The biggest takeaway from the earnings of crypto-related firms this week is not how bad the results were, but what they did to withstand the so-called crypto winter.
More mundane factors like cost cutting, higher interest rates and improved crypto accounting helped them beat expectations on revenue, earnings and customers. That may be faint praise for the once-high-flying stocks that were driven last year by a mania for digital coins. But that’s what investors got.
Here is what happened.
Bitcoin and micro strategy
In MicroStrategy’s ( MSTR ) earnings Tuesday, bitcoin was much less prominent in its financial statements compared to last quarter when the company recorded a quarterly loss of $917.8 million due to a decline in value on its bitcoin. This is largely due to bitcoin’s lower volatility over the quarter.
The business intelligence company that has become the largest corporate bitcoin holder reported a $727,000 write-down on its digital asset holdings — the lowest since first acquiring BTC two years ago.
As its earnings came to light, MicroStrategy beat on adjusted earnings per share. The stock is up 7% from $258 to $277 a share between earnings and Friday’s close. Year to date it is down 49%.
Additionally, former CEO and now executive chairman Michael Saylor also offered optimistic guidance on how the company’s bitcoin write-off issues could one day become even less of a problem for profit and loss statements.
In October, the Financial Standards Accounting Board (FASB) voted unanimously to recognize digital assets at fair value. This ultimately means the current practice – of reporting crypto holdings at their lowest value of the quarter and not being able to mark the value if the asset rises during the quarter – will disappear.
“That doesn’t mean we have enough guidance to change our accounting,” Saylor said during MSTR’s earnings call. “It will probably be late 2023 or the fiscal year of 2024 when the financial accounting changes take place.”
Is Robinhood getting disciplined?
While Robinhood ( HOOD ) lost 1.5 million more monthly active users (MAUs) than expected during the quarter, it beat revenue and earnings expectations by thin margins Wednesday afternoon. Shares of HOOD are up 7% since Friday’s close, from $11.41 to $12.24. Year to date, it is down 30.8% from $18 per share.
It appears that investors may care less about the company’s retail interests and more about the heavy cuts it has made to achieve profitability in the bear market. Robinhood’s biggest win in the third quarter was “cost discipline,” according to Will Nance, vice president of equity research at Goldman Sachs.
“We think HOOD’s results make a good case for their ability to invest in the platform with a much leaner cost structure, despite a weak customer acquisition environment,” Nance wrote in a note Wednesday.
Popularly known as the go-to retail trading platform for younger investors, the company also benefited from higher interest rates throughout the third quarter – net interest income increased 73% to $128 million. And at least on the surface, its cost-cutting measures aren’t affecting its ability to roll out new products.
Robinhood CEO Vlad Tenev said during HOOD’s earnings call Wednesday that the company still plans to debut Roth IRA accounts on its platform “just in time for tax season.”
Coinbase is… good?
The largest US crypto exchange kicked off its Q3 shareholder letter acknowledging that “Q3 was a mixed quarter for Coinbase.” The company missed expected estimates on revenue and earnings.
COIN shares fell as much as 8% in the minutes after the release on Thursday, but through its earnings call, the stock reversed course and was up 4.5% in after-hours trading. The stock closed up 5% on the day at $58.8 on Friday, although it has lost 78% from its start-of-the-year value of $256 per share.
Of Coinbase Global’s ( COIN ) Q3 financials, Mark Palmer, a fintech analyst at BTIG, said “at first glance [the report] appeared disappointing, even in the context of a digital asset exchange operating in the midst of a severe ‘crypto winter’.
Its biggest profit generator — transaction fees from retail merchants — came in 44% lower than last quarter ($346 million vs. $616 million, ouch!). Its interest income, touted as a critical profit generator driven less by volatility than trading volume, also underperformed ($62 million versus $68 million).
However, analysts saw a silver lining in the crypto exchanges’ ability to hang on to customers (albeit mostly “hodling”), earn interest income from US Treasuries and cut costs.
Coinbase reported an adjusted EBITDA loss of $116 million versus expectations of a loss of $212.95 million. Monthly transaction users shrank by 500,000 from 9 million to 8.5 million, but beat expectations of 7.4 million.
“A lot of these companies just grew with not a lot of restraint until this year. I think you see that a lot of that spending was discretionary. The market realizes you don’t need to spend and hire to operate properly,” Chris Brendler, a senior analyst at DA Davidson, told Yahoo Finance.
Still, Coinbase CFO Aleisa Haas offered investors a cryptic warning about the company’s outlook.
“As we approach 2023 planning, we are currently preparing with a conservative bias and similar current macroeconomic headwinds will continue, and possibly intensify. We are not giving a quantitative outlook at this time,” she said in the Thursday afternoon call.
David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets. Follow him on Twitter @DsHollers
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