Bank notes. Pixabay image.
This article presents the operating expenses of Coinbase Global, Inc. (NASDAQ: COIN).
Operating expenses are a big part of the company’s total costs and expenses.
In fiscal 2022, Coinbase’s operating expenses exceeded its net revenue, causing the company to incur an operating loss for the first time since 2020.
Therefore, understanding Coinbase’s operating expenses can provide insight into the company’s financial health and long-term viability.
Investors interested in Coinbase’s trading and transaction volumes may find the statistics on this page: Coinbase Trading Volume.
We’ll start by going through the table of contents.
Table Of Contents
Overview And Definition
A1. Types Of Operating Expense
Results By Year
B1. Operating Expenses By Year
B2. Growth Rates Of Operating Expenses By Year
B3. Operating Expenses To Net Revenue Ratio
Results By Quarter
C1. Operating Expenses By Quarter
C2. Operating Expenses By TTM
C3. Growth Rates Of Operating Expenses By TTM
C4. Operating Expenses To Net Revenue Ratio
Results By Category
D1. Operating Expenses By Type
D2. Growth Rates Of Operating Expenses By Type
D3. Operating Expenses By Type To Total Expenses Ratio
D4. Operating Expenses By Type To Net Revenue Ratio
Conclusion And Reference
S1. Conclusion
S2. References and Credits
S3. Disclosure
Types Of Operating Expense
Coinbase’s operating expenses include transaction, technology and development, sales and marketing, general and administrative, restructuring, and other operating expenses.
Transaction Expense
Coinbase defines transaction expense as costs incurred to operate its platform, process crypto asset trades, and perform wallet services.
For example, these costs include account verification fees, miner fees for processing transactions on blockchain networks, fees paid to payment processors, and crypto asset losses due to transaction reversals.
Additionally, transaction fees include rewards paid to Coinbase users for staking activities.
Technology And Development
Coinbase defines expenses related to personnel, infrastructure, and development of its platform, including new products and services and acquired technology, as part of the technology and development costs.
Sales And Marketing
Sales and marketing expenses include costs associated with acquiring and retaining customers, advertising and marketing, and employee-related fees.
General And Administrative
General and administrative expenses refer to the costs incurred to support Coinbase’s business, including personnel-related fees for executive, customer support, compliance, finance, human resources, legal, and other support operations.
These expenses include software subscriptions for support services, facilities, and equipment, depreciation, amortization of acquired customer relationship intangible assets, gains and losses on disposal of fixed assets, legal reserves and settlements, and other general overhead.
Operating Expenses By Year
Coinbase-operating-expenses-by-year
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Coinbase’s total operating expenses for fiscal year 2022 reached US$5.9 billion, an increase of over US$1 billion from fiscal year 2021.
A primary concern is that Coinbase’s operating expenses have risen nearly 600% since fiscal year 2020.
Growth Rates Of Operating Expenses By Year
Coinbase-growth-rates-of-operating-expenses-by-year
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Coinbase’s total operating expenses increased by 448% and 24% in fiscal year 2021 and 2022, respectively.
The 2022 growth rate is a far lower figure than the one measured in 2021, implying a significant slowdown in the growth of Coinbase’s operating costs.
Operating Expenses To Net Revenue Ratio
Coinbase-operating-expenses-by-year-to-net-revenue-ratio
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Coinbase’s percentage of total operating expenses to net revenue reached a massive 187.5% in fiscal 2022, pointing to an operating cost that far exceeded its net revenue.
As a result, Coinbase incurred a substantial operating loss in fiscal 2022, which topped as much as US$2.7 billion.
Before 2022, the ratio was only 64.8% and 76.1% in fiscal 2021 and 2020, respectively, far lower than in 2022.
Operating Expenses By Quarter
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Coinbase recorded total operating expenses of $754 million, $782 million, and $897 million in Q3, Q2, and Q1 2023, respectively.
The numbers for this period are notably lower than the ones reported during the same period in 2022.
Operating Expenses By TTM
Coinbase-operating-expenses-by-ttm
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The TTM plot appears much smoother than the quarterly plot and clearly displays the trend of Coinbase’s total operating expenses.
In 3Q 2022, Coinbase’s total operating expenses had peaked at over US$6 billion on a TTM basis but have since decreased.
The TTM figure reached US$3.6 billion as of 3Q 2023, marking the lowest result recorded since 2022.
Growth Rates Of Operating Expenses By TTM
Coinbase-growth-rates-of-operating-expenses-by-ttm
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Coinbase has been trying to reduce its massive operating expenses, as reflected in the declining growth rates shown in the chart above.
As shown in the chart above, the growth rates have significantly declined and become negative since 2022, indicating the company’s aggressive efforts at cutting its expenses and costs.
Operating Expenses To Net Revenue Ratio
Coinbase-operating-expenses-by-ttm-to-net-revenue-ratio
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With respect to the net revenue, Coinbase’s operating expense ratio has started to decline after peaking at nearly 188% by the end of fiscal 2022.
As of 3Q 2023, the ratio of operating expenses to net revenue slipped to 138%, the lowest figure since the first quarter of 2023.
Although Coinbase’s operating expenses have been trending down, they are still significantly higher than the net revenue, as reflected in the ratio presented in the chart above.
At a ratio of almost 140%, Coinbase’s operating expenses exceed its net revenue by a considerable margin.
Consequently, Coinbase has been operating at a loss since 2022. As of 3Q 2023, the company incurred an operating loss of US$277 million in the nine months ended on September 30.
Operating Expenses By Type
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As discussed earlier, Coinbase’s operating expenses are categorized into several types, such as transaction-related, sales and marketing, technology and development, general and administrative, restructuring, and other expenses.
Coinbase’s restructuring expenses have been insignificant and are not presented in the chart above.
That said, Coinbase’s technology and development cost appears to account for most of the company’s total operating expenses, as shown in the chart above.
The expenses for technology and development nearly doubled in fiscal 2022, reaching US$2.3 billion, which is over 700% higher than in 2020.
Coinbase’s general and administrative expenses have increased from $280 million in fiscal year 2020 to $1.6 billion in 2022, representing a 471% increase from 2020 and a 76% increase from 2021.
The expenses for transaction fees and sales and marketing were the only costs that declined in 2022, reaching US$630 million and US$510 million, respectively.
Growth Rates Of Operating Expenses By Type
Coinbase-growth-rates-of-operating-expenses-by-type
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Coinbase’s transactions and sales and marketing were the only expenses that declined in fiscal 2022, as shown in the chart above.
Technology and development expenses grew by 80% in 2022 over 2021, while general and administrative increased by 76% year-over-year.
A noteworthy trend is that the growth of all expenses is significantly lower in 2022 compared to that of 2021.
In short, Coinbase’s transaction expense saw the largest decline among all operating expenses in fiscal year 2022, at 50% year-over-year.
Operating Expenses By Type As A Percentage Of Total Expenses
Coinbase-operating-expenses-by-type-to-total-expenses-ratio
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Since fiscal year 2020, Coinbase has allocated the majority of its operating expenses towards technology and development.
In fiscal year 2022, these expenses accounted for 39% of the company’s total operating costs, up from 31% in 2020.
Coinbase’s second-highest expense category is general and administrative expenses, accounting for 27% of total operating expenses in fiscal 2022.
Despite being one of the largest expense categories, the ratio for general and administrative expenses has declined from 32% in 2020 to 27% in 2022.
Coinbase’s transaction expense comprised only 10.7% of its total operating expenses as of fiscal 2022.
Before 2022, transaction expenses were among the highest, accounting for as much as 27% and 15.6% of its total operating expenses in 2021 and 2020, respectively.
Coinbase allocated only 8.6% of its total operating expenses in 2022 towards sales and marketing, a significant decrease from 13.9% in 2021.
Operating Expenses By Type As A Percentage Of Net Revenue
Coinbase-operating-expenses-by-type-to-net-revenue-ratio
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It’s unsurprising that technology and development expenses account for the largest percentage of Coinbase’s net revenue, as they are one of the biggest expenses.
As presented in the chart above, the ratio of Coinbase’s technology and development expense to net revenue reached 74% as of fiscal 2022, up significantly from the 17.6% recorded in 2021.
Being the second-highest expense, Coinbase’s general and administrative expense reached 51% of its net revenue in 2022, a significant rise over the 12.4% recorded in 2021.
The expenses of both transaction and sales and marketing accounted for 20% and 16% of Coinbase’s net revenue in 2022, respectively, which were far lower than the ratio of technology and development and general and administrative.
Conclusion
Coinbase, a cryptocurrency exchange company, has seen its operating expenses rise significantly in recent years.
However, the growth rate has slowed in fiscal year 2022 compared to the previous year, indicating the company’s efforts to reduce expenses.
Technology and development expenses account for the largest percentage of Coinbase’s operating costs, with general and administrative expenses being the second-highest expense category.
Transaction expenses saw the largest decline among all operating expenses in fiscal year 2022, at 50% year-over-year.
Credits and References
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.
Disclosure
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