Shares for cryptocurrency exchange Coinbase were up 9% in after-hours trading as the company beat revenue expectations and posted a narrower-than-expected first-quarter loss.
Revenue was down 34% year-over-year, but still managed to beat analysts expectations by 18%, coming in at $772.5 million . Net loss narrowed to $79 million, a staggering 76% less than analysts’ expectations of $330 million, according to data from FactSet, compared with $429.7 million last year.
On the adjusted per-share basis used by Wall Street, the company lost 34 cents, narrower than the $1.45 expected.
Operating costs were almost halved to $896.4 million as the company laid off 950 employees, or 20% of its workforce, in January and minimized its real estate footprint, CEO Brian Armstrong said during the company’s earnings call.
The exchange’s user base grew 14.3%, FactSet data show, as the crypto market began to recover from a disastrous 2022. But new customers weren’t enough to make up for the staggering 53% decline in trading volume year-over-year, to $145 billion. Assets on the platform also fell 49% to $130 billion as the cryptocurrency market shrank by 30%, according to CoinGecko.
Regulatory uncertainty has pushed Coinbase to look abroad for its business opportunities, launching Bermuda-based Coinbase International Exchange on Tuesday. A Thursday note by Needham analyst John Todaro estimates that the exchange could bring in $30 million to $200 million of revenue a year.
The venture, focused on non-U.S. based institutional clients, offers perpetual futures for bitcoin and ether trading. While the domestic exchange caters largely to retail clients, with institutional transactions amounting to just 6% of the total, those trades accounted for 86% of volume in the latest period.
It’s been a busy week for the only publicly listed cryptocurrency company in the United States. Along with the new international branch, a federal appeals court in Texas ordered the Securities and Exchange Commission to provide an answer to Coinbase’s petition to the agency to clarify rules for digital assets and crypto currencies. The victory is a minor one, however, as the SEC is unlikely to give in without a fight.
Coinbase is continuously “looking for revenue diversification” as a way to safeguard the company in potential regulatory action, Chief Financial Officer Alesia Haas said during Thursday’s call.
Regulatory costs could also become a burden in upcoming quarters as the fight with the SEC continues. “While most specialists believe regulation would enable Coinbase to gain market share, the uncertainty involving future regulatory frameworks and current SEC regulation by enforcement may lead to increased costs from potential litigation,” analyst at global research firm Third Bridge Andrew McGee said in an emailed statement.
Coinbase also announced on Wednesday that it would stop issuing new loans via its Coinbase Borrow program, where users could get up to $1 million using bitcoin as collateral. The company said in an e-mailed statement that there is “no impact on customer’s outstanding loans.” It did not disclose how many users the program had.