Gemini Space Station Inc. reported a wider-than-expected loss for the second quarter, with a $16.1 million provision for credit losses linked to an identity fraud incident weighing heavily on its results.
The cryptocurrency platform reported an adjusted loss of $0.89 per share for the quarter ended June 30, compared with analysts’ expectations of a $0.57 loss. Its shares fell 6.9% following the results.
Revenue, however, rose 37% year on year to $45.5 million, supported by strong growth in services revenue. Services revenue surged 149% to $23.5 million, helping offset a 38% decline in exchange revenue to $12.5 million amid challenging cryptocurrency market conditions.
The credit card portfolio was the main drag on the quarter. Gemini recorded a $16.1 million provision for credit losses after identifying an identity fraud event earlier in the year. Transaction losses consequently increased to $20.1 million, from $3.6 million a year earlier.
Management said the elevated provision was concentrated in an identified fraud-related cohort and did not indicate broad-based deterioration in the underlying credit portfolio.
“While we still have work to do as a company, this quarter’s results reflect our ongoing efforts to reduce operating expenses while diversifying revenue,” said Tyler Winklevoss, Gemini’s chief executive.
Despite the pressure from the cryptocurrency market, Winklevoss said the company was making progress towards building a more resilient business through revenue streams that are less dependent on crypto market conditions and continued reductions in operating costs.
Gemini’s efforts to diversify were reflected in strong growth across several businesses. Credit card revenue jumped 231% year on year to $16.2 million, driven by growth in the Gemini Credit Card user base.
Over-the-counter revenue also increased sharply, reaching $4.7 million from $600,000 in the corresponding period last year, supported by higher activity from institutional clients.
The company also continued to reduce its cost base. Operating expenses fell 15% sequentially to $122.4 million, from $144.5 million in the first quarter, following cost-optimisation measures that included a reduction in its workforce in February.
Despite the wider-than-expected adjusted loss, Gemini’s overall net loss declined 19% year on year to $107.7 million.
The platform’s user base also expanded, with monthly transacting users rising 11% year on year to 580,000.
The second-quarter results underscore Gemini’s efforts to reduce its dependence on cryptocurrency trading, as weaker exchange revenue is increasingly being offset by credit card, institutional and other services. However, the fraud-related credit losses remain a significant setback as the company seeks to improve profitability and build more diversified revenue streams.
