Coinbase’s Loss Narrows While Revenue Rises More Than Forecast

Olga Kharif and Shelly Hagan, Bloomberg News

The Coinbase logo on a smartphone arranged in the Brooklyn borough of New York, US, on Wednesday, June 7, 2023. The list of digital tokens deemed as unregistered securities by the Securities and Exchange Commission now spans over $120 billion of crypto after the US agencys lawsuits against Binance Holdings Ltd. and Coinbase Global Inc. , Bloomberg

(Bloomberg) -- Coinbase Global Inc.’s third-quarter loss narrowed and revenue increased more than forecast as the largest US crypto exchange sought to weather an industrywide decline in trading activity.

Revenue increased 14% to $674 million, compared with a forecast of $654.7 million by analysts surveyed by Bloomberg. Trading volume was $76 billion, lower than a forecast of $80.4 billion. It was $92 billion in the second quarter. The net loss narrowed to $2.3 million from $545 million in the year-ago period, the exchange said in a shareholder letter Thursday.

“While rising retail take rates may have saved the day in 3Q, the underlying fundamentals continue at COIN to worsen,” Dan Dolev, a analyst at Mizuho who has an “underperform” rating on Coinbase, wrote in a note.

Coinbase benefited in part from greater contributions from its partnership with Circle in the USDC stablecoin, which earned more interest income on its reserves thanks to rising interest rates. It was still a seventh consecutive quarterly loss in the wake of the collapse in crypto prices from the highs seen in late 2021. The US Securities and Exchange Commission sued the firm in June for allegedly running an illegal exchange, broker and clearing agency.

“Net losses were minimized, supporting consensus for solidly positive 2023 adjusted Ebitda,” Paul Gulberg, a Bloomberg Intelligence banks analyst said. “Trading struggled, but subscription revenue was led by better stablecoin revenue.”

With trading volume down, Coinbase Chief Executive Officer Brian Armstrong has sought to provide a variety of services to customers, including those seeking to offer exchange-traded funds that invest directly in Bitcoin. The company is also expanding its derivatives business, letting eligible US customers trade crypto futures for the first time this week directly through it.

“What’s loud and clear is that investors would like to get access to crypto,” Chief Financial Officer Alesia Haas said about the ETFs in an interview on Bloomberg Television. “We believe it’s going to be additive to the market, we believe this is going to bring more capital to the market.”

The company doesn’t plan to make “significant” changes to its expenses in the current quarter, Haas said.

During Coinbase’s call with investors, Haas said the company will continue to experiment with fee structures, and may explore differentiating fees across coins and geographies. The company adjusted fees in the past.

“We continue to experiment with our pricing models, and price changes may impact future quarters,” Haas said on the call.

Coinbase’s shares have more than doubled this year, tracking the rebound in Bitcoin that is largely being spurred by expectations the SEC will sign-off on ETFs in the coming months.

The stock fell about 4.3% in late trading.

--With assistance from Sonali Basak and Katie Greifeld.

(Updates with comments from earnings call from the ninth paragraph.)