Loss of nearly 100 million US dollars? A quick look at Coinbase's Q2 financial report

Original translation: Felix, PANews

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

Better than expected revenue

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 the analysts' expected revenue of $628 million and a loss of $0.76 per share. However, the revenue in the same period last year was $808.3 million. 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.

Coinbase stated in a letter to shareholders that part of the strong quarterly performance is due to continuous efficiency improvement. The company emphasized that its operating expenses decreased by 50% YoY to $664 million, partly due to a 30% decrease in employee count. In addition, Coinbase has recently achieved diversification and added additional sources of revenue, such as subscription fees and service fees. It also highlighted the agreement with an asset management company to launch a Bitcoin spot ETF.

Decrease in Trading Volume and Trading Revenue

Despite a narrower loss compared to the same period last year, the overall revenue situation of the company did not improve in the second quarter, as Coinbase's trading volume and revenue both declined.

Coinbase disclosed that the total trading volume in Q2 dropped significantly to $92 billion, compared to $145 billion in Q1. The total trading volume decreased by 57% compared to Q2 of last year, which was $217 billion. The trading revenue in Q2 was $327 million, a decrease of 13% compared to the previous quarter. This number is mediocre considering the low trading volume. In Q1, the trading revenue was $375 million, and in Q2 of last year, it was $655 million.

Among them, the user trading revenue in Q2 was $310 million, a decrease of 12% QoQ, and the trading volume was $14 billion, a decrease of 33% QoQ. The institutional trading revenue in Q2 was $17 million, a decrease of 24% QoQ, and the trading volume was $78 billion, a decrease of 37% QoQ.

The subscription and service revenue in Q2 was $335 million, a decrease of 7% QoQ. The decrease in subscription and service revenue was mainly due to the decrease in interest income caused by the decline in USDC market value.

Coinbase interest income decreased from $241 million in the first quarter to $201 million. In the second quarter, $151 million of interest income came from its holdings of USDC, lower than the $199 million USDC interest income in the first quarter, with the company attributing a 28% decrease in USDC market value as a significant factor. As of the end of this quarter, Coinbase reported approximately $1.8 billion of USDC on its platform.

Platform Assets Under Operation (AOP) stood at $12.8 billion, a slight 1% decrease compared to the previous period. Blockchain rewards increased by 19% to $88 million, accounting for 13% of net revenue. Custodial fees amounted to $17 million.

Decreased Expenses

Total operating expenses for the second quarter were $781 million, a 13% decrease compared to the previous period. Transaction expenses for the second quarter amounted to $108 million, a 12% increase. Recurring operating expenses, including technology and development, sales and marketing, and general and administrative costs, decreased by 1%. Sales and marketing expenses were $84 million, a 31% increase. Technology and development expenses amounted to $321 million, a 10% decrease. General and administrative expenses were $259 million, a 4% increase. Other operating expenses were $11 million, mainly including impairment charges related to cryptocurrencies.

Outlook

Regarding the outlook for the third quarter, Coinbase reported approximately $110 million in trading revenue for July and expects subscription and services 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 cut costs, operate efficiently, and remain well-positioned to build the future of the crypto economy and help drive clearer regulation."

About Coinbase's financial report, Bloomberg analyst Mark Palmer wrote in an email, "Coinbase's revenue exceeded market expectations, largely due to interest income and staking income. However, given the continued decline in USDC's market value and regulatory challenges facing staking projects, the ability to sustain high revenue in the future seems to be at some risk."

Reference sources: Coinbase, CoinDesk, The Block