CCUP

I. Earnings Highlights Recap

1. Full-year guidance

a. Other revenue: Maintained at $310–330 mn for the year, including $182 mn of Arc token pre-sale revenue already recognized in Q3, with other products contributing $130–150 mn. There was only one blockchain integration in Q3, while multiple are expected in Q4, so non-Arc other revenue should rise QoQ.

b. RLDC margin: Reiterated at 41.7%–43.7% for the year. Ex-Arc, it is expected to land near the midpoint of the original start-of-year range of 38%–40%.

c. Adj. operating expenses: Still tracking toward the high end of the original $570–585 mn range. d. USDC in circulation: The multi-year, cross-cycle framework is unchanged, with management acknowledging growth will not be linear.

2. Revenue recognition for the Arc pre-sale

a. Recognition cadence: Of the $242 mn pre-sale, revenue is recognized by milestones. Approximately 75% (or $182 mn) was recognized in Q3 upon token minting/delivery and mainnet launch, booked under other revenue.

b. Impact on margin: The pre-sale carries no distribution cost, lifting Q3 RLDC margin to 52.4%. Ex-Arc, RLDC margin was 39.7%, roughly flat YoY and down about 150 bps QoQ, driven by lower net reserve margin and reduced non-Arc other revenue.

3. Arc monetization paths and accounting treatment: All three routes are recognized under other revenue. The CFO said Arc has built $3 bn in token assets.

a. Staking rewards: After moving to PoS, staking self-held tokens while serving as a validator is expected to be Arc's primary recurring revenue, depending on staked amount, network reward rate, and token price at receipt. b. Token sales: Selective sales may be used to support network development, with no associated cost, dropping straight to profit. c. Ecosystem incentives: Recognized as other revenue at fair value upon grant, with an equal amount booked under other distribution costs. d. Off-balance-sheet value: The company holds 25% of Arc token allocations, which are not recognized under GAAP until sold or distributed.

4. Margins and opex trends

a. Net reserve margin: 37.8%, up about 70 bps YoY and down about 80 bps QoQ, with the QoQ decline mainly due to Hyperliquid being in its first full quarter. In Q4, the first full quarter of the renewed Binance agreement will also be reflected.

b. Reserve yield: 3.54%, down 61 bps YoY. After the Fed's Sep rate hike, it rose 6 bps QoQ. c. Expenses and EBITDA: Adj. operating expenses rose 13% YoY, directed to Arc and AI infra and marketing (incl. the Chelsea sponsorship), but fell about 5% QoQ due to one-off costs in Q2. Adj. EBITDA margin was 70%, or 50% ex-Arc.

II. Earnings Call Details

2.1 Key executive remarks

1. Strategic positioning: With the GENIUS Act taking effect in Jan next year, the digital dollar is going mainstream, and the company positions itself as a platform with three mutually reinforcing networks. a. Circle National Trust has received an OCC federal charter. The CFO will step down after 5.5 years in the role.

2. USDC: Circulating supply was flat YoY, but usage continued to expand.

a. Volumes: On-chain volume rose 49% YoY to $13.9 tn, representing 79% of stablecoin transactions (vs. 66% last year), with a supply share of about 27%. Each USDC dollar turned over about 190 times during the quarter, roughly 10x the second-largest stablecoin.

b. Mints and redemptions: $208 bn during the quarter, up 42% YoY and a record, averaging about $2.3 bn per day (vs. $1.9 bn in Q2), totaling over $520 bn YTD. c. Distribution and brand: Signed a new 5-year agreement with Binance and received a $100 mn equity investment from Binance. USDC will feature on Chelsea's kit front in the 2026/27 season. d. Other assets: EURC rose 92% YoY to €413 mn, nearing €500 mn. USYC assets reached $2.4 bn, up 230% YoY.

3. CPN: Payment volume and participant onboarding accelerated, with M&A used to complete the last mile.

a. Scale: As of end-Q3, annualized payment volume was $41 bn, more than 15x YoY. By Oct 30, it exceeded $58 bn. Onboarded institutions reached 205, more than 4x YoY.

b. Capabilities: Integrated with treasury platforms such as Kyriba and connected to SAP ERP customers. It has gone live on the Arc mainnet, enabling AI Agent payments. c. Acquisition of Tazapay: Consideration is $400 mn in Class A common shares. Annualized payment volume exceeds $25 bn, with about 60% involving stablecoins. Closing is expected in 2027.

4. Arc: Mainnet went live on Sep 16, with focus shifting to scale-up and migration to PoS.

a. On-chain metrics: 11 founding validators and over 100 institutions and apps. On-chain assets were about $1.5 bn in late Oct. Since launch, USDC throughput exceeded $30 bn, with recent daily averages around $1 bn, about 500k txs, and fees under 1 cent.

b. Roadmap: Three sectors in development: privacy, payments (targeting >100k TPS), and Agents.

5. Agent economy: By Q1 2027, Agents on Arc will be discoverable, hireable, payable, and trustable. a. Over 99% of Agent payments on the x402 protocol settle in USDC. Nearly 2,800 endpoints are listed on the Agent Marketplace.

2.2 Q&A

Q: If approved to issue USDC in Hong Kong, what services would you first offer to enterprises that are not possible today?

A: Asia is the most active region for USDC, CPN, and Arc, and the company is engaging with the Hong Kong Gov. Through a G-SIB, the company already provides institutional-grade primary USDC liquidity in Hong Kong, with infrastructure in place for cross-border and digital asset transactions.

Management believes Hong Kong's stablecoin regime provides a framework for offshore-issued stablecoins and is confident about market entry. After the GENIUS Act takes effect in Jan, regulators across countries could pursue mutual recognition based on it. Merchants and investors in Hong Kong are already deeply integrated with the USD system, and management sees it as one of the largest global market opportunities, though they did not specify the first service to launch.

Q: Revenues and profits are growing slower than USDC adoption. Over the next 12–18 months, what milestones should we watch to gauge non-interest income growth, and when will it become a major contributor?

A: No 2027 outlook for other revenue was provided, with formal guidance to come on the next call. Management only noted that other revenue hit a record this quarter, with incremental drivers from scaling and monetizing CPN (bolstered by Tazapay) and from Arc token utility as it moves to PoS. Platform investments have begun to pay off.

Q: Amid intensifying stablecoin competition, how will you restore sustained USDC supply growth while protecting margins? How will you balance growth, partner incentives, and profitability?

A: We will keep doubling down on distribution partnerships, with liquidity and infra as core competitive edges. Management cited that a newly launched stablecoin sees on-chain volume of around $5 mn per day and tens of thousands of dollars in daily trading, while USDC runs at tens of billions and sometimes close to $10 bn. The trade-off between partner incentives and broad circulation will evolve over time. Management views stablecoins as a multi-trillion-dollar market with winner-takes-most dynamics. The CFO added that USDC's share of transaction volume rose to 79% and expects usage growth to translate into supply growth over a longer horizon.

Q: What gaps remain before 'blockchains fade into the background as financial infra'? What bottleneck is the company allocating the most resources to solve now?

A: Regulation, Arc, and CPN are now in place, with mainstream FIs already operating and building on them. Management did not single out one bottleneck, emphasizing this as the start of scale-up: the digital dollar has become regulated money, Arc has been built over two years to traditional FI-grade prudence and security standards, and CPN abstracts on-chain compliance and custody complexity. All three are done, and major crypto exchanges now support Arc.

Examples this quarter include: Lloyds Bank settling cross-border payments in USDC, Visa Direct supporting USDC funding, OnePay under Walmart supporting USDC, and Samsung embedding USDC in its phone wallet. The CFO added the company has built the broadest distribution and deepest primary/secondary liquidity among USD stablecoins, which took years of investment. Management also noted that asset tokenization is accelerating, with last quarter seeing significant trading volume shift toward RWAs, a key focus area for Arc and the digital asset business.

Q: How is the renewed Binance partnership structured, and what are the economics?

A: No economic details were disclosed, other than marketing, distribution, and product collaboration. Binance is strongly incentivized to promote USDC as the primary digital dollar across its platform. The CFO said the strategy is to incentivize top platforms to bet on USDC, and history shows the more active these platforms are, the faster USDC grows off-platform. The CFO also guided that ex-Arc, full-year RLDC margin lands near the midpoint of the original range, implying that Q4 margin will step down QoQ as Binance incentives are recognized for the full quarter.

Q: Do recent events at Binance affect the partnership?

A: Binance remains strong, with $2.5 bn net inflows over the past 24 hours. Management said last week's security incident involved a large amount, but the company's, law enforcement's, and the industry's response was forceful. Withdrawals surfaced under pressure right after the incident, but funds are returning, and the company will monitor closely. Management believes AI-driven cyberattacks are accelerating, and global regulators will step up cybersecurity scrutiny, not limited to digital asset exchanges but across all FIs.

Q: Hyperliquid increased Coinbase-related costs, yet distribution costs declined this quarter. Where did non-Coinbase costs fall?

A: Specific changes by distribution agreement were not disclosed, and incentives vary with balances quarter by quarter. Management only noted that the QoQ drop in net reserve margin mainly came from the Hyperliquid agreement (with related balances counted under Coinbase), from which one can infer the impact.

Q: Does the renewed Binance deal involve any upfront costs?

A: There are no upfront costs in the Binance agreement.

Q: AI payment systems may route via card networks or stablecoins. How will the company work with these systems and endpoints to drive adoption?

A: Connecting to card networks is just the first step; the real scale shift happens when Agents pay each other. As Agents become economic actors, transactions will be smaller and structurally different, requiring programmatic execution via smart contracts. The company is building an end-to-end tech stack and giving Agents on Arc fiat on/off-ramps. Network effects for USDC are already evident: Stripe's new Agent wallet holds balances in USDC, which can be spent via card rails or directly on-chain. The world's largest card networks already accept USDC settlement, so the rails are in place.

Q: Are AI-driven hacks a wake-up call? Can the industry form alliances, and what else can be done?

A: Yes, it is a wake-up call, requiring coordination among infra providers, the industry, and governments. Issuers need emergency response capabilities and the ability to cooperate with law enforcement to intercept funds. Leading infra, protocols, exchanges, and custodians are building real-time monitoring and alert mechanisms that may formalize over time, and government/law enforcement responses are also accelerating. Management believes that blockchains run by known entities under high compliance and infosec standards provide stronger security than permissionless chains, one reason Arc is designed this way, drawing a parallel to early enterprise migration to cloud computing.

Q: Post-GENIUS Act, how will Fortune 500 and Global 2000 firms adopt stablecoins? What is the outlook over the next 6–12 months?

A: Large enterprises will wait until the digital dollar is embedded in the financial system; 2027 will be the year of mainstream enterprise integration. The accounting standards body is close to finalizing accounting treatment for payment stablecoins under the GENIUS framework, with a proposal to classify them as cash or cash equivalents. Discussions with relevant enterprises have begun. The CFO said CFO adoption depends on three prerequisites: legislation (done), accounting and tax rules (in progress), and integration with existing systems. Integration with SAP and treasury management systems is rolling out, so enterprises will not need parallel processes.

Q: What are CPN's economics and monetization model, and how does it link with Arc? When will Arc move to PoS?

A: Monetization has started for portions of CPN traffic, and CPN is expected to contribute meaningful revenue by 2027. Since late Jul, CPN's annualized volume has grown 150%. Migrating settlement to Arc will generate fees for Arc and validators and encourage hundreds of connected institutions to use Arc as a primary settlement fabric. StableFX on Arc is a real-time atomic FX swap protocol supporting roughly a dozen other currency stablecoins, with an independent fee model, and could serve as the backbone for real-time FX in CPN. No 2027 guidance or PoS timeline was provided, and management said monetization will accelerate after closing and integrating Tazapay (which covers 100+ payout markets and 60+ bank/fintech partners). Management emphasized the goal is to materially compress unit payment costs, and that using fee benchmarks of 10–15 bps, 20–30 bps, or 2% from payment companies is the wrong comparison. They also want more balances to reside with network nodes.

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