Cryptocurrency Exchange Coinbase and a Historical Moment

Cryptocurrency exchanges are working hard to expand their business activities. This week, an American cryptocurrency exchange Coinbase released an S-1 filing of its direct listing. As a reminder, the company’ public debut has been hotly anticipated thanks to recent activity amongst bitcoin as well as other blockchain-based assets, the company’s controversial positions, and its spiking valuation on private exchanges.

Interestingly, Coinbase’s financials show a company that grew rapidly from 2019 to 2020. Furthermore, Coinbase also crossed the threshold into unadjusted profitability. People should keep in mind that, it is common amongst quickly growing tech companies to lean more heavily on adjusted profit and other more flattering metrics.

Interestingly, Coinbase lost $30.4 million against $533.7 million in revenue in 2019. Furthermore, the company’s net income rose to $127.5 million against $1.28 billion in revenue in 2020. The cryptocurrency exchange grew just over 139% in 2020, a massive improvement on its 2019 results. The data mentioned above is helpful to understand why some investors are bidding its value up as much as $100 billion on the private markets.

Coinbase and investors

It is worth noting that, Coinbase has highly variable revenues. As a reminder, an American cryptocurrency exchange posted revenues of $190.6 million in Q1 in 2020. However, in the second quarter of 2020, that number fell to $186.4 million. However, the company’s topline accelerated in Q3 2020 to $315.4 million and $585.1 million in the final quarter of 2020.

Interestingly, it is easy to see why Coinbase is moving forward with its direct listing now; the cryptocurrency exchange just posted an excellent quarter.

The company generated an operating income of $226.6 million as well as a net income of $176.8 million in the last quarter of the year. Importantly, those represent high-quality profitability improvements from preceding periods.

Coinbase generates the vast majority of its revenues from transaction revenues. Moreover, the company has a comparatively modest subscription and services revenue category.

Last but not least, the company swung from operating cash-flow negative in 2019 to incredibly cash-flow positive in 2020. Nevertheless, the $3.0 billion in positive operating cash flow that Coinbase generated in 2020 includes $2.7 billion “related to cash from the change in custodial funds due to customers” decreasing the number to a more understandable scale.

The company continues to grow and it is not surprising that investors, as well as analysts, are closely monitoring the situation. Coinbase has the potential to reach even better results.