Shares of Coinbase fell in extended trading on Tuesday after the crypto technology exchange reported a loss of more than $1 billion in the second quarter and missed analysts’ revenue estimates.
Here’s How The Company Did It:
Earnings: A loss of $4.98 per share, versus a loss of $2.65 per share expected by analysts, according to Refinitiv.
Revenue: $808.3 million, versus $832.2 million expected by analysts, according to Refinitiv.
Coinbase’s revenue fell nearly 64% as investors abandoned the crypto market after last year’s dramatic run. Retail transaction revenue came in at $616.2 million, down 66% among analysts surveyed by StreetAccount and below the $667.1 million consensus.
According to a letter to shareholders, Coinbase reported a net loss of $1.1 billion compared to net income of $1.59 billion in the same quarter last year. One factor was a non-cash cryptocurrency-related impairment charge of $377 million. Coinbase’s cryptocurrency assets were worth $428 million at the end of June, down from $1 billion at the end of March. More than 40% of cryptocurrency assets were in Bitcoin.
“Q2 was a test of sustainability for crypto technology companies and a complex quarter overall,” the company said in the letter. “Dramatic market movements changed consumer behavior and transaction volume, which impacted transaction revenue, but also highlighted the strength of our risk management program.”
The company said there were 9 million users who transacted monthly during the period, down from 9.2 million in the first quarter but higher than StreetAccount’s consensus of 8.7 million. Trading volume decreased during the quarter as a result of macro and cryptocurrency credit, the company said.
Coinbase Is Forced To Resize Its Business In Response To Market Conditions
Cryptocurrency controversies helped bring down prices in what some call “crypto technology winter.” Coinbase shares fell 75 percent during the second quarter, while bitcoin’s price fell nearly 59 percent. Coinbase said it is freezing its hiring for the foreseeable future and cutting 18% of its workforce. Coinbase said assets on the platform fell from $256 billion to $96 billion during the quarter, mainly due to pressure on cryptocurrency prices.
“While we looked at net outflows in Q2, we observed that the majority of this behavior was from institutional clients who risked and sold their crypto rather than withdrawing it to another platform. Coinbase said in a letter to shareholders. “As a result, our market share of total crypto market capitalization decreased from 11.2% in Q1 to 9.9%.”
Bitcoin accounted for 31% of transaction revenue in the quarter, the highest level since Q1 2021, while Ethereum accounted for 22% of transaction revenue.
Coinbase updated its outlook for the full year. It now expects 7-9 million monthly transaction users, down from the 5-15 million range three months ago. Management said it expects average revenue per user. To be in the low $20 range per transaction, rather than pre-2021 levels.
To reduce marketing costs, the company is doing less with paid media. And incentives while finding ways to drive paid traffic. It also lowered its forecast for technology, development. And general and administrative expenses to $4 billion to $4.25 billion from a range of $4.25 billion to $5.25 billion a quarter ago. This includes optimizing spending on infrastructure.
“Of course, we don’t have control over economic factors or the recession”. Chief Executive Officer Brian Armstrong said on a conference call with analysts. “We don’t really control the crypto market very broadly, do we? So what do we control? Well obviously we can focus on building great products for our customers. We make sure that We can focus on staying on the cutting edge of crypto technology. By creating compelling use cases and making them available to our customers. We can focus on managing our costs in downstream markets. And frankly, we can make sure we don’t. Get distracted or frustrated by short-term thinking.”
Armstrong added that he expects the company’s current efforts to result in “a disproportionate share in the next cycle.”
Shares of Coinbase were down about 11 percent in the regular trading session on Tuesday.
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