Revenues, losses beat expectations as volumes plunge for 2022

Coinbase Global ( COIN ) reported fourth-quarter results Tuesday afternoon that beat Wall Street expectations, with revenue unexpectedly up and full-year losses narrower than expected.

Shares rose 6% after those gains before settling in after-hours trading.

Here are Coinbase’s fourth-quarter results that beat Wall Street expectations, according to data from Bloomberg:

• Income: $629 million vs. $581.2 was expected

• Adjusted earnings per share: ($2.46) and ($2.44) are expected

• Adjusted EBITDA: ($124 million) vs. ($201.8 million) was expected

• Monthly Transactional Users (MTU): 8.3 million vs. 8.4 million expected

“In the fourth quarter, we improved net income, continued to grow Subscription and Services revenue, gained merchant market share, and took significant steps to reduce our expense base and improve the company’s Adjusted EBITDA in 2023,” Coinbase’s CFO said. Aleisa Haas said in a statement.

Transaction fee income was $322 million, versus estimates of $326 million. The platform’s total client assets fell to $80 billion, the lowest figure in the previous two years and against expectations of $88.8 billion.

Retail transaction volume was down 88% from the previous year, while institutional transaction volume was down 66%. The company also disclosed a $14 million loss on exposure to FTX.

“Despite market fluctuations, our retail customers continued to ‘hodl’ Coinbase at levels similar to Q3,” the company said. “We believe this indicates that retail clients, on average, maintained long-term conviction in crypto and, assuming history repeats itself, are likely to become more active when market conditions improve.”

For the full year, Coinbase reported an adjusted EBITDA loss of $371 million, narrower than the $500 million loss the company had labeled as the high end of its estimated range. In 2023, the company said it plans to “improve full-year Adjusted EBITDA in absolute dollar terms year over year.”

The story continues

Service revenue grows

Major U.S.-based exchanges leaned further on subscription and service revenue in the fourth quarter. This non-trading side of the business was $283 million, above expectations and accounting for half (44%) of the platform’s total revenue in Q4.

While nothing has changed in Coinbase’s operations, the SEC’s recent enforcement actions have raised concerns about its subscription and service revenues, particularly its participation, custodial and stablecoin revenues, which may be under threat from driving interest income.

“Unfortunately, we don’t see regulators making rules that necessarily welcome transparency and public participation. Agencies in the United States, in particular, are showing a discordant attitude toward crypto that is pushing the industry overseas,” Coinbase said.

Driven by Treasury yields, interest income rose 44% to $182 million in the fourth quarter. Cryptos rose 1% to $62 million. Care fees fell 21% over the same period to $11.4 million.

After spending more than $1 billion in the first half of 2022, Coinbase has laid off 2,110 employees since June 2022, according to Yahoo Finance’s count. A month before Tuesday’s results, the company also said in an SEC filing filing plans to reduce operating expenses by 25% by the end of the next quarter.

In recent weeks, the company suspended operations in Japan and dropped new founders for its NFT market. He offered no further guidance on the future of the two divisions.

Cash and cash equivalents fell 38% from $7.1 billion to $4.4 billion in 2022.

Looking ahead, the exchange offered upbeat guidance for 2023, saying it generated $120 million in transaction revenue during January. It has also added $1.1 billion in monetary resources, including stablecoins.

“Crypto remains volatile and we have limited ability to forecast our transaction revenues, which remain tied to crypto market capitalization and crypto-asset volatility. As such, we are prepared to manage our business through a broad transaction revenue scenario in 2023, i.e. “includes potential increases, decreases or stabilization of crypto market capitalization and crypto asset volatility relative to end-2022 levels,” the company said. .

“We are confident that we have a more sustainable cost structure, which along with our strong balance sheet, positions our expenses to better align with the range of scenarios we are currently anticipating,” the company added.

Coinbase shares have rallied to start 2023, rising more than 75% at Tuesday’s close. Over the past year, however, the stock has lost about two-thirds of its value.

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