Surging trading volumes — and for Coinbase, profits.
To that end, Coinbase gave its first earnings report Thursday (May 13) as a publicly traded company. In terms of headline numbers, the firm largely met its own previously announced expectations. But the results were just below analyst expectations, and the stock swung between gains and losses after hours.
It’s the metrics that matter. Drilling into the announcement, which came through a shareholder letter, Coinbase’s first quarter results show just how popular cryptocurrency trading is getting. And the space, by Coinbase’s own admission, is about to get a lot more crowded.
The company’s reported $1.8 billion in revenues were just slightly below the $1.8-plus billion expected by analysts in the quarter that ended in March, soaring above the $191 million seen last year. The net income line swelled from $32 million to $771 million, according to the letter. Earnings came in at $3.05 a share, which missed analyst expectations by four pennies.
Looking Toward Competition
“Despite our strong Q1 results, the rapid expansion of the cryptoeconomy also creates challenges for Coinbase,” the company said in the letter. “Competition is increasing as new market entrants join the cryptoeconomy every month. Our competitors are supporting certain crypto assets that are experiencing large trading volume and growth in market capitalization that we do not currently support, as well as offering new products and services that we do not offer.”
On the earnings call, management said that it will look to list new assets, such as Dogecoin, which is widely known as a “joke” coin that has quickly become a marquee name in crypto. Availability will be within a matter of weeks.
CEO Brian Armstrong said on the call that in terms of strategy, the firm may in some cases wait for coins to reach some level of scale and acceptance before offering trading, while the company would look to be the first exchange for other listings.
The letter detailing results showed that the platform had more than 56 million verified users at the end of the quarter, with more than 8,000 institutions, up from a total tally of 34 million users in the same period last year. Monthly transacting users came in at 6.1 million, more than doubling over the end of the fourth quarter of 2020.
Total assets traded on the platform came in at $223 billion in the most recent quarter, up from $17 billion in the year ago period, the letter stated. Trading volume was $334 billion, and institutional trading volume accounted for $215 billion of that. Bitcoin accounted for 39 percent of all trading volume, followed by Ethereum at 21 percent.
But in a nod to retail interest, consider the fact that retail was $1.45 billion of the total $1.54 billion in net revenues, according to the letter.
In further detail on retail traders’ interest in crypto and its impact on Coinbase, the company said in the letter: “Over the last two years, we have seen average annual net revenue per retail [monthly transacting user (MTU)] range between $34 [and] $45 per month, with the low end of this range occurring in 2019, a period of low Bitcoin price and low crypto asset price volatility, and the high end of the range occurring in 2020, a period of rising Bitcoin price. Given the strong performance of Q1 2021, we anticipate the annual average net revenue per user will exceed this historical range.”
May 14, 2021 at 12:59AM