Coinbase Reports $1 Billion Loss In Q2
Coinbase is the largest centralized cryptocurrency exchange in the United States. Coinbase went public on April 14, 2021. In Quarter 2 of 2022, Coinbase saw a 30% drop in trading volume and 35% decrease in transaction revenue. The Q2 report was released yesterday, August 9and includes more information this quarter, organized into 6 chapters to “help investors better understand their results.”
Chapter 1 highlights that the crypto market is cyclical. During down markets, Coinbase remains focused on building products. They even go on to state that “each crypto cycle landed higher than the previous one, due to innovations built during the down turns.” Chapter 2 goes on to explain how these down markets are reflected in their Q2 results, but highlights the fact that their year-over-year growth in subscription and services grew 44%.
Like many of the other crypto companies reporting losses in Q2, Coinbase was just as effected by the aftermath of the Terra Luna collapse, crypto liquidity crisis, and macroeconomic conditions.
The other chapters of the report outline how Coinbase is reacting and adjusting to market conditions. If trends continue, Coinbase expects total trading volume will be lower in Q3 compared to Q2 while their subscription and services revenue will be slightly higher.
Visit the Q2 Earnings Call page on Coinbase to review the webcast, Q&A, press release, shareholder letter, and the earnings and analyst call transcripts.
Their number of monthly transacting users declined in Q2 to 8 million and Coinbase expects this number to be further lowered in Q3.
The majority of Coinbase’s expenses are spent on technology and development as well as administrative expenses. In Q3, these expenses are expected to be around $1 billion, which includes $400 million in stock-based compensation. Sales and marketing expenses are expected to be around $100 million.
In their full-year 2022 outlook, some estimates have been adjusted to better react to the current market conditions. Coinbase lowered their expense range for Technology & Development and General & Administrative expenses from $4.25 - $5.25 billion to $4 - $4.25 billion. The lower range is a direct result of their hiring freeze and cutting around 18% of their work force back in June.
