Coinbase Global Inc. swung to a loss in its most recent quarter and posted lower-than-expected revenue as it lost 2.2 million crypto traders from its platform, citing the impacts of lower volatility and prices for crypto assets.
Shares of Coinbase
COIN,
were down 24% in premarket trading Wednesday after sliding about 13% in Tuesday’s regular session. They were trading at lower prices than they have in any regular trading session since the company went public a little more than a year ago.
Coinbase’s net revenue for its first quarter fell to $1.17 billion from $1.60 billion a year before, while analysts had been modeling $1.50 billion.
The revenue decline came as volume slowed. Coinbase reported trading volume of $309 billion for its March quarter, compared with $547 billion in the December quarter and $335 billion in the year-prior March quarter. Retail trading volume was $74 billion, compared with $177 billion in the December quarter and $120 billion a year before.
The company had 9.2 million monthly transacting users, compared with 11.4 million in the December quarter.
“We believe these market conditions are not permanent and we remain focused on the long term. In fact, our investment in our business now is especially critical — these periods of low volatility can provide the opportunity to focus more intently on product development (as opposed to peak periods, when we are more focused on meeting high demand),” the company said in its shareholder letter.
The company also posted a first-quarter net loss of $430 million, or $1.98 a share, compared with net income of $388 million, or $3.05 a share, in the year-prior quarter. Analysts tracked by FactSet expected a 1-cent loss per share on a GAAP basis.
Coinbase had previously set out to make 2022 an “investment year,” and the company continues to prioritize investment spending amid a more challenging climate for the business.
“We are highly confident that we could choose profitability over reinvesting in the business,” Chief Financial Officer Alesia Haas said on Coinbase’s earnings call, but the company sees opportunities to invest in areas like non-fungible tokens (NFTs) and international growth.
“We could have done more of these sequentially, we could have moved more slowly and focused on profitability, but we have the resources,” she continued. “We have a disciplined approach to managing our business through peaks and valleys.”
Coinbase disclosed that 24% of its overall volume in the latest quarter was concentrated in bitcoin
BTCUSD,
along with 21% in ethereum
ETHUSD,
and the rest in other assets. That compares with 16% concentrations in each bitcoin and ethereum in the December quarter.
While Coinbase acknowledged “market softness,” it said that it was seeing encouraging trends, such as increasing adoption of non-investing products. About 5 million Coinbase monthly transacting users engaged with a non-investing product during the quarter, with staking serving as the most popular option.
“Our thesis about moving away from just being a trading platform to enabling the entire crypto economy and being that primary financial account for people is really starting to work,” Chief Executive Brian Armstrong said on the call.
The report follows a rough slide for Coinbase shares, which have shed 53% over the past month as the S&P 500
SPX,
has lost 9%. The company disclosed that it saw “continued declines in both crypto asset volatility and crypto asset prices” during the month of April.
For the second quarter, Coinbase expects that monthly transacting users and total trading volume will be lower than what was seen in the first quarter. Coinbase also anticipates that subscription and services revenue will be similar to or modestly lower than what the company saw in the first quarter.
