Coinbase Revenue Breakdown, Profitability And Margin

Crypto asset. Pixabay image.

This article presents the revenue and revenue breakdown of Coinbase Global, Inc., (NASDAQ: COIN).

For your information, Coinbase provides a safe and easy-to-use technology as well as a financial platform to enable any person on earth who has an internet connection to discover, trade, and, engage with crypto assets and decentralized applications.

Crypto assets are primarily digital assets built using blockchain technology, including cryptocurrencies, stablecoins, and security tokens.

All told, let’s start with the following topics.

How Coinbase Makes Money

Coinbase earns its revenue primarily from 2 sources, namely transaction as well as subscription and services.

Transaction revenue, as the name implies, is transaction fees generated from trading that occurs on Coinbase’s platforms, which usually refer to the company’s website as well as the app.

Coinbase’s transaction revenue is highly dependent on the price and quantity of the assets being traded and is recognized as soon as the transaction is completed.

In addition to the price and quantity of assets being traded, the trading volume also determines Coinbase’s transaction revenue.

On the other hand, subscription and services revenue consist of several sources, and they are primarily blockchain rewards, custodial fees, and interest income.

Blockchain rewards refer to revenue earned by participating in activities on the blockchain such as participating in proof-of-stake networks.

Coinbase’s staking revenue is part of the blockchain rewards.

Custodial fees are revenue earned by securing customer crypto assets in dedicated cold storage. The fee is usually based on a percentage of the daily value of crypto assets under custody.

Apart from rewards and fees, Coinbase also earns interest income from a variety of sources and this includes interest income on fiat money under a revenue-sharing agreement with the issuer of USD Coin (USDC).

In addition, Coinbase also earns interest income on loans issued to consumers and institutional users while also making money off customer custodial funds as well as cash and cash equivalents held at certain third-party banks that provide interest.

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Revenue By Year

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On a consolidated basis, Coinbase’s total revenue hit $3.2 billion as of fiscal 2022, down significantly from the record figure of $7.8 billion reported in the prior year.

Despite the revenue being cut by more than half in 2022 from the prior year, it still represents an increase since fiscal fiscal 2019 and is up more than 500% in the past 4 years.

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Revenue By Quarter

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On a quarterly basis, Coinbase earned $708 million in revenue in 2Q 2023 and has guided for an in-line revenue figure for the next quarter in 3Q 2023.

On a long-term basis, Coinbase’s quarterly revenue in fiscal 2023 was roughly in line with those reported in fiscal 2022 but was down considerably from fiscal 2021.

Fiscal 2021 has been the best year for Coinbase in terms of revenue earned.

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Revenue By TTM

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The TTM plot presented in the chart above shows that Coinbase’s revenue has started trending down since fiscal 2022 and is down considerably as of fiscal 2023 compared to fiscal 2022.

As of 2Q 2023, Coinbase’s TTM revenue hit $2.7 billion compared to $5.8 billion measured a year ago, down more than 50% year-over-year.

In 3Q 2023, Coinbase’s TTM revenue is expected to come in at USD 2.8 billion, roughly in line with the prior quarter but down considerably over a year ago.

A trend worth mentioning is that Coinbase’s revenue growth seems to have stalled in post-pandemic times.

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Growth Rates Of Revenue By TTM

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As presented in the plot above, Coinbase’s revenue growth has considerably slowed in post-pandemic periods and even turned to a decline.

As of 2Q 2023, Coinbase’s revenue growth came in at -53% compared to +17% recorded a year ago.

Also, revenue growth is expected to be in decline again in the 3rd quarter of 2023 at -44.5% year-on-year.

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Operating Income, Net Income And Adjusted EBITDA

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From the perspective of profitability, Coinbase has been a profitable company until fiscal 2022 in which the company suffered huge losses.

As shown in the chart above, in fiscal 2022, Coinbase’s operating income dipped to a massive loss of $2.8 billion while net income also suffered a similar loss at $2.6 billion.

In the same fiscal year, Coinbase’s adjusted EBITDA incurred a first loss of $371 million over the past 4 years since fiscal 2019.

Coinbase’s negative profitability reported in fiscal 2022 is a huge contrast compared to the profits the company produced in the prior year.

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Operating Margin, Net Margin And Adjusted EBITDA Margin

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Similarly, Coinbase’s margins dipped considerably in fiscal 2022, underscoring for the first time the company incurred huge losses over the past 4 years.

As seen, Coinbase’s operating margin in fiscal 2022 reversed to a massive loss of -85% while net profit margin declined to -82%.

Even the adjusted EBITDA margin which used to be a positive figure plunged considerably as of fiscal 2022 to -11.6%.

In short, Coinbase’s profitability seems to have taken a beating in post-pandemic times.

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The United States And Rest Of World Revenue

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Coinbase gets a significantly huge portion of its revenue in the U.S., notably at $2.7 billion and $6.3 billion in fiscal 2022 and 2021, respectively.

On the other hand, Coinbase’s revenue streams from the rest of world totaled only $510 million and $1.5 billion in fiscal 2022 and 2021, respectively, a much lower portion compared to revenue from the U.S.

While revenue in the U.S. and the rest of world declined considerably in fiscal 2022, they were still up on a long-term basis, remarkably at more than 500% and 300% for the U.S. and the rest of world, respectively, from 2019.

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The United States And Rest Of World Revenue In Percentage

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Coinbase earned 84% of its total revenue in the U.S. as of fiscal 2022 and this ratio has been on the rise since fiscal 2019.

On the other hand, Coinbase’s revenue streams from the rest of world accounted for only 16% of the company’s total revenue in fiscal 2022, down significantly from 2019.

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Growth Rates Of The United States And Rest Of World Revenue

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Coinbase’s revenue streams in the U.S. and other countries of the world were down considerably in fiscal 2022, with the year-over-year growth rates tumbling to -58% and -66%, respectively.

The growth rates measured in fiscal 2022 were a contrast to the triple-digit growth rates reported a year earlier.

In short, Coinbase’s revenue in the U.S. and other regions of the world has significantly slowed in post-pandemic times after reporting stellar growth during the pandemic.

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Transaction And Subscription Revenue

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Coinbase earns the majority of its revenue from transaction in which trading fee is derived as mentioned in the overview section.

Although transaction revenue represents the bulk of Coinbase’s sales, it declined significantly in fiscal 2022 from a year ago.

In fiscal 2022, Coinbase’s transaction revenue declined to only $2.4 billion compared to $6.8 billion reported a year ago.

This figure was still considerably higher than the $793 million of subscription and services revenue reported in the same period.

While transaction revenue was significantly down, subscription and services revenue continued to rise, illustrating the resilience of this revenue segment in post-pandemic periods.

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Transaction And Subscription Revenue In Percentage

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From the perspective of percentages, Coinbase’s transaction revenue accounted for nearly 74% of the company’s total sales in fiscal 2022.

However, this ratio has been on a steady decline over the past 4 years.

In contrast, the percentage of Coinbase’s subscription and services revenue has continued to rise and reached nearly 25% as of fiscal 2022.

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Growth Rates Of Transaction And Subscription Revenue

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The growth rate plot above shows that Coinbase’s revenue growth under the transaction segment took a heavy beating in fiscal 2022 as the growth rate plunged to a record low of -65.5%.

Since transaction revenue accounts for the biggest portion of sales, it leads to the plunge of the total revenue as well as shown in the chart above.

In contrast, Coinbase’s subscription and services revenue rose by a massive 53% in fiscal 2022, defying the slowdown seen in the transaction revenue segment.

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Consumer And Institutional Users Revenue

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Coinbase’s transaction revenue can be further broken down into consumers and institutional users.

Under the transaction segment, Coinbase earns the majority of sales from consumers, totaling more than $2 billion and a massive $6.5 billion in fiscal 2022 and 2021, respectively.

On the other hand, Coinbase’s revenue from institutional users accounts for only a minor portion, totaling only $119 million and $346 million in fiscal 2022 and 2021, respectively.

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Consumer And Institutional Users Revenue In Percentage

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From the perspective of percentage, Coinbase’s transaction revenue from consumer accounts for more than 90% of the segment’s total revenue.

On the other hand, institutional users contribute only about 5% of sales to the segment’s total revenue.

These figures have remained roughly the same over the past 4 years.

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Bitcoin, Ethereum And Other Crypto Assets Revenue

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Coinbase’s transaction revenue also can be categorized by the type of crypto assets, ie. bitcoins, Ethereum, etc., apart from being categorized as consumer and institutional.

That said, Coinbase’s transaction revenue from other crypto assets makes up the bulk of the segment revenue, totaling as much as $1.2 billion and $3.7 billion in fiscal 2022 and 2021, respectively.

Coming in second was bitcoin in which the transaction revenue contribution from this crypto asset was roughly at $683 million and $1.7 billion in fiscal 2022 and 2021, respectively.

Ethereum contributed to about $518 million and $1.4 billion of transaction revenue in fiscal 2022 and 2021, respectively.

A trend worth mentioning is the significant decline in the transaction revenue of all crypto assets in fiscal 2022.

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Bitcoin, Ethereum And Other Crypto Assets Revenue In Percentage

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The transaction revenue from other crypto assets makes up roughly half of Coinbase’s total transaction revenue.

On the other hand, bitcoin contributes to only about one-third of Coinbase’s transaction revenue and this figure came in at 29% in fiscal 2022, down significantly from 2019.

Ethereum accounts for roughly one-fourth of Coinbase’s transaction revenue.

Despite being the smallest in terms of revenue contribution, the ratio of Ethereum has nearly doubled since fiscal 2019 and reached 22% as of fiscal 2022.

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Blockchain Rewards, Custodial Fees, And Interest Income

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For subscription and services revenue, Coinbase’s interest income forms the biggest portion of this segment revenue, notably at $327 million in fiscal 2022, up more than 10X from 2021.

Coming in second was Coinbase’s blockchain rewards revenue which totaled $275 million in fiscal 2022, up slightly from 2021.

Coinbase’s custodial fee revenue represented the smallest portion of the subscription and services revenue in fiscal 2022, only at $80 million, down significantly from 2021.

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Blockchain Rewards, Custodial Fees, And Interest Income In Percentage

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Coinbase’s interest income accounted for 41% of the total subscription and services revenue in fiscal 2022 while blockchain rewards accounted for 35% in the same period.

Coinbase’s custodial fee revenue formed only 10% of the total subscription and services revenue in fiscal 2022, the smallest among all revenue portions under this segment.

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Crypto Assets Sales Revenue And Corporate Interest Income

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Coinbase’s other revenue consists of crypto assets sales and corporate interest income.

According to Coinbase, crypto asset sales are periodic sales of the company’s crypto assets.

The purpose of these sales is to fulfill customer accommodation transactions for orders that do not meet the minimum trade size for execution on Coinbase’s platform or to maintain customers’ trade execution and processing times during unanticipated system disruptions.

For your information, Coinbase has custody and control of these crypto assets before the sale to the customer and records revenue at the point in time when the sale is processed.

All told, Coinbase’s crypto asset sales revenue totaled nearly $500 million in fiscal 2021 before tumbling to $0.6 million in fiscal 2022.

Coinbase’s crypto asset sales revenue had been on the rise since fiscal 2019 before abruptly becoming immaterial in fiscal 2022.

On the other hand, Coinbase’s corporate interest income has always been insignificant over the past 4 years and it hit only $45 million as of fiscal 2022.

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Crypto Assets Sales Revenue And Corporate Interest Income In Percentage

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You can see that Coinbase’s crypto asset sales accounted for nearly 100% of the other revenue segment in fiscal 2021 before taking a plunge in fiscal 2022 to 1.3%

In fiscal 2022, Coinbase’s corporate interest income represented almost all of the other segment revenue at 98.7%.

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Conclusion

In short, Coinbase’s revenue significantly slowed in fiscal 2022 and perhaps, may have already peaked in fiscal 2021.

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Credits and References

1. All financial figures presented in this article were obtained and referenced from Coinbase Global, Inc.’s SEC filings, earnings reports, financial statements, news releases, shareholder presentations, etc., which are available in Coinbase Investor Relations.

2. Featured images in this article are obtained free and are used without any attribution from Pixabay.

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Disclosure

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