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US-based cryptocurrency exchange Coinbase had some cause for cheer as it released its first-quarter revenue report, with results exceeding expectations.
The exchange reported a net loss of $79 million but also reported a 22% growth in revenue.
Analyzing The First Quarter Revenue Report
The report, released on the 4th of May, saw Coinbase Global report a loss for the fifth consecutive quarter. The results potentially indicated that users and investors had fallen out of the company, despite a steady recovery of the crypto space during the first quarter. However, the numbers posted have beaten expectations, with the company reporting a loss of $79 million. This figure is significantly lower than the $430 million loss reported during the same period last year. Analysts were expecting a loss of over $316 million for the company at a net loss per share of $1.45.
Coinbase also reported that its net revenue increased by 22% quarter over quarter, rising to $736 million, with its operating expenses falling by 24% from the previous quarter. The reduction in operating expenses can be attributed to the company cutting down its workforce. Coinbase had laid off 950 employees in January, with the restructuring process costing the company $144 million. However, Coinbase stated that restructuring helped it become more efficient, allowing it to “do more for less.”
Coinbase also reported that its transaction revenue increased by 16% to $375 million. Consumer transaction revenue also increased by 14%, while institutional transactions rose by 67%. Its quarterly trading volume stood at $145 billion, which was equal to the numbers posted during the previous quarter. The company’s “assets on platform,” which refers to the US dollar value of various digital assets, rose by 62% to $130 billion.
Coinbase also reported an increase in its quarter-over-revenue in several other categories. Its subscription and services revenue reported an increase of 28%, rising to $362 million. Additionally, blockchain rewards grew by 18%, rising to $74 million, while custodial fee revenue reported an increase of 48% to $17 million. Last but not least, interest income reported an increase of 32%, rising to $241 million.
Coinbase is mired in a regulatory tussle with the United States Securities and Exchange Commission (SEC). On several occasions, the SEC has threatened enforcement action and lawsuits against the exchange. Paul Grewal, the Chief Legal Officer for Coinbase, has stated that the legal fight against regulatory authorities could take a significant amount of time. However, he expected the firm to be fully operational, with no significant hiccups expected.
Coinbase revealed earlier this week that it would be shutting down its Coinbase Borrow services by the 10th of May. However, the company did not clarify why it was shuttering the service. Coinbase was also at the receiving end of a lawsuit during the ongoing week, with executives accused of dumping millions in stock to prevent losses.
Outlook For Q2
The company also gave a glimpse into its outlook for Q2. In its report, Coinbase stated that it expects transaction expenses to make up around 15% of its net revenue. It also expects to see around $300 million raised through subscription and services revenue. This is a decline thanks to a drop in the market capitalization of USDC. It also predicted that technology and development expenses and other administrative expenses could reach $650 million. This is a considerable increase, thanks in part due to increased legal expenses, thanks to its ongoing issues with the Securities and Exchange Commission.
The company also stated that marketing and sales expenses could reach $80 to $90 million thanks to an NBA partnership and stock-based compensation. Meanwhile, the company’s stock surged by 9% in after-hours trading, according to data from MarketWatch, with COIN shares hitting $53.75 on the 4th of May. Coinbase shares have gained a staggering 60% since the start of the year. However, they are still a far cry from their peak price of $343, achieved in November 2021.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.