10-Q 1 coin-20220930.htm 10-Q coin-20220930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from     to     .

Commission file number 001-04321
Coinbase Global, Inc.
(Exact name of registrant as specified in its charter)
Delaware46-4707224
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
Not Applicable(1)
Not Applicable(1)
(Address of Principal Executive Offices)(Zip Code)
Not Applicable(1)
Registrant's telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.00001 par value per shareCOINNasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes     No   ☐  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes     No   ☐ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐Accelerated filer
 ☐
Non-accelerated filer   ☒Smaller reporting company 
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes        No   ☒

As of October 27, 2022, the number of shares of the registrant's Class A common stock outstanding was 178,849,467 and the number of shares of the registrant's Class B common stock outstanding was 48,116,152.
(1) We are a remote-first company. Accordingly, we do not maintain a headquarters. For purposes of compliance with applicable requirements of the Securities Act of 1933, as amended, and Securities Exchange Act of 1934, as amended, stockholder communications required to be sent to our principal executive offices may be directed to the email address set forth in our proxy materials and/or identified on our investor relations website.



TABLE OF CONTENTS
Page



1


SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “potential,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “target,” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our future financial performance, including our expectations regarding our net revenue, operating expenses, and our ability to achieve and maintain future profitability;
our business plan and our ability to effectively manage any growth;
anticipated trends, growth rates, and challenges in our business, the cryptoeconomy, and in the markets in which we operate;
market acceptance of our products and services;
beliefs and objectives for future operations;
our ability to maintain, expand, and further penetrate our existing customer base;
our ability to develop new products and services and grow our business in response to changing technologies, customer demand, and competitive pressures;
our expectations concerning relationships with third parties;
our ability to maintain, protect, and enhance our intellectual property;
our ability to continue to expand internationally;
the effects of increased competition in our markets and our ability to compete effectively;
future acquisitions of or investments in complementary companies, products, services, or technologies and our ability to successfully integrate such companies or assets;
our ability to stay in compliance with laws and regulations that currently apply or become applicable to our business both in the United States and internationally;
economic and industry trends, projected growth, or trend analysis;
trends in revenue, cost of revenue, and gross margin;
trends in operating expenses, including technology and development expenses, sales and marketing expenses, and general and administrative expenses, and expectations regarding these expenses as a percentage of revenue;
our key business metrics used to evaluate our business, measure our performance, identify trends affecting our business, and make strategic decisions;
increased expenses associated with being a public company; and
other statements regarding our future operations, financial condition, and prospects and business strategies.
2


We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in the section titled Risk Factors and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on any forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in such forward-looking statements.
Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, restructurings, joint ventures, partnerships, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Risk Factors Summary
Consistent with the foregoing, our business is subject to a number of risks and uncertainties, including those risks discussed at length below. These risks include, among others, the following, which we consider our most material risks:
our operating results have and will significantly fluctuate, including due to the highly volatile nature of crypto;
our total revenue is substantially dependent on the prices of crypto assets and volume of transactions conducted on our platform. If such price or volume declines, our business, operating results, and financial condition would be adversely affected;
our net revenue may be concentrated in a limited number of areas. Within transaction revenue and subscription and services revenue, a meaningful concentration is from transactions in Bitcoin and Ethereum and interest income in connection with USDC, respectively. If revenue from these areas declines and is not replaced by new demand for crypto assets or other products and services, our business, operating results, and financial condition could be adversely affected;
the future development and growth of crypto is subject to a variety of factors that are difficult to predict and evaluate. If crypto does not grow as we expect, our business, operating results, and financial condition could be adversely affected;
3


cyberattacks and security breaches of our platform, or those impacting our customers or third parties, could adversely impact our brand and reputation and our business, operating results, and financial condition;
we are subject to an extensive and highly-evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition;
we operate in a highly competitive industry and we compete against unregulated or less regulated companies and companies with greater financial and other resources, and our business, operating results, and financial condition may be adversely affected if we are unable to respond to our competitors effectively;
we compete against a growing number of decentralized and noncustodial platforms and our business may be adversely affected if we fail to compete effectively against them;
as we continue to expand and localize our international activities, our obligations to comply with the laws, rules, regulations, and policies of a variety of jurisdictions will increase and we may be subject to inquiries, investigations, and enforcement actions by U.S. and non-U.S. regulators and governmental authorities, including those related to sanctions, export control, and anti-money laundering;
we are, and may continue to be, subject to material litigation, including individual and class action lawsuits, as well as investigations and enforcement actions by regulators and governmental authorities. These matters are often expensive and time consuming, and, if resolved adversely, could harm our business, financial condition, and operating results;
if we cannot keep pace with rapid industry changes to provide new and innovative products and services, the use of our products and services, and consequently our net revenue, could decline, which could adversely impact our business, operating results, and financial condition;
a particular crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset, we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties, which may adversely affect our business, operating results, and financial condition;
we currently rely on third-party service providers for certain aspects of our operations, and any interruptions in services provided by these third parties may impair our ability to support our customers;
loss of a critical banking or insurance relationship could adversely impact our business, operating results, and financial condition;
any significant disruption in our products and services, in our information technology systems, or in any of the blockchain networks we support, could result in a loss of customers or funds and adversely impact our brand and reputation and our business, operating results, and financial condition;
our failure to safeguard and manage our customers’ fiat currencies and crypto assets could adversely impact our business, operating results, and financial condition; and
the theft, loss, or destruction of private keys required to access any crypto assets held in custody for our own account or for our customers may be irreversible. If we are unable to access our private keys or if we experience a hack or other data loss relating to our ability to access any crypto assets, it could cause regulatory scrutiny, reputational harm, and other losses.

4



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Coinbase Global, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except par value data)
(unaudited)
September 30,December 31,
20222021
Assets
Current assets:
Cash and cash equivalents$5,006,584 $7,123,478 
Restricted cash23,113 30,951 
Customer custodial cash6,591,105 10,526,233 
Customer crypto assets(1)
95,113,124  
USDC368,121 100,096 
Accounts and loans receivable, net of allowance240,354 396,025 
Income tax receivable60,522 61,231 
Prepaid expenses and other current assets277,044 135,849 
Total current assets107,679,967 18,373,863 
Non-current assets:
Crypto assets held623,073 988,193 
Lease right-of-use assets76,465 98,385 
Property and equipment, net170,922 59,230 
Goodwill1,073,906 625,758 
Intangible assets, net161,669 176,689 
Other non-current assets1,382,361 952,307 
Total assets$111,168,363 $21,274,425 
Liabilities, Convertible Preferred Stock and Stockholders’ Equity
Current liabilities:
Customer custodial cash liabilities$6,357,657 $10,480,612 
Customer crypto liabilities(2)
95,113,124  
Accounts payable61,514 39,833 
Accrued expenses and other current liabilities298,101 439,559 
Crypto asset borrowings209,678 426,665 
Lease liabilities, current33,025 32,366 
Total current liabilities102,073,099 11,419,035 
Lease liabilities, non-current50,167 74,078 
Long-term debt3,391,237 3,384,795 
Other non-current liabilities27,545 14,828 
Total liabilities105,542,048 14,892,736 
Commitments and contingencies (Note 18)
Stockholders’ equity:
Class A common stock, $0.00001 par value; 10,000,000 shares authorized at September 30, 2022 and December 31, 2021; 178,489 and 168,807 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
2 2 
Class B common stock, $0.00001 par value; 500,000 shares authorized at September 30, 2022 and December 31, 2021; 48,116 and 48,310 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
  
Additional paid-in capital3,380,330 2,034,658 
Accumulated other comprehensive loss(36,493)(3,395)
Retained earnings2,282,476 4,350,424 
Total stockholders’ equity5,626,315 6,381,689 
Total liabilities, convertible preferred stock and stockholders’ equity$111,168,363 $21,274,425 
__________________
(1)Safeguarding assets
(2)Safeguarding liabilities

The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Coinbase Global, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenue:
Net revenue$576,375 $1,234,736 $2,543,869 $4,864,727 
Other revenue13,964 77,172 21,231 476,254 
Total revenue590,339 1,311,908 2,565,100 5,340,981 
Operating expenses:
Transaction expense101,876 197,251 546,889 766,743 
Technology and development556,338 356,264 1,736,251 831,950 
Sales and marketing75,888 105,395 416,986 419,117 
General and administrative339,157 242,642 1,222,904 612,068 
Restructuring(1,232) 41,221  
Other operating expense, net74,796 118,548 756,185 556,857 
Total operating expenses1,146,823 1,020,100 4,720,436 3,186,735 
Operating (loss) income(556,484)291,808 (2,155,336)2,154,246 
Interest expense21,507  6,972 67,301 7,720 
Other expense, net65,699  13,976 271,067 10,119 
(Loss) income before income taxes(643,690)270,860 (2,493,704)2,136,407 
Benefit from income taxes (99,055)(135,240)(425,756)(647,505)
Net (loss) income$(544,635)$406,100 $(2,067,948)$2,783,912 
Net (loss) income attributable to common stockholders:
Basic$(544,635)$402,343 $(2,067,948)$2,241,790 
Diluted$(544,635)$405,340 $(2,073,343)$2,338,407 
Net (loss) income per share attributable to common stockholders:
Basic$(2.43)$1.92 $(9.37)$13.58 
Diluted$(2.43)$1.62 $(9.39)$11.19 
Weighted-average shares of common stock used to compute net (loss) income per share attributable to common stockholders:
Basic223,916209,604220,816165,045
Diluted223,916250,536220,856209,052
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

Coinbase Global, Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(In thousands)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net (loss) income$(544,635)$406,100 $(2,067,948)$2,783,912 
Other comprehensive loss:
Translation adjustment, net of tax(18,310)(3,206)(33,098)(6,688)
Comprehensive (loss) income$(562,945)$402,894 $(2,101,046)$2,777,224 

The accompanying notes are an integral part of these condensed consolidated financial statements.
7

Coinbase Global, Inc.
Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity
(In thousands)
(unaudited)

Three Months Ended September 30, 2022
Convertible Preferred StockAdditional Paid-In Capital Accumulated Other Comprehensive (Loss) IncomeRetained Earnings
Common Stock
SharesAmountShares Amount Total
Balance at July 1, 2022 $ 224,398 $2 $3,004,459 $(18,183)$2,827,111 $5,813,389 
Issuance of common stock upon exercise of stock options, net of repurchases— — 812 — 10,318 — — 10,318 
Stock-based compensation expense— — — — 417,721 — — 417,721 
Issuance of common stock upon settlement of Restricted Stock Units ("RSUs") and restricted common stock, net of shares withheld— — 1,395 — (55,613)— — (55,613)
Other— — — — 3,445 — — 3,445 
Comprehensive loss— — — — — (18,310)— (18,310)
Net loss— — — — — — (544,635)(544,635)
Balance at September 30, 2022 $ 226,605 $2 $3,380,330 $(36,493)$2,282,476 $5,626,315 
Three Months Ended September 30, 2021
Convertible Preferred StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained Earnings
Common Stock
SharesAmountSharesAmountTotal
Balance at July 1, 2021 $ 209,876 $2 $1,516,533 $2,774 $3,104,116 $4,623,425 
Issuance of common stock upon exercise of stock options, net of repurchases— — 2,964 — 43,221 — — 43,221 
Stock-based compensation expense— — — — 264,941 — — 264,941 
Issuance of equity instruments as consideration for business combinations— — 211 — 77,482 — — 77,482 
Issuance of common stock upon settlement of RSUs and restricted common stock, net of shares withheld— — 611 — (51,466)— — (51,466)
Comprehensive loss— — — — — (3,206)— (3,206)
Net income— — — — — — 406,100 406,100 
Balance at September 30, 2021 $ 213,662 $2 $1,850,711 $(432)$3,510,216 $5,360,497 


The accompanying notes are an integral part of these condensed consolidated financial statements.
8

Coinbase Global, Inc.
Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity
(In thousands)
(unaudited)

Nine Months Ended September 30, 2022
Convertible Preferred StockAdditional Paid-In Capital Accumulated Other Comprehensive (Loss) IncomeRetained Earnings
Common Stock
SharesAmountShares Amount Total
Balance at January 1, 2022 $ 217,117 $2 $2,034,658 $(3,395)$4,350,424 $6,381,689 
Issuance of common stock upon exercise of stock options, net of repurchases— — 3,052 — 45,260 — — 45,260 
Stock-based compensation expense— — — — 1,232,815 — — 1,232,815 
Issuance of equity instruments as consideration for business combinations— — 1,663 — 314,356 — — 314,356 
Issuance of common stock upon settlement of RSUs and restricted common stock, net of shares withheld— — 4,618 — (268,746)— — (268,746)
Issuance of common stock under the Employee Stock Purchase Plan (the “ESPP”)— — 155 — 14,863 — — 14,863 
Other— — — — 7,124 — — 7,124 
Comprehensive loss— — — — — (33,098)— (33,098)
Net loss— — — — — — (2,067,948)(2,067,948)
Balance at September 30, 2022 $ 226,605 $2 $3,380,330 $(36,493)$2,282,476 $5,626,315 
Nine Months Ended September 30, 2021
Convertible Preferred StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained Earnings
Common Stock
SharesAmountSharesAmountTotal
Balance at January 1, 2021112,878 $562,467 73,108 $ $231,024 $6,256 $726,304 $963,584 
Issuance of common stock upon exercise of stock options, net of repurchases— — 22,257 — 181,025 — — 181,025 
Stock-based compensation expense— — — — 559,652 — — 559,652 
Issuance of equity instruments as consideration for business combinations— — 3,891 — 509,379 — — 509,379 
Conversion of preferred stock(112,878)(562,467)112,878 2 562,465 — — 562,467 
Issuance of shares from exercise of warrants— — 412 — 433 — — 433 
Issuance of common stock upon settlement of RSUs and restricted common stock, net of shares withheld— — 1,116 — (103,136)— — (103,136)
Purchase of capped calls— — — — (90,131)— — (90,131)
Comprehensive loss— — — — — (6,688)— (6,688)
Net income— — — — — — 2,783,912 2,783,912 
Balance at September 30, 2021 $ 213,662 $2 $1,850,711 $(432)$3,510,216 $5,360,497 
The accompanying notes are an integral part of these condensed consolidated financial statements.
9

Coinbase Global, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Nine Months Ended September 30,
20222021
Cash flows from operating activities
Net (loss) income$(2,067,948)$2,783,912 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization113,721 40,633 
Crypto asset impairment expense689,077 234,023 
Investment impairment expense70,866  
Other impairment expense9,071  
Stock-based compensation expense1,135,078 558,157 
Provision for transaction losses and doubtful accounts(7,599)14,816 
Loss on disposal of property and equipment 361 
Deferred income taxes(444,225)(572,044)
Unrealized loss on foreign exchange192,253 16,084 
Fair value gain on foreign exchange derivatives(22,935) 
Non-cash lease expense23,374 27,151 
Change in fair value of contingent consideration(7,175)(924)
Realized gain on crypto assets(34,274)(125,822)
Crypto assets received as revenue(376,990)(661,254)
Crypto asset payments for expenses332,897 465,157 
Fair value loss (gain) on derivatives3,351 (23,823)
Amortization of debt discount and issuance costs7,042 2,420 
Loss (gain) on investments1,118 (14,209)
Changes in operating assets and liabilities:
USDC(298,236)(56,710)
Accounts and loans receivable32,211 37,244 
Income taxes, net4,785 (95,756)
Other current and non-current assets(104,801)(26,331)
Customer custodial cash liabilities(3,977,293)4,938,326 
Accounts payable24,667 17,393 
Lease liabilities(7,758)(18,899)
Other current and non-current liabilities(107,553)196,806 
Net cash (used in) provided by operating activities(4,817,276)7,736,711 
Cash flows from investing activities
Purchase of property and equipment(3,747)(1,628)
Proceeds from sale of property and equipment 31 
Capitalized internal-use software development costs(47,831)(15,507)
Business combinations, net of cash acquired(186,150)(39,405)
Purchase of investments(57,716)(251,118)
Purchase of assembled workforce (24,000)
Proceeds from settlement of investments1,497  
Purchase of crypto assets held(1,339,689)(1,479,091)
Disposal of crypto assets held894,147 1,268,801 
Loans originated(189,137)(169,325)
Proceeds from repayment of loans290,928 66,827 
Net cash used in investing activities(637,698)(644,415)
The accompanying notes are an integral part of these condensed consolidated financial statements.
10

Coinbase Global, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Nine Months Ended September 30,
20222021
Cash flows from financing activities
Issuance of common stock upon exercise of stock options, net of repurchases40,978 174,949 
Taxes paid related to net share settlement of equity awards(268,746)(103,136)
Proceeds received under the ESPP16,064 11,532 
Other financing activities3,679  
Issuance of shares from exercise of warrants 433 
Issuance of convertible senior notes, net 1,403,753 
Issuance of senior notes, net 1,976,011 
Purchase of capped calls (90,131)
Proceeds from short-term borrowings149,400 20,000 
Repayment of short-term borrowings(170,000) 
Net cash (used in) provided by financing activities(228,625)3,393,411 
Net (decrease) increase in cash, cash equivalents, and restricted cash(5,683,599)10,485,707 
Effect of exchange rates on cash, cash equivalents, and restricted cash(376,261)(1,111)
Cash, cash equivalents, and restricted cash, beginning of period17,680,662 4,856,029 
Cash, cash equivalents, and restricted cash, end of period$11,620,802 $15,340,625 
Cash, cash equivalents, and restricted cash consisted of the following:
Cash and cash equivalents$5,006,584 $6,352,775 
Restricted cash23,113 30,884 
Customer custodial cash6,591,105 8,956,966 
Total cash, cash equivalents, and restricted cash$11,620,802 $15,340,625 
Supplemental disclosure of cash flow information
Cash paid during the period for interest$43,630 $ 
Cash paid during the period for income taxes17,762 53,426 
Operating cash outflows for amounts included in the measurement of operating lease liabilities10,845 16,781 
Supplemental schedule of non-cash investing and financing activities
Unsettled purchases of property and equipment$177 $974 
Right-of-use assets obtained in exchange for operating lease obligations3,059 26,672 
Non-cash consideration paid for business combinations324,925 535,989 
Purchase of crypto assets and investments with non-cash consideration17,898 4,940 
Redemption of investments with non-cash consideration5,000  
Crypto assets borrowed728,490 292,635 
Crypto assets borrowed repaid with crypto assets1,182,479 59,348 
The accompanying notes are an integral part of these condensed consolidated financial statements.
11

Coinbase Global, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

1.    NATURE OF OPERATIONS
Coinbase, Inc. was founded in 2012. In April 2014, in connection with a corporate reorganization, Coinbase, Inc. became a wholly-owned subsidiary of Coinbase Global, Inc. (together with its consolidated subsidiaries, the “Company”).
The Company operates globally and is a leading provider of end-to-end financial infrastructure and technology for the cryptoeconomy. The Company offers retail users the primary financial account for the cryptoeconomy, institutions a state of the art marketplace with a deep pool of liquidity for transacting in crypto assets, and ecosystem partners technology and services that enable them to build crypto-based applications and securely accept crypto assets as payment.
The Company is a remote-first company. Accordingly, the Company does not maintain a headquarters.
On April 14, 2021, the Company completed the direct listing of its Class A common stock on the Nasdaq Global Select Market (the “Direct Listing”).
2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The accompanying condensed consolidated financial statements of the Company are unaudited. These unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) on the same basis as the audited consolidated financial statements, and in management’s opinion, reflect all adjustments, consisting only of normal, recurring adjustments, that are necessary for the fair statement of the Company’s condensed consolidated financial statements for the periods presented. The unaudited condensed consolidated results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year or any other period.
These condensed consolidated financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on February 25, 2022 (the “Annual Report”).
These condensed consolidated financial statements include the accounts of the Company and its subsidiaries. The Company’s subsidiaries are entities in which the Company holds, directly or indirectly, more than 50% of the voting rights, or where it exercises control. Certain subsidiaries of the Company have a basis of presentation different from GAAP. For the purposes of these unaudited condensed consolidated financial statements, the basis of presentation of such subsidiaries is converted to GAAP. All intercompany accounts and transactions have been eliminated in consolidation.
There were no changes to the significant accounting policies or recent accounting pronouncements that were disclosed in Note 2. Summary of Significant Accounting Policies to the audited consolidated financial statements included in the Annual Report, other than as discussed below.
Reclassifications
Certain prior period amounts have been reclassified in order to conform with the current period presentation. These reclassifications have no impact on the Company’s previously reported consolidated net income.
12

Coinbase Global, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Use of estimates
The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions in the Company’s condensed consolidated financial statements and notes thereto.
Significant estimates and assumptions include the determination of the recognition, measurement, and valuation of current and deferred income taxes; the fair value of stock-based awards issued; the useful lives of long-lived assets; the impairment of long-lived assets; the valuation of privately-held strategic investments, including impairments; the Company’s incremental borrowing rate; the fair value of customer crypto assets and liabilities; the fair value of assets acquired and liabilities assumed in business combinations, including contingent consideration arrangements; the fair value of derivatives and related hedges; the fair value of long-term debt; assessing the likelihood of adverse outcomes from claims and disputes; and loss provisions.
Actual results and outcomes may differ from management’s estimates and assumptions due to risks and uncertainties. To the extent that there are material differences between these estimates and actual results, the Company’s condensed consolidated financial statements will be affected. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the result of which forms the basis for making judgments about the carrying values of assets and liabilities.
Customer custodial cash and customer custodial cash liabilities
Customer custodial cash represents restricted cash and cash equivalents maintained in segregated Company bank accounts that are held for the exclusive benefit of customers. Customer custodial cash liabilities represent cash deposits held by customers in their fiat wallets and unsettled deposits and withdrawals. The Company restricts the use of the assets underlying the customer custodial cash to meet regulatory requirements and classifies the assets as current based on their purpose and availability to fulfill the Company’s direct obligation under customer custodial cash liabilities.
Certain jurisdictions where the Company operates require the Company to hold eligible liquid assets, as defined by applicable regulatory requirements and commercial law in these jurisdictions, equal to at least 100% of the aggregate amount of all customer custodial cash liabilities. Depending on the jurisdiction, eligible liquid assets can include cash and cash equivalents, customer custodial cash, and in-transit customer receivables. As of September 30, 2022 and December 31, 2021, the Company’s eligible liquid assets were greater than the aggregate amount of customer custodial cash liabilities.
Concentration of credit risk
The Company’s cash and cash equivalents, restricted cash, customer custodial cash, and accounts and loans receivable are potentially subject to concentration of credit risk. Cash and cash equivalents, restricted cash, and customer custodial cash are placed with financial institutions which are of high credit quality. The Company invests cash and cash equivalents, and customer custodial accounts primarily in highly liquid, highly rated instruments which are uninsured. The Company may also have deposit balances with financial institutions which exceed the Federal Deposit Insurance Corporation insurance limit of $250,000. The Company also holds cash at crypto trading venues and performs a regular assessment of these crypto trading venues as part of its risk management process.
The Company held $368.1 million and $100.1 million of USD Coin (“USDC”) as of September 30, 2022 and December 31, 2021, respectively. The issuer of USDC reported that, as of September 30, 2022, underlying reserves were held in cash and short-duration U.S. Treasuries within segregated accounts for the benefit of USDC holders.
13

Coinbase Global, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
As of September 30, 2022 and December 31, 2021, the Company had one customer and no customers, respectively, who accounted for more than 10% of the Company’s accounts and loans receivable, net. As of September 30, 2022 and December 31, 2021, the Company had no payment processors or bank partners representing more than 10% of accounts and loans receivable, net.
During the three and nine months ended September 30, 2022 and September 30, 2021, no customer accounted for more than 10% of total revenue.
Derivative contracts
Derivative contracts derive their value from underlying asset prices, other inputs or a combination of these factors. Derivative contracts are recognized as either assets or liabilities in the condensed consolidated balance sheets at fair value, with changes in fair value recognized in other operating expense, net.
The Company enters into arrangements that result in obtaining the right to receive or obligation to deliver a fixed amount of crypto assets in the future. These are hybrid instruments, consisting of a debt host contract that is initially measured at the fair value of the underlying crypto assets and is subsequently carried at amortized cost, and an embedded forward feature based on the changes in the fair value of the underlying crypto asset. The embedded forward is bifurcated from the host contract, and is subsequently measured at fair value.
The Company also enters into foreign exchange forward contracts that act as economic hedges against the impact of changes in Euro on the Company’s intercompany transactions. The Company records changes in fair value of the forward contracts as part of other expense, net in the consolidated statements of operations.
Derivatives designated as hedges
The Company applies hedge accounting to certain derivatives executed for risk management purposes. To qualify for hedge accounting, a derivative must be highly effective at reducing the risk associated with the exposure being hedged. The Company uses fair value hedges primarily to hedge the fair value exposure of crypto asset prices. For qualifying fair value hedges, the changes in the fair value of the derivative and the fair value of the hedged item are recognized in current-period earnings in other operating expense, net in the condensed consolidated statements of operations. Derivative amounts affecting earnings are recognized in the same line item as the earnings effect of the hedged item.
Customer crypto assets and liabilities
Customer crypto assets and liabilities represent the Company’s obligation to safeguard customers’ crypto assets in digital wallets on the Company’s platform. The Company safeguards these assets for customers and is obligated to safeguard them from loss, theft, or other misuse. The Company recognizes customer crypto liabilities and corresponding customer crypto assets, on initial recognition and at each reporting date, at fair value of the crypto assets. Any loss, theft, or other misuse would impact the measurement of customer crypto assets.
Recent accounting pronouncements
Recently adopted accounting pronouncements
On October 28, 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 amends Accounting Standards Codification 805 (“ASC 805”) to require acquiring entities to apply Topic 606 - Revenue from Contracts with Customers to recognize and measure contract assets and contract liabilities in a business combination. The Company early adopted the standard on January 1, 2022. The adoption of the standard did not have a material impact on the Company’s condensed consolidated financial statements.
14

Coinbase Global, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
On March 31, 2022, the SEC issued Staff Accounting Bulletin No. 121 (“SAB 121”). SAB 121 sets out interpretive guidance from the staff of the SEC regarding the accounting for obligations to safeguard crypto assets that an entity holds for its customers. Safeguarding is defined as taking actions to secure customer crypto assets and the associated cryptographic key information and protecting them from loss, theft, or other misuse. The guidance requires an entity to recognize a liability for the obligation to safeguard the users’ assets, and recognize an associated asset for the crypto assets safeguarded. Both the liability and asset should be measured initially and subsequently at the fair value of the crypto assets being safeguarded. The guidance also requires additional disclosures related to the nature and amount of crypto assets that the entity is responsible for holding for its customers, with separate disclosure for each significant crypto asset, and the vulnerabilities the entity has due to any concentration in such activities. The Company has adopted this guidance as of June 30, 2022 with retrospective application as of January 1, 2022. The balances as of January 1, 2022 for the customer crypto assets and customer crypto liabilities were both $267.6 billion.
Accounting pronouncements pending adoption
On June 30, 2022, FASB issued Accounting Standards Update No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). ASU 2022-03 clarifies that a contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security and is not included in the equity security's unit of account. The standard requires specific disclosures related to equity securities that are subject to contractual sale restrictions, including (1) the fair value of such equity securities reflected in the balance sheet, (2) the nature and remaining duration of the corresponding restrictions, and (3) any circumstances that could cause a lapse in the restrictions. The new standard is effective for the Company for its fiscal year beginning January 1, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard on the Company’s consolidated financial statements.
3.    RESTRUCTURING
In June 2022, the Company announced and completed a restructuring impacting approximately 18% of the Company’s headcount. This strategic reduction of the existing global workforce was intended to manage the Company’s operating expenses in response to market conditions and ongoing business prioritization efforts. As a result, approximately 1,100 employees in various departments and locations were terminated. As part of their termination, they were given separation pay and other personnel benefits.
The following expenses were recognized within restructuring expenses in the condensed consolidated statements of operations during the three and nine months ended September 30, 2022 (in thousands). The Company does not expect to incur any additional charges in connection with this restructuring.
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022Cumulative Costs Incurred to Date
Separation pay$ $39,259 $39,259 
Other personnel costs(1)
(1,232)1,962 1,962 
Total$(1,232)$41,221 $41,221 
__________________
(1)The negative adjustment of $1.2 million during the three months ended September 30, 2022 is due to the release of accruals for certain other personnel costs recorded as of June 30, 2022 which were not utilized.

15

Coinbase Global, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table summarizes the balance of the restructuring reserve and the changes in the reserve as of and for the nine months ended September 30, 2022 (in thousands):
Expenses IncurredPaymentsAdjustment to Other Personnel CostsAccrued Balance as of September 30, 2022
Separation pay$39,259 $(37,940)$ $1,319 
Other personnel costs3,194 (1,480)(1,232)482 
Total$42,453 $(39,420)$(1,232)$1,801 

4.    ACQUISITIONS
2022 Acquisitions
Unbound Security, Inc.
On January 4, 2022, the Company completed the acquisition of Unbound Security, Inc. (“Unbound”) by acquiring all issued and outstanding shares of capital stock and stock options of Unbound. Unbound is a pioneer in a number of cryptographic security technologies, which the Company believes will play a key role in the Company’s product and security roadmap.
In accordance with ASC 805, Business Combinations, the acquisition was accounted for as a business combination under the acquisition method. The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill, none of which is expected to be deductible for tax purposes. The goodwill balance is primarily attributed to the assembled workforce, synergies, and the use of purchased technology to develop future products and technologies. The final allocation of purchase consideration to assets and liabilities remains in process as the Company continues to evaluate certain balances, estimates, and assumptions during the measurement period (up to one year from the acquisition date). Any changes in the fair value of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. During the nine months ended September 30, 2022, a measurement period adjustment associated with deferred tax assets was recorded, resulting in an increase in other non-current assets of $4.1 million and a corresponding reduction in goodwill.
The total consideration transferred in the acquisition was $258.0 million, consisting of the following (in thousands):
Cash$151,424 
Cash payable126 
Class A common stock of the Company103,977 
RSUs for shares of the Company’s Class A common stock2,457