By Paul Vigna
Coinbase Global Inc.'s profit surged in the first quarter, driven by a manic rally in bitcoin and other digital assets, the cryptocurrency exchange said in its first earnings report as a public company.
It earned $771 million, or $3.05 a share, in the quarter, up from $32 million a year earlier. Total revenue surged to $1.8 billion from $191 million. The top and bottom-line figures represent records for the company, which was founded in 2012 and is the largest bitcoin exchange in the U.S.
In early April, the company projected earnings of $730 million to $800 million on revenue of $1.8 billion.
Coinbase's revenue and profit have largely been driven by the explosion in the popularity of bitcoin and other digital currencies. The price of bitcoin rose to nearly $59,000 by the end of the first quarter, from about $7,300 at the beginning of 2020. It hit a record high of $64,802 on April 14 -- the same day Coinbase went public.
Those outsize gains attracted a new crowd of buyers. Some were high-profile hedge-fund managers like Paul Tudor Jones and Stanley Druckenmiller and companies like MicroStrategy Inc., Square Inc. and Tesla Inc. Others were individual investors and day traders, introduced to crypto through trading apps like Coinbase and Robinhood.
Coinbase's stock price has struggled since its debut. It opened at $381 following the company's direct listing and has since fallen steadily. On Thursday, shares closed down 6.5% at $265.10.
"The first-quarter results reflect the strength of the crypto price cycle," Chief Financial Officer Alesia Haas said in an interview. The company saw increased interest from both individual and institutional customers, she said.
At the end of the first quarter, the company had 56 million verified users, up from 34 million a year earlier. Active users, a group the company calls "monthly transacting users," rose to 6.1 million from 1.3 million.
Total trading volume was $335 billion. Assets on the company's platform rose exponentially, to $223 million from $17 million a year ago and $90 million in the fourth quarter.
The company was cautious about the rest of the year, noting in a letter to shareholders that the crypto market is "inherently unpredictable." Its trading volume and active users are driven "potentially materially" by changes in bitcoin's price and the market's volatility.
The company said for the second quarter it expects its key business metrics to meet or exceed the first quarter. It noted that the number of active users have continued to increase and at the current pace, total trading volume would match or slightly exceed the first quarter.
The bitcoin rally has driven awareness of Coinbase itself. Its app recently has been one of the top downloads on Apple's app store. The company has been actively marketing as well and plans to substantially increase those efforts this year, it said.
By one metric, institutional clients have become Coinbase's largest. Of $335 billion in trading volume, $215 billion came from institutional clients and $120 billion came from individuals.
Ms. Haas said the company is courting new institutional clients, with expectations that as those relationships grow, the company will persuade them to use more products and services. Indeed, part of Coinbase's long-term strategy involves generating more revenue from non-trading services, like custody and payments.
"We're in a bit of a land-and-expand mode," she said.
Yet, the company makes most of its revenue in transaction fees from individual investors. Transaction-fee revenue from those clients totaled $1.46 billion in the quarter, compared to $85 million from institutional clients.
Coinbase lists 109 digital assets on its exchange, but two of them -- bitcoin and ether -- comprise more than half of its trading volume. Bitcoin comprised 39% of its trading volume in the quarter and ether 21%.
The company added seven assets for trading in the quarter, and expects to add more in the coming quarters. Ms. Haas said the heavy concentration in bitcoin and ether trading, though, isn't a concern.
"We are happy," she said.
Write to Paul Vigna at firstname.lastname@example.org
(END) Dow Jones Newswires