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Coinbase Global (COIN - Free Report) , the $15 billion cryptocurrency exchange that lost over two-thirds of its value in the last month, delivered a crushing reversal of fortunes last week in its Q1 report on Tuesday evening May 10.
Lower crypto prices and volatility in the quarter that ended in March, led to lower trading volumes and resulted in a drop in net revenue of 27% year-over-year to $1.2 billion.
Meanwhile, net income plummeted from $771 million to a loss of $430 million. Primarily, a doubling of operating expenses during the quarter created the whopping loss.
But the stock drop of over 40% in the two days following that report was also fueled by speculation about the company warning that "in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings, and such customers could be treated as our general unsecured creditors."
This sent further panic through a crypto market already reeling with the crash of Bitcoin to $30,000 -- and subsequently to $25,000 -- and the concurrent collapse of a "stablecoin" called Luna.
Quarter Details
Coinbase Global reported a Q1 loss of $1.98 per share in contrast to the year-ago earnings of $3.05 per share.
In the quarter, Coinbase witnessed lower trading volumes in both retail and institutional as the trend of both lower crypto asset prices and volatility that began in late 2021 continued into the first quarter of 2022. Active monthly users declined 19% from the fourth quarter.
In the days since the company report, the Zacks Consensus EPS estimate for this year has been slashed from a profit of 51-cents to a loss of $7.47, representing an annual decline of over 150%. A few weeks ago, the full-year projection had been for a profit of $3.07.
And next year's profit consensus has also been shredded from $5.70 to a loss of 93-cents in the last few weeks.
Total Q1 revenues came in at $1.2 billion, which missed the Zacks Consensus Estimate of $1.4 billion. The top line drop reflected decreases in transaction revenues, subscription and services revenues as well as other revenues.
Monthly Transacting Users (MTUs) grew to 9.2 million, up 50.8% year over year, driven by higher retail and institutional volume.
The trading volume of $309 billion declined 7.8% year over year, attributable to lower trading volume in both Retail and Institutional. Total trading volume continued to diversify beyond Bitcoin into Ethereum and other crypto assets.
Total operating expenses more than doubled year over year to $1.7 billion, attributable to an increase in transaction expense, technology and development, sales and marketing and general and administrative and other operating expense.
Adjusted EBITDA was $20 million in the reported quarter, a drop from $1.2 billion reported in the year-ago quarter.
Financial Update
As of Mar 31, 2022, cash and cash equivalents were $6.1 billion, down 14.4% from the figure at 2021 end. Total assets were $20.9 billion, down 1.8% from the level at 2021 end.
At the end of the first quarter of 2022, the long-term debt of the company was $3.4 billion, up 0.1% from 2021 end.
Total shareholders’ equity was $6.5 billion at the end of the reported quarter, up 1.8% from the value on Dec 31, 2020.
Cash used in operations was $830.1 million versus cash from operations of $3.4 million in the year-ago quarter.
Q2 Guidance
Coinbase estimates retail MTU and total Trading volume to be lower in second-quarter 2022 compared with first-quarter 2022.
Transaction expenses are expected to be in the lower twenties as a percent of net revenues.
Operating expenses will be between $1.1 and $1.3 billion. Sales and marketing expenses are expected to be in the mid-to-high teens of as a percentage of net revenues.
2022 Guidance
The annual average retail MTU is expected to be between 5 and 15 million.
While subscription and services revenues are expected to strongly grow over 2021, transaction expenses, as a percentage of revenues, are expected to be in the low 20%. Sales and marketing expenses, as a percentage of revenues, are expected to be about 12-15%. Technology & development and general & administrative expenses are projected to be between $4.25 and $5.25 billion.
Adjusted EBITDA losses are expected to be about $500 million.
Bottom line on COIN: While Cathie Wood's ARK Invest Innovation ETF (ARKK - Free Report) continues to back COIN and bought 860,000 more shares last week, other interested investors may benefit and keep their risk low by letting the dust settle here as the shares should see continued volatility. Best to wait until the earnings outlook stabilizes and stops heading down. The Zacks Rank will let you know.
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Bear of the Day: Coinbase Global (COIN)
Coinbase Global (COIN - Free Report) , the $15 billion cryptocurrency exchange that lost over two-thirds of its value in the last month, delivered a crushing reversal of fortunes last week in its Q1 report on Tuesday evening May 10.
Lower crypto prices and volatility in the quarter that ended in March, led to lower trading volumes and resulted in a drop in net revenue of 27% year-over-year to $1.2 billion.
Meanwhile, net income plummeted from $771 million to a loss of $430 million. Primarily, a doubling of operating expenses during the quarter created the whopping loss.
But the stock drop of over 40% in the two days following that report was also fueled by speculation about the company warning that "in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings, and such customers could be treated as our general unsecured creditors."
This sent further panic through a crypto market already reeling with the crash of Bitcoin to $30,000 -- and subsequently to $25,000 -- and the concurrent collapse of a "stablecoin" called Luna.
Quarter Details
Coinbase Global reported a Q1 loss of $1.98 per share in contrast to the year-ago earnings of $3.05 per share.
In the quarter, Coinbase witnessed lower trading volumes in both retail and institutional as the trend of both lower crypto asset prices and volatility that began in late 2021 continued into the first quarter of 2022. Active monthly users declined 19% from the fourth quarter.
In the days since the company report, the Zacks Consensus EPS estimate for this year has been slashed from a profit of 51-cents to a loss of $7.47, representing an annual decline of over 150%. A few weeks ago, the full-year projection had been for a profit of $3.07.
And next year's profit consensus has also been shredded from $5.70 to a loss of 93-cents in the last few weeks.
Total Q1 revenues came in at $1.2 billion, which missed the Zacks Consensus Estimate of $1.4 billion. The top line drop reflected decreases in transaction revenues, subscription and services revenues as well as other revenues.
Monthly Transacting Users (MTUs) grew to 9.2 million, up 50.8% year over year, driven by higher retail and institutional volume.
The trading volume of $309 billion declined 7.8% year over year, attributable to lower trading volume in both Retail and Institutional. Total trading volume continued to diversify beyond Bitcoin into Ethereum and other crypto assets.
Total operating expenses more than doubled year over year to $1.7 billion, attributable to an increase in transaction expense, technology and development, sales and marketing and general and administrative and other operating expense.
Adjusted EBITDA was $20 million in the reported quarter, a drop from $1.2 billion reported in the year-ago quarter.
Financial Update
As of Mar 31, 2022, cash and cash equivalents were $6.1 billion, down 14.4% from the figure at 2021 end. Total assets were $20.9 billion, down 1.8% from the level at 2021 end.
At the end of the first quarter of 2022, the long-term debt of the company was $3.4 billion, up 0.1% from 2021 end.
Total shareholders’ equity was $6.5 billion at the end of the reported quarter, up 1.8% from the value on Dec 31, 2020.
Cash used in operations was $830.1 million versus cash from operations of $3.4 million in the year-ago quarter.
Q2 Guidance
Coinbase estimates retail MTU and total Trading volume to be lower in second-quarter 2022 compared with first-quarter 2022.
Transaction expenses are expected to be in the lower twenties as a percent of net revenues.
Operating expenses will be between $1.1 and $1.3 billion. Sales and marketing expenses are expected to be in the mid-to-high teens of as a percentage of net revenues.
2022 Guidance
The annual average retail MTU is expected to be between 5 and 15 million.
While subscription and services revenues are expected to strongly grow over 2021, transaction expenses, as a percentage of revenues, are expected to be in the low 20%. Sales and marketing expenses, as a percentage of revenues, are expected to be about 12-15%. Technology & development and general & administrative expenses are projected to be between $4.25 and $5.25 billion.
Adjusted EBITDA losses are expected to be about $500 million.
Bottom line on COIN: While Cathie Wood's ARK Invest Innovation ETF (ARKK - Free Report) continues to back COIN and bought 860,000 more shares last week, other interested investors may benefit and keep their risk low by letting the dust settle here as the shares should see continued volatility. Best to wait until the earnings outlook stabilizes and stops heading down. The Zacks Rank will let you know.