The second one-time number Coinbase reported on Thursday is part of a far less positive story. That would be the “$307 million in expenses related to the data theft incident disclosed in May.”
If the fallout from the episode only costs $307 million, Coinbase can count that as a win. But that’s a big if in light of the gaggle of class action lawyers and state regulators lining up to extract a payout from the company over the data breach. Then there is the reputational damage that goes with Coinbase failing to see how outsourcing sensitive customer data to dirt-cheap agents in India posed a security risk. For now, though, the company appears to have weathered the PR storm, and its announcement of a new customer service “Center of Excellence” in North Carolina could help to smooth out remaining mistrust.
Finally, there is a third big one-off number tucked into Thursday’s earnings report: “a $362 million pretax gain on our crypto investment portfolio (largely unrealized).” This reflects a pair of significant recent developments. The first is the obvious run-up in crypto asset prices, which is fattening Coinbase’s treasury holdings. The other is the recent change in accounting rules that allows companies to record crypto gains as they accrue. While companies accumulating crypto on their balance sheet is generally a dicey corporate finance strategy, it is fortunately only a small part of Coinbase’s operations, and for now, the gains are very real and help to strengthen its already strong fundamentals.
While one-off numbers are typically just that—temporary noise that shouldn’t be mistaken for a signal of a company’s broader performance—they can also represent something more. That is the case with Coinbase’s Q2 earnings, where items like its massive Circle windfall arguably matter more than the usual quarter-to-quarter revenue and trading fluctuations.
