Circle Raises $222M in Arc Presale; Q1 Revenue Misses

Circle raised $222 million in a presale of its Arc token and reported first-quarter results on Monday that fell short of revenue estimates. The company posted revenue of $694 million versus analysts’ $722 million projection and reported earnings of $0.21 per share, $0.03 above forecasts. Circle’s stock rose more than 4% after the announcements.

Andreessen Horowitz committed $75 million to the Arc presale, which also drew investments from BlackRock, Apollo Funds, Intercontinental Exchange, SBI Group, Janus Henderson, Standard Chartered Ventures, General Catalyst, Marshall Wace, ARK Invest, IDG Capital, Haun Ventures and the Bullish crypto exchange. Circle said Arc will have an initial supply of 10 billion tokens and that the company will retain 25% of that supply. Sixty percent is allocated to developers, users and ecosystem participants, and 15% will be held in a long-term reserve. Circle’s fully diluted network value is about $3 billion.

Jeremy Allaire, Circle’s co-founder and CEO, described Arc as part of the company’s shift toward a token-based distributed network and application platform, saying, “We want to build an operating system that has many, many stakeholders in it,” and that Circle is evolving into “a broader internet platform company.” Circle said the retained 25% allocation will allow it to run validators, collect network fees and earn staking income if the network is adopted.

On the earnings front, reserve income rose to $653 million, a 17% increase from a year earlier, driven largely by a 39% jump in the average volume of USDC in circulation. The return on those reserves declined by 66 basis points. Revenue from subscriptions, transactions and service fees increased by $21 million to $42 million, and adjusted EBITDA climbed 24% to $151 million.

Costs rose across the business. Distribution, transaction and related expenses increased to $407 million due to larger distribution payments. Operating expenses grew 76% year over year to $242 million, which Circle attributed to post-IPO stock-based compensation and related payroll taxes. Adjusted operating costs rose 32% to $136 million as the company invested more in product, distribution and operations. Net income for the quarter fell 15% to $55 million.

Circle also introduced the Circle Agent Stack, a set of developer tools and payment services for machine and software-driven use cases. The suite includes a command-line interface, agent wallets, an agent marketplace and a Nanopayments feature available through Circle Gateway that the company says can move USDC with fees down to $0.000001 for machine-to-machine payments. Nikhil Chandhok, Circle’s chief product and technology officer, described USDC as “internet-native, programmable, and always available.” He said the new products combine digital dollars, wallets, service discovery, machine-readable controls and payment tools for autonomous software.

Circle is the first publicly traded company to hold a token presale before launching its own blockchain. The presale and product rollouts come as the company continues to expand USDC use while reporting higher operating and distribution costs.