In-depth Analysis of Coinbase Q3 Financial Report: Selective Market Trends Drive Stock Price Surge, Base Continues to Lead Layer 2
In the application activities of Base, the DeFi category performed outstandingly, with address activity increasing significantly from 143,600 in the second quarter of 2024 to 405,700 in the third quarter.Author: insights4.vc
Compiled by: Shenchao TechFlow
Between November 5 and 6, the stock price of Coinbase Global (NASDAQ: COIN) rose by 31% due to the election results, increasing from $193.96 to $254.31. This report provides an in-depth analysis of Coinbase's current financial status and the performance metrics of its Layer 2 blockchain, Base.
Coinbase (COIN) Closing Price: $254.31 | Volume: 35.46 million - November 6, 2024
Coinbase Competitors: Key Metrics Overview
Revenue Analysis
Revenue Breakdown (Q3 2020 - Q3 2024)
Revenue
Total Revenue for Q3 2024: $1.2052 billion, down from $1.4496 billion in Q2 2024, but an increase from $772.5 million in Q3 2023.
Revenue Trend: After peaking in Q4 2021, total revenue has stabilized but remains at a lower level since Q2 2022.
Revenue by Segment
Consumer Trading: $483.3 million in Q3 2024, down from $664.8 million in Q2, showing sensitivity to market fluctuations, but remains the primary source of revenue.
Institutional Trading: Slightly decreased from $63.6 million in Q2 2024 to $55.3 million, with minimal fluctuations, but contributes a lower proportion of revenue.
Blockchain Rewards: $154.8 million in Q3 2024, down from $185.1 million in Q2, but showing year-over-year growth, providing stable income related to blockchain development.
Stablecoin Revenue: $246.9 million, stable across quarters, demonstrating Coinbase's significant role in the digital currency space.
Interest and Financial Fees: $64 million in Q3, providing a stable source of income despite market changes.
Subscription and Services: $556.1 million in Q3, down from $599 million in Q2, indicating growth in services but affected by current market pressures.
Expense Analysis
Transaction Fees: $171.8 million (15% of net revenue), down 10.3% from Q2 2024.
Technology and Development: $377.4 million, up 3.6% quarter-over-quarter.
Sales and Marketing: $164.8 million, slightly down 0.3%.
General and Administrative: $330.4 million, up 3.2%.
Other Operating Net Income: -$8.6 million, indicating a net loss in this category.
Total Operating Expenses: $1.0357 billion, down 6.4% from Q2 2024.
Trading Volume and Asset Revenue Contribution
Total Trading Volume for Q3 2024: $185 billion, down from $226 billion in Q2 2024, and also lower than $92 billion in Q3 2023.
Consumer Trading: $34 billion, down from $37 billion in Q2 2024.
Institutional Trading: $151 billion, down from $189 billion in Q2 2024.
Asset Revenue Breakdown
Bitcoin: 37% of total trading volume, up from 35% in Q2 2024.
Ethereum: Stable trading volume at around 15%, showing consistent market interest.
Note: Solana has been highlighted as the third-largest asset over the past two quarters, with its total trading revenue share increasing from 10% to 11%.
Other Assets: Decreased to 33% in Q3 2024, reflecting diversification efforts, but the focus remains on Bitcoin and Ethereum.
Resource Allocation and Investment Analysis
Liquidity Overview
USDC Holdings: $508 million in Q3 2024, slightly down from $589 million in Q2 2024. This indicates that USDC remains a stable source of liquidity, with the decrease possibly indicating strategic asset redeployment.
Company Cash Held at Third-Party Institutions: $92 million, slightly down from $97 million previously, showing minimal exposure to third-party risk.
Money Market Funds and Government Bonds: Increased to $6.088 billion, up from $4.068 billion in Q3 2023, indicating a conservative shift towards low-risk, highly liquid financial instruments amid market volatility.
Company Cash: Decreased from a peak of $3.549 billion in Q2 2022 to $1.544 billion, possibly due to strategic investments or operational needs.
Total Liquidity Resources: Increased to $8.232 billion in Q3 2024, showing a solid financial foundation and readiness to address strategic opportunities or market downturns.
Investment and Financing Activities
Operating Cash Flow: $687 million in Q3 2024, demonstrating the company's strong ability to generate cash from core operations.
Capital Expenditures: Only $19 million, reflecting a conservative strategy towards fixed costs to support financial flexibility.
Strategic Investments: Minimal outflows, including $14 million in venture capital details of Coinbase Ventures activities can be found in the Google Sheet, $18 million in crypto investments, and $173 million for fiat loans and collateral, emphasizing prudent risk management.
Financing Activities: No issuance of new long-term debt in Q3 2024, indicating a strategic focus on organic growth and internal liquidity utilization.
Workforce Metrics and Other Data
Total Employees in Q3 2024: Increased from 3,486 in Q2 2024 to 3,672.
Monthly Active Users (MTUs): 7.8 million, down 4.9% from Q2 2024 and down 16.4% year-over-year.
Website Traffic: Decreased from 40.7 million in Q2 2024 to 37.8 million, possibly reflecting waning interest or seasonal changes.
Google Trends: Peaked at 74 in September, indicating fluctuations in public interest.
App Downloads: Decreased from 14,189 in August to 8,928 in September, suggesting a slowdown in new user acquisition.
Job Listings: Dropped to 818 in October, possibly indicating stabilization in hiring or ongoing restructuring.
Financial Ratios
Note: The following explanations provide insights based on current data and are not definitive conclusions. Independent review of the data is recommended; detailed data can be found in the Google Sheet.
Financial Ratios (2020 - 2023; Q3 2023 - Q3 2024)
Liquidity Analysis
Current Ratio (Q3 2024: 1.03): Remains stable, indicating limited coverage of current liabilities by current assets.
Operating Cash Flow to Current Liabilities Ratio (Q3 2024: 0.0025): Slightly increased, showing partial recovery in cash flow generation ability.
Cash Ratio (Q3 2024: 0.03): Maintained at a low level, emphasizing strict cash management requirements.
Leverage Ratios
Debt to Equity Ratio (Q3 2024: 32.29): High leverage indicates increased financial risk.
Debt Ratio (Q3 2024: 0.97): Debt is nearly equal to assets, showing high reliance on debt.
Interest Coverage Ratio (Q3 2024: 8.09): Positive, indicating operating income is sufficient to cover interest expenses, reflecting good debt repayment capacity.
Profitability and Efficiency Ratios
Net Profit Margin (Q3 2024: 6.26%): Improved from losses in Q3 2023, showing enhanced net income generation capability.
Return on Assets (ROA) (Q3 2024: 0.03%): Low asset utilization efficiency, indicating potential operational efficiency issues.
Return on Equity (ROE) (Q3 2024: 0.86%): Slight improvement but still low, indicating suboptimal returns on shareholder equity.
Gross Margin (Q3 2024: 71.00%): Increased, showing effective cost control.
Operating Profit Margin (Q3 2024: 13.78%): Significantly improved, indicating more effective control over operating expenses.
Market Performance Ratios
Earnings Per Share (EPS) (Q3 2024: $0.28): Recovered from negative earnings, showing enhanced profitability.
Price-to-Earnings (P/E) Ratio (TTM Net EPS) (Q3 2024: 31.93): Moderate P/E ratio indicates cautious optimism from investors about the future.
Base
For detailed information on the origin and development of Base, please refer to our June newsletter. Under the leadership of Jesse Pollak, Base was officially launched on July 13, 2023.
Overview
Platform Mission: Base is Coinbase's Layer 2 solution on Ethereum, aimed at creating a global on-chain economy that prioritizes innovation, creativity, and economic freedom, providing a secure and low-cost environment for the development of decentralized applications (dApps).
Infrastructure and Governance: Base is built on the OP Stack for scalability and cost-effectiveness. Base has confirmed it will not issue a native token (as stated by CEO Brian Armstrong on December 1, 2023). Base is actively collaborating with OP Labs on decentralized governance and research projects, including EIP-4844 and the op-geth client, aligning with Coinbase's vision for gradual decentralization.
Ecosystem Development: Base is widely welcomed in the developer community, focusing on substantive innovation in products rather than relying on token incentives. Coinbase's internal team utilizes Base to deploy smart contracts, enhancing the consumer and institutional product experience and promoting the adoption of on-chain applications through easy onboarding and intuitive interfaces.
Core Product: Base is positioned as a decentralized "app store," providing developers with an open platform that includes the Base name for simplified on-chain identity management, as well as a smart wallet that offers users secure and programmable asset management solutions.
Strategic Positioning: Base is competitive not only within the Layer 2 ecosystem but also competes with traditional online platforms by providing on-chain experiences that can rival traditional web applications.
Key Metrics
In Base's application activities, the DeFi category has shown outstanding performance, with address activity soaring from 143,600 in Q2 2024 to 405,700 in Q3. However, revenue in Q3 decreased to $7.3 million, down from $24.2 million in Q2. The volume of stablecoin transfers significantly increased from $97.8 billion in Q2 to over $415 billion in Q3, indicating rising trading demand. The ratio of new users to returning users also changed: in Q2, it was 107,000 to 278,000; in Q3, it was 420,000 to 450,000; and in Q4, it reached 509,000 to 827,000. The number of Sybil addresses decreased to 178,000 in Q4, while non-Sybil addresses reached 1.2 million, compared to 550,000 Sybil addresses and 320,000 non-Sybil addresses in Q3.
As we see in the charts, as of November 7, Base is the leading Layer 2 blockchain. A few weeks ago, it surpassed Arbitrum in total value locked (TVL) and has maintained its position as the top Layer 2 for several months in terms of daily active addresses and daily transactions.
Total Value Locked in Smart Contracts (in millions of dollars)
Daily Active Addresses (number of unique on-chain wallets interacting with the protocol daily)
Daily Transactions (number of unique on-chain interactions with the protocol)
