The biggest takeaway from the earnings of crypto-related firms this week is not how bad the results were, but what they did to weather the so-called crypto winter.
More mundane factors such as cost cutting, higher interest rates, and improved crypto accounting helped them beat expectations on revenue, earnings, and customers. That may be meager kudos for the once high-flying stocks that were buoyed by a mania for digital coins last year. But it's what investors got.
Here's what happened.
Bitcoin and MicroStrategy
In MicroStrategy's (MSTR) earnings Tuesday, bitcoin featured much less prominently in its financials versus last quarter when the company recorded a $917.8 million quarterly loss from an impairment on its bitcoin. That's largely thanks to bitcoin's lower volatility over the quarter.
The business-intelligence-company-turned-largest-corporate bitcoin holder reported a $727,000 impairment on its digital asset holdings — its lowest since first acquiring BTC two years ago.
While its revenue came in light, MicroStrategy beat on adjusted earnings per share. The stock is up 7% from $258 to $277 per share between earnings and Friday's close. Year to date its down 49%.
Additionally, former CEO and now Executive Chairman, Michael Saylor, also offered optimistic guidance for how the company’s bitcoin write-down issues might 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 means eventually the current practice — reporting crypto holdings at their lowest value of the quarter and not being able to mark up the value if the asset rises during the quarter — will go away.
“It doesn't mean that we have enough guidance to change our accounting,” Saylor said during MSTR's earnings call. “Probably, it’ll be late 2023 or the fiscal year of 2024 when the financial accounting changes take place."
Robinhood is getting disciplined?
While Robinhood (HOOD) lost 1.5 million more monthly active users (MAUs) than expected during the quarter, it beat on revenue and earnings expectations by thin margins Wednesday afternoon. Shares of HOOD have since rallied 7% as of Friday’s close from $11.41 to $12.24. Year to date its off by 30.8% from $18 per share.
It turns out investors may care less about the firm's retail interest and more about the heavy cuts it has made to reach profitability in the bear market. Robinhood’s biggest Q3 win was “cost discipline,” according to Will Nance, vice president of equity research with 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 Wednesday note.
The company, known colloquially as the going retail trading platform for younger investors, also benefited from higher interest rates through Q3 — net interest revenue increased by 73% to $128 million. And at least on the surface level, its cost-cutting measures aren’t affecting its ability to roll out new products.
Robinhood CEO Vlad Tenev said during HOOD’s Wednesday earnings call, the company still plans to debut Roth IRA accounts on its platform “just in time for the tax season.”
Coinbase is… okay?
The largest U.S. crypto exchange began its Q3 shareholder letter admitting that “Q3 was a mixed quarter for Coinbase.” The company missed expectation estimates on revenue and earnings.
COIN shares plummeted as much as 8% in the minutes after the release on Thursday, yet by its earnings call, the stock had changed course, rallying at 4.5% in after hours trading. The stock closed Friday up 5% on the day at $58.8, though it lost 78% of its beginning of the year value from $256 per share.
Of Coinbase Global (COIN)’s Q3 financials, Mark Palmer, a fintech analyst with 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 largest profit generator — transaction fees from retail traders — came in 44% lower than last quarter ($346 million vs. $616 million, ouch!). Its staking revenue, which has been touted as a critical profit generator that’s less volatility-driven than trading volume, also under performed ($62 million versus $68 million).
However, analysts saw silver linings in the crypto exchanges' ability to hang onto customers (even though they’re mostly “hodling”), earn interest income from U.S. Treasuries and cut costs.
Coinbase reported an adjusted EBITDA loss of $116 million versus expectations of a $212.95 million loss. Monthly transacting users shrank by 500,000 from 9 million to 8.5 million, but better than expectations of 7.4 million.
“A lot of these companies were just growing with not a lot of restraint until this year. I think you’re seeing that a lot of that spending was discretionary. The market is realizing you don’t need to spend and hire to run properly,” Chris Brendler, a senior analyst at D.A. Davidson, told Yahoo Finance.
Still, Coinbase CFO Aleisa Haas offered investors a cryptic warning about the company’s forward outlook.
“As we approach 2023 planning, we're currently preparing with a conservative bias and similar current macroeconomic headwinds will persist, and potentially intensify. We're not providing 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 at @DsHollers