Discover more from Popular Fintech
Coinbase losses narrow despite lower trading volumes
Coinbase losses narrow despite lower trading volumes, Robinhood reaches GAAP profitability, Shift4 Payments’ international expansion gains momentum, and Lightspeed sets payments as a key priority
Hope you had a fantastic weekend! Last week was the peak of the second-quarter earnings season, so four stories from me today instead of the typical three:
Coinbase narrows losses despite lower trading volumes,
Robinhood reaches GAAP profitability,
Shift4 Payments’ international expansion gains momentum, and
Lightspeed Commerce sets payments as a key priority
Thank you for reading and have a great day!
p.s. have feedback? DM me on Twitter
Was this email forwarded to you? Subscribe for free to receive new posts 👇🏻
Coinbase Narrows Losses Despite Lower Trading Volumes
Coinbase (NASDAQ: COIN), the largest US cryptocurrency exchange, reported that its second-quarter loss narrowed to $97 million, despite a 17% YoY decline in net revenue. Transaction revenue declined 50% YoY to $327.1 million, partially offset by a 28% growth in subscription and service revenue to $335.4 million. The growth in non-transaction revenue was primarily driven by interest income, while the decline in transaction revenue resulted from lower trading volumes. A narrower loss comes on the back of multiple layoffs that the company executed in 2022 and early 2023, which reduced the total operating expenses for the quarter to $781.5 million, down 58% from a year ago.
It was a busy quarter for Coinbase, which will be most remembered by the Securities and Exchange Commission filing a lawsuit against the company in June. Thus, the SEC accused Coinbase of operating an illegal exchange and evading securities regulations by allowing users to trade numerous cryptocurrencies, which the agency considers to be unregistered securities. The SEC also accuses Coinbase of acting as an exchange, a broker-dealer, and a clearing house without registering with the agency, as well as failing to register the offer and sale of its staking-as-a-service program. The company rejected the accusations but suspended its staking service in multiple states.
Robinhood Reaches GAAP Profitability
Robinhood’s (NASDAQ: HOOD) second-quarter revenue increased 53% YoY to $486 million, driven by a 216% YoY growth in net interest revenue and partially offset by a 4% YoY decline in transaction-based revenue. Monthly Active Users declined to 10.8 million, from 14.0 million a year ago, while Assets Under Custody increased to $89 billion, from $64 billion in the second quarter of 2022. The company reported its first profitable quarter on a non-adjusted basis with GAAP Net income reaching $25 million, which compares to a Net loss of $295 million a year ago. Adjusted EBITDA was $151 million, compared to negative $80 million a year ago.
Robinhood continues to benefit from a higher interest rate environment, earning higher interest income on customer deposits and its corporate cash balance. The company’s customers deposited an additional $4.1 billion during the quarter, bringing the total net deposits over the past twelve months to $16.1 billion. The company also had $6.3 billion in corporate cash and cash equivalents. Nevertheless, the stock declined 11% during the week on concerns about the declining active monthly users. As a way to grow its customer base, Robinhood is planning to launch brokerage operations in the UK and has recently hired a CEO to lead the company’s expansion to the country.
Shift4 Payments’ International Expansion Gains Momentum
Shift4 Payments (NYSE: FOUR) held its second-quarter 2023 earnings call, reporting a 59% YoY increase in payment volume to $26.8 billion and a 26% YoY growth in revenue to $637.0 million. The company observed typical seasonality with higher spending during the summer holiday period, “especially around Memorial Day and the July 4th weekend”. Net income for the quarter was $36.8 million and Adjusted EBITDA was $110 million, which compares to a Net income of $15 million and an Adjusted EBITDA of $65.6 million in the second quarter of 2022. Shift4’s management guided for $2.6 - 2.7 billion in revenue and an Adjusted EBITDA of $435 - 460 million for the full year 2023.
During the earnings call, Jared Isaacman, the company’s founder and CEO, called out international expansion as the number one capital allocation priority both “in terms of our M&A pipeline and organic investment initiatives.” The company is on track to close the acquisition of the European payments platform Finaro by the end of the current quarter, as well as expanded organically with its SkyTab POS offering into several Eastern European countries, Canada, and the Caribbean. Additionally, Shift4 started testing several hotel property management system integrations in Europe, as it aims to grow by “taking the same products and services that made [the company] successful in the US and bringing them all over the world.”
Lightspeed Commerce Sets Payments as Key Priority
Lightspeed Commerce (NYSE: LSPD) reported its second quarter (fiscal first quarter 2024) results last week. Revenue increased 20% YoY to $209.1 million, driven by a 32% YoY growth in transaction-based revenue, and a 7% YoY growth in subscription revenue. The company reported a Net loss of $48.7 million and an Adjusted EBITDA of negative $7.0 million, representing an improvement from a Net loss of $100.8 million and an Adjusted EBITDA of negative $15.6 million a year ago. The company’s management guided for $875 - $900 million in revenue and reiterated its goal of “being adjusted EBITDA breakeven or better” in the fiscal year 2024 (year ending on March 31, 2024).
Last quarter, Lightspeed announced its “Unified Payments” initiative, which aims at integrating the company’s point-of-sale and payments into a single platform. Previously, Lightspeed allowed customers to integrate its POS solution with any payment terminal or payment processor. However, under the “Unified Payments” initiative, choosing payment processing from Lightspeed became mandatory for eligible new and existing customers. Per the earnings call comments, the initiative's rollout yielded promising results, as indicated by the all-time high Average Revenue Per User (ARPU), consistent close rates for new customers, unaffected sales cycles, and a lack of increase in customer churn.
This year payments companies are underperforming the Nasdaq Composite index, while Coinbase shares are up 146%, and Robinhood shares are up 38%. As noted above, both Coinbase and Robinhood are benefiting from higher interest rates, which could be considered a headwind for the payments companies (as higher interest payments erode consumers’ purchasing power).
Head, Mobile Business Development
🇬🇧 London, United Kingdom
🇺🇸 Washington, DC or New York, NY, United States
Principal Product Manager, Online Payments
@ Shift4 Payments
🇺🇸 Tampa, FL or Atlanta, GA, United States
Director Product Management
@ Lightspeed Commerce
🇨🇦 Ottawa or Toronto, Canada
Director, Software Development
@ Lightspeed Commerce
🇨🇦 Montreal or Toronto, Canada
Thanks for reading Popular Fintech! Subscribe to receive new posts and support my work.
Cover image source: Coinbase
Disclaimer: Information contained in this newsletter is intended for educational and informational purposes only and should not be considered financial advice. You should do your own research or seek professional advice before making any investment decisions.