Coinbase’s First-Quarter Profit, Revenue Top Forecasts

Olga Kharif, Bloomberg News

Monitors display Coinbase signage during the company's initial public offering (IPO) at the Nasdaq MarketSite in New York, U.S., on Wednesday, April 14, 2021. Coinbase Global Inc., the largest U.S. cryptocurrency exchange, is set to debut on Wednesday through a direct listing, an alternative to a traditional initial public offering that has only been deployed a handful of times. Photographer: Michael Nagle/Bloomberg , Bloomberg

(Bloomberg) -- Coinbase Global Inc. posted higher-than-forecast first-quarter revenue and profit as a resurgence in cryptocurrency prices reawakened demand from individual investors.

Revenue more than doubled to $1.58 billion, topping the $1.32 billion average estimate of analysts surveyed by Bloomberg. Net income was $1.17 billion, or $4.40 a share, compared with a loss of $79 million, or 34 cents, a year earlier, the largest US crypto exchange said in a shareholder letter Thursday. Net income benefitted from $737 million in pre-tax crypto asset mark-to-market gains.

“It’s a complex quarter, because it’s an accounting change, people need to digest what the impact is,” Coinbase Chief Financial Officer Alesia Haas, said in an interview.

Coinbase’s trading volume and mobile-app downloads surged during the rival of demand that was driven by the January introduction of US spot Bitcoin exchange-traded funds. Bitcoin rose a record of almost $74,000 in March. The second consecutive quarterly profit followed seven straight losses, a period that has been referred to as crypto winter.

For the current quarter, Coinbase said it generated more than $300 million in transaction revenue in April, but said it continues “to urge caution in extrapolating these results.” It also projected about $525 million to $600 million in subscription and services revenue in the second quarter.

“Guidance is good, but a lot of it depends on crypto prices, which came down in April,” said Paul Gulberg, a senior industry analyst at Bloomberg Intelligence. The accounting change “plays to the same tune of crypto price-dependence.”

Coinbase also referenced a Manhattan federal court’s decision in March to dismiss the SEC’s claim that the company had acted as an unregistered broker through its Wallet offering in its shareholder letter, but also mentioned that the court denied the company’s request to dismiss the case entirely. The SEC alleged in a lawsuit in June that Coinbase sells unregistered securities and illegally operates as an exchange, a broker and a clearing agency in violation of federal securities laws.

“Clarity is the ultimate goal and the court’s decision continues us on that path,” the letter said. “We remain confident in the strength of our legal arguments and are fully prepared for an intensive discovery phase throughout the remainder of the year.”

Consumer transaction revenue nearly doubled from the fourth quarter, to more than $1 billion, driven mostly by retail users. Institutional customers accounted for the majority of trading volume.

Shares of Coinbase fell about 2% in after-hour trading. The stock has climbed almost 30% this year, while Bitcoin has increased around 40%.

“I am hopeful that when people digest the news, they’ll see it’s a strong story,” Haas said.

--With assistance from Hannah Miller.

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