Coinbase shares drop on billion-dollar loss in second quarter and revenue miss

Coinbase shares dropped in extended trading on Tuesday after the crypto exchange reported a loss of over $1 billion in the second quarter and missed analysts’ estimates for revenue.

Here’s how the company did:

• Earnings: Loss of $4.98 per share, vs. loss of $2.65 per share as expected by analysts, according to Refinitiv.
• Revenue: $808.3 million, vs. $832.2 million as expected by analysts, according to Refinitiv.

Coinbase’s revenue declined nearly 64% as investors exited the crypto market after last year’s dramatic run. Retail transaction revenue came in at $616.2 million, down 66% and below the $667.1 million consensus among analysts polled by StreetAccount.

Coinbase reported a $1.1 billion net loss, compared with $1.59 billion in net income in the same quarter last year, according to a letter to shareholders. One factor was a $377 million non-cash cryptocurrency-related impairment charge. Coinbase’s own cryptocurrency assets at the end of June were worth $428 million, down from about $1 billion at the end of March.

“Q2 was a test of durability for crypto companies and a complex quarter overall,” the company said in the letter. “Dramatic market movements shifted user behavior and trading volume, which impacted transaction revenue, but also highlighted the strength of our risk management program.”

The company said it had 9 million monthly transacting users during the period, down from 9.2 million in the first quarter but more than the 8.7 million StreetAccount consensus. Macroeconomic and cryptocurrency credit resulted in lower trading volume during the quarter, the company said.

It was a challenging quarter for Coinbase from an operational perspective.

Cryptocurrency controversies helped to push down prices in what some called a “crypto winter.” Coinbase’s stock tumbled 75% during the second quarter, while the price of Bitcoin plunged by about 59%. Coinbase said it was extending its hiring freeze into the foreseeable future and cutting 18% of headcount. Bitcoin accounted for 31% of transaction revenue in the quarter, the highest level since the first quarter of 2021, while 22% of transaction revenue was associated with Ethereum.

Assets on platform fell quarter over quarter to $96 billion from $256 billion, mostly because of pressure on cryptocurrency prices, Coinbase said.

“While we did see net outflows in Q2, we observed that the majority of this behavior was institutional clients de-risking and selling crypto for fiat as opposed to withdrawing their crypto to another platform,” Coinbase said in the shareholder letter. “As a result, our market share of the total crypto market capitalization declined to 9.9% from 11.2% in Q1.”

Coinbase updated its outlook for the full year. It now expects 7 million to 9 million monthly transacting users, down from a range of 5 million to 15 million three months ago. Management said it expects average transaction revenue per user in the low $20 range, rather than pre-2021 levels.

The company said has set a plan for marketing spending for the second half of the year that’s in keeping with its efforts to manage expenses, including “optimization of paid media.” And it reduced its forecast for technology, development and general and administrative expenses to $4.0 billion to $4.25 billion from the $4.25 billion to $5.25 billion range a quarter ago.

Coinbase shares declined almost 11% in Tuesday’s regular trading session.

Executives will discuss the results on a conference call starting at 5:30 p.m. ET.

This story is developing. Please check back for updates.