Despite fourth-quarter profit and sales exceeding expectations, Coinbase reported user counts below analysts’ expectations. After falling 4.8% during regular trading, the stock increased by more than 2% during extra hours.
Here is how the business fared:
Earnings: Loss of $2.46 per share versus analysts’ projected loss of $2.55 per share, according to Refinitiv.
Revenue: Refinitiv reports that revenue was $629 million instead of analysts’ expectations of $590 million.
When the so-called crypto winter continued to pressure the price of cryptocurrencies, revenue fell by roughly 75% from a year earlier. A year after Coinbase generated a net income of $840 million during the height of cryptocurrency growth, the business also disclosed a (non-adjusted) net loss of $557 million.
The user base of Coinbase is still declining. In contrast to the previous quarter’s 8.5 million, the corporation reported 8.3 million monthly transacting users (MTUs) during the fourth quarter. 8.182 million were anticipated by analysts, according to StreetAccount. Trade volume decreased 9% from the prior quarter to $145 billion.
Transaction revenue decreased 12% from the prior quarter to $322 million, less than the $327 million consensus estimate of analysts surveyed by StreetAccount.
The business anticipated subscription and service revenue of $300 million to $325 million for the first quarter of 2023 and restructuring costs of roughly $150 million. The corporation has aimed to diversify its revenue sources, emphasizing subscriptions and services, away from only trading fees. In the fourth quarter, traction in products, including Staking, Earn, and Custody, generated more than $200 million.
Since June 2022, Coinbase has gone through two significant rounds of layoffs to reduce costs and preserve cash. Following an 18% employee decrease in 2022, the exchange reduced its personnel by 20% last month.
Before Tuesday’s after-hours trading, the stock had increased by more than 75% in 2023, following a decline in crypto-currency prices and a move away from the riskiest stocks in 2022. The most well-known cryptocurrency this year, bitcoin, has increased by more than 48%.
According to Coinbase Chief Financial Officer Alesia, “market circumstances have substantially shifted, even in a single month,” and markets have recovered this quarter compared to Q4 2022. According to Haas, retail has returned to the market after Coinbase produced $120 million in transaction fee revenue in January.
In a call with CNBC, Haas stated, “We’re seeing what we’ve always seen with crypto.” “Market circumstances and overall volatility drive trading activity, and these unique occurrences have altered the longer-term dynamic we have observed.”
Possible SEC actions regulating specific types of cryptocurrency tokens and crypto services as securities may also affect Coinbase’s business. According to tweets from CEO Brian Armstrong and Chief Legal Officer Paul Grewal, the business will challenge any such legal action.
For instance, cryptocurrency exchange Kraken recently stopped offering staking services as part of a deal with the SEC to resolve claims that the company traded unregistered securities.
Customers can stake their tokens on many centralized exchanges, including Kraken and Gemini, to earn a yield on digital assets that would otherwise remain idle on the platform. Investors who use crypto staking often store their digital assets with a blockchain validator, confirming blockchain transactions’ veracity. By securing those assets, investors may be rewarded with more crypto tokens.
Yet, Haas claimed that Coinbase’s staking product was “not a security.” Staking was less than 3% of net revenue, according to Haas, so it wasn’t a significant source of net revenue at the time. Nonetheless, it was an “important element of the ecosystem,” which the platform intended to expand.
