Coinbase reports 22% revenue growth, net loss of $79M for Q1; notes lower volatility in Q2

On May 4, Coinbase announced that its net revenue increased by 22% to $736 million, quarter over quarter, while operating expenses dropped by 24% from the previous quarter. This reduction in expenses was a result of the company's decision to lay off 950 employees in January as part of its restructuring strategy. Despite the $144 million cost of this strategy, Coinbase believes that it is now a more efficient company that can achieve more with less.

However, due to these developments, Coinbase reported a net loss of $79 million. Nonetheless, it generated $284 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). Additionally, Coinbase disclosed that it holds $5.3 billion in U.S. dollar resources, including cash, cash equivalents, USDC, and custodial account overfunding.

In summary, Coinbase's net revenue saw a significant increase, while operating expenses dropped, mainly because of the January layoffs. This has resulted in a more efficient company that can achieve more with less, despite the incurred net loss. Coinbase's balance sheet shows substantial holdings in U.S. dollar resources, which is a positive indicator for the company.

More revenue and activity trends

In the latest quarter, Coinbase's transaction revenue climbed 16% to $375 million, with consumer transaction revenue up by 14% and institutional transaction revenue up by 67%. The company's quarterly trading volume remained consistent with the previous quarter at $145 billion.

According to Coinbase's report, the U.S. dollar value of various digital assets stored on its platform, also known as “assets on platform,” rose 62% to $130 billion.

In addition to transaction revenue, Coinbase's revenue increased in various other categories. Subscription and services revenue rose 28% to $362 million, blockchain rewards revenue climbed 18% to $74 million, custodial fee revenue surged 49% to $17 million, and interest income increased 32% to $241 million during the quarter.

Coinbase provides Q2 outlook

Coinbase has provided its second-quarter outlook, forecasting that transaction expenses will account for up to 15% of its net revenue. However, subscription and services revenue is expected to decline to $300 million, driven by a reduction in the market cap of USDC.

The firm expects technology and development expenses, as well as general and administrative expenses, to reach $650 million, reflecting increased costs, including higher legal expenses related to an ongoing conflict with the U.S. Securities and Exchange Commission (SEC).

Coinbase has projected that its sales and marketing expenses could be between $80 million and $90 million, partially due to an NBA partnership and stock-based compensation.

In the second quarter of the year, Coinbase observed a divergence between cryptocurrency market cap and asset volatility, as the average crypto market cap increased 17% to $1.3 trillion compared to the previous quarter's average of $1.1 trillion.

Coinbase stated that crypto asset volatility in April was 25% lower than the previous quarter's average, and this impacted the company's transaction revenue as it generated around $110 million in total transaction revenue in April.

The company cautioned investors not to make assumptions based on this data, citing the rapid evolution of the market in the past year as a reminder.

Coinbase's stock (COIN) has risen 1.51% today and 7.05% after hours.

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