Coinbase had over $1 billion in quarterly profit after crypto-trading explosion. But costs are rising too.

By Bill Peters

Second-quarter spending 'driven primarily by elevated expenses associated with higher trading volumes,' including customer-support and infrastructure costs

A boom in crypto trading during the first quarter led cryptocurrency exchange Coinbase Global to a dramatic reversal of fortunes from the prior year, but the company warned of "elevated expenses" in the second quarter as it tries to handle the flood.

Shares of Coinbase (COIN) slipped 2.6% in after-hours trading on Thursday.

The company on Thursday reported first-quarter net income of $1.18 billion, or $4.40 a share. That contrasted with a loss of $78.9 million, or 34 cents a share, in the same quarter last year. The per-share profit figure reported on Thursday was far above FactSet forecasts for $1.15 a share.

Revenue, much of which comes from transaction fees, subscriptions and other services, more than doubled to $1.64 billion. That was above Wall Street forecasts for $1.36 billion.

Coinbase said that in April, it brought in over $300 million of total transaction revenue. And it said it expected subscription and services sales to land between $525 million and $600 million for the second quarter.

However, after first-quarter consumer trading volumes jumped 93% from the prior quarter, Coinbase said it would have to spend more to maintain its trading infrastructure.

"We expect [second-quarter] technology [and] development and general and] administrative expenses to be $660-$710 million, driven primarily by elevated expenses associated with higher trading volumes (notably customer support and certain infrastructure expenses)," it said.

BofA analysts, citing CoinGecko data, said in a note last month that trading volumes on Coinbase had jumped during the quarter, after the Securities and Exchange Commission in January approved exchange-traded funds that track bitcoin (BTCUSD), the world's biggest cryptocurrency. Those funds allow more mainstream, or at least more cautious, investors to get a piece of bitcoin's gains without some of the security risks of owning the volatile cryptocurrency directly.

Shares of Coinbase have rocketed more than 370% higher over the past 12 months. However, hand-wringing over the Federal Reserve's decision on whether to cut interest rates has weighed on the digital currency's price recently.

And Coinbase itself, like the rest of the crypto industry, has faced concerns from regulators. In March, a court denied Coinbase's request to dismiss an SEC lawsuit that accused the trading platform of running unregistered securities exchange.

-Bill Peters

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05-02-24 2304ET

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