there could be some surprise us quite candidly, but I wanted to be more cautious and when we see that coming into our revenue this year.

Got it and that you do have I think Schmidt.

Shimon.

Together with investment in open seas.

And I'm, just trying to understand the strategy and philosophy.

I think they just raised money at a pretty pretty good valuation.

Would you look at that is there an exit strategy for those types of investments like <unk>.

Okay.

You cut out for the first part of the question, but I think the question was about venture then whats the exit strategy or our plan is to hold those will be again, we feel it's very early days and so I expect crime Datacenters will turn out to be incredibly valuable.

We're not planning to try to liquidate anything there in the short term.

Emily anything you want to call rich.

<unk> so one of the things like the way, we think about the goals there as it is.

In the system see whats topping get great.

And build relationships in that crypto ecosystem that potentially lead to M&A as we did with basin trails.

And then Roy.

IRR is more of a third criteria and yet at the same time.

The returns have been quite impressive and so it's a really nice side benefit again were holders of of all these assets, we think theyre going to be quite valuable.

Well I think we have time for one last question. Please.

Alright, Thank you and our final question comes from the line of Lisa Ellis of Moffett. Nathan. Your line is now open you may ask your questions.

Terrific. Thank you. Thanks for squeezing me in I had a question about the competitive environment.

In the U S market, where some of the global players have been investing more heavily in their U S subsidiaries.

Can you just help crystallize for us, how coinbase shines or differentiate itself relative to the the handful or so of.

Other crypto native brokerage and exchanges operating in the U S. Thank you.

Yes, I can take that quickly so.

So far we haven't seen meaningful volume.

I guess foreign exchanges that are now trying to enter the U S.

But I think.

We have to be mindful of as.

You can think of it as clean base really has the off the challenge, which is we started in the U S. We're very we're doing really well there, but we have increasingly turned our attention to international so I think that the way we've differentiated over time as we've leaned into regulation.

Thought to be the most trusted player in this space.

Whether that comes to cyber security or legal efforts and that kind of thing and then we tried to made crypto easier to use as well so.

We're not trying to make a product for super technical people or.

Super professional type approach traders or whatever we're trying to make a product for everybody and actually I think even technical people and pro traders prefer interfaces that are easy to use and so being the most trusted being easier to use and that's the way we've differentiated overtime.

Emily if you want to add.

Great.

Same.

Okay well.

That does it for say I, thank everybody for joining us on our call today, and we look forward to.

Speaking with you on our next call.

Thank you ladies and gentlemen that concludes today's conference call. Thank you all for participating you may now disconnect.

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Yes.

Sure.

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