Coincheck Group N.V. (CNCK) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Coincheck Group Fiscal Year 2026 Fourth Quarter Earnings Conference Call covering the quarter ended March 31, 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 performance 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 on the SEC website. And finally, Coincheck Group's functional currency is the Japanese yen. During today's call, for your convenience, figures may be expressed in U.S. dollars using a translation from yen to U.S. dollars. Please see the company's earnings release issued earlier today for detail on how the currency translation was done. I would now like to turn the conference over to your first speaker, Pascal St. Jean. You may begin.

Good afternoon, and thank you for joining us for our Fiscal Fourth Quarter and Year-end 2026 Earnings Call. This Q1 fiscal 2027 is my first quarter as CEO of Coincheck Group, and I'm truly excited about the opportunity to lead our company into its next stage of growth as we work to become one of the leading global crypto financial services company. Today, I want to share an important evolution in our strategy. Our current thinking is to no longer view ourselves as a holding company with a collection of independent businesses, but rather to build one unified synergistic platform of products and solutions that serve both retail and institutional clients. We plan to build this platform on 3 connected initiatives: First, Japan retail, the anchor of trust, liquidity, users and brand. Second, the institutional platform, the bridge to higher quality revenue, broader capability and strategic relevance. And third, on-chain innovation, the edge that extends future growth and long-term upside. Our strategic focus is clear. We will build comprehensive capabilities across custody, asset management, staking, trading and execution, serving retail customers and institutional clients with the same level of excellence. The reason we're leaning into this now is that the question institutions are asking has fundamentally shifted. The boundaries between traditional financial services and digital assets are converging. And institutions of consequence are no longer asking if they should engage with digital assets. They are asking who they can trust to engage with at scale. The deliberate disciplined work we've been doing across regulation, infrastructure and institutional capability is what makes Coincheck Group an answer to that question. Now you might ask, why is now the right time for this strategic shift? The answer is straightforward. Japan is entering a more constructive phase for digital assets. We're seeing meaningful progress on several fronts in Japan, potential tax reform, accelerated product development and growing institutional participation in the market. This convergence of regulatory progress and market maturation creates a significant opportunity, and we believe Coincheck Group is uniquely positioned to capitalize on it. Now let me explain why. First, we have a defensible consumer leadership in Japan. This matters because Japan is highly regulated, trust-sensitive and operationally demanding market. We've maintained our position as the #1 downloaded crypto app in Japan for 7 consecutive years. Our local relevance and strategic position is not easily replicated. Second, we've been deliberately building institutional capabilities through our strategic acquisition of 3iQ. 3iQ provides immediate institutional credibility, deep solution capabilities and a meaningful AUM base. 3iQ's clients range from established Canadian banks to an Abu Dhabi-based sovereign wealth fund, the kind of institutional validation that opens doors globally. And we're not just talking about strategy, we're executing on it. Two recent partnerships make this point very clear. In March, Dynamic Funds, a Scotiabank subsidiary, selected 3iQ as sub-adviser on their new Dynamic multi-crypto ETF listed on Cboe Canada. It's a Tier 1 Canadian bank. They chose Coincheck Group's institutional capability to bring crypto exposure to their clients at scale. And today, we announced our strategic partnership with KDDI Corporation, one of Japan's largest telecommunications companies. KDDI is taking a 14.9% equity investment in Coincheck Group. And our Japanese subsidiary, Coincheck, Inc. has entered into a business alliance with KDDI that includes mutual customer referrals across both companies' ecosystems. Most of all, we're excited about what this partnership means for people in Japan. Millions of consumers gaining easier, more trusted access to digital assets through an institution they already know and rely on every day. These 2 partnerships are not isolated wins. They're a signal. Institutions are no longer asking if they should enter digital assets. They're asking who they should enter it with, 2 months, 2 institutions, 2 markets, 1 platform of choice, Coincheck Group. Our land-and-expand strategy is also gaining traction more broadly. Our pipeline is growing as it reflects the same logic that drew KDDI and Scotiabank to us. Institutions want to partner with regulatory standing, infrastructure and proven institutional capability, and that is a platform we're building. Now let's dive a little deeper into our strategic road map. Japan is one of the world's most important regulated crypto markets. If we can demonstrate success here by deepening our retail leadership, building institutional relevance and monetizing our platform through higher-value products like staking, lending, custody and over time derivatives, we believe we can replicate this model in other markets around the world. Success in Japan proves our model works in a demanding regulated environment. That proof becomes our competitive advantage as we look to expand globally. And the fact that institutions like KDDI are choosing to enter digital assets through Coincheck Group is the strongest confirmation that the institutional bridge we're seeking to build is actually real. Now let me be clear about our approach. This strategy is not built in one leap. It's built on a deliberate sequence. Let me talk about our 3 phases. In Phase 1, we're going to prove the model works. That means demonstrating tangible integration progress across our acquired businesses, showing real institutional traction in the market, deepening our platform capabilities in Japan and making our recurring and nontrading revenue streams more visible to investors. In Phase 2, we scale what we've already proven. The plan is to cross-sell across the platform, improve our revenue mix and operating leverage and significantly increase the contribution from institutional and platform style revenues. In Phase 3, we expand beyond our core. We will seek to extend this proven model into new markets, deepen monetization and product breadth and broaden the group's strategic and valuation relevance on a global stage. As we close fiscal 2026 and look to the year ahead, let me leave you with a few key takeaways. One, our leadership position in Japan is real and defensible. 7 consecutive years as the #1 crypto app downloaded in Japan is not luck. It's the result of operational excellence and deep customer trust. Two, our institutional strategy is deliberate, commercially meaningful and has begun to be visibly proven. KDDI in Japan, Dynamic Funds and Scotiabank in Canada, and the pipeline behind both, institutions are no longer asking whether to engage with digital assets, they're asking who they can trust to do it with, and they're choosing Coincheck Group. And three, our revenue quality should improve over time as we shift towards institutional and platform-style revenues while maintaining and growing our retail strength in Japan. I'm confident in our strategy. I'm excited about the opportunity ahead, and I'm committed to delivering value to our shareholders as we build Coincheck Group into the global platform of choice for digital finance. And with that, I'll turn it over to our CFO, Jason Sandberg, for highlights of our financial results. Thank you.

Thank you, Pascal. Let me take you through our fourth quarter fiscal 2026 performance. I will start with some year-over-year comparisons. Total revenue increased 4% to JPY 119.7 billion or USD 752 million in the fourth quarter of fiscal 2026, up from JPY 114.6 billion or USD 720 million in the fourth quarter of fiscal 2025. For the fiscal 2026 full year, total revenue increased 25% to JPY 480.2 billion or USD 3 billion from JPY 383.3 billion or USD 2.4 billion in the fiscal 2025 full year. Growth was primarily driven by increases in transaction revenue, specifically institutional and revenue from cover counterparty transactions. Adjusted revenue for the fourth quarter of fiscal 2026 decreased 18% to JPY 2.9 billion or USD 18 million from JPY 3.5 billion or USD 22 million in the fourth quarter of fiscal 2025. The decrease was driven primarily by a decline in marketplace trading volume, partially offset by an increase in staking revenue of JPY 622 million or USD 3.9 million and investment management fee revenue of JPY 140 million or USD 900,000. We introduced adjusted revenue this quarter to provide a clear view of our core transactional and fee-based business. For the fiscal 2026 full year, adjusted revenue decreased 8% to JPY 13.1 billion or USD 82 million from JPY 14.2 billion or USD 89 million in the fiscal 2025 full year, driven primarily by a decline in marketplace trading volume, partially offset by an increase in staking revenue and investment management fee revenue. Our verified accounts increased 10% to 2.5 million accounts as of March 31, 2026, up from 2.3 million accounts as of March 31, 2025. Even though the quality of digital tokens held by customers remained relatively stable during the fiscal 2026 full year, customer assets decreased, primarily due to the decline in the market price of crypto assets, including Bitcoin and XRP. Our assets under management were JPY 128.8 billion or USD 810 million as of March 31, 2026, due to the acquisition of 3iQ. Our marketplace trading volume decreased 29% to JPY 65.7 billion or USD 413 million for the fourth quarter of fiscal 2026, down from JPY 92 billion or USD 578 million compared to the fourth quarter of fiscal 2025, and decreased 8% to JPY 309.6 billion or USD 1.9 billion in the fiscal 2026 full year from JPY 337.5 billion or USD 2.1 billion in the fiscal 2025 full year. Please note that 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 that are frequently traded. Our net loss was JPY 1.2 billion or USD 7.6 million for the fourth quarter of fiscal 2026 compared to a net profit of JPY 642 million or USD 4 million in the fourth quarter of fiscal 2025. The swing to a net loss was driven partially by a fourth quarter fiscal 2026 decline in marketplace trading volumes and an increase in selling, general and administrative expenses, consisting mainly of: one, employee severance expenses of JPY 334 million or USD 2.1 million related primarily to the March 31, 2026 departure of the company's former CEO; two, professional fees of JPY 261 million or USD 1.6 million related to a potential transaction with which the company decided not to move forward; and three, capitalized software impairment costs of JPY 197 million or USD 1.2 million relating to a particular software development project. For the fiscal 2026 full year, net loss was JPY 1.8 billion or USD 11.5 million as compared to a net loss of JPY 14.35 billion or USD 90.2 million in the fiscal 2025 full year. Note, the significant net loss in fiscal 2025 was primarily due to the transaction costs related to the public transaction. Turning now to adjusted EBITDA. We reported a loss of JPY 863 million or USD 5.4 million in the fourth quarter of fiscal 2026 compared to adjusted EBITDA income of JPY 719 million or USD 4.5 million in the fourth quarter of fiscal 2025. The fiscal 2026 full year adjusted EBITDA decreased 61% to JPY 1.7 billion or USD 10.5 million from JPY 4.3 billion or USD 26.9 million in the fiscal 2025 full year. These declines were related mainly to lower adjusted revenue, driven mostly by declines in marketplace trading volume and increased selling, general and administrative expenses consisting mainly of the certain specific fourth quarter 2026 expenses. Now let's move on to our operating expenses. Our total selling, general and administrative expenses increased to JPY 4.3 billion or USD 27 million in the fiscal 2026 fourth quarter compared to JPY 3.6 billion or USD 22.4 million in the fiscal 2025 fourth quarter due to several expenses, higher professional fees and capitalized software impairment costs discussed earlier. We ended the fiscal 2026 fourth quarter with cash and cash equivalents of JPY 9.5 billion or USD 59.5 million. In summary, the fourth quarter reflects a difficult market environment, but the strategic building blocks are in place, growing accounts, institutional traction with KDDI and Scotiabank and a full year of positive adjusted EBITDA. We look forward to updating you on our progress. With that, operator, please open the line for Q&A.

[Operator Instructions] We'll move first to Ed Engel with Compass Point.

Congrats, Pascal, for finishing your first full quarter as CEO. Just wanted to touch on, I guess, the tax reform over in Japan. Just kind of curious of where that legislation is kind of tracking here and whether there's still a chance it could happen in 2026.

Yes. Thank you for the comment. So, so far, we operate on the original time line that is proposed by the regulators in Japan and the politicians in general, which is basically the FIEA rule, so the basically exchange and investment act that's coming in for crypto in 2027. And then after that, tax reform starting in 2028, primarily for crypto and crypto ETFs. That may compress over time if progress gets made. But so far, these are the guidelines we've been provided, and we operate towards that. But in terms of our efforts in Japan, we see partnerships, distribution and essentially the land grab happening this year. And so that's our focus. And I think the deal with KDDI is just one example. And of course, we're working on other things. But this is the year where the land grab is in place in preparation for the regulatory change that's coming in the coming year.

Great. And would that include, I guess, crypto ETFs in Japan? Or could that still happen independently? And then I guess, how are you guys going to position yourselves, I guess, for that opportunity?

Yes. So they're both together on the tax reform side. In terms of the crypto regulation that's coming in this year, it's all the beginning of the positioning. In other words, the regulatory requirements, the regulatory capital, et cetera. Right now, there's a lot of planning going ahead in Japan across the entire industry on the custody model, liquidity model, governance model for these ETFs. I can tell you, I've been spending 60 of the past 120 days in Japan, not because we have a lot of work internally, it's because there's a lot of demand for discussions with, as you can imagine, a lot of the large institutions as well as with regulators, and we are at the forefront of those discussions as a group. And so our plan, as described in our press release as well as in our online presentation is to tackle both the retail and the institutional market, which means the change in regulation coming for the exchanges and the changes coming with the opening of the ETFs. So we are playing for both.

Great. And then one just last one housekeeping. Did you provide the average spread on the exchange for the fourth quarter?

Yes. We didn't have it in the earnings release. It was relatively consistent quarter-over-quarter. We're still between 3.2% and 3.3% for the quarter ended.

We'll move next to Brett Knoblauch with Cantor Fitzgerald.