Coinbase's belt-tightening measures show uneven results

It shook the whole crypto industry when its leading publicly traded firm in the U.S. announced massive layoffs in June, but the headcount changes are lost in the numbers Coinbase released with Q3 results.

Why it matters Headcount is about 26% higher now than the start of the year, in spite of CEO Brian Armstrong's pledge to slim down after the company's growth ambitions pushed the firm out over its skis.

• The company employed 4,706 full-time employees at the end of September, after the 1,100 laid off in June. It employed 3,730 on December 31, according to SEC filings.
• And the headcount numbers the company cited in the last two quarters were pretty close to today's, according to numbers in the company's shareholder letter.

During Coinbase's conference call Thursday evening, Piper Sandler analyst Rich Repetto asked whether the firm really was "right-sized" given the potential for a protracted crypto winter.

• He pointed to rising expenses in the fourth quarter, which Coinbase said would be due to "seasonally higher spend" on marketing and sales.
• "It’s very plausible that we’ll see a further downtrend in the market in the next year," Armstrong responded, adding that the firm was "monitoring the situation."
• CFO Alesia Haas: "We’re committed to managing our expenses prudently."

The big picture: Most analysts were focused on the firm's outlook, rather than its past performance, homing in on whether it was strategically positioned to weather a protracted downturn in coin prices and the broader economic gloom.

• Shares are trading up over 7% since the company reported results Thursday, which showed a deep hit in transaction revenue but also narrowed profit losses.
• The firm's Q3 report card shows a crypto winter in full swing, but because the poor results were widely expected, investors appear to be giving the U.S.'s largest centralized crypto exchange a pass.

What they're saying: "Coinbase is going to continue to lead in this environment," Armstrong said during the company's earnings call.

What others are saying: BTIG analyst Mark Palmer says his view of the company this quarter is "more realistic about the environment in which it is operating" compared to the prior quarter.

• "The question really moves to 'how is Coinbase positioning itself to manage through the crypto winter and position itself to be in a position of strength when it ends,'" he tells Axios.

By the numbers: Third-quarter net revenue was $576 million, down 28% compared to the previous quarter. Transaction revenue fell 44% to $366 million, driven by lower trading volume.

• Net loss and adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) both improved sequentially to negative $545 million and negative $116 million, respectively.

The bottom line: Coinbase says its adjusted EBITDA loss goals are within reach for the year, assuming the market environment doesn't get worse.

(Editor's note: This article was updated with additional head-count numbers from the company's Q3 shareholder letter)