Circle(CRCL) - 2025 Q2 - Quarterly Report

PART I Unaudited Condensed Consolidated Financial Statements The company's H1 2025 financials show significant asset and liability growth from increased USDC circulation, a $583 million IPO, and a $417.3 million net loss due to $423.8 million in stock-based compensation Condensed Consolidated Balance Sheets Total assets increased to $64.2 billion and liabilities to $61.8 billion by June 30, 2025, driven by a $17.4 billion rise in stablecoin-related cash and deposits, while equity grew to $2.37 billion from the IPO and preferred stock conversion | (in thousands) | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $1,118,119 | $750,981 | | Cash and cash equivalents segregated for the benefit of stablecoin holders | $61,365,920 | $43,918,572 | | Goodwill | $266,384 | $169,544 | | Intangible assets, net | $396,969 | $331,394 | | Total Assets | $64,153,508 | $45,834,409 | | Liabilities & Equity | | | | Deposits from stablecoin holders | $61,101,523 | $43,727,363 | | Total Liabilities | $61,782,677 | $44,124,115 | | Redeemable convertible preferred stock | $— | $1,139,765 | | Additional paid-in capital | $3,998,827 | $1,792,969 | | Accumulated deficit | ($1,640,510) | ($1,223,213) | | Total Stockholders' Equity | $2,370,831 | $570,529 | Condensed Consolidated Statements Of Operations The company reported a net loss of $482.1 million for Q2 2025 and $417.3 million for H1 2025, primarily due to a surge in compensation expenses from IPO-related stock-based compensation, despite revenue growth to $658.1 million and $1.24 billion respectively | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenue and reserve income | $658,078 | $430,030 | $1,236,651 | $795,124 | | Compensation expenses | $503,392 | $67,604 | $579,012 | $128,753 | | Operating income (loss) | ($325,582) | $50,246 | ($232,642) | $102,565 | | Net income (loss) | ($482,100) | $32,923 | ($417,309) | $81,562 | | Earnings (loss) per share, basic | ($4.48) | $0.00 | ($5.04) | $0.00 | Condensed Consolidated Statements Of Cash Flows Net cash from operations was $303.7 million, investing used $46.1 million, and financing provided $17.8 billion, primarily from stablecoin deposits and IPO proceeds, leading to an $18.1 billion increase in total cash and equivalents by June 30, 2025 | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $303,716 | $124,955 | | Net cash (used in) provided by investing activities | ($46,108) | $52,221 | | Net cash provided by financing activities | $17,797,061 | $7,632,000 | | Net increase in cash and cash equivalents | $18,107,916 | $7,806,941 | Notes To Condensed Consolidated Financial Statements Notes detail the June 2025 IPO's $583 million net proceeds and $423.8 million stock-based compensation, the $100.1 million Hashnote acquisition, primary revenue from reserve income, and an unquantifiable legal dispute with FT Partners - In June 2025, the company completed its IPO, raising net proceeds of $583.0 million. This event triggered the conversion of all redeemable convertible preferred stock into 139.8 million shares of Class A common stock[30][31] - The IPO caused the vesting of certain performance-based RSUs, resulting in the recognition of $423.8 million of stock-based compensation expense[32][120] - In January 2025, the company acquired Hashnote for approximately $100.1 million, consisting of $10.2 million in cash and 2.9 million shares of Class A common stock. The acquisition resulted in $96.8 million of goodwill[50][54] - The company is in a legal dispute with a former financial advisor, FT Partners, regarding advisory fees. The company disputes the claim, and the outcome cannot be reasonably quantified at this time[132] Management's Discussion And Analysis Of Financial Condition And Results Of Operations Management attributes performance to USDC growth, with reserve income rising to $1.19 billion despite a net loss of $417.3 million due to a one-time $423.8 million stock compensation expense, emphasizing regulatory approach and strategic partnerships Key Operating and Financial Indicators (Six Months Ended June 30) | (in millions, except percentages) | 2025 | 2024 | | :--- | :--- | :--- | | Average USDC in circulation | $57,574 | $30,405 | | Reserve return rate | 4.2% | 5.2% | | Total revenue and reserve income | $1,237 | $795 | | Net income (loss) from continuing operations | ($417) | $82 | | Adjusted EBITDA (Non-GAAP) | $248 | $159 | - The increase in reserve income for H1 2025 was driven by an 89% increase in average daily USDC circulation, which was partially offset by a 100 basis point decline in average yields[217] - Compensation expenses for H1 2025 increased by $450.3 million year-over-year, primarily due to $423.8 million in stock-based compensation expense recognized upon the IPO[221] Composition of USDC Reserves (as of June 30, 2025) | Asset Class | Fair Value (in millions) | Average Yield (Q2 2025) | | :--- | :--- | :--- | | Cash | $8,233 | 3.45% | | Circle Reserve Fund | $53,165 | 4.24% | Quantitative And Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity, with a 100 bps rate increase potentially boosting annual reserve income by $618 million, while foreign currency risk is deemed immaterial Hypothetical 12-Month Impact of Interest Rate Changes | Change in interest rates | Estimated change in reserve income (in millions) | Estimated change in distribution and transaction costs (in millions) | | :--- | :--- | :--- | | +200 bps | $1,235 | $631 | | +100 bps | $618 | $315 | | -100 bps | ($618) | ($315) | | -200 bps | ($1,235) | ($631) | - The company acknowledges that predicting the impact of interest rate changes on overall reserve income is difficult because the effect on USDC in circulation is uncertain and unproven[279] Controls And Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management, including the principal executive officer and principal financial officer, concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at the reasonable assurance level[282] - No changes occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[283] PART II Legal Proceedings The company is involved in various legal proceedings arising from ordinary business, with details on specific matters, including a financial advisor dispute, referenced in Note 22 and Risk Factors - The company is involved in various legal proceedings and claims arising from its business activities. For a summary of these proceedings, the report refers to Note 22 of the condensed consolidated financial statements[288] Risk Factors The company faces intense competition, regulatory uncertainty from the GENIUS Act, heavy reliance on third parties like BlackRock for USDC reserves, operational risks including stablecoin 'runs', financial risks from interest rate volatility, and a significant legal dispute with FT Partners - The company faces intense competition from other stablecoins, banks, and new yield-bearing digital assets like TMMFs, which could reduce demand and circulation of Circle stablecoins[290][292][297] - The recently enacted GENIUS Act will create a new federal regulatory regime for payment stablecoins. While it provides a path to regulatory clarity, its implementation is uncertain and could impose additional costs, limit reserve asset flexibility, and encourage new competitors[310][311][312] - As of June 30, 2025, approximately 87% of USDC reserves are held in the Circle Reserve Fund, managed by BlackRock. The business is subject to risks associated with BlackRock's management and the fund's availability[318] - The company is in a legal dispute with financial advisor FT Partners over fees for several transactions, including the IPO. An adverse outcome could require substantial payments and affect future capital raises[370] Unregistered Sales Of Equity Securities And Use Of Proceeds The June 2025 IPO generated $583.0 million in net proceeds from selling 19.9 million Class A shares at $31.00 each, with funds used for RSU tax withholding and general corporate purposes - The company's June 2025 IPO generated net proceeds of $583.0 million from the sale of 19.9 million Class A shares at $31.00 per share[479] - Proceeds were used to satisfy tax withholding on vested RSUs and for general corporate purposes. The company did not receive any proceeds from the 19.2 million shares sold by selling stockholders[479][481] Other Information Several executive officers, including the CEO and CFO, adopted Rule 10b5-1 trading plans in June 2025 for future stock sales, established during an open trading window with required cooling-off periods - In June 2025, CEO Jeremy Allaire, CFO Jeremy Fox-Geen, and other key executives adopted Rule 10b5-1 trading plans to sell portions of their Class A common stock over specified periods through 2026[482][484][485] Exhibits This section lists exhibits filed with Form 10-Q, including corporate governance documents, incentive plans, CEO/CFO certifications, and XBRL data files