In this photo illustration, the Coinbase logo is displayed on a smartphone screen.
Rafael Enrique | Images of SOPA | Lightrocket | Getty Images
Coinbase reported user numbers that missed analysts’ estimates, even as fourth-quarter earnings and revenue beat forecasts. Shares rose more than 2% in extended trading after falling 4.8% on the day.
Here’s how the company did it:
- income: According to Refinitiv, the loss was $2.46 per share, compared with a loss of $2.55 per share as expected by analysts.
- income: $629 million versus the $590 million analysts expected, according to Refinitiv.
Revenue fell by nearly 75% year-over-year as the so-called crypto winter continued to drag down the price of the cryptocurrency. The company also reported an (unadjusted) net loss of $557 million a year after Coinbase posted a net profit of $840 million during the peak of crypto adoption.
Coinbase’s user base continues to shrink. The company said it had 8.3 million transactional users (MTUs) during the fourth quarter, compared with 8.5 million in the prior period. Analysts had expected 8.22 million, according to StreetAccount. Trading volume fell 9% to $145 billion compared to the previous quarter.
Transaction revenue fell 12% to $322 million from the prior quarter, which was below the $327 million consensus of analysts polled by StreetAccount.
In the first quarter of 2023, the company forecasts subscription and services revenue of $300 million to $325 million, and restructuring costs of approximately $150 million. Diversifying revenue streams away from just trading commissions has been a big priority for the subscription and services-focused company. Traction in products such as Staking, Earn and Custody brought in more than $200 million in the fourth quarter.
Since June 2022, Coinbase has gone through two major layoffs to cut costs and conserve cash. Last month, the exchange cut 20% of its staff after cutting its workforce by 18% in 2022.
Prior to Tuesday’s after-hours change, the stock was up more than 75% in 2023 after the crypto price crash of 2022 combined with a retreat from the riskiest stocks. Bitcoin, the most popular cryptocurrency, is up more than 48% this year.
Coinbase CFO Alessia told CNBC that the markets recovered in the current quarter compared to Q4 2022 and that “market conditions have really changed, even in one month.” Haas noted that Coinbase received $120 million in transaction fees in January, adding that retail has returned to the market.
“We’re seeing what we’ve always seen in crypto,” Haas told CNBC. “Trading activity is driven by overall volatility and market conditions, and these idiosyncratic events have changed the long-term dynamics we’ve seen.”
Coinbase’s business may also be affected by potential SEC actions to regulate certain types of cryptocurrency tokens and crypto-services as securities. Tweets from CEO Brian Armstrong and Chief Legal Officer Paul Grewal are there suggested the company would fight such actions in court.
Crypto exchange Kraken, for example, recently suspended its betting services as part of a settlement with the SEC over allegations that the platform sold unregistered securities.
Many centralized exchanges, such as Kraken and Gemini, offer customers the opportunity to stake their tokens to earn income from their digital assets that would otherwise sit idle on the platform. When betting on crypto, investors typically store their crypto assets with a blockchain validator that verifies the accuracy of transactions on the blockchain. Investors can receive additional crypto tokens as a reward for locking these assets.
But Haas insisted to CNBC that Coinbase’s staking product is “not a security.” Haas added that the rate is less than 3% of net income, so it is not a significant source of net income at this time, but “an important part of the ecosystem” that the platform plans to develop.
Executives will discuss the results on a conference call beginning at 5:30 p.m. ET.
