Coinbase Global, the US-based cryptocurrency exchange, not only confounded analysts with its first-quarter earnings report results, but also managed to raise some eyebrows with its outlook for forthcoming quarters. Despite a net loss of $79 million for the fifth consecutive quarter, the reported figures surpassed expectations, considering the $430 million loss during the same period last year. Expected to record losses of over $316 million, the reduced net loss per share of $1.45 reflects the impressive 22% growth in revenue, with operating expenses falling 24%.
The reduction in operating expenses is due to the company’s workforce downsizing. Coinbase had let go of 950 employees in January, cutting costs by $144 million. This restructuring process allowed the firm to be more efficient and do more for less.
Coinbase’s considerable transactions revenue increase by 67% suggests the company’s success at optimizing operations. Furthermore, the digital assets held by the platform experienced a 62% growth amounting to $130 billion. With categories such as subscription and services recording a revenue increase of 28%, blockchain rewards going up by 18%, and custodial fee reporting a rise of 48%, Coinbase’s performance reveals a silver lining in the dark clouds of regulatory wrangling that the company finds itself in.
Coinbase’s tussle with the US Securities and Exchange Commission (SEC) seems ongoing, as the exchange often faces threats of enforcement actions and lawsuits. Chief Legal Officer Paul Grewal has said that the lengthy battle against regulatory authorities is expected to come without significant hiccups.
Looking to the future, the company offered a glimpse into its Q2 expectations. Coinbase predicts transaction costs will account for 15% of net revenue, with a subscription and services revenue of around $300 million. This decline is partly attributed to a drop in USDC market capitalization. Additionally, the forecast reveals increased expenses such as technology and development costs, administrative expenses, and legal fees due to the constant battle with the SEC.
Marketing and sales costs could reach between $80 and $90 million, driven by an NBA partnership and stock-based compensation. Meanwhile, the company’s stock surged by 9% in after-hours trading, and COIN shares hit $53.75. This gain is still far from reaching the peak price of $343, recorded in November 2021.
While quarterly financials paint a brighter picture for Coinbase than experts predicted, several factors still loom over the company’s success. The outcome of regulatory battles and maintaining improved financials amidst various expenses will determine the trajectory towards a more promising future for this US-based cryptocurrency exchange.