A $1.1 Billion Loss!?
At face value, the $1.1 billion net loss is a red flag for any business; however, much of the loss seems to be attributable to accounting tools at Ms. Haas’s disposal rather than actual cash burn. The following article explores Coinbase’s liquidity after the recent headline loss of $1.1 billion.
Approximately $453 million in losses were attributable to non-cash impairment expenses. This means $COIN owned assets that lost a bunch of value, but it did not result in actual cash outflows (these losses will likely be used to offset taxable gains in other segments of the business in the future). Also, restructuring expenses accounted for another $42 million in operating expenses.
After adding back these and other non-cash expenses, $COIN presents that the actual EBITDA loss is more in line with -$151 million:
Ultimately, balance sheet cash changed from $6.1 billion to $5.7 billion over Q2. This strong cash position would allow Coinbase to operate at last quarter’s run rate for several years.
Finally, these results were predictable. Coinbase projected a $500 million EBITDA loss for 2022, which was on track to operate within the confines of their prior guidance. Despite the stressed market conditions, the company performed in line with disclosed expectations:
The latest financial reports also detail some negative news for the industry related to market demand. A key piece of information for growth relates to trading volumes, which have declined almost 74% for retail and 54% for institutions since Q4 2021:
Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Do your own research.