Coinbase revenue jumps in Q1 ahead of direct listing

Yahoo Finance’s Zack Guzman, Myles Udland, and Brian Sozzi discuss Coinbase’s earnings expectations.

Video Transcript

MYLES UDLAND: Yesterday, we got news from a company that is about to be public, but is not yet public, reporting its estimated first quarter results. That, of course, is Coinbase, out last night reporting 56 million verified users. That's up from 43, when the company filed its S-1 earlier this year. Trading volumes, $335 billion in the first quarter. Total revenue, $1.8 billion in the company's first quarter.

Joining us now to talk more about these numbers, Yahoo Finance's Zack Guzman. Zack, I was very excited to get these numbers yesterday, just because I figured, as they would, that they'd be great since Coinbase is coming out ahead of their offering with these results. What stood out to you? Because there's a lot here in the way that not only Coinbase presented these numbers, but how they talked about what future presentations of their quarterly results might look like.

ZACK GUZMAN: Yeah, and just to be clear, you know, these are unaudited numbers, right? So we're talking about an earnings call, if you want to call it that, earnings outlook for Q1 that was hosted internally, no outside questions being asked ahead of that direct listing. But the numbers, as you said, Myles, the expectation here, you're not going to come out with weak numbers ahead of a direct listing if you don't need to. This was all in line with kind of the process to go public.

But a nine-fold increase, when you look at it year over year in terms of revenue there for Q1, that by itself is just kind of astounding when you think about how much-- obviously, there was a lot of enthusiasm in the crypto space. So you knew it was going to be a big jump, but ninefold? I'm not sure how many people were expecting that large of an increase. But looking ahead, that was kind of the focus of what we heard on the call with Coinbase because they were walking through scenarios for what could happen.

Because obviously, the crypto space, as we all know, goes through with some pretty drastic booms and busts. And they kind of tried to project out what that would look like. All of this stems around what they call Monthly Transacting Users, MTUs. And they kind of laid out three scenarios, which could come down to a high scenario where they stick with about 7 million, a mid tier scenario, 5.5 million, and a low scenario of 4 million. And that kind of stems back to what they saw back in 2018 with the last boom.

But this one, they noted, was about more than double kind of that increase, 2.3 times higher than the peak in 2018 of MTUs of 2.7 million. So, comparing boom to boom, they're well ahead of where they were and. That's kind of speaking to their point that they were making on this earnings call that the growth is going to continue. Because even if you do drop back down, even in this mid scenario, the low scenario, you're still looking at pretty substantial growth when you kind of annualize it.

So, still early on in the growth stage for Coinbase, at least when you listen to them on their earnings call. April 14, though, when we get this direct listing, Myles, going to be a very interesting day because there's a lot of enthusiasm at this company about this company, especially after they just delivered that nine-fold increase in revenue numbers.

BRIAN SOZZI: Zack, you're a veteran crypto watcher. A lot of new metrics on this press release from Coinbase. Is there one metric, in your view, that investors need to pay more attention to than others?

ZACK GUZMAN: I think right now-- and this is something they stressed in their S-1 earlier-- a lot of the emphasis around these alternative crypto-- you can call them alt coins, right? That's the term that's used. We've talked a lot about Bitcoin. And obviously, that's the one that gets the most attention, as we were discussing yesterday. It's the largest one out there, market cap north of $1 trillion now. But it's the other ones on this platform, which Brian Armstrong, the CEO of Coinbase, was really talking about here in terms of what's going to be that next leg of growth.

Because if you do look at Coinbase, it's just kind of this exchange on board, and they continually add new assets to the platform for users to trade. So not only are we talking about monthly transacting users growing year over year pretty substantially, but we're talking about the opportunity for them to trade more and more assets. Mike Novogratz, who you've had on the show, hedge funder turned into crypto enthusiast, always notes Bitcoin is somewhat of a gateway drug.

So you kind of dip your toe in that. You're led to these other cryptocurrencies. And next thing you know, suddenly you've got someone who may have just spent a few dollars on maybe one crypto transaction. But then beyond it, they look into some of these other projects. And those, as they gain more and more steam, I think there's a lot of upside in terms of the revenue that Coinbase has already established the deeper and deeper we go into this thing.

MYLES UDLAND: Yeah, I think to say it's a fascinating company probably undersells it a little bit. And I'll be really interested to see where it trades. And, you know, they think they're going to trade in line broadly as a levered play on the crypto cycle. I'll be interested to see just how much that bears out as the company's life cycle as a public company gets going here. All right, Zack Guzman, thanks for jumping on. We'll see you at 11 o'clock here on Yahoo Finance Live.