Bo Pei

Bo Pei at US Tiger asked for quantification of the effective take rate compression resulting from the shift to simple-to-advanced and Coinbase One users, and where normalized consumer take rates are expected to settle in the next two to three years.

Answer

CFO Alesia Haas observed a mix shift towards advanced products and Coinbase One users, noting that while Coinbase One members benefit from reduced trading fees, Coinbase still generates a spread recorded as retail transaction revenue. She did not provide a forecast for take rate compression but emphasized the company's focus on growing Coinbase One membership, which is expected to bring more trading volume under its umbrella.

Bo Pei from US Tiger Securities asked for a quantification of the effective take rate compression observed from simple to advanced and Coinbase One users, and Coinbase's outlook on where normalized consumer take rates might settle over the next two to three years.

Answer

CFO Alesia Haas noted a mix shift in Q4 with more volume moving to advanced products and Coinbase One users. She explained that as Coinbase One membership grows, more trading volume will occur under this umbrella, benefiting from reduced or no trading fees, though Coinbase still generates a spread. Haas stated she does not have a view on when take rates will compress from simple to advanced but emphasized the focus on growing Coinbase One membership.

Bo Pei of U.S. Tiger Securities, Inc. asked about the early traction of the newly launched CFTC-regulated crypto perpetual futures in the U.S. and inquired about the timeline for this business to become a material revenue contributor.

Answer

CFO Alesia Haas reported strong early momentum, with volumes doubling week-over-week, but stressed that the immediate focus is on building liquidity and market share, not near-term monetization. CEO Brian Armstrong added that derivatives volume in Q2 exceeded $100 billion, underscoring the scale of the opportunity as they bring this popular offshore product to the U.S. market.

Bo Pei of US Tiger Securities, Inc. asked about the recently launched perpetual futures product in the U.S., inquiring about its early traction and the expected timeline for it to become a material revenue contributor for the company.

Answer

CFO Alesia Haas highlighted the significant market opportunity, noting that derivatives are 75% of the crypto market. She reported strong early momentum with volumes doubling week-over-week but stressed that the near-term focus is on building liquidity and market share, not immediate monetization. CEO Brian Armstrong added that Coinbase saw over $1 trillion in derivatives volume in Q2 and hit an all-time high of $1 billion in open interest.

Bo Pei of U.S. Tiger Securities asked a high-level question about the flexibility of Coinbase's strategy across different market environments, particularly how it emphasizes different areas in a bearish versus a bullish market.

Answer

CFO Alesia Haas explained that the company's long-standing strategy is to plan for a wide range of scenarios, including severe bear markets. They set expense growth plans against worst-case outcomes, which allows them to continue investing in their core strategy and product roadmap through market downturns. She stated that a bear market alone would not materially change their strategy, providing confidence in their ability to navigate volatility.

Bo Pei of U.S. Tiger Securities, Inc. asked why the retail trading fee rate increased slightly amid surging volume, and how Coinbase competes with platforms offering a broader range of non-crypto products.

Answer

CFO Alesia Haas explained the fee rate was stable because growth was strong across both simple and advanced trading, so the product mix did not shift disproportionately. CEO Brian Armstrong and President & COO Emilie Choi addressed competition by stating they welcome new entrants as it validates and grows the entire market. They reiterated that being 'crypto-native' is a core advantage, as all asset classes will eventually be tokenized and move on-chain.

Bo Pei followed up on the retail take rate, asking for the specific volume contribution from stablecoins and whether the resulting mix shift is a structural or temporary trend.

Answer

CFO Alesia Haas stated she does not believe the shift is structural, as stablecoin trading is often driven by temporary arbitrage opportunities that vary by quarter. While not quantifying the exact volume, she confirmed it was the most material factor in the take rate change for Q3.

Bo Pei inquired about the geographic and financial applicability of NIP Group's event production model, specifically referencing the Wonderland Festival. He also asked about the pipeline for the second half of 2025 and 2026, and the expected margins over time for this segment. Additionally, Bo Pei asked about the esports team's competitive performance, sponsorship pipeline, and profitability, seeking expectations for recovery in H2 2025 and 2026, and the league revenue share amount in H1 2024.

Answer

Mario Ho, Chairman and Co-CEO, stated that the event model is highly replicable in China and selected international markets, with plans for 10 more large-scale music festivals in 2026, which are expected to improve margins. Regarding esports, Mr. Ho attributed revenue pressure to league revenue timing issues, expecting normalization in H2 2025, and noted improving competitive performance, particularly in Counter-Strike.

Bo Pei from US Tiger Securities inquired about the geographic and financial applicability of NIP Group's event production model, particularly after the successful Wonderland Festival. He also asked about the pipeline for H2 2025 and 2026, and the expected long-term margins for this segment. Additionally, Bo Pei questioned the esports team's competitive performance, sponsorship pipeline, and profitability, seeking expectations for recovery in H2 2025 and 2026, and the specific amount of league revenue share recognized in H1 2024.

Answer

Chairman and Co-CEO Mario Ho confirmed the event model's high replicability in China and selected international markets, citing a strong pipeline with over 10 festivals planned for next year and improving margins. For esports, Mr. Ho attributed revenue pressure to league revenue timing issues expected to normalize in H2 2025, noting improving competitive performance, especially in Counter-Strike.

Inquired about the rationale for the stock buyback program, the timeline for reaching cash flow breakeven, the potential impact of U.S. tariffs and regulations under a new administration, and the market opportunity for the modular PMTA.

Answer

The stock buyback is a flexible 24-month program supported by operating cash flow turning positive in the quarter. The breakeven target might be slightly delayed by one-time restructuring costs. The company is prepared for potential U.S. tariffs due to its Malaysian operations and expects to benefit from stricter border enforcement. The modular PMTA for age-gating technology is a significant opportunity to license a solution to other manufacturers, addressing the large illicit market for flavored vape products.

Bo Pei of US Tiger Securities questioned the rationale behind the $10 million stock buyback program in light of cash flow performance and asked for an update on the breakeven timeline. He also inquired about the potential impact of U.S. tariffs and future regulations on the business, and sought more details on the modular PMTA opportunity and its revenue timeline.

Answer

Michael Wang (Executive) clarified that the stock buyback is a 24-month program, supported by operating cash flow turning positive in the quarter. He noted the breakeven timeline might be slightly delayed by onetime restructuring costs. Wang stated that the company's Malaysian operations mitigate tariff risks and that tighter border enforcement could benefit Ispire. He described the component PMTA as a pioneering modular solution for age-gating, enabling licensing opportunities to tap into the multi-billion dollar illicit market for flavored products.

Bo Pei requested an outlook or guidance for fiscal year 2025 revenue growth, broken down by cannabis and e-cigarette segments, and asked for more color on the primary drivers of incremental demand by geography and product.

Answer

Executive Michael Wang declined to provide specific fiscal 2025 revenue guidance, citing the difficulty in predicting outcomes due to numerous new projects. However, he elaborated that the vast majority of growth is expected to come from the global nicotine business, driven by the new ODM deal which alone could double e-cigarette revenue. He also highlighted growth from branded products like BRKFST and Hidden Hills in international markets, stating this segment would see much higher growth than the cannabis side.