Coinbase Global’s fourth quarter results on Tuesday topped Wall Street estimates with significantly higher revenue in spite of smaller losses for the entire year than anticipated.
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Coinbase (COIN), a cryptocurrency exchange, announced fourth-quarter net revenue of $605 million, a 5% increase from the third-$590 quarter million and higher than analyst expectations of $588 million. Their adjusted loss of $2.46 per share for the quarter outperformed FactSet’s forecast of a loss of $2.52 per share.
The following are Coinbase’s significant fourth quarter results in comparison to Wall Street expectations:
- Revenue: $629 million vs. $581.2 expected
- Adjusted earnings per share: ($2.46) vs. ($2.44) expected
- Adjusted EBITDA: ($124 million) vs. ($201.8 million) expected
- Monthly transacting users (MTUs): 8.3 million versus expected 8.4 million
Revenue fell by about 75% from a year earlier as the price of cryptocurrencies continued to decline due to the so-called “crypto winter.” A year after Coinbase generated 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.
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Transaction revenue decreased 12% from the prior quarter to $322 million, which was 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, as well as restructuring costs of roughly $150 million. The corporation has made it a top aim to diversify its revenue sources, placing an emphasis on subscriptions and services, away from only trading fees. In the fourth quarter, traction in products including Staking, Earn, and Custody generated more over $200 million.
Since June 2022, Coinbase has undertaken two significant waves of layoffs in an effort to cut costs and protect its cash flow. Following an 18% employee decrease in 2022, the exchange reduced its personnel by 20% last month.
Following the collapse in crypto prices and a flight from the riskiest equities in 2022, the stock was up more than 75% in 2023 before Tuesday’s after-hours trading. The most well-known cryptocurrency this year, bitcoin, has increased by more than 48%.
Markets have recovered this quarter compared to Q4 2022, according to Coinbase Chief Financial Officer Alesia, who also noted that “market circumstances have actually evolved, even in a single month.”
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Haas highlighted out that Coinbase produced $120 million in transaction fee income in January and added that the retail sector has recovered.
“We’re seeing what we’ve seen always in crypto,” Haas said in a call with CNBC. “It’s overall volatility and market conditions that drive trading activity and…these idiosyncratic events have changed that longer-term dynamic that we’ve seen.”
Possible SEC actions that would regulate specific types of cryptocurrency tokens and crypto services as securities may also have an effect on Coinbase’s business. The company will likely challenge any such legal action, according to tweets from CEO Brian Armstrong and Chief Legal Officer Paul Grewal.
Through Tuesday’s close, the price of Coinbase had increased by more than 75%. This was a strong start to 2023 for the stock. The stock, however, has lost about two-thirds of its value over the past year.