Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included elsewhere in this Annual Report on Form 10-K. Th e following discussion and analysis contain forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those identified below and those discussed in the section titled Risk Factors in Part I, Item 1A of this Annual Report on Form 10-K . Unless otherwise expressly stated or the context otherwise requires, references to “we,” “our,” “us,” “the Company,” and “Coinbase” refer to Coinbase Global, Inc. and its consolidated subsidiaries.
Discussions of year-to-year comparisons between 2021 and 2020 are not included in this Annual Report on Form 10-K, and can be found in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II - Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022.
Executive Overview
This executive overview of Management’s Discussion and Analysis of Financial Condition and Results of Operations highlights selected information and does not contain all of the information that is important to readers of this Annual Report on Form 10-K.
2022 was a challenging year for crypto markets and our transaction revenues. As macroeconomic indicators like inflation remained high and interest rates rose throughout the year, crypto market capitalization declined along with broader equity markets. These weakening market conditions became exacerbated by two idiosyncratic events. The first was the depegging of $LUNA in the second quarter of 2022, which contributed to an approximately 60% crypto market capitalization decline in that quarter and exposed poor risk management practices in crypto, and ultimately helped drive the credit related bankruptcies of Three Arrows Capital, Voyager, and Celsius. The second event was the collapse of FTX in the fourth quarter of 2022, which was the result of fraud, and helped drive additional credit related bankruptcies.
For the year ended December 31, 2022, our total net revenue was $3.1 billion, including $2.4 billion in transaction revenue. For the year ended December 31, 2021, we generated $7.4 billion of total net revenue, including $6.8 billion in transaction revenue.
Subscription and services revenue was $792.6 million for the year ended December 31, 2022 and $517.5 million for the year ended December 31, 2021.
For the year ended December 31, 2022, our net loss was $2.6 billion, and Adjusted EBITDA loss was $371.4 million. For the year ended December 31, 2021, our net income was $3.6 billion and Adjusted EBITDA was $4.1 billion.
Crypto remains volatile and we have limited ability to forecast our transaction revenues which remain correlated with crypto market capitalization and crypto asset volatility. In addition to our focus on cost reduction and efficiency, we are more rigorously assessing our product-market fit, and taking a scrappier approach to investments in new and unproven products by, for example, getting back to smaller team sizes. We are controlling what we can control and contingency planning for what we cannot. You can expect us to be nimble and adapt to the market if conditions evolve outside the range of scenarios we have currently planned for.
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Key Business Metrics
In addition to the measures presented in our consolidated financial statements, we have historically used the key business metrics below to evaluate our business, measure our performance, identify trends affecting our business, and make strategic decisions:
Year Ended December 31, % Change
2022 2021 2020 2022 2021
Verified Users (in millions)
110 89 43 24 % 107 %
MTUs (1) (in millions)
8.3 11.2 2.8 (26) 300
Assets on Platform (in billions)
$ 80 $ 278 $ 90 (71) 209
Trading Volume (in billions)
$ 830 $ 1,671 $ 193 (50) 766
Net (loss) income (in millions)
$ (2,625) $ 3,624 $ 322 (172) 1,025
Adjusted EBITDA (2) (in millions)
$ (371) $ 4,090 $ 527 (109) 676
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(1) We previously identified an issue in the calculation of our Monthly Transacting Users metric related to the complexity in measuring users and activity in self-custodial products (notably Coinbase Wallet) that resulted in the overstatement of the MTU figures previously disclosed as of December 31, 2021. Accordingly, the MTU metric as of December 31, 2021 was revised from 11.4 million to 11.2 million to reflect our estimate of the overstatement.
(2) Please see the section titled Non-GAAP Financial Measure below for a reconciliation of net (loss) income to Adjusted EBITDA and an explanation for why we consider Adjusted EBITDA to be a helpful metric for investors.
As previewed in our prior periodic filing, following an evaluation of our key business metrics, we plan to update our key business metrics to better align with business performance and how management views the business. Accordingly, based on our evaluation of our Verified Users metric, we do not believe this metric, which is an indicator of the scale of our platform, provides meaningful information related to our business performance. Verified Users do not track user activities leading to revenue generation and, as a result, are not indicative of our overall performance, including with respect to our revenue and operating results and, therefore, we believe that this metric no longer provides valuable insight into our business performance. Accordingly, we do not plan to report the number of Verified Users in our future periodic filings, beginning with our Quarterly Report on Form 10-Q for the three months ending March 31, 2023. Additionally, we will no longer include our Assets on Platform metric as part of our key business metrics disclosure given that this information is available elsewhere in our periodic filings. As a result of the issuance of Staff Accounting Bulletin No. 121 (“SAB 121”) by the SEC staff, investors may calculate the Assets on Platform metric by aggregating our “customer crypto liabilities” and our “customer custodial cash liabilities,” which are provided on our consolidated balance sheets.
Lastly, given that crypto markets and our revenue sources continue to evolve, we believe there may be further opportunity to evolve our key business metrics disclosures to better align with business performance, which we will continue to evaluate as the cryptoeconomy further develops. Based on this evaluation, we may determine to change or eliminate our current key business metrics in future filings we make with the SEC.
Verified Users
We define “Verified Users” as all consumers, institutions, and developers that have registered an account on our platform and confirmed either their email address or phone number, or that have established an account with a username on our non-custodial wallet application, as of the date of measurement. Verified Users are an indication of our scale. These customers have demonstrated an interest in our platform or direct intent to transact with crypto assets. Verified Users represent the top level of our customer acquisition funnel. Verified Users may overstate the number of unique customers who have registered an account on our platform as one customer may register for, and use, multiple accounts with different email addresses, phone numbers, or usernames.
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Monthly Transacting Users
We define an “MTU” as a consumer who actively or passively transacts in one or more products on our platform at least once during the rolling 28-day period ending on the date of measurement. MTUs presented for the end of a quarter are the average of each month’s MTUs in each respective quarter. MTUs presented as of the end of a year represent the MTUs for the last quarter of that year. The annual average MTUs for the years ended December 31, 2022, 2021, and 2020 were 8.8 million, 8.4 million, and 1.9 million, respectively. MTUs represent our transacting base of consumers who drive potential revenue generating transactions on our platform . MTUs engage in transactions that generate both transaction revenue and subscription and services revenue. Revenue-generating transactions include active transactions such as buying or selling crypto assets through our Invest product or passive transactions such as earning a staking reward. MTUs also engage in transactions that are non-revenue generating such as send and receive. MTUs may overstate the number of unique consumers due to differences in product architecture or user behavior.
Assets on Platform
We define “Assets on Platform” as the aggregate of “customer crypto liabilities” and “customer custodial cash liabilities,” each as set forth on our consolidated balance sheets.
Assets on Platform demonstrates the scale of balances held across our suite of products and services, the trust customers place in us to securely store their assets, and the underlying growth of the cryptoeconomy. Assets on Platform also represent our monetization opportunity for subscription products and services, including current products such as Custody, Stake, Borrow, and Lend. Assets on Platform generate fees that are recorded as subscription and services revenue when customers engage with these products.
The value of Assets on Platform is driven by three factors – the price, quantity, and type of crypto assets held by customers on our platform. Changes in the price and quantity, particularly for Bitcoin and Ethereum, or type of crypto asset held on our platform, can result in the increase or decrease in Assets on Platform in a particular period. Our Assets on Platform by asset are as follows:
As of December 31,
% Change
2022 2021 2020 2022 2021
Assets on Platform:
Bitcoin 41 % 40 % 70 % 3 % (43) %
Ethereum (1)
26 25 13 4 92
USDC 1 1 — — 100
Other crypto assets 26 30 13 (13) 131
Fiat 6 4 4 50 —
Total
100 % 100 % 100 %
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(1) Ethereum included $3.0 billion and $5.8 billion of Ethereum 2 as of December 31, 2022 and 2021 , respectively.
As of December 31, 2022 and 2021, no asset other than Bitcoin and Ethereum individually represented more than 10% of our Assets on Platform.
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Trading Volume
We define “Trading Volume” as the total U.S. dollar equivalent value of spot matched trades transacted between a buyer and seller through our platform during the period of measurement. Trading Volume represents the product of the quantity of asset transacted and the trade price at the time the transaction was executed. As trading activity directly impacts transaction revenue, we believe this measure is a reflection of liquidity on our order books, trading health, and the underlying growth of the cryptoeconomy. Generally, Trading Volume on our platform is primarily influenced by the price of crypto assets, Crypto Asset Volatility and macroeconomic conditions. In periods of high crypto asset prices and Crypto Asset Volatility, we have experienced correspondingly high levels of Trading Volume on our platform. Our Trading Volume in future periods will depend on the relative availability and adoption of Bitcoin, Ethereum, and other crypto assets.
Year Ended December 31, % Change
2022 2021 2020 2022 2021
Trading Volume (in billions):
Consumer $ 167 $ 535 $ 73 (69) % 633 %
Institutional 663 1,136 120 (42) 847
Total $ 830 $ 1,671 $ 193 (50) 766
Trading Volume by crypto asset:
Bitcoin 29 % 24 % 41 % 21 (41)
Ethereum 25 21 15 19 40
Other crypto assets 45 55 44 (18) 25
Total (1)
100 % 100 % 100 %
Transaction revenue by crypto asset:
Bitcoin 29 % 25 % 44 % 16 (43)
Ethereum 22 21 12 5 75
Other crypto assets 49 54 44 (9) 23
Total 100 % 100 % 100 %
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(1) Figures presented above may not sum precisely due to rounding .
Trading Volume decreased 50% for the year ended December 31, 2022 compared to the year ended December 31, 2021. The decrease in Trading Volume was driven by steep declines in both average crypto asset prices and total crypto spot market volumes associated with macroeconomic challenges during the year ended December 31, 2022. In addition, Crypto Asset Volatility decreased 32% for the year ended December 31, 2022 compared to the year ended December 31, 2021.
During the years ended December 31, 2022 and 2021, no asset other than Bitcoin and Ethereum individually represented more than 10% of our Trading Volume or transaction revenue, respectively.
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Components of Results of Operations
Net revenue
Transaction revenue
Net revenue consists of transaction revenue generated from transaction fees from trades that occur on our platform. The transaction fee earned is based on the price and quantity of the crypto asset that is bought, sold, or converted. Transaction revenue is recognized at the time the transaction is processed and is directly correlated with Trading Volume.
Subscription and services revenue
Subscription and services revenue primarily consists of:
• Blockchain rewards: We derive blockchain rewards through various blockchain protocols. These blockchain protocols, or the participants that form the protocol networks, reward users for performing various activities on the blockchain, such as participating in proof-of-stake networks. We earn blockchain rewards on crypto assets.
Our staking revenue is included within blockchain rewards. Our blockchain services offered as part of Coinbase Cloud’s blockchain infrastructure solutions are included in other subscription and services revenue.
• Custodial fee revenue: We derive custodial fee revenue based on a percentage of the daily value of customer crypto assets that we hold under custody in our dedicated cold storage solution. The value of crypto assets held under custody is driven by the quantity, price, and type of crypto asset.
• Interest income: We earn income on fiat funds under a revenue sharing arrangement with the issuer of USDC, pursuant to which we share any interest income generated from USDC reserves pro rata based on (i) the amount of USDC distributed by each respective party and (ii) the amount of USDC held on each respective party’s platform. Our income is dependent on the balance of such fiat funds and the prevailing interest rate environment. We also earn interest income on loans issued to our consumers and institutional users. Additionally, we hold customer custodial funds and cash and cash equivalents at certain third-party banks which earn interest. Interest earned on revenue sharing, customer custodial funds, and loans is included in interest income within subscription and services revenue. Interest earned on cash and cash equivalents is included in corporate interest and other income, within other revenue.
• Other: Other subscription and services revenue primarily includes revenue from Coinbase Cloud, which includes staking application, delegation, and infrastructure services, subscription revenue from Coinbase One, Learning Rewards (formerly “Earn”) campaign revenue, and revenue from other subscription licenses.
Other revenue
Other revenue includes the sale of crypto assets when we are the principal in the transaction. Periodically, as an accommodation to customers, we may fulfill customer transactions using our own crypto assets. We fulfill customer accommodation transactions using our own assets for orders that do not meet the minimum trade size for execution on our platform or to maintain customers’ trade execution and processing times during unanticipated system disruptions. We have custody and control of these crypto assets prior to the sale to the customer and record revenue at the point in time when the sale is processed. Accordingly, we record the total value of the sale as revenue and the cost of the crypto asset in other operating expense, net. Transactions involving our sale of crypto assets represented less than 0.1% of our total revenue for the year ended December 31, 2022.
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Other revenue also includes interest income earned primarily on our corporate cash and cash equivalents. Interest income is calculated using the interest method and depends on the balance of cash and cash equivalents as well as the prevailing interest rate environment.
Operating expenses
Operating expenses consist of transaction expense, technology and development, s ales and marketing, general and administrative, restructuring, and other operating expense, net.
Transaction expense
Transaction expense includes costs incurred to operate our platform, process crypto asset trades, and perform wallet services. These costs include account verification fees, miner fees to process transactions on blockchain networks, fees paid to payment processors and other financial institutions for customer transaction activity, and crypto asset losses due to transaction reversals. Transaction expense also includes rewards paid to users for staking activities conducted by us. Fixed-fee costs are expensed over the term of the contract and transaction-level costs are expensed as incurred.
Technology and development
Technology and development expenses include personnel-related expenses incurred in operating, maintaining, and enhancing our platform. These costs also include website hosting, infrastructure expenses, costs incurred in developing new products and services and the amortization of acquired developed technology.
Sales and marketing
Sales and marketing expenses primarily include costs related to customer acquisition, advertising and marketing programs, and personnel-related expenses. Sales and marketing costs are expensed as incurred.
General and administrative
General and administrative expenses include personnel-related expenses incurred to support our business, including executive, customer support, compliance, finance, human resources, legal, and other support operations. These costs also include software subscriptions for support services, facilities and equipment costs, depreciation, amortization of acquired customer relationship intangible assets, gains and losses on disposal of fixed assets, legal reserves and settlements, and other general overhead. General and administrative costs are expensed as incurred.
Restructuring
Restructuring expenses primarily consist of non-recurring costs and severance for employees related to reductions in our headcount during the year ended December 31, 2022. For more information, see Note 3. Restructuring of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.
Other operating expense, net
Other operating expense, net includes impairment and realized gains on the sale of crypto assets, realized gains and losses resulting from the settlement of derivative instruments, and fair value gains and losses related to derivatives and derivatives designated in qualifying fair value hedge accounting relationships.
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Other operating expense, net also includes the cost of our crypto assets used to fulfill customer accommodation transactions. Periodically, as an accommodation to customers, we may fulfill customer transactions using our own crypto assets held for operating purposes. We have custody and control of the crypto assets prior to the sale to the customer. Accordingly, we record the total value of the sale in other revenue and the cost of the crypto asset in other operating expense, net.
Interest expense
Interest expense on debt includes coupon interest expense, as well as amortization of debt discounts and debt issuance costs.
Other expense (income), net
Other expense (income), net includes the following items:
• gains and losses on investments, net, which consists primarily of realized and unrealized gains and losses from fair value adjustments on investments;
• realized impacts on foreign exchange resulting from the settlement of our foreign currency assets, liabilities and foreign exchange forward contracts, as well as unrealized impacts on foreign exchange resulting from remeasurement of transactions and monetary assets and liabilities denominated in non-functional currencies; and
• impairment recognized on certain strategic equity investments in privately held companies without readily determinable fair values.
(Benefit from) provision for income taxes
(Benefit from) provision for income taxes includes income taxes related to foreign jurisdictions and U.S. federal and state income taxes.
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Results of Operations
The following table summarizes the historical consolidated statements of operations data:
Year Ended December 31,
2022 2021 2020
(in thousands)
Revenue:
Net revenue $ 3,148,815 $ 7,354,753 $ 1,141,167
Other revenue 45,393 484,691 136,314
Total revenue 3,194,208 7,839,444 1,277,481
Operating expenses:
Transaction expense 629,880 1,267,924 135,514
Technology and development 2,326,354 1,291,561 271,732
Sales and marketing 510,089 663,689 56,782
General and administrative 1,600,586 909,392 279,880
Restructuring 40,703 — —
Other operating expense, net 796,804 630,308 124,622
Total operating expenses 5,904,416 4,762,874 868,530
Operating (loss) income (2,710,208) 3,076,570 408,951
Interest expense 88,901 29,160 —
Other expense (income), net 265,473 20,463 (248)
(Loss) income before income taxes (3,064,582) 3,026,947 409,199
(Benefit from) provision for income taxes (439,633) (597,173) 86,882
Net (loss) income $ (2,624,949) $ 3,624,120 $ 322,317
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The following table presents the components of the consolidated statements of operations data as a percentage of total revenue:
Year Ended December 31,
2022 2021 2020
(as a % of total revenue) (1)
Total revenue 100 % 100 % 100 %
Operating expenses:
Transaction expense 20 16 11
Technology and development 73 16 21
Sales and marketing 16 9 4
General and administrative 50 12 22
Restructuring 1 — —
Other operating expense, net 25 8 10
Total operating expenses 185 61 68
Operating (loss) income (85) 39 32
Interest expense 3 — —
Other expense (income), net 8 — —
(Loss) income before income taxes (96) 39 32
(Benefit from) provision for income taxes (14) (7) 7
Net (loss) income (82) % 46 % 25 %
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(1) Figures presented above may not sum precisely due to rounding.
Comparison of the years ended December 31, 2022 and 2021
Revenue
Year Ended December 31, % Change
2022 2021 2020 2022 2021
(in thousands)
Transaction revenue $ 2,356,244 $ 6,837,266 $ 1,096,174 (66) % 524 %
Subscription and services revenue 792,571 517,487 44,993 53 1,050
Other revenue 45,393 484,691 136,314 (91) 256
Total revenue $ 3,194,208 $ 7,839,444 $ 1,277,481 (59) 514
Transaction revenue for the year ended December 31, 2022 decreased by $4.5 billion compared to the year ended December 31, 2021, primarily due to the following:
• a decrease in consumer Trading Volume of 69% due to a decrease in crypto market capitalization including the average crypto asset prices; and
• a decline in Crypto Asset Volatility by 32%. Trading Volume on our platform is generally correlated with Crypto Asset Volatility.
A number of factors contribute to changes in crypto asset prices and Crypto Asset Volatility, including, but not limited to, changes in the supply and demand for a particular crypto asset, crypto market sentiment, macroeconomic factors, utility of a particular crypto asset, and idiosyncratic events.
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Subscription and services revenue for the year ended December 31, 2022 increased by $275.1 million compared to the year ended December 31, 2021, due to the following:
• an increase in interest income of $301.1 million due to an increased return on our revenue sharing arrangement with the issuer of USDC and on interest-bearing customer custodial funds, driven by an increase in interest rates ; and
• an increase in blockchain rewards of $52.5 million due to the addition of new assets available for staking such as Solana and Cardano in 2022 and increased staking activity primarily due to Ethereum 2 Staking which was launched in the second quarter of 2021; offset by
• a decrease in custodial fee revenue of $56.4 million due to a decrease in the average assets under custody of $48.3 billion over the same period. The decline in average assets under custody was primarily driven by a decrease in the price of crypto assets under custody; and
• a decrease in other subscription and services revenue of $22.0 million due to a decrease in Learning Rewards campaign revenue and a decrease in participation and delegation revenue, partially offset by an increase in subscription fees for Coinbase One which was launched in the fourth quarter of 2021.
Other revenue for the year ended December 31, 2022 decreased by $439.3 million compared to the year ended December 31, 2021 due to a decrease in crypto asset sales revenue over the same period. A system disruption which occurred on May 19, 2021 as a result of an unprecedented short term spike in Trading Volume as well as the exchange disruption on September 7, 2021 were primarily responsible for the increase in crypto asset sales during the year ended December 31, 2021.
We generate revenue from crypto asset sales where the transactions are fulfilled with our crypto assets to accommodate customers, primarily as a result of unanticipated system disruptions. For the year ended December 31, 2022, we did not experience any unanticipated system disruptions with material impact to our financial results compared to 16 unanticipated system disruptions for the year ended December 31, 2021. The number of unanticipated system disruptions declined during the year ended December 31, 2022 as we continued to make significant investments in infrastructure to support trading volumes on our platform.
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Operating expenses
Year Ended December 31, % Change
2022 2021 2020 2022 2021
(in thousands)
Transaction expense $ 629,880 $ 1,267,924 $ 135,514 (50) % 836 %
Technology and development 2,326,354 1,291,561 271,732 80 375
Sales and marketing 510,089 663,689 56,782 (23) 1,069
General and administrative 1,600,586 909,392 279,880 76 225
Restructuring 40,703 — — 100 —
Other operating expense, net 796,804 630,308 124,622 26 406
Total operating expenses $ 5,904,416 $ 4,762,874 $ 868,530 24 448
Transaction expense for the year ended December 31, 2022 decreased by $638.0 million, compared to the year ended December 31, 2021. Transaction expense as a percentage of net revenue was 20.0% and 17.2% during the years ended December 31, 2022 and 2021, respectively. Our transaction expenses as a percentage of net revenue will vary depending on the composition of our revenue. For example, over the years ended December 31, 2022 and 2021, blockchain rewards revenues have grown, and these revenues have a higher transaction expense as a percentage of net revenue compared to transaction fees or interest income.
The decrease in transaction expense for the year ended December 31, 2022, compared to the year ended December 31, 2021, was driven by the following:
• a decrease of $411.2 million related to miner fees driven by a decrease in blockchain transmission volume, both related to customer withdrawals and corporate wallet movements, lower blockchain network fees such as Ethereum gas prices, and significant investments in batching and other optimizations in on-chain activity;
• a decrease of $147.0 million related to lower payment processing fees driven by lower settled trading volume; and
• a decrease of $139.9 million related to transaction reversal losses driven by lower transaction volumes; offset by
• an increase of $55.7 million related to an increase in blockchain activities associated with rewards paid or payable to users from blockchain activities such as staking.
Technology and development expenses for the year ended December 31, 2022 increased by $1.0 billion compared to the year ended December 31, 2021, predominantly due to the following:
• an increase of $680.3 million in personnel-related expenses, including a $518.9 million increase i n stock-based compensation expense, primarily due to an 87% increase in average headcount and the full-year impact of equity instruments issued in conjunction with business combinations that occurred throughout 2021 and early in 2022 ;
• an increase of $198.1 million in software and service costs, driven by continued investment in our products and platform, along with an increase in headcount driven by software licenses ; and
• an increase of $83.4 million in amortization expense, related to amortization on capitalized software and assembled workforce.
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Sales and marketing expenses for the year ended December 31, 2022 decreased by $153.6 million compared to the year ended December 31, 2021. Sales and marketing expenses as a percentage of net revenue were 16.2% and 9.0% during the years ended December 31, 2022 and 2021, respectively.
The decrease in sales and marketing expenses for the year ended December 31, 2022 compared to the year ended December 31, 2021, was due to the following:
• a decrease of $316.5 million in digital advertising spend due to lower investment in paid media in 2022; and
• a decrease of $32.4 million in r eferral and promotion fees related to marketing initiatives such as sweepstakes and incentivized campaigns; offset by
• an increase of $128.7 million related to higher offline and brand spend; and
• an increase of $59.6 million in personnel-related expenses, including a $41.2 million increase in stock-based compensation expense, due to a 109% increase in average headcount.
General and administrative expenses for the year ended December 31, 2022 increased by $691.2 million compared to the year ended December 31, 2021 predominantly driven by the following:
• an increase of $290.1 million in customer support costs due to an increase in managed services to support compliance operations and customer experience, as a result of increased capacity needs to address backlogs from 2021, and an increase in personnel-related expenses;
• an increase of $230.6 million in personnel-related expenses excluding customer support, including a $149.4 million increase in stock-based compensation expense, primarily due to a 92% increase in average headcount ;
• an increase of $75.1 million in settlement costs largely due to a one-time settlement cost accrual of $50.0 million with NYDFS in 2022;
• an increase of $71.0 million in professional services due to higher legal fees related to litigation, regulatory, compliance and business consulting; and
• an increase of $22.1 million in software license costs to support business, security and risk applications; offset by
• a decrease of $39.2 million in direct listing costs associated with our Direct Listing in the second quarter of 2021.
Restructuring expenses were $40.7 million for the year ended December 31, 2022. The $40.7 million is driven by separation pay and other personnel costs related to the workforce reduction in June 2022. There were no restructuring expenses for the year ended December 31, 2021.
Other operating expense, net for the year ended December 31, 2022 increased by $166.5 million compared to the year ended December 31, 2021, predominantly driven by the following:
• an increase of $428.1 million related to gross impairment charges on crypto assets held;
• an increase of $19.2 million due to certain platform-related incidents losses; and
• a decrease of $137.3 million in crypto asset realized gains; offset by
• a decrease of $435.4 million attributed to the decrease in the crypto assets sold in order to fulfill customer accommodation transactions, primarily as a result of a decrease in unanticipated system disruptions.
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Interest expense
Year Ended December 31, % Change
2022 2021 2020 2022 2021
(in thousands)
Interest expense $ 88,901 $ 29,160 $ — 205 % 100 %
During the year ended December 31, 2022, we had interest expense on debt of $88.9 million compared to $29.2 million for the year ended December 31, 2021. The increase in interest expense was predominantly due to a full-year impact of interest expense recognized on our Convertible Notes that were issued in May 2021 and our Senior Notes that were issued in September 2021.
Other expense (income), net
Year Ended December 31, % Change
2022 2021 2020 2022 2021
(in thousands)
Other expense (income), net $ 265,473 $ 20,463 $ (248) 1,197 % (8,351) %
Other expense (income), net for the year ended December 31, 2022 increased by $245.0 million compared to the year ended December 31, 2021 due to the following:
• an increase in net unrealized and realized losses related to foreign exchange of $61.7 million due to the timing of Euro denominated intercompany settlements and depreciation of the Euro and British Pound against the U.S. dollar;
• realized losses on foreign exchange forward derivative contracts of $59.1 million; and
• an increase in impairment expense recognized on certain strategic equity investments of $101.4 million; offset by
• a decrease in net realized and unrealized gains on investments of $19.4 million related to gains recorded during 2021 primarily due to the remeasurement gain of $8.8 million during the year ended December 31, 2021 related to our previously held investment in Bison Trails, as a result of the acquisition that occurred in February 2021 and other investment gains of $8.1 million.
(Benefit from) provision for income taxes
Year Ended December 31, % Change
2022 2021 2020 2022 2021
(in thousands)
(Benefit from) provision for income taxes $ (439,633) $ (597,173) $ 86,882 (26) % (787) %
The benefit from income taxes decreased by $157.5 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 predominantly driven by a reduction in tax benefits relating to stock-based compensation and research and development credits, and a valuation allowance recorded on impairment charges, offset by an increase in tax benefit on pretax loss.
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Non-GAAP Financial Measure
In addition to our results determined in accordance with GAAP, we believe Adjusted EBITDA, a non-GAAP measure, is useful in evaluating our operating performance. We use Adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that Adjusted EBITDA may be helpful to investors because it provides consistency and comparability with past financial performance. However, Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Among other non-cash and non-recurring items, Adjusted EBITDA excludes stock-based compensation expense, which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and an important part of our compensation strategy. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
We calculate Adjusted EBITDA as net loss or income, adjusted to exclude provision for or benefit from income taxes, depreciation and amortization, interest expense, crypto asset borrowing costs, stock-based compensation expense, crypto asset impairment, net, impairment on investments, other impairment, non-recurring Direct Listing expenses, restructuring, change in unrealized foreign exchange, fair value gain or loss on derivatives , non-recurring legal reserves and related costs, and other adjustments, net.
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The following table provides a reconciliation of net (loss) income to Adjusted EBITDA:
Year Ended December 31,
2022 2021 2020
(in thousands)
Net (loss) income $ (2,624,949) $ 3,624,120 $ 322,317
Adjusted to exclude the following:
(Benefit from) provision for income taxes (439,633) (597,173) 86,882
Depreciation and amortization 154,069 63,651 30,962
Interest expense 88,901 29,160 —
Crypto asset borrowing costs 6,675 11,847 2,634
Stock-based compensation 1,565,823 820,685 69,889
Crypto asset impairment, net (1)
592,495 119,421 8,355
Impairment on investments 101,445 — —
Other impairment (2)
26,518 500 —
Non-recurring Direct Listing expenses — 39,160 —
Restructuring 40,703 — —
Change in unrealized foreign exchange 28,516 (14,944) 1,057
Fair value loss (gain) on derivatives 7,410 (32,056) 5,254
Non-recurring legal reserves and related costs 64,250 1,500 —
Other adjustments, net 16,379 24,200 —
Adjusted EBITDA $ (371,398) $ 4,090,071 $ 527,350
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(1) Crypto asset impairment, net represents impairment on crypto assets still held.
(2) Other impairment represents impairment on intangible assets of $4.7 million and $0.5 million for the years ended December 31, 2022 and 2021, respectively, and impairment on property and equipment of $21.8 million for the year ended December 31, 2022.
Liquidity and Capital Resources
Cash and cash equivalents, restricted cash and USDC
As of December 31, 2022, we had cash and cash equivalents of $4.4 billion, exclusive of restricted cash and customer custodial funds. As of December 31, 2022 and 2021, our cash and cash equivalents, restricted cash, USDC and cash collateral balance consisted of the following (in millions):
Year Ended December 31,
2022 2021
Cash and cash equivalents:
Cash equivalents (1)
$ 2,250.1 $ 4,813.6
Cash held at banks 2,031.7 2,141.0
Cash held at venues 143.2 168.9
Total cash and cash equivalents $ 4,425.0 $ 7,123.5
Restricted cash (2)
$ 25.9 $ 31.0
USDC (3)
861.1 100.1
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(1) Cash equivalents consists of money market funds primarily denominated in U.S. dollars.
(2) Restricted cash consists primarily of amounts held in restricted bank accounts at certain third-party banks as security deposits or pledged as collateral to secure letters of credit.
(3) USDC is a stablecoin which can be redeemed one USDC for one U.S. dollar on demand. While not accounted for as cash or cash equivalents, we treat our USDC holdings as a liquidity resource.
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Debt
In September 2021, we issued $2.0 billion in Senior Notes consisting of $1.0 billion of 2028 Senior Notes due on October 1, 2028 and $1.0 billion of 2031 Senior Notes due on October 1, 2031. In May 2021, we issued an aggregate of $1.4 billion of 2026 Convertible Notes that mature on June 1, 2026, unless converted, redeemed or repurchased on an earlier date. We periodically issue short-term debt to support certain business operations. See Notes 12. Accrued Expenses and Other Current Liabilities and 13. Indebtedness of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding our short and long-term borrowings, respectively.
In August 2022, S&P Global Ratings announced a downgrade of our issuer credit rating and senior unsecured debt from BB+ to BB . In January 2023, S&P Global Ratings announced an additional downgrade of our issuer credit rating and senior unsecured debt from BB to BB-.
In June 2022, Moody’s Investors Service (“Moody’s”) announced a downgrade of our Corporate Family Rating (“CFR”) to Ba3 from Ba2 and downgraded our guaranteed senior unsecured notes to Ba2 from Ba1. In January 2023, Moody’s announced additional downgrades of our CFR to B2 from Ba3 and our guaranteed senior unsecured notes to B1 from Ba2.
Crypto assets
Our crypto asset investment policy allows us to invest up to 10% of our quarterly net income into a diversified portfolio of crypto assets. Our investments will be deployed over a multi-quarter window. We continue to execute these trades away from our crypto asset trading platform to avoid any conflict of interest with our customers. We may increase or decrease our allocation over time.
As of December 31, 2022, we held $356.2 million of crypto assets for investment and operating purposes at impaired cost. Our future earnings and cash flows will be impacted when we choose to monetize our crypto assets and the variability of our earnings will be dependent on the future fair value of such crypto assets. We have limited ability to predict whether the sale of crypto assets received from airdrops or forks will be material to our future earnings, which is dependent on the future market liquidity, viability and fair value of such crypto assets. Our current policy is not to monetize unsupported forks or airdrops held on our platform. Crypto assets received through airdrops and forks, at the time of the airdrop or fork and at the end of the periods presented, are not material to our financial statements.
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As of December 31, 2022 and 2021, the cost basis and fair value of our crypto assets held at impaired cost was as follows:
Year Ended December 31,
2022 2021
Cost (1)
Fair Value (2)
Cost (1)
Fair Value (2)
(in millions)
Crypto assets held as investments:
Bitcoin (3)
$ 111.6 $ 151.8 $ 87.9 $ 265.8
Ethereum (3)
91.2 138.7 46.1 167.1
Other 85.9 135.8 75.4 263.1
Total crypto assets held as investments 288.7 426.3 209.4 696.0
Crypto assets held for operating purposes:
Bitcoin 5.4 5.8 95.5 97.9
Ethereum 24.4 25.8 58.2 75.4
Other 37.7 59.1 203.4 267.5
Total crypto assets held for operating purposes 67.5 90.7 357.1 440.8
Total crypto assets held $ 356.2 $ 517.0 $ 566.5 $ 1,136.8
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(1) Cost amounts shown are net of impairment recognized.
(2) The fair value of crypto assets held is based on quoted market prices for one unit of each crypto asset reported on our platform at 11:59 pm Coordinated Universal Time (UTC) on the last day of the respective period multiplied by the quantity of each crypto asset held.
(3) During the fourth quarter of 2022, we entered into futures contracts to hedge our price exposure on crypto assets held as investments. As of December 31, 2022, the cost and fair value amounts for Bitcoin were $89.9 million and $85.8 million, respectively, and the cost and fair value amounts for Ethereum were $43.7 million and $50.8 million, respectively.
We view our crypto asset investments as long term holdings and we do not plan to engage in regular trading of crypto assets. During times of instability in the market of crypto assets, we may not be able to sell our crypto assets at reasonable prices or at all. As a result, our crypto assets are less liquid than our existing cash and cash equival ents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents. Customer accommodations and corporate expenses denominated in crypto assets are fulfilled with crypto assets held for operational purposes. We recognized $501.0 million and $43.1 million of impairment expense on our crypto asset investment portfolio for the years ended December 31, 2022 and 2021, respectively.
We enter into fiat and crypto asset borrowing arrangements with certain unaffiliated institutional customers. These borrowings are generally open-term or have a term of less than one year. Certain borrowing arrangements require us to post collateral in the form of fiat or crypto assets, including stablecoins, and the lender may have the right to sell, repledge or rehypothecate such collateral without our consent. We only use our corporate crypto assets, stablecoins, and cash as collateral. We do not use cbETH as corporate collateral.
We are required to maintain a collateral to loan ratio per our borrowing agreements. Any significant change in crypto asset prices could impact the value of the crypto asset borrowed or the value of crypto asset collateral. Current downward trends in crypto asset prices have not had a material impact on the value of our corporate collateral. If crypto asset prices rise, we will post additional collateral to maintain required collateral to loan ratios. We were in compliance with all collateral requirements as of December 31, 2022. See Risk Factors—We provide secured loans to our customers, which exposes us to credit risks and may cause us to incur financial or reputational harm included in Part I, Item 1A of this Annual Report on Form 10-K for further information.
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As of December 31, 2022, the balance of our pledged collateral consisted of the following (in millions, except units):
December 31, 2022
Units Fair Value
Asset
USDC 47,633,897 $ 47.6
Bitcoin 650 10.8
Fiat N/A 41.6
Total $ 100.0
As of December 31, 2021, we did not have any assets pledged as collateral recorded on the consolidated balance sheets.
Customer crypto assets and liabilities
We safeguard customer crypto assets and the associated keys and are obligated to safeguard them from loss, theft, or other misuse. In accordance with recently adopted guidance, SAB 121, we record customer crypto liabilities, as well as a corresponding customer crypto asset on the consolidated balance sheets, at fair value. See Note 10. Customer Assets and Liabilities of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, for further information as of December 31, 2022 .
As of December 31, 2022, we have not experienced excessive redemptions or withdrawals, or prolonged suspended redemptions or withdrawals, of crypto assets to date. See Risk Factors - Depositing and withdrawing crypto assets into and from our platform involves risks, which could result in loss of customer assets, customer disputes and other liabilities, which could adversely impact our business. in Part I, Item 1A of this Annual Report on Form 10-K for further information. We do not use customer crypto assets as collateral for any loan, margin, rehypothecation, or other similar activities without their consent to which we or our affiliates are a party.
Cash requirements and contractual obligations
Certain jurisdictions where we operate require us 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 December 31, 2022 and 2021, our eligible liquid assets were greater than the aggregate amount of customer custodial cash liabilities. We are also required to hold corporate liquid assets at our subsidiaries to meet capital requirements established by our regulators based on the value of crypto assets held in custody. We are in compliance with these capital requirements.
We believe our existing cash and cash equivalents will be sufficient in both the short and long term to meet our requirements and plans for cash, including meeting our working capital and capital expenditure requirements. Our ability to meet our requirements and plans for cash, including meeting our working capital and capital expenditure requirements, will depend on many factors, including market acceptance of crypto assets and blockchain technology, our growth, our ability to attract and retain customers on our platform, the continuing market acceptance of our products and services, the introduction of new subscription products and services on our platform, expansion of sales and marketing activities, and overall economic conditions. We anticipate satisfying our short-term cash requirements with our existing cash and cash equivalents and may satisfy our long-term cash requirements with cash and cash equivalents on hand or with proceeds from a future equity or debt financing.
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To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and cash and other requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operation s. As a result of our downgrade, our ability to raise additional financing from external sources in the future may be adversely affected and we may not be able to raise capital on terms acceptable to us or at all. In addition, even if debt financing is available, the cost of additional financing may be significantly higher than our current debt.
Our material cash requirements and contractual obligations arising in the normal course of business primarily consist of operating lease commitments, non-cancelable purchase obligations, debt and related interest payments, and income taxes.
As of December 31, 2022, our material cash requirements and contractual obligations due within the next 12 months and in total consisted of the following (in millions):
Amounts due
Next 12 Months Total
Operating leases (1)
$ 37.0 $ 79.5
Non-cancelable purchase obligations (2)
282.6 628.4
2026 Convertible Notes (3)
Interest 7.2 24.6
Principal — 1,437.5
2028 Senior Notes (4)
Interest 33.8 202.5
Principal — 1,000.0
2031 Senior Notes (4)
Interest 36.3 326.3
Principal — 1,000.0
Other (5)
50.0 100.0
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(1) Lease payments due for corporate offices.
(2) Committed spend primarily relating to technology and advertising.
(3) Assumes the 2026 Convertible Notes are not converted into our Class A common stock, repurchased or redeemed prior maturity.
(4) Assumes the 2028 and 2031 Senior Notes are not repurchased or redeemed prior to maturity.
(5) In January 2023, the NYDFS announced a consent order focused on historical shortcomings in Coinbase, Inc.’s compliance program. Pursuant to the consent order, Coinbase, Inc. has paid a $50.0 million penalty in January 2023 and agreed to invest an additional $50.0 million in its compliance function by the end of 2024.
Se e Notes 7 . Leases , 12. Accrued Expenses and Other Current Liabilities, 13. Indebtedness, 19. Income Taxes and 21. Commitments and Contingencies of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, for further information relating to debt and income taxes as of December 31, 2022 .
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Cash flows
Year Ended December 31,
2022 2021 2020
(in thousands)
Net cash (used in) provided by operating activities (1)
$ (1,585,419) $ 4,038,172 $ 293,548
Net cash (used in) provided by investing activities (663,822) (1,124,740) 50,822
Net cash (used in) provided by financing activities (1)
(5,838,518) 9,976,084 2,729,323
Net (decrease) increase in cash, cash equivalents, and restricted cash $ (8,087,759) $ 12,889,516 $ 3,073,693
Effect of exchange rates on cash, cash equivalents, and restricted cash $ (163,257) $ (64,883) $ (2,081)
Change in customer custodial cash $ (5,547,481) $ 6,762,841 $ 2,562,042
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(1) See Note 2. Summary of Significant Accounting Polic ies - Reclassifications of the Notes to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K, for further information relating to the change in customer custodial cash liabilities from operating activities to financing activities.
Operating activities
Net cash used in operating activities was $1.6 billion for the year ended December 31, 2022. Our net cash used in operating activities reflected a net loss of $2.6 billion, partially offset by non-cash adjustments of $2.1 billion, which was driven by stock-based compensation expense, crypto asset impairment expense, depreciation and amortization, impairment expense on ventures investments, non-cash lease expense, unrealized losses on foreign exchange, and other impairment expense. This was partially offset by deferred income taxes and realized gains on crypto assets driven by net crypto assets received from operating activities. In addition to these changes were changes in operating assets and liabilities of $1.0 billion.
Net cash provided by operating activities was $4.0 billion for the year ended December 31, 2021. Our net cash provided by operating activities reflected net income of $3.6 billion and non-cash adjustments of $272.6 million, which was driven by benefits from deferred income taxes and realized gains on crypto assets driven by net crypto assets received from operating activities. This was partially offset by stock-based compensation expense, crypto asset impairment expense and depreciation and amortization expense. In addition to these changes were changes in operating assets and liabilities of $141.4 million.
Investing activities
Net cash used in investing activities of $663.8 million for the year ended December 31, 2022 was due to $430.8 million in net outflow for the purchase and sale of crypto assets, $186.2 million in net cash paid in the Unbound Security and FairXchange acquisitions, $63.0 million in investments of companies and technologies and $61.0 million in capitalized internal-use software development costs. This was partially offset by $120.2 million in net inflow for consumer loans repaid and originated.
Net cash used in investing activities of $1.1 billion for the year ended December 31, 2021 was due to $435.1 million in net outflow for the purchase and sale of crypto assets, $326.5 million in investments of companies and technologies, $211.7 million in net outflow for consumer loans originated and repaid, $70.9 million in net cash paid for acquisitions, $60.8 million related to an asset acquisition of technical talent and $22.1 million in capitalized internal-use software development costs.
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Financing activities
Net cash used in financing activities of $5.8 billion for the year ended December 31, 2022 was due to changes in customer custodial cash liabilities of $5.6 billion, $351.9 million of taxes paid related to net share settlements of equity awards and $191.1 million in repayments of short-term borrowings. This was partially offset by $191.0 million of proceeds received from the issuance of short-term borrowings, net of issuance costs, $51.5 million of proceeds from the issuance of common stock from stock option exercises, net of repurchases, and $20.8 million of proceeds received under our employee stock purchase plan.
Net cash provided by financing activities of $10.0 billion for the year ended December 31, 2021, was due to changes in customer custodial cash liabilities of $6.7 billion, $2.0 billion of proceeds from the issuance of our Senior Notes, net of issuance costs and $1.4 billion of proceeds from the issuance of 2026 Convertible Notes, net of issuances costs, $217.1 million of proceeds from the issuance of common stock from stock option exercises, net of repurchases, $20.0 million of proceeds from the issuance of a short-term borrowing, and $19.9 million of proceeds received under our employee stock purchase plan. This was partially offset by $262.8 million of taxes paid related to net share settlement of equity awards and the purchase of $90.1 million of capped calls in connection with the 2026 Convertible Notes.
Critical Accounting Policies and Estimates
Our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K are prepared in accordance with GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, operating results, and cash flows will be affected.
See Note 2. Summary of Significant Accounting Policies , of the Notes to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements.
Revenue recognition
We primarily generate revenue through transaction fees charged on our platform. We charge a fee at the transaction level. The transaction price, represented by the trading fee, is calculated based on volume and may vary depending on payment type and the value of the transaction. The transaction fee is collected from the customer at the time the transaction is executed. In certain instances, the transaction fee can be collected in crypto assets, with revenue measured based on the amount of crypto assets received and the fair value of the crypto assets at the time of the transaction. For the year ended December 31, 2022, we collected approximately 15% of total revenue in crypto assets. We currently do not have any formal policies requiring conversion of these crypto assets received into fiat currency.
The transaction price includes estimates for reductions in revenue from transaction fee reversals that may not be recovered from customers. Such reversals occur when the customer disputes a transaction processed on their credit card or their bank account for a variety of reasons and seeks to have the charge reversed after we have processed the transaction. These amounts are estimated based upon the most likely amount of consideration to which we will be entitled. All estimates are based on historical experience and our best judgment at the time to the extent it is probable that a significant reversal of revenue previously recognized will not occur. All estimates of variable consideration are reassessed periodically. The total transaction price is allocated to the single performance obligation. While we recognize transaction fee reversals due to transaction reversals as a reduction of net revenue, crypto asset losses due to transaction reversals are included in transaction expense.
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Business combinations
We account for our business combinations using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date. When determining the fair value of assets acquired and liabilities assumed, we make significant estimates and assumptions, especially with respect to non-crypto intangible assets. These intangible assets do not have observable prices. We have generally applied a cost approach in estimating the fair values of acquired intangible assets, with the number of working hours required to recreate the intangible asset being a significant input to the estimate. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and, as a result, actual results may differ from estimates.
Income taxes
We utilize the asset and liability method for computing our income tax provision. Deferred tax assets and liabilities reflect the expected future consequences of temporary differences between the financial reporting and tax bases of assets and liabilities as well as operating loss, capital loss, and tax credit carryforwards, using enacted tax rates. Management makes estimates, assumptions, and judgments to determine our provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. We assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we establish a valuation allowance.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits are recognized within provision for income taxes.
For U.S. federal tax purposes, crypto asset transactions are treated on the same tax principles as property transactions. We recognize a gain or loss when crypto assets are exchanged for other property, in the amount of the difference between the fair market value of the property received and the tax basis of the exchanged crypto assets. Receipts of crypto assets in exchange for goods or services are included in taxable income at the fair market value on the date of receipt.
Recent Accounting Pronouncements
See Note 2. Summary of Significant Accounting Policies , of the Notes to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for a discussion about new accounting pronouncements adopted and not yet adopted as of the date of this report.
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