Coinbase Shares Surge Following Q1 2023 Financials: 22% Revenue Jump, Flat Trading Volume, $79 Million Net Loss

Coinbase Global, Inc. (NASDAQ: COIN) reported its Q1 2023 financials, topbilled by $736.4 million in net revenue. This is a jump from Q4 2022’s $604.9 million but a decline from Q1 2022’s $1.16 billion.

Breaking down the figure, transaction revenue contributed $374.7 million (vs. Q4 2022’s $322.1 million) and subscription and services revenue added $361.7 million (vs. Q4 2022’s $282.8 million).

“In Q1, the average crypto market cap increased 16% compared to Q4 and the crypto market cap at the end of Q1 was 47% higher than at the end of Q4. The strong increase in market cap in Q1 contributed to our better-than-expected subscription and services revenue, particularly blockchain rewards and custodial fee revenue,” the firm said in its letter to shareholders.

However, the firm’s dwindling trading volume has seen a sequential flat movement in Q1 2023. Coinbase saw total trading volume in the first quarter at $145 billion, virtually the same with Q4 2022. The figure is also a decline from Q1 2022’s $309 billion.

The firm added that “Q1 had 2 fewer days than Q4, or 2%.” They also said that “crypto asset volatility, a key driver of our trading volume, increased 8% compared to Q4 but remained below 2020-2022 average levels.”

Coinbase shares surged 9% in after-hours trading following the news.

Total operating expenses for the quarter went down 24% to $896.4 million from last quarter’s $1.18 billion–the firm’s lowest level of expenses since 2021. This is mainly a result of the massive layoffs Coinbase started to implement in January 2023; the total expenses also included $144 million in restructuring charges.

The company’s net loss climbed to $78.9 million in Q1 2023 from $557 million in Q4 2022 and $430 million in Q1 2022. The firm was also able to record its first positive adjusted EBITDA since last year, notching $284 million in the first quarter.

According to Coinbase, the quarter marked a “turning point” in the company’s efforts to become more “efficient” and “financially disciplined.”

“We reduced costs, doubled down on operational excellence and risk management, and continue to drive product innovation and regulatory clarity. Our efforts are showing meaningful progress,” the firm said. “Our teams are smaller, but more nimble than ever and we are pleased with the pace of innovation and the results we are seeing.”

Despite the net loss, Coinbase generated positive operating cash for the quarter at $463.1 million, leading the firm to end with $5.02 billion in cash and cash equivalents. This makes the balance of the current assets land at $135.84 billion while current liabilities ended at $130.20 billion.

The quarterly earnings come amid the ensuing legal battle between Coinbase and the Securities and Exchange Commission (SEC). The firm recently published its response to the Wells notice issued by the regulatory agency, encouraging the agency not to pursue enforcement action against the business for the sake of the SEC.

“Coinbase has never wanted to litigate with the Commission. The Commission should not want to litigate either. Litigation will put the Commission’s own actions on trial, erode public trust cultivated over decades, undermine incentives for market participants to engage with the Commission in good faith, and present significant risks to broad aspects of the Commission’s enforcement program,” the crypto exchange said.

Following this, the SEC has been ordered by Third Circuit Court of Appeals to respond within 10 days to Coinbase’s complaint over how it applies securities laws to digital assets.

The order refers to a petition filed in 2022 seeking official rulemaking in the digital assets industry, to which the SEC has yet to react. The 10-day deadline set this week alludes to the SEC’s duty to present a legal justification for its failure to reply to the petition.

Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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