Coinbase (NASDAQ:COIN) has released Q4 earnings along with full-year 2022 numbers, and while the crypto exchange beat both on the top and bottom line, shares are little impressed in after-hours trading.
In its shareholder letter, Coinbase said that its Q4 results “were consistent with our outlook, including coming in well within our full-year Adjusted EBITDA loss guardrail we conveyed in February 2022.” During the latter half of the year, Coinbase moved to slash expenses, including reducing employee headcount.
During Q4 2022, Coinbase reported $605 million in revenue in comparison to $2.49 billion in the year prior quarter. For the full year of 2022, Coinbase booked $3.149 billion in revenue, a significant drop from 2021, when the company generated $7.355 billion.
Coinbase lost $557 million during Q4, a dramatic change from earning $840 million in Q4 2021. For the full year 2022, Coinbase lost $2.625 billion versus a positive $3.624 billion in 2021.
“To state the obvious, 2022 was a challenging year for crypto markets and our transaction revenues. As macroeconomic indicators like inflation remained high and interest rates rose throughout the year, crypto market cap declined along with broader equity markets. These weakening market conditions became exacerbated by two idiosyncratic events. The first was the depegging of $LUNA in Q2’22 which contributed to a ~60% crypto market cap decline in that quarter and exposed poor risk management practices in crypto, which ultimately helped drive the credit related bankruptcies of Three Arrows Capital, Voyager, and Celsius. The second event was the collapse of FTX in Q4’22, which was the result of fraud, and helped drive additional credit-related bankruptcies.”
Transaction revenue during 2022 took a serious haircut, cratering by more than half. In 2022, transaction revenue was $2.356 billion compared to $6.837 billion in 2021.
Coinbase said that their January 2023 headcount reduction and ongoing across-the-board cost management efforts should result in a 30%+ reduction in Q1 2023 expenses compared to Q4 2022.
While it is hard to put a positive spin on the results in the current economic and regulator environment, Coinbase said that new regulation is on the way, and they believe they will benefit from the changes.
“In the face of this disjointed approach in the United States, the need for federal legislation is more important than ever. We believe and strongly advocate that the United States should follow the lead of jurisdictions around the world that have created frameworks to establish consistency and certainty for the industry. Congress seems to recognize this need – it has held multiple hearings on crypto since the fall of FTX. We expect the relevant committees in Congress to begin concrete action to develop and consider crypto-related legislation. Tangible progress in Congress will be important, and will also demonstrate to relevant agencies the importance of allowing crypto companies to operate in and with the regulated sphere in ways that advance the goals of consumer protection, protect against systemic risk, and grow this innovative industry.”
Recently, Coinbase CEO and founder Brian Armstrong spoke out about the SEC’s actions against crypto staking calling the SEC’s claims that firms should come in and register as “fake.”
The earnings call is scheduled for 430PM ET today.