from Jeff John Roberts
Coinbase announced its second quarter results on Tuesday afternoon, reporting a loss of $1.1 billion on revenue of $803 million. Both figures were below analysts’ expectations and are lower than what the company posted in the first quarter of the year.
The results also equate to the second consecutive quarterly loss for Coinbase, which posted huge gains after going public last year but struggled to maintain momentum during the recent “cryptocurrency winter.”
“We continue to take a long-term view and remain focused on the path forward. Q2 was a test of resilience for cryptocurrency companies and a complicated quarter overall. Dramatic market movements changed user behavior and trading volume, which impacted trading revenue,” the company said in a letter to shareholders.
One relatively bright spot is that the number of users transacting on Coinbase seemed to remain relatively stable at around 9 million.
In a conference call with investors, Coinbase’s CFO noted that much of the company’s $1.1 billion loss came as a result of accounting rules that force it to record impairments when cryptocurrency prices fall, but not record gains when prices rise. As a result, the actual loss was close to $640 million.
The company’s revenue from both retail and institutional trading fell sharply, while its custody and services business – both key priorities for Coinbase – also struggled. The only area of improvement came from a rise in interest income.
Coinbase’s earnings decline comes as the company is trying to cope with an industry-wide downturn in the cryptocurrency market and also to reassure nervous investors about a recent report that the US Securities and Exchange Commission is investigating the company for illegally trading securities. Coinbase also suffered a blow to its reputation last month when the Department of Justice announced that it had arrested a former product manager for insider trading.
In response to weaker-than-expected growth, CEO Brian Armstrong announced in June that Coinbase would lay off more than 1,100 employees, representing about 18% of its workforce.
However, the company had some good news earlier this month when it announced a partnership with investment giant BlackRock – a development that will make it easier for businesses to hold cryptocurrencies and which drove Coinbase’s share price up more than 20%.
Shares of Coinbase were down about 10% as of Tuesday afternoon, at around $87. In after-hours trading, they retreated closer to $83.
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