A quick look at Coinbase's second quarter financial report: revenue exceeded expectations but still lost nearly $100 million

On August 4, the listed US crypto exchange Coinbase (COIN) released its second quarter financial report. Due to better-than-expected financial results, Coinbase's stock price rose 1.6% to $92.23 in after-hours trading, according to TradingView data. So far this year, Coinbase's stock price has risen by nearly 160%, while the price of Bitcoin has risen by more than 75% during the same period.

Revenue exceeded expectations

Coinbase's second-quarter revenue was $707.9 million, down 8% from the previous quarter, with a loss of $0.42 per share, higher than analysts' expectations of $628 million in revenue and $0.76 per share in loss, but revenue in the same period last year was $808.3 million. Net income in the second quarter was $663 million, down 10% from the previous quarter. Net loss in the second quarter was $97.4 million, compared with a net loss of $1.1 billion in the same period last year.

In a letter to shareholders, Coinbase said that the strong quarterly results were partly due to continued efficiency improvements. The company highlighted that its recurring operating expenses fell 50% year-on-year to $664 million, partly due to a 30% reduction in headcount. In addition, Coinbase has recently successfully diversified and added additional revenue sources, such as charging subscription fees and service fees. It also highlighted the recent agreement with an asset management company to launch a Bitcoin spot ETF.

Trading volume and trading revenue declined

Although the loss narrowed compared to the same period last year, it was mainly due to cost-cutting. The company's overall revenue situation did not improve in the second quarter, and Coinbase's trading volume and revenue both declined.

Coinbase disclosed that total trading volume in the second quarter dropped sharply to $92 billion from $145 billion in the first quarter, a 57% drop from $217 billion in the second quarter of last year. Trading revenue in the second quarter was $327 million, a 13% drop from the previous quarter, which was mediocre given the low trading volume, with $375 million in the first quarter and $655 million in the second quarter of last year.

Among them, user trading revenue in the second quarter was US$310 million, a decrease of 12% from the previous quarter, and trading volume was US$14 billion, a decrease of 33% from the previous quarter. Institutional trading revenue in the second quarter was US$17 million, a decrease of 24% from the previous quarter, and trading volume was US$78 billion, a decrease of 37% from the previous quarter.

Subscription and service revenue in the second quarter was $335 million, down 7% from the previous quarter. From a sequential perspective, the decline in subscription and service revenue was due to a decline in interest income due to the decline in USDC market value.

Coinbase's interest income fell to $201 million from $241 million in the first quarter. Of the second quarter's interest income, $151 million came from its USDC holdings, down from $199 million in USDC interest income in the first quarter, which the company cited as an important reason for the 28% drop in USDC market value. By the end of the quarter, Coinbase said it had about $1.8 billion in USDC on its platform.

Assets on the platform (AOP) were $128 billion, down 1% from the previous quarter. Blockchain incentive revenue increased 19% from the previous quarter to $88 million, accounting for 13% of net revenue. Custody fee revenue was $17 million.

Spending down

Total operating expenses in the second quarter were $781 million, down 13% from the previous quarter. Transaction expenses in the second quarter were $108 million, up 12% from the previous quarter; recurring operating expenses, including technology and development, sales and marketing, and general and administrative expenses, were down 1% from the previous quarter. Among them, sales and marketing expenses were $84 million, up 31% from the previous quarter; technology and development expenses were $321 million, down 10% from the previous quarter; general and administrative expenses were $259 million, up 4% from the previous quarter; other operating expenses were $11 million, mainly including crypto impairment expenses.

prospect

Regarding the outlook for the third quarter, Coinbase said it had generated about $110 million in trading revenue in July and said it expects third-quarter subscription and service revenue to reach at least $300 million in the third quarter.

“Q2 was a strong quarter for Coinbase as we executed effectively and demonstrated resilience in a challenging environment,” Coinbase CEO Brian Armstrong said in a statement. “We have cut costs, are operating efficiently, and remain well-positioned to build the future of the crypto economy and help drive greater regulatory clarity.”

Regarding 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, but considering the continued decline in USDC’s market value and the regulatory challenges faced by staking projects, whether it can continue to have high income in the future seems to face certain risks.