Quick Look at Coinbase’s Q2 Financial Report Revenue Exceeds Expectations, But Still Records a Loss of Nearly 100 Million US Dollars

Author: Felix, LianGuaiNews

On August 4th, US listed cryptocurrency exchange Coinbase (COIN) released its second-quarter financial report. Due to better-than-expected financial performance, Coinbase’s stock price rose 1.6% to $92.23 in after-hours trading, according to TradingView data. So far this year, Coinbase’s stock price has risen nearly 160%, while the price of Bitcoin has risen over 75% during the same period.

Revenue Exceeds Expectations

Coinbase’s second-quarter revenue was $707.9 million, a decrease of 8% compared to the previous quarter. The loss per share was $0.42, higher than analysts’ expected revenue of $628 million and a loss per share of $0.76. However, the revenue in the same period last year was $808.3 million. The net income for the second quarter was $663 million, a decrease of 10% compared to the previous quarter. The net loss for the second quarter was $97.4 million, while the net loss for the same period last year was $1.1 billion.

In a letter to shareholders, Coinbase stated that part of the reason for the strong quarterly performance was the continuous improvement in efficiency. The company emphasized that its operating expenses decreased by 50% compared to the same period last year, to $664 million, partly due to a 30% reduction in staff. In addition, Coinbase has recently achieved diversification and added additional sources of revenue, such as subscription fees and service fees. It also highlighted the recent agreement reached with asset management companies and hopes to launch a Bitcoin spot ETF.

Decline in Trading Volume and Trading Revenue

Although the loss narrowed compared to the same period last year, mainly due to cost-cutting measures, the overall revenue situation of the company did not improve in the second quarter. Both Coinbase’s trading volume and revenue declined.

Coinbase disclosed that the total trading volume in the second quarter decreased significantly to $92 billion, compared to $145 billion in the first quarter. Compared to the second quarter of last year, the total trading volume decreased by 57% from $217 billion. The second-quarter trading revenue was $327 million, a decrease of 13% compared to the previous quarter. Considering the low trading volume, this number was relatively flat. The trading revenue in the first quarter was $375 million, and the trading revenue in the second quarter of last year was $655 million.

Among them, the user trading revenue in the second quarter was $310 million, a decrease of 12% compared to the previous quarter, and the trading volume was $14 billion, a decrease of 33% compared to the previous quarter. The institutional trading revenue in the second quarter was $17 million, a decrease of 24% compared to the previous quarter, and the trading volume was $78 billion, a decrease of 37% compared to the previous quarter.

The subscription and service revenue for the second quarter was $335 million, a decrease of 7% compared to the previous quarter. From a quarter-on-quarter perspective, the decline in subscription and service revenue was due to the decrease in the market value of USDC, which led to a decrease in interest income.

Coinbase’s interest income decreased from $241 million in the first quarter to $201 million in the second quarter. In the interest income of the second quarter, $151 million came from its holdings of USDC, lower than the $199 million USDC interest income in the first quarter. The company stated that the 28% decrease in USDC market value was a significant reason. As of the end of this quarter, Coinbase stated that it has approximately $1.8 billion worth of USDC on its platform.

Assets on the platform (AOP) were $128 billion, a slight decrease of 1% compared to the previous quarter. Blockchain incentive income increased by 19% quarter-on-quarter, reaching $88 million, accounting for 13% of net income. Custodial fee income was $17 million.

Decrease in Expenses

Total operating expenses for the second quarter were $781 million, a 13% decrease compared to the previous quarter. Transaction expenses for the second quarter were $108 million, a 12% increase quarter-on-quarter; recurring operating expenses including technology and development, sales and marketing, and general and administrative expenses decreased by 1% quarter-on-quarter. Among them, sales and marketing expenses were $84 million, a 31% increase quarter-on-quarter; technology and development expenses were $321 million, a 10% decrease quarter-on-quarter; general and administrative expenses were $259 million, a 4% increase quarter-on-quarter; other operating expenses were $11 million, mainly including cryptocurrency impairment expenses.

Outlook

Regarding the outlook for the third quarter, Coinbase stated that it generated approximately $110 million in transaction revenue in July and expects subscription and service revenue to reach at least $300 million in the third quarter.

Coinbase CEO Brian Armstrong stated in a statement, “The second quarter was a strong quarter for Coinbase as we executed efficiently and demonstrated resilience in a challenging environment. We have reduced costs, are operating efficiently, and remain well-positioned to build the future of the crypto economy and help drive clearer regulation.”

Regarding Coinbase’s financial report, Bloomberg analyst Mark LianGuailmer wrote in an email, “Coinbase’s revenue exceeded market expectations, largely due to interest income and staking income, but considering the continued decline in USDC market value and the regulatory challenges faced by staking projects, the sustainability of high revenue seems to face certain risks.

Reference sources: Coinbase, CoinDesk, The Block

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