Coinbase Beats Q4 Estimates, but Shares Fall on Outlook
The U.S.’s largest crypto exchange expects lower trading volumes and monthly transacting users in Q1.
Coinbase (COIN) shares fell in postmarket trading Thursday as the company reported strong fourth-quarter results but said it expects some headwinds in the first quarter.
Coinbase reported fourth-quarter revenue of $2.5 billion versus analyst estimates of $2.0 billion, while adjusted earnings per share came in at $3.32 , versus estimates of $1.94, according to FactSet. The company posted $2.3 billion in transaction revenue in the fourth quarter versus $1.1 billion in the third quarter.
Q4 trading volume of $547 billion was up from $327 billion in the third quarter. Coinbase also reported 11.4 million in monthly transacting users (MTU) in Q4 versus 7.4 million MTUs in Q3.
However, the crypto exchange said it has seen a drop in crypto asset volatility and prices versus all-time high levels in the fourth quarter, owing in part to macroeconomic factors and geographical instability in parts of the world. As a result, it expects retail MTUs along with total trading volume to be lower in the first quarter versus Q4.
Michael Safai, managing partner at crypto trading firm Dexterity Capital, said he wasn’t surprised by Coinbase’s strong Q4 results, given how the company has diversified beyond just bitcoin and ether. Safai noted that altcoins now make up close to 70% of Coinbase’s trading volume, versus around 40% in early 2021.
“All signs are pointing towards a continuation of this strategy, with its upcoming [non-fungible token] marketplace and its stated ambition to list every legal coin,” Safai said.
For 2022, Coinbase said it expects annual average retail MTUs of between five million to 15 million. "This wider than normal set of factors results in a wider range of potential outcomes for 2022. Simply put, we have less near-term visibility, and it is currently too early to provide a more precise range," Coinbase said in a statement.
The exchange also expects subscription and services segment revenues to be lower in Q1 versus Q4 2021.
The company is planning for “aggressive” investment in its business in 2022, though it says it will be ready for varying market conditions that may arise. “In the event of a material decline in our business, below the ranges we have planned for, we may slow down our investments and would expect to manage our adjusted EBITDA losses to approximately $500 million on a full-year basis.”
Coinbase said it expects to spend $4.25 billion to $5.25 billion on tech and development and general and administrative expenses in 2022. This includes the company's plans to hire 6,000 employees in 2022, largely on technology and development teams.
Shares of Coinbase were falling about 5% after-hours on Thursday. Shares are down about 30% this year, and nearly 50% since debuting on the Nasdaq in April of last year.
In the fourth quarter, Coinbase's institutional platform added or expanded relationships with Anheuser-Busch, Brex, Enfusion and Franklin Templeton.
Regarding listing more assets and trading pairs, Coinbase said that "as part of our strategy to serve as the primary crypto account and give our customers the greatest amount of choice, we want to list all legal assets."
On the company's earnings call, Coinbase's CFO Emilie Choi said the company doesn't view NFTs as a "zero-sum game" and sees opportunity for competitors to emerge. Additionally, CEO Brian Armstrong said the goal isn't to beat-out OpenSea, and the NFT market is ripe. Armstrong also said the NFT opportunities will be much larger than solely digital artwork. Coinbase has been planning to expand its NFT business, and reports last fall indicated its NFT marketplace had a waiting list of more than one million people who signed up on the first day it was announced.
This is a developing story and will be updated.
UPDATE (Feb. 24, 22:12 UTC): Updated with additional information throughout.
UPDATE (Feb. 24, 22:34 UTC): Updated with comments from Michael Safai.
UPDATE (Feb. 24, 23:33 UTC): Updated with earnings call commentary on NFTs.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.