Coinbase Global (NASDAQ: COIN) released its Q2 2023 financials, headlined by a quarterly total revenue of $707.9 million. This is a drop from Q1 2023’s $772.5 million and Q2 2022’s $808.3 million, but but still surpassing the consensus of analysts surveyed by Bloomberg, who had predicted $631.2 million.
What’s noteworthy is that Coinbase’s revenue mix has undergone a significant shift. For the first time, the majority of its net revenue, 51% to be precise, came from subscriptions and services, including custodial fees, interest income on the USDC stablecoin, and staking revenue. This category outperformed the traditional transaction revenue, which declined 50% year-on-year, reaching $327 million from over $655 million due to decreased trading volume on the exchange. Coinbase managed to earn $335 million from the aforementioned subscription and service segment during Q2.
Despite a rebound in cryptocurrency prices during the quarter, trading volume on Coinbase’s platform plummeted from $217 billion to $92 billion compared to the same period last year and from $145 billion in the previous quarter. Interest income was also impacted, dropping to $201.4 million from $240.8 million as the market value of USDC fell approximately $15 billion in the quarter.
The firm’s net loss also widened to $97.4 million compared to last quarter’s $78.9 million loss. But it’s an improvement from last year’s net loss of $1.09 billion.
For the second time, the company delivered a positive quarterly adjusted EBITDA, with the figure for Q2 2023 ending at $194 million compared to $284 million in the previous quarter and a negative value of $151 million in the previous year.
Following the release of the earnings report, Coinbase’s stock is trading relatively flat, despite hitting $97 in after-hours activity. The stock has experienced a remarkable surge of over 60% since mid-June when BlackRock filed an application for a spot bitcoin exchange-traded fund and identified Coinbase as its custodian.
Coinbase noted that in July, its transaction revenue amounted to approximately $110 million. Looking ahead to Q3, the firm anticipates subscription and services revenue to reach a minimum of $300 million, while projecting that transaction expenses as a percentage of net revenue will be in the mid teens.
In addition to its financial achievements, Coinbase has been facing legal challenges, with the SEC filing a lawsuit against the company for allegedly failing to register properly with the agency. The lawsuit also raised concerns about the classification of at least 13 tokens on the platform as securities. Coinbase’s chief legal officer, Paul Grewal, expressed confidence in the company’s position.
“We expect to win,” Grewal said on an earnings call. “Obviously, we are disappointed that despite our good-faith efforts, and our efforts to be as transparent as possible with the commission and with the markets as a whole, the SEC did choose to bring an enforcement action against us.”
Grewal stated that they are preparing to submit a brief to the Southern District of New York and seek dismissal of the lawsuit.
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