This article delves into the cash position and cash flow statistics of Coinbase Global, Inc., one of the world’s most well-known and widely used cryptocurrency exchanges.
In a separate article, Coinbase Revenue And Profit, we discovered that Coinbase was once a highly profitable firm with operating income exceeding US$3 billion in fiscal 2021.
However, its profitability plummeted in 2022 due to increasing operating costs, resulting in a significant loss for the company.
The bad news is that the massive operating loss continues into the end of fiscal 2023.
Is the company’s cash flow having the same fate as its profitability?
Let’s take a look.
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To help readers understand the content better, the following terms and glossaries have been provided.
Operating Cash Flow: Operating cash flow (OCF) measures the cash generated by a company’s regular business activities. This metric indicates if a company can generate enough positive cash flow to sustain and expand its operations or if it needs external financing for capital expansion. In other words, OCF helps to assess a company’s ability to fund its current and future growth without relying on external sources.
Free Cash Flow: Free cash flow (FCF) refers to a company’s cash generated after accounting for the cash outflows supporting its operations and maintaining its capital assets. Simply put, it is the cash remaining after a company’s payment of operating expenses (OpEx) and capital expenditures (CapEx).
Cash Flow Margin: The cash flow margin is a financial ratio that calculates the cash generated as a percentage of total sales revenue over a specific period. This metric is a reliable indicator of a company’s cash flow efficiency.
USD Coin or USDC: A stablecoin issued by Circle that is backed by dollar-denominated assets held by the issuer in segregated accounts with U.S. regulated financial institutions. Coinbase and Circle co-founded the Centre Consortium, which supports and administers the governance of USDC.
Cash & Cash Equivalents
As of 3Q 2023, Coinbase had $5.1 billion in cash and cash equivalents, roughly in line with the figure a year ago but significantly down from the $7.1 billion recorded two years ago.
Despite having lower cash and cash equivalents, the figure has remained consistent for the past four quarters, indicating a stable cash position for the company.
Therefore, there is no cause for concern regarding Coinbase’s cash and cash equivalents, as the amount has not significantly decreased.
Total Cash On Hand
Besides having cash and cash equivalents, Coinbase also carries restricted cash and USD Coins (USDC).
According to Coinbase, USDC is a stablecoin that can be redeemed one USDC for one U.S. dollar on demand.
While not accounted for as cash or cash equivalents, Coinbase treats its USDC holdings as a liquidity resource.
That said, Coinbase’s total cash on hand reached US$5.5 billion as of 3Q 2023 after considering the restricted cash and USDC.
Although the latest cash on hand is lower than its peak figure of US$7.2 billion two years ago, it has remained consistent over the past several quarters, indicating a stable cash balance for the company.
Again, there is no cause for concern regarding Coinbase’s cash position, as the amount has not significantly dropped.
Cash On Hand To Current Assets Ratio
The plot illustrates that Coinbase’s current assets consist primarily of cash, representing almost 90% as of 3Q 2023.
The ratio has remained relatively the same since 2020, indicating that the company’s bank account is flush with cash.
Net Cash From Operations
Coinbase used to be a cash cow, with net cash from operations exceeding US$4 billion on a TTM basis.
Since reaching its peak in 4Q 2021, the company’s operating cash flow has significantly declined. It even came to negative values in 2023, indicating that it consumed more cash than it could generate.
The primary concern is that Coinbase’s negative operating cash flow could continue.
The good news is that the negative operating cash flow has significantly decreased in recent quarters and turned positive, reaching over US$183 million as of 3Q 2023.
Therefore, Coinbase’s net cash from operating activities appears to have significantly recovered.
Free Cash Flow
Similarly, Coinbase used to generate a significant amount of free cash flow, topping nearly US$3 billion in 2021, as shown in the chart above.
However, during the post-COVID period, Coinbase’s free cash flow decreased significantly, reaching as low as -$2.2 billion in fiscal year 2021 on a TTM basis.
Despite the negative figures, the free cash flow appeared to have significantly recovered in recent quarters.
As of 3Q 2023, Coinbase’s free cash flow reversed to $72 million from negative values in previous quarters, indicating a significant improvement in the company’s cash flow.
Operating Cash Flow Margin
Coinbase’s operating cash flow margin hovered around 6.6% as of 3Q 2023, roughly in line with the ratio a year ago but down significantly from prior highs.
At this ratio, Coinbase only generates 6.6 cents of operating cash flow per dollar of revenue.
The good news is that the operating cash flow margin has significantly improved over the past several quarters, suggesting a remarkable recovery in the company’s cash generation.
Free Cash Flow Margin
Coinbase’s free cash flow margin topped 2.6% as of 3Q 2023, a significant improvement over the same quarter a year ago.
Again, Coinbase’s improving cash flow generation has led to a significant rise in free cash flow margin in recent quarters.
Net Cash Adjusted For Debt Borrowing And Repayment
Positive figures indicate cash inflow from debt borrowings, while negative figures indicate cash outflow for debt repayments.
That said, Coinbase’s cash inflow from debt borrowings between fiscal 2021 and 2022 exceeds US$3 billion on a TTM basis.
The positive net cash figures have slowly decreased and reversed to negative values since the end of fiscal 2022, suggesting cash outflow for debt repayment.
In other words, Coinbase has not taken on any new debt since the end of 2022 and has been repaying its existing debt.
The cash outflow totaled about US$222 million as of 3Q 2023 on a TTM basis.
This figure slightly exceeded net cash from operations but significantly surpassed free cash flow, indicating Coinbase may have used cash on hand to repay debt.
Even if Coinbase were to use its cash on hand to repay existing debt, the amount represents a pin in the bucket compared to its enormous cash balance, which totaled over US$5 billion as of 3Q 2023.
Therefore, Coinbase’s cash outflow for debt repayment should not be a cause for concern for investors.
Coinbase held a significant cash balance as of 3Q 2023, notably at US$5 billion.
Coinbase’s negative cash flow has significantly narrowed in recent quarters and reversed to a positive figure in the latest quarter, indicating a recovery in cash flow generation.
Coinbase’s cash outflow for debt repayment does not pose a problem to its cash position, as it represents only a tiny portion of its enormous cash on hand.
References and Credits
1. All financial figures presented in this article were obtained and referenced from Coinbase Global, Inc.’s annual and quarterly filings, earnings reports, news releases, shareholder presentations, etc., which are available in Coinbase Investor Relations.
2. Pixabay images.
References and examples such as tables, charts, and diagrams are constantly reviewed to avoid errors, but we cannot warrant the total correctness of all content.
The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.
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