Coinbase shares fell in extended trading on Tuesday after the crypto exchange reported a loss of more than $1 billion in the second quarter and fell short of analysts’ revenue estimates.
Earnings: Loss of $4.98 per share, compared to analysts’ expectations of a loss of $2.65 per share. According to Refinitiv, revenue was $808.3 million, up from $832.2 million expected by analysts.
Coinbase’s revenue fell nearly 64% as investors fled the crypto market following last year’s meteoric rise. Retail transaction revenue was $616.2 million, a 66% decrease and less than the $667.1 million consensus among StreetAccount analysts polled.
“Q2 was a test of endurance for crypto companies, as well as a complex quarter overall,” the company said in the letter. “Dramatic market movements influenced user behavior and trading volume, affecting transaction revenue but also highlighting the strength of our risk management program.”
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The company reported 9 million monthly transacting users during the period, down from 9.2 million in the first quarter but higher than the StreetAccount consensus of 8.7 million. According to the company, lower trading volume was caused by macroeconomic and cryptocurrency credit during the quarter.
Coinbase is being forced to restructure its business due to market conditions.
Cryptocurrency controversies aided in driving down prices during what some referred to as a “crypto winter.” During the second quarter, Coinbase’s stock fell 75%, while the price of bitcoin fell 59%. Coinbase announced an extension of its hiring freeze into the foreseeable future, as well as an 18% reduction in headcount. Assets on the platform fell quarter over quarter to $96 billion from $256 billion, owing primarily to pressure on cryptocurrency prices, according to Coinbase.
“While we did see net outflows in Q2, we observed that the majority of this behavior was institutional clients de-risking and selling crypto for fiat rather than withdrawing crypto to another platform,” Coinbase said in a shareholder letter. “As a result, our market share of total cryptocurrency market capitalization fell to 9.9%.” from 11.2% in Q1.”
Bitcoin accounted for 31% of transaction revenue in the quarter, the highest level since the first quarter of 2021, while ethereum accounted for 22%.
Coinbase has updated its full-year forecast. It now anticipates 7 million to 9 million monthly transacting users, down from 5 million to 15 million three months ago. Management expects average transaction revenue per user to be in the low $20s, rather than the pre-2021 levels.
To cut marketing costs, the company is focusing less on paid media and incentives and more on attracting nonpaid traffic. It also cut its forecast for technology, development, and general and administrative expenses from $4.25 billion to $5.25 billion to $4 billion to $4.25 billion range a quarter ago. That includes optimizing infrastructure spending.
“Of course, we have no control over macroeconomic factors or the downturn,” CEO Brian Armstrong said during an analyst conference call. “We don’t really control the crypto market in general, do we?” So, what do we have control over? Obviously, we can concentrate on developing excellent products for our customers. We can concentrate on staying on the cutting edge of crypto technology to ensure that we are developing compelling use cases and making them available to our customers. In down markets, we can focus on expense management and, frankly, we can avoid being distracted or disillusioned by short-term thinking.”
Armstrong went on to say that the company’s current efforts will result in a “disproportionate share in the next up cycle.”
Coinbase’s stock dropped nearly 11% in Tuesday’s regular trading session.