We do the research, you get the alpha!
Cryptocurrency exchange Coinbase reported a loss for the first fiscal quarter, but the chills of crypto winter nipped at the San Fransisco-based firm far less than expected.
The leading U.S. cryptocurrency exchange disclosed a Q1 loss of $79 million, its fifth straight quarterly loss. But, on a per-share basis, the exchange posted a loss of $0.34, far outperforming analyst expectations of $1.45, and much less severe compared to a loss of $1.98 a year ago.
The company’s revenue was down compared to the first quarter of last year when Coinbase reported $1.1 billion in sales. The exchange reported $736 million net revenue on Thursday, beating analysts' forecasts, and building on the momentum it established at the tail end of last year despite the collapse of its competitor FTX.
Coinbase’s Vice President of Investor Relations Anil Gupta noted that revenue was up 22% sequentially in an interview with Decrypt, pointing to growth in both revenue from trading and subscriptions and services. “This quarter, it was a real turning point in our efforts to turn the company around,” he said.
Shares of Coinbase started tradings hands this year at $33.60 and had grown 47% to $49.34 as of market close on Thursday. In after-hours trading, the company’s share price was up over 7% to $52.75.
Year-over-year, trading volume decreased and customers showed signs of being less active, a metric Coinbase reports as monthly transacting users (MTUs).
Coinbase reported MTUs averaged 8.4 million during its latest quarter, a decrease compared to 9.2 million during the same period a year ago. But the figure represented a slight increase compared to its 2022 average of 8.3 million, suggesting an uptick in digital asset prices was good for Coinbase’s appeal to retail traders.
“In general, [we] took a much scrappier approach with more nimble teams,” Coinbase CEO Brian Armstrong said during an earnings call, noting the company was able to cut its operating expenses by 24% quarter-over-quarter. Coinbase CFO Alicia Haas attributed the firm’s better-than-expected subscription and services revenue to a bump in Bitcoin and Ethereum, which bolstered revenue from custody services and staking.
Following A Tough Year
Coinbase’s business benefited from sky-high digital asset prices in 2021, but its business faced headwinds last year.
Trading volume on Coinbase totaled $145 billion in the first quarter, a drop compared to $309 billion a year ago. Revenue from subscriptions and services, which Coinbase has said comprise the most “stable and predictable elements” of its business grew to $361 million in the first quarter, a notable increase compared to $151 million last year.
While individual consumers are a vital part of Coinbase’s business, the exchange offers products and services tailored toward institutional customers like banks, hedge funds, and corporations. This includes both asset custody and staking, areas of contention between Coinbase and the SEC.
Coinbase anticipated its focus on transparency and compliance would benefit the firm amid heightened regulatory scrutiny. But as a potential enforcement action that could put its products like staking in jeopardy looms, Coinbase’s attitude towards regulation has turned confrontational.
At the same time, Coinbase is looking offshore for opportunities to grow its business. It unveiled its Bermuda-based international exchange on Tuesday, offering financial products like perpetual futures on Bitcoin and Ethereum that aren’t allowed in the U.S.
Editor's note: This story was updated after publication to include comments from Coinbase's VP of Investor Relations Anil Gupta and CEO Brain Armstrong.