Coinbase stuns with first-quarter results as shares rise 7%

Coinbase’s net loss Coinbase in the first quarter of 2023 was $78.9 million or $0.34 per share, markedly ahead of analysts’ expectations ($0.87). In after-hours trading, the shares rose by 7%.

Our Q1’23 financial results are in and our letter to shareholders can be found on the Investor Relations website at ? https://t.co/8ovHEtPRgf pic.twitter.com/4iWAPGZNMh

— Coinbase ?️ (@coinbase) May 4, 2023

For the same period in 2022, Coinbase posted a net loss of $429.7 million, in Q4 2022 — $557 million.

Since the start of the year, Coinbase shares have risen 39.1%. Losses since the IPO stand at 87%.

The reduction of negative financial results was driven by cost-cutting measures — total operating expenses fell 24% in October–December (from $1.18 billion to $884.3 million) thanks to optimization of investments and staff layoffs.

The company warned that operating expenses going forward are likely to rise due to higher legal services costs.

Net revenue in January–March fell from $1.16 billion to $736.4 million, versus an expected $658 million, but was up 16% from the previous three months ($604.9 million).

The driver remained the subscriptions and services category. Fees totaled $361.7 million versus expectations of $316 million, compared with $282.8 million in the prior quarter and $151.9 million a year ago.

The main growth came from interest income ($240 million), of which $199 million related to USDC. By way of comparison, in October–December these figures were $182 million and $146 million respectively. The company expects a decline in the metric in April–June amid a reduction in the market supply of the stablecoin in recent months.

Staking brought Coinbase $73.7 million (forecast — $71 million). A year earlier the figure was $81.9 million, and in the previous three months — $62.4 million.

Trading commissions interrupted the negative quarterly trend, rising 16% from $322.1 million to $374.7 million. In Q1 2022 they were 2.7 times higher at $1.01 billion.

Trading volume was unchanged, while volatility and the capitalisation of digital assets rose.

Revenue rose after the removal of discounts for certain institutional client categories and widening the spread on standard trades for retail investors. Trading interest shifted toward altcoins.

As drivers of future business growth, the exchange cited the acquisition of One River Digital Asset Management, as well as launch of an international exchange, Base and Wallet services.

The latter is positioned by Coinbase as ‘a decentralised haven for countries with unstable governments and currencies’. The Wallet is described as a tool for ‘updating the financial system’. The stance in Washington is also supported by various initiatives.

The platform’s management disclosed details regarding the dispute with SEC.

“Despite our ongoing engagement with the Commission, its staff have provided no clarity […]. While we hope to avoid litigation, we are fully prepared to defend ourselves and speak for the entire crypto industry if necessary”, — according to the letter to shareholders.

Top management said that the best option would be for Congress to adopt a clear set of rules for players in the industry. Coinbase expects movement on this issue in the second quarter of 2023.

Earlier, the SEC sent a notice to the exchange about an investigation into the listing procedure on the platform and its products — Coinbase Prime, Coinbase Wallet and the staking service Coinbase Earn.

In April, the company responded to regulator’s claims, saying it was prepared to “vigorously defend itself.” Representatives of the platform also noted that because of the investigations the SEC could suffer reputational damage.