Coincheck (CNCK) Q2 2027 Earnings Call Transcript

DATE

Monday, Nov. 9, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Pascal St. Jean
• Chief Financial Officer - Jason Sandberg

TAKEAWAYS

• Total Revenue -- 75.5 billion yen (480.2 million dollars), representing a 43% decrease primarily driven by lower marketplace trading volume.
• Marketplace Trading Volume -- 41.5 billion yen (264.0 million dollars), falling 56% compared to the second quarter of fiscal 2026 due to general crypto industry market conditions.
• Net Loss -- 4.1 billion yen (26.3 million dollars), reflecting a shift from net income of 355 million yen in the prior year primarily due to an impairment charge.
• Adjusted EBITDA -- 4.0 billion yen (25.6 million dollars) loss, compared to 1.5 billion yen (9.5 million dollars) profit in the prior-year period.
• Verified Accounts -- 2.87 million accounts as of Sept. 30, 2026, representing an 18% increase from 2.42 million accounts a year prior.
• Customer Assets -- 876.9 billion yen (5.6 billion dollars), decreasing 26% driven primarily by price declines in Bitcoin, Ethereum, and XRP.
• Assets Under Management -- 148.8 billion yen (946.0 million dollars) as of the end of the second quarter, up from 128.8 billion yen on March 31, 2026.
• Aplo Impairment -- 3.0 billion yen (18.8 million dollars) loss, recorded in the second quarter of fiscal 2027 related to the wind-down of the Aplo subsidiary.
• Selling, General and Administrative Expenses -- 4.2 billion yen (26.6 million dollars), an increase from 3.4 billion yen in the prior year reflecting higher headcount and business expansion.
• Cash and Cash Equivalents -- 14.0 billion yen (89.0 million dollars) as of Sept. 30, 2026, compared to 9.5 billion yen at the beginning of the fiscal year.
• Retail Transaction Revenue -- 67.6 billion yen, representing the majority of the top line and derived from sales to retail customers in Japan.
• Institutional Transaction Revenue -- 6.6 billion yen, generated through Aplo prime brokerage services during the quarter.
• Investment Management Fee Revenue -- 542 million yen, reflecting fees from professional services and sponsored investment vehicles.
• Staking Revenue -- 474 million yen, earned through network validation activities using company and customer digital assets.
• Operating Loss -- 1.5 billion yen (9.7 million dollars), compared to an operating profit of 516 million yen in the second quarter of fiscal 2026.
• Crypto Asset Borrowings -- 46.9 billion yen (298.0 million dollars) as of Sept. 30, 2026, increasing from 37.5 billion yen as of March 31, 2026.
• Capital Surplus -- 44.6 billion yen (283.8 million dollars) as of Sept. 30, 2026, compared to 34.2 billion yen at the end of fiscal 2026.
• Ordinary Shares Issuance -- 9.95 billion yen (63.3 million dollars) in net proceeds from share issuances during the first half of fiscal 2027.
• Commission Revenue -- 214 million yen (1.4 million dollars), including fees from custodial services, IEO business, and NFT marketplace transactions.

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RISKS

• St. Jean stated, "Retail crypto trading volumes in Japan remain low, and our marketplace and company felt that this quarter," noting that the global exchange industry is undergoing a structural reset.

SUMMARY

Coincheck Group N.V. (NASDAQ:CNCK) reported a 43% decline in total revenue for the second quarter of fiscal 2027 as management implemented a new three-phase strategic framework titled fund, grow, and replicate. The company began winding down its Aplo subsidiary's European prime brokerage operations to integrate institutional trading technology into its 3iQ asset management division for a planned product launch in the first half of calendar 2027. Management stated that the core marketplace in Japan and ETF operations in Canada will serve as a cash engine to fund growth initiatives, including the expansion of crypto contracts for difference and institutional partnerships. The company reported that regulatory changes enacted in Japan during the summer of 2026 are expected to provide a long-term opportunity for new asset management products by mid-2027.

• CEO Pascal St. Jean stated, "We're focused on turning our core businesses into a cash engine, investing that cash into 2 growth engines and building a model we can replicate well beyond Japan."
• The company launched crypto contracts for difference (CFDs) in September 2026 to offer regulated leverage products to Japanese customers.
• Management indicated that the wind-down of Aplo operations in France will involve retaining approximately 50% of the staff to focus on the SMA product development.
• The 3iQ subsidiary is currently moving its Canadian ETF suite to a custodian that permits the use of proprietary staking validators.
• Management expects regulatory amendments in Japan to expand the potential for crypto-focused investment trusts and funds between mid-2027 to early 2028.
• Next Finance Tech has been integrated into 3iQ to manage staking and on-chain engineering for the group's asset management platform.

INDUSTRY GLOSSARY

• CaaS: Crypto-as-a-Service, a model where companies provide digital asset infrastructure to third-party partners.
• CFD: Contract for Difference, a financial derivative that allows investors to speculate on price movements without owning the underlying asset.
• IEO: Initial Exchange Offering, a type of crypto crowdfunding conducted through an exchange.
• MiCA: Markets in Crypto-Assets Regulation, a European Union regulatory framework for digital assets.
• SMA: Separately Managed Account, a private investment account managed by a professional investment firm.
• Staking: The process of participating in network validation on a proof-of-stake blockchain to earn rewards.
• XRP: A digital currency used for global payments on the XRP Ledger.

Full Conference Call Transcript

Operator: Good afternoon, and welcome to the Coincheck Group Second Quarter Fiscal 2027 Conference Call covering the quarter ended September 30, 2026. With us today are Pascal St. Jean, Chief Executive Officer; and Jason Sandberg, Chief Financial Officer. Before Pascal and Jason begin their prepared remarks, we'd like to remind everyone that the discussion today will include several forward-looking statements, including statements about plans, goals, expectations and aspirations of the company. Such forward-looking statements are not guarantees of future performances or success, and actual results may and often do differ materially from those expressed or implied in the forward-looking statements.

These differences may be driven by factors discussed in the company's filings with the SEC which may be updated from time to time. The company undertakes no obligation to update its forward-looking statements, except as may be required by law. Also, throughout this conference call, non-IFRS financial measures may be presented or discussed. Reconciliations of these non-IFRS financial measures to their most directly comparable IFRS financial measures appear in today's earnings press release, which is available on the company's Investor Relations website and the SEC website. And finally, Coincheck Group N.V. functional currency is in Japanese yen. During today's call, for your convenience, figures may be expressed in U.S. dollars using the translation from the yen to the U.S. dollar.

Please see the company's earnings release issued earlier today for details on how the currency translation was done. I would like to now turn the call over to your first speaker, Pascal St. Jean. You may begin.

Pascal St. Jean: Good afternoon, and thank you for joining us for our second quarter fiscal 2027 earnings call. Two quarters ago, I told you we would turn Coincheck Group from a holding company of independent businesses into a driving force of one platform with an offering of various important crypto services. And last quarter, I told you that it was starting to happen. But today, I want to go a little further and lay out plainly where the company is going, what we've already done and what's our plan to fund it. Here it is in one sentence.

We're focused on turning our core businesses into a cash engine, investing that cash into 2 growth engines and building a model we can replicate well beyond Japan. Three phases: fund, grow, replicate. Every decision we've made this quarter fits into one of them, and now I'll walk you through each. Let me start with the current market environment, and I'm not going to dress it up. Retail crypto trading volumes in Japan remain low, and our marketplace and company felt that this quarter. We don't read this as a dip that simply reverses if and when prices or volumes recover. Our industry for exchanges globally is going through a structural reset.

Crypto asset managers went through their reset between 2022 and 2024. ETFs made it simple exposure cheap, fees compressed and subscale asset managers disappeared. Exchanges globally are going through their reset today. Users who once came only for spot crypto want more in one place, more products, more yield and the confidence of doing business with a well-regulated provider. Our 3iQ subsidiary went through the asset management reset and came out stronger. Our Coincheck subsidiary is going through the exchange reset now, and we're on top of it.

And here's why that excites me because we think the winners of this cycle will be the platforms that can bring together trading, yield and asset management, meaning they'll be able to reach customers through multiple channels. And we've already had all the pieces right here inside Coincheck Group. And I want to emphasize that our entire plan discussed here today does not assume a crypto price or volume recovery. Every target and every investment I'll be describing today is built on current market conditions. If prices and volumes come back, that's all upside. I'll start with Phase 1, optimizing our core operations, so it becomes our cash engine.

Our core businesses are the Coincheck marketplace in Japan, 3iQ's ETF suite in Canada and staking across the group. These are established, trusted businesses with loyal customers. Their jobs from here are simple: generate cash and do it efficiently. The centerpiece of Phase 1 is hold each of our operating businesses to explicit operating margin standards in accordance to best-in-class global industry benchmarks. That matters a lot for one big reason. Our goal is to fund our Phase 2 growth from our own operations. Our core businesses need to be our fuel. The work is already in progress. 3iQ is already running its ETF businesses leaner.

We've brought our Next Finance Tech subsidiary's work into tight integration with 3iQ and also reset its cost basis. And today, I'm also announcing that we are beginning the process to wind down Aplo as a separate business in Europe and use its institutional technology for a new 3iQ offering, which I'll speak more about in a few minutes. Across the group, we're cutting out the work that doesn't earn its place and focusing on the areas we believe will move the needle and can increase shareholder value. The Coincheck exchange in Japan is our next focus for Phase 1 and optimizing its operations and doing it quickly is now our top priority.

The work is underway, and the rest of this plan depends on it, and I'll update you on our progress in future calls. Now let's talk about Phase 2, our 2 growth engines. The cash from our core businesses will go into 2 main growth engines. Both follow the same rule, build a product once, then plug it into every distribution channel we own, partner with or over time, acquire. First, let's talk about Japan. In Japan, Coincheck has millions of customers, trusted brand, a regulated platform and a seat at the table with regulators. We also have marquee crypto-as-a-service partners like Mercari, KDDI and Credit Saison through which we can reach millions more customers.

For financial institutional partners in Japan, our discussions with them continue, and we have our group's asset management capabilities ready to add products to what we can offer them. We believe we are well positioned to grow in Japan. For direct distribution to our Coincheck customers, we've added CFDs, which just went live in September. CFDs are one of the only regulated ways to offer leverage on crypto in Japan today. Active users who used to go elsewhere for it can now stay with us. We're rolling out CFD product offering in a controlled manner, and we'll closely monitor its adoption over the next few quarters.

We look forward to adding more leveraged crypto products as well as yield products in Japan over time as regulation allows it. And I want to be clear about this. Japan is a long-term opportunity. It's going to be driven in large part by the pace of development of Japan's regulatory scheme, what those regulations permit or incentivize and when that happens. The regulatory amendments enacted in Japan this summer reposition crypto as a financial product in Japan. Over time, that opens new product channels such as crypto and funds and investment trusts and eventually, tax treatment closer to what is given to other financial assets. That's a great start.

The timing of our opportunities in Japan will also depend in part in our success in finding the right institutional partners, developing and implementing the incremental pieces we need for those institutional partnerships and also the timing of when financial institutions in Japan feel comfortable taking their next step with crypto. Japan is a very large market that is opening to crypto in real time over the coming years, and we're ready for this opportunity. But let me be clear, as I mentioned earlier, our current plan does not depend on Japan timing exclusively, which brings me to our second growth engine. As I mentioned, we've started the process to move Aplo's institutional trading technology into 3iQ.

This technology will be integrated with 3iQ's asset management capabilities to create a new 3iQ offering, a dedicated institutional separately managed account or SMA product line. And here's why we think this is exciting. Institutions want crypto exposure without putting all their assets with one exchange or one manager. They want a crypto asset manager and brokerage that has the ability to spread risk across counterparties and custodians and see their risk in real time. A separately managed account can do that, and Aplo had already built much of that technology behind this.

Combined with 3iQ's platform, licenses and institutional relationships, 3iQ can deliver an SMA offering much faster, and we're aiming to launch this in the first half of calendar 2027. And as I also mentioned, Next Finance Tech is now tightly integrated with 3iQ. Our teams work side by side every day, and we see Next Finance Tech's team as a core part of the group's asset management capabilities, bringing staking and helping us with on-chain engineering. All assets on 3iQ's offshore active platform are now stake through Next Finance Tech. And we have begun moving our Canadian ETF suite to a custodian that lets us bring our very own staking validators.

Put that together with 3iQ's other recent accomplishments and 3iQ is a different company from the one we acquired earlier this year. 3iQ is now 1 of only 4 crypto managers rated by Mercer worldwide. It manages mandates for sovereign clients, including Bhutan's Bitcoin Treasury and has a partnership with Dynamic Funds, a Scotiabank company. And its strategies are now part of global macro portfolios. 3iQ can now serve an institution through a fund, an ETF and offer yield products that plug straight into our distribution partners, with 3iQ's separately managed account offering on its way. Now growth does not, however, mean writing blank checks. Every growth initiative has a clear payback period, a return target and regular checkpoint reviews.

If it isn't meeting those targets, we change course or stop. Aplo is an example. We chose not to keep funding a business that we determined could not compete on its own in its market, and so we're taking the necessary steps. Now let's discuss Phase 3, replicate, meaning having a model that is built to travel. Our view is global and not Japan only. And our model has 3 basic parts: one, distribution to customers; two, trading products for them; and three, 3iQ's asset management and yield products behind it. That combination can work in any market where customers want more than just spot crypto. We've looked closely at many businesses and more emerge every quarter.

Many have strong distributions but no way to earn from their users beyond trading, and that is exactly where our model fits. If we well execute the first 2 phases of our strategy, we expect that our share price will reflect the value we are building. And it is at that time, we may seriously explore acquisitions to replicate our model in places that make sense. When that time comes, we will be disciplined about it. A potential acquisition target will have to meet 3 tests. It must come at the right price, it must have an incredible path to cost efficiency and it must be in a jurisdiction where 3iQ's asset management can plug in.

We will not do deals for the sake of doing deals. In closing, let me leave you with 3 things. First, we know where we're going, one platform, a core that funds itself, 2 engines that grow and a model built to travel. Second, we now have a plan to fund it. Our core businesses held to a high optimization standard are there -- are to be that fuel, and every growth dollar has to earn its place. Third, this is already happening. Aplo is being wound down and its trading technology will be incorporated into 3iQ for a new and we believe powerful SMA.

Next Finance Tech is working hand-in-hand with 3iQ, CFDs are live and the cost optimization work is moving across the group with Coincheck now our top priority. Through these steps, our plan is to build a globally diversified integrated platform where our products and asset managements plug into distribution anywhere and everywhere crypto can be accessed. I've never been more confident in the company we are building and more committed to helping make this happen. And with that, I'll turn it over to Jason, our CFO, for a brief review of our financial results. Thank you.

Jason Sandberg: Thank you, Pascal. Let me take you through our second quarter fiscal 2027 performance. I will start with some year-over-year comparisons. Total revenue decreased 43% to JPY 75.5 billion or USD 480 million in the second quarter of fiscal 2027, down from JPY 133.1 billion or USD 846 million in the second quarter of fiscal 2026. Decrease was driven mainly by a decrease in marketplace trading volume, partially offset by an increase in transaction revenue of institutional and investment management fee revenue. Our verified accounts increased 18% to 2.87 million accounts as of September 30, 2026, up from 2.42 million accounts as of September 30, 2025.

Our customer assets decreased 26% to JPY 876.9 billion or USD 5.6 billion as of September 30, 2026. From JPY 1,189.2 billion or USD 7.6 billion as of September 30, 2025. Customer assets decreased due primarily to the decline in the market price of certain crypto assets, including Bitcoin, Ethereum and XRP. Our assets under management were JPY 148.8 billion or USD 946 million as of September 30, 2026, compared to JPY 128.8 billion as of March 31, 2026. Our marketplace trading volume decreased 56% to JPY 41.5 billion or USD 264 million for the second quarter of fiscal 2027, down from JPY 94.7 billion or USD 602 million in the second quarter of fiscal 2026.

Fluctuations in marketplace trading volume are usually driven by crypto asset industry market volumes and conditions generally and the size and level of trading activity at Coincheck specifically as well as market price fluctuations in the crypto assets frequently traded. Our net loss was JPY 4.14 billion or USD 26.3 million in the second quarter of fiscal 2027 compared to net income of JPY 355 million or USD 2.3 million for the second quarter of fiscal 2026.

The decrease was driven primarily by an impairment loss of JPY 2,962 million or USD 18.8 million related to the Aplo subsidiary recorded in the second quarter of fiscal 2027, a decrease in marketplace trading volume and higher selling, general and administrative expenses, partially offset by a net tax benefit in the second quarter of fiscal 2027. Turning now to adjusted EBITDA. We reported a loss of JPY 4,020 million or USD 25.6 million in the second quarter of fiscal 2027 compared to an adjusted EBITDA of JPY 1,486 million or USD 9.5 million in the second quarter of fiscal 2026.

The decrease in adjusted EBITDA was due primarily to the impairment loss relating to Aplo and an increase in our operating loss. Let's now move on to our operating expenses. Our total selling, general and administrative expenses increased to JPY 4,186 million or USD 26.6 million in the second quarter of fiscal 2027 compared to JPY 3,370 million or USD 21.4 million in the second quarter of fiscal 2026. The increase was due mainly to higher operating costs from increased headcount and business expansion, including the addition of employees and operations from the 3iQ and Aplo acquisitions. We ended the second quarter of fiscal 2027 with cash and cash equivalents of JPY 14 billion or USD 89 million.

In summary, before we open the call for questions, I would like to reinforce one point. The wind down of Aplo and transfer of its technology into 3iQ position us as a more streamlined and more cost-efficient business going forward. We will continue to evaluate additional cost optimization opportunities, and we will keep you informed as we make progress. Thank you for joining us this afternoon, and I will now turn the call back to the operator.

Operator: [Operator Instructions] and we'll take our first question from [ Jose Valicourt ] with Compass Point Research & Trading.

Unknown Analyst: I was wondering if you can provide an estimate for the potential cost savings in 2027 after Aplo's European operations are shut down?

Jason Sandberg: Yes, sure. We don't have specific numbers at this time, as we're still working through that process. But as mentioned in the press release, we're retaining approximately half the employees, moving them over to the opportunity that was mentioned related to the SMA product.

Unknown Analyst: Got it. Awesome. And then just as a quick follow-up. I was wondering if you guys can provide any color on the competitive dynamic in Japan and whether there's been any change in new competitors or promotional environment? I know you just went through some of the stuff with CFDs and the new products there, but any insight or color on that would be greatly appreciated.

Pascal St. Jean: Yes, sure. Thanks for the question. So in terms of new competition, it's still the main players involved. There was news last quarter of SBI acquiring bitBank and then there's us and then bitFlyer. All 3 share roughly around the same sort of penetration of the market. So those are the big 3 from that perspective. Like I mentioned in previous quarters, we're all taking different approaches. From our perspective, our approach is primarily finding distribution capabilities as well as institutional partners. Those are still in the works. We've announced some last quarter from the Crypto-as-a-Service segment, and we'll be hopefully announcing some in the future quarters on the institutional side.

But the team is working very hard at distribution, which is a little bit different than our competition. And like I mentioned on this call, we're really focused at that point as building new products that could fit within those channels. Asset management is opening like based on current regulatory projections sometime in mid-2027, early 2028, at which point those will be able to be also integrated within distribution. And then we, of course, have a seat at the table with the regulators where we're trying to push for the allocation and the adoption of more trading products, whether it's prediction markets or perpetual derivatives, things of that nature, which today are not allowed in Japan.

And so we're on top of what can be pushed through. Our team are working on making sure we have the products ready at the time when they are distributable. And then we're getting ready for the asset management sort of opening in -- pending regulation in mid-2027, early 2028.

Operator: We'll take our next question from Zoe Deng with KeyBanc.

Zheqian Deng: This is Zoe Deng for Alex. Could you talk a little bit about the user growth trends? And how should we think about the contribution of this larger cohort over time?

Pascal St. Jean: Sure. Jason can talk about the contribution, and I'll talk about strategic sort of opportunities with them over time.

Jason Sandberg: Yes, sure thing. So as mentioned, we're taking a strategic look at the legacy businesses that we have where we're trying to ensure we get to pure cost optimization, looking towards operating margins that we would define as best-in-class from our peer group, including crypto companies as well as brokerages, asset management and other exchanges. So at this point, we don't have projected numbers to share. But I think thinking about those market operating margins would give you a sense of where we would expect to generate additional cash for the growth initiatives.

Pascal St. Jean: So to give you a little bit more color for the future. So as Jason mentioned, we have existing business lines that are -- can be operated in Japan, like our spot trading, CFDs have just launched. The way we see things, as we mentioned in last quarter's sort of Japan deep dive presentation, which I highly recommend anyone review again to see where are the opportunities in Japan. There is a huge portion of dollars still sitting in what we call uninvested bank accounts in Japan. And the government is working very, very hard towards enabling new innovation to try to create an environment more towards long-term investing.

And we see fintech and digital native providers like Coincheck as being that sort of gateway for the younger generation looking to invest and for those dollars to make their way. So it is definitely a long-term play for us. Our Crypto-as-a-Service distribution partners are big wins. We're the only ones doing it in Japan. With that said, we realize that the product suite available for that distribution is still thin. It's primarily still spot crypto. And right now, as we know, globally, spot crypto trading volumes are down, not just in Japan, but everywhere. So we continue to focus on discussions long term with our partners and then getting ready with new products and asset management capabilities.

So this is a long-term play in Japan, but the key is getting access to those users. And we still believe that our marketing team, our cost of customer acquisitions for organic marketing is still one of the best in the Japanese market in terms of cost. And in terms of our Crypto-as-a-Service partners, we're still the only one doing that in Japan at this moment in time. So it's a long-term play. User growth has been strong through those partners, but the discussions on what to offer them over time as regulation evolves is an ongoing discussion with each partner.

Operator: This brings us to the end of today's question-and-answer session and the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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