I wrote this article myself, and it expresses my own opinions. Obviously, a key growth strategy for this company is to acquire additional merchant partners. Khosla Ventures: 6,947,972 shares of Class A common stock and Class B common stock each. Defendant. Zilch operates as a financial service provider. The company services some of the loans that it generates. 9.89 +0.03 (+0.30%) After SAN FRANCISCO--(BUSINESS WIRE)--Affirm, a more flexible and transparent alternative to credit cards, today announced a $500 million series G round of funding. This announcement comes on the heels of recent company news, including: Affirm is purpose-built from the ground up to provide consumers and merchants with honest financial products and services that improve their lives. This company experiences notable seasonality typical of consumer retail buying patterns. Obviously that kind of progression will not continue and I think it is best to look a growth for this company in terms of its growth in GMV. When the pandemic struck, the company substantially increased its provision for loan losses which jumped more than 100% sequentially during the March quarter. This financing was based on the sale of 21.8 million shares of Series G preferred shares. Faire, the online wholesale marketplace connecting more than 300,000 retailers with 40,000 brands around the world, today announced the closing of $400 million in a Series G investment round co-led by new investors, Durable Capital Partners LP, and returning investors, D1 Capital Partners, and Dragoneer Investment Group. The company offers consumers the option to pay for purchases in installments, rather than all at once. Typically, most consumers have bought these kind of bikes on their cards-but not everyone can make a $2000 purchase on their card. Affirm's new interest-free, biweekly payment option for transactions as low as $50 (Photo: Business Wire). The Company believes that equity capital required as a percentage of total platform portfolio is a useful financial measure to both the Company and investors in assessing the proportion of outstanding loans on the Company's platform that are funded by the Company's own equity capital. According to the WSJ, Affirm and another likely strong IPO called Roblox (RBLX), a developer of video games, have determined that they can improve the IPO process by enlarging the offering size, and changing the mix of the offering that is sold for the benefit of the company, its employees and VC holders. Market PayRight is an Australian payment plan provider developed for merchants to accelerate return-on-effort and for making things more affordable to consumers, by spreading the cost of purchases over time, without ever paying interest. Mr. Levchin was one of the several co-founders of PayPal (PYPL) and is credited with creating its initial set of security applications. That has made the home exercise segment, and Peloton specifically, ideal for penetration by the Affirm service. The loss of Peloton as a merchant partner, or the loss of any other significant merchant relationships, would materially and adversely affect our business, results of operations, financial condition, and future prospects.. In IPO Pop, Affirm Doubles In Value To $24 Billion - Forbes But Find the right companies, identify the right contacts, and connect with decision-makers with an all-in-one prospecting solution. The company has most of the elements that investors look for in terms of strong and persistent growth, excellent unit economics, a defensible moat and what appears to be a strong management team. It is just a guess, but companies that can achieve a 3 year CAGR of 40%, are averaging an EV/S ratio of about 30X. In any event, the deferral program was used by just 63k borrowers deferring payments on less than $20 million of loan principle. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. In the spring of 2020, the company sold $75 million of convertible debt. There are a huge number of fintech startups of varying sizes and varying levels of operational performance. You're more than your latest funding, tell our customers your company's story. I think the only objective way to test the validity of these assertions is to see how they have worked out over time in the real world. Affirm's valuation in April 2019 was $2,600 - $2,900M. PayRight practices responsible lending and performs extensive identification and credit checks to ensure a customer's repayment capability. It offers services such as direct payments, pay-after-delivery options, and installment plans. The Company plans to provide additional detail on the financial impact of the partnership in subsequent quarters, The Company has also not included any potential GMV or Revenue contributions from its forthcoming rollout of Affirm Debit+ and plans to update its outlook as the offering is more widely available, The Company expects a moderation in GMV and revenue from Peloton in fiscal year 2022. Definitions of these non-GAAP financial measures are included under "Key Operating Metrics, Non-GAAP Financial Measures and Supplemental Performance Indicators" above, and reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures are included in the tables below. CBI websites generally use certain cookies to enable better interactions with. SAN FRANCISCO September 17, 2020 By offering Affirm, our 6,000 merchant partners can Borrowers have been, and are more likely to make payments that are smaller in dollars and relate to a purchase that they are using such as a home exercise bike or a TV or even a puppy than might be the case for buying use a revolving credit card. I will attempt to provide some rough metes and bounds that relate to what I consider to be a fair enterprise value for the company. However, the Company believes that GMV is a useful operating metric to both the Company and investors in assessing the volume of transactions that take place on the Company's platform, which is an indicator of the success of the Company's merchants and the strength of that platform. He left that company after it was acquitted by eBay (EBAY) and spent the following years starting various IT companies. The Company is intentionally prioritizing increased investments in both its product and engineering teams, while also increasing its brand and direct response marketing efforts. More recently, the company reported net revenue of nearly $174 million for the three months that ended on September 30, 2020, up nearly 98 percent from the $87.9 million in revenue it generated during the same period the year prior. One of the things that has struck me in doing due diligence with regard to Affirm is that compared to most credit card purchases, Affirms lending is based on a specific consumer purchase. 2023 Crunchbase Inc. All Rights Reserved. I have no business relationship with any company whose stock is mentioned in this article. Transaction Costs - The Company defines transaction costs as the sum of loss on loan purchase commitment, provision for credit losses, funding costs, and processing and servicing expense. Its among a number of pay-over-time fintech companies that have cropped up in recent years, with others including Klarna and Afterpay. Affirms credit app provides consumers with offers essentially on an instantaneous basis. Mr. Hochfeld has published more than 500 articles on Seeking Alpha, all dealing with companies in the information technology space. . Like many other payment processors, Shift4 reports gross revenues which really are not comparable to the revenues reported by other software companies. In the S-1, Affirm disclosed the number of Class A and Class B common stock each shareholder held, but did not disclose what percentage of ownership their shares represented. Affirm's latest funding round was a IPO for $1,205.4M on January 13, 2021. Thats up nearly 93 percent from the same period in 2019. Its among a number of pay-over-time fintech companies that have cropped up in recent years, with others including, . To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Active Consumers - The Company defines an active consumer as a consumer who engages in at least one transaction on its platform during the 12 months prior to the measurement date. It has experienced very substantial growth between the September and December quarters, with less growth in the subsequent March quarter. However, these non-GAAP financial measures are presented for supplemental informational purposes only, and these non-GAAP financial measures have limitations as analytical tools. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONT. Certainly I am not. Given the growth expectations for this company, I imagine that sales and marketing expense will continue to grow as an expense ratio from current levels. The company reported net revenue of a bit greater than $3 billion last quarter. The San Francisco-based company raised about $1.5 billion in funding from investors including Durable Capital Partners, GIC, Thrive Capital and Spark Capital. At that time of the Series G stock sale, the company did not disclose the enterprise value assigned as part of the capital raise. A company like Affirm should have a noticeable cost advantage in the sense that its funding costs should be lower than competitive offerings given the low loss ratios, the favorable experience it had in terms of charge-ffs during the pandemic and the unique process of underwriting at checkout. Please note that I deliberately used the word niche as opposed to space. As I mentioned earlier, I have no independent way of assessing the companys assertions about the superiority of its credit grading algorithms. With our superior technology, Affirm is strongly positioned to build a more valuable two-sided network for consumers and merchants. Mr. Hochfeld has enjoyed a long career in the tech world, working for IBM, Memorex/Telex, Raytheon Data Systems, and BMC Software. Sign up for a free trial to see Affirm's valuations in January 2021 and more. I have no reason to doubt the statement and of course given the background of the CEO and the rest of the management team, it makes sense to me that the company would be in a position to create differentiated offerings. The Company believes that revenue less transaction costs is a useful financial measure to both the Company and investors of the economic value generated by transactions processed on the Company's platform. American Express B2B Cross-Border Payments: Building Business Beyond The Card, First Republics Billions In Losses Show Why Bank Deposits Need More Protection, The Ascendancy Of AI In Asias Financial Services Industry, National Digital ID Is A Foundation For CBDC. Sales in the March quarter showed minimal sequential growth followed by a substantial bounce back in the June quarter, and some moderation of sequential growth in the September quarter. Some of these limitations are as follows: Accordingly, investors should not consider these non-GAAP financial measures in isolation or as substitutes for analysis of the Company's financial results as reported under GAAP, and these non-GAAP measures should be considered along with other operating and financial performance measures presented in accordance with GAAP. It has focused on prime+ credit customers. Affirm shares one thing in common with C3.AI, a famous founder who is well known in the IT industry and whose experience is on point for this company. No. As the company saw a rather substantial mix change to loans with 0% APR, the growth in interest revenues was constrained. Decided on March 30, 2023. Affirm says it has more than 6,500 merchant partners including. Levchins 11% stake in the company is now worth $2.7 billion, making him fintechs newest billionaire. I wish I didnt have to write that-but while there are many differences between now and the .com bubble, there are some similarities as well. How many readers believed that Square Cash would achieve the growth trajectory it has. The significance of Peloton in our portfolio has increased as a result of consumer spending trends on home fitness equipment, and there can be no assurance that such trends will continue or that the levels of total revenue and merchant network revenue that we generate from Peloton will continue, the company wrote. Payment options through Affirm are provided by these lending partners: https://www.businesswire.com/news/home/20210909006033/en/, Gross merchandise volume ("GMV") for the fourth quarter of fiscal 2021 was, Active merchants grew by 412% to nearly 29,000 for the fourth quarter of fiscal 2021, including several thousand newly integrated Shopify merchants, Transactions per active consumer increased 8% to approximately 2.3 as of, Adjusted operating income for the fourth quarter of fiscal 2021 was, Net loss for the fourth quarter of fiscal 2021 was, The Company has not included estimates of potential contributions to GMV or revenue from the recently announced partnership with Amazon, which is currently being tested with select customers. So far, Affirm has grown primarily through its merchant partners and through word of mouth. Jasmine Ventures: 11,003,701 shares of Class A common stock and Class B common stock each. Copyright 2023 CB Information Services, Inc. All rights reserved. Adjusted Operating (Loss) Income - The Company defines adjusted operating (loss) income as its GAAP operating loss, excluding: (a) depreciation and amortization; (b) stock-based compensation included in GAAP operating loss; (c) the amortization of its commercial agreement asset; and (d) certain other costs as set forth in the reconciliation of adjusted operating (loss) income to GAAP operating loss included in the tables at the end of this press release. It seems like a straight forward concept but it upends the way credit has been advanced through cards for many years now. Affirm narrowed its net loss in fiscal 2020 to $112.6 million, compared with a loss of $120.5 million a year earlier. It most recently raised a $500 million Series G round led by Durable and GIC in September. The company earns interest on the balances of loans it holds for sale. Key Operating Metrics, Non-GAAP Financial Measures and Supplemental Performance Indicators, (in millions, except GMV and percent data) (unaudited), Revenue Less Transaction Costs (Non-GAAP), Revenue Less Transaction Costs as a % of GMV (Non-GAAP), Adjusted Operating Income (Loss) (Non-GAAP), Total Platform Portfolio (Non-GAAP) (in billions), Equity Capital Required (Non-GAAP) (in millions), Equity Capital Required as a % of Total Platform Portfolio (Non-GAAP), Allowance for Credit Losses as a % of Loans Held for Investment. By building a new kind of payment network one based on trust, transparency and putting people first we empower millions of consumers to spend and save responsibly, and give thousands of businesses the tools to fuel growth. Total Platform Portfolio - The Company defines total platform portfolio as the unpaid principal balance outstanding of all loans facilitated through its platform as of the balance sheet date, including loans held for investment, loans held for sale, and loans owned by third-parties. Affirm has made 5 investments. I think it unlikely, as I detail below, that this company can achieve 98% growth in this current quarter. Shop Now Easy Builder Custom build the perfect gaming PC based on the games you play and we will ship it out in 5 business days! Depending on the specifics, the company offers consumers 0% APR loans as well as other credit terms that are processed and funded at the time of checkout. Currency in USD. Transaction Costs as a Percentage of GMV - The Company defines transaction costs as a percentage of GMV as transaction costs, as defined above, as a percentage of GMV, as defined above. Highly esteemed for his investment wisdom accumulated over decades, Mr. Hochfeld ranks in the top 0.1% of Tip Ranks analysts for his selection of information technology stocks and their subsequent successes. The company calls out a differentiated technology that has been able to increase credit approvals while creating a high performing and rapidly maturing pool of assets. That computes to an enterprise value of $3.75 billion. Overall, I think the advantages that Affirm has within the POS credit market are of sufficient magnitude that it likely they will continue to dominate the broadly defined space-and the space itself is likely to experience continued rapid growth. As part of the series G financing, this debt was converted into 4.4 million Series G shares. Our solutions use the latest in machine learning, artificial intelligence, cloud-based technologies, and other modern tools to create differentiated and scalable products. Equity Capital Required - The Company defines equity capital required as the sum of the balance of loans held for investment and loans held for sale, less the balance of funding debt and notes issued by securitization trusts as of the balance sheet date. Affirm was founded and is still lead by Max Levchin. Its commerce platform, agreements with originating banks, and As with Affirms existing monthly payment options, consumers will never be charged late or hidden fees when using this new product. WebAffirm's valuation in April 2019 was $2,600 - $2,900M. Currently, the proportion of loans with a 0% APR has reached 46% and that is up from 31% in the prior year. Overall, last quarter, the company achieved an increase of 71% in terms of the GMV transacted on the companys platform on a year to year basis. WebAffirm is a financial technology services company that offers installment loans to consumers at the point of sale. In 2012, Mr. Hochfeld was convicted of misappropriating funds from a hedge fund he operated. For readers wanting to do a deep dive on this company, a few paragraphs from the S-1 are important to consider: Technology is at the core of everything we do. The Company believes that equity capital required is a useful financial measure to both the Company and investors in assessing the amount of the Company's total platform portfolio that the Company funds with its own equity capital. (Recently, PayPal launched a service called Pay in 4 which allows consumers to split payments into 4 bi-weekly payments with a 0% APR-this is perhaps an initial step into the world of POS lending which may be of significance over time. (a) Amounts include stock-based compensation as follows: Total stock-based compensation in operating expenses, CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS. We prioritize building our own technology and investing in engineering talent, as we believe these are enduring competitive advantages that are difficult to replicate.. I look at companies such as Square and Shift4 as technology companies that facilitate loans and payments. Overall, the fee revenue as a percentage of GMV increased from 4.2% to 6.3%. The half-a-billion-dollar Series G round, which was led by returning investor GIC and Durable Capital Partners LP, brings the total money raised to $1.3 billion since the Based on what I know, Affirm really does provide its borrowers with a better experience, and allows them to buy more than would be the case using other credit scoring technologies. 2W 10W 9M. Klarna offers a range of payment solutions to e-stores. Affirm says it has more than 6,500 merchant partners including Tonal, Dyson, Gucci, and Expedia. Alongside this new capital, our latest product is another step towards becoming as ubiquitous as credit cards Affirm is now an even more attractive payment option for everyday wants and needs, Levchin added. At the end of the day, regardless of the specific classification of the company, Affirm shares will trade at some multiple of sales that is congruent to its growth rate and its free cash flow expectations. All statements other than statements of historical fact are forward-looking statements, including statements regarding: the Company's strategy and future operations, including the Company's partnerships with Amazon and Shopify; the development, innovation, introduction and performance of the Company's products, including the Debit+ Card; acquisition and retention of merchants and consumers; the Company's future growth, investments, network expansion, product mix, brand awareness, financial position, gross market value, revenue, transaction costs, operating income, provision for credit losses, and cash flows; and general economic trends and trends in the Company's industry and markets. I cant say I know most of the merchants who offer the Affirm service, but I do know Dyson, Callaway, Delta Airlines and Expedia. Payment options through Affirm are provided by these lending partners: affirm.com/lenders. The company has been achieving remarkable growth with total revenue growth reaching 98% last quarter accelerating from 93% in the prior fiscal year. Affirm had been planning on launching its IPO before the end of 2020, but it has now delayed that schedule as I will detail below. In November, Ayden, which is a major and rapidly growing global payment platform signed a partnership with Affirm. Which industries has this organization most actively invested in? The funding round was led by GIC, a The event will feature keynote presentations by Max Levchin, Founder and Chief Executive Officer, and Michael Linford, Chief Financial Officer, and Q&A sessions with Mr. Levchin, Mr. Linford and additional members of its executive leadership team. I think this is a very reasonable strategy from the perspective of most investors who read about 100% first day pops but are unable to penetrate the charmed circle of brokerage house favorite clients and hedge funds who generate trading volumes that are often rewarded by IPO allocations. Affirm has recently signed a 3 year agreement with Peloton that renews automatically for additional one year terms. It is standard these days for fintech firms to assert that they have competitive advantages based on their unique credit scoring technology. It charges interest in about half of its transactions, making most of its revenue through fees charged to merchants. The Affirmed S-1 is written from the point of view of trying to prove the company is based on technology-I think it is, other readers will not reach the same conclusion. of Affirms plans for an IPO, estimated valuation at $5 billion to $10 billion. Hosting the call will be Max Levchin, Founder and Chief Executive Officer, and Michael Linford, Chief Financial Officer. In dealing with Affirm, the analogs I will use are going to be Square (SQ) and Shift4 (FOUR). We can also now better support merchants who offer smaller ticket items and bring their customers a more transparent, flexible way to pay.. Supplemental Disclosures of Cash Flow Information, Supplemental Disclosures of Non-Cash Investing and Financing Activities, Stock-based compensation included in capitalized internal-use software, Additions to property and equipment included in accrued expenses, Issuance of warrants in exchange for commercial agreement, Acquisition of commercial agreement assets, Conversion of redeemable convertible preferred stock, Issuance of common stock in connection with acquisition, Right of use assets obtained in exchange for operating lease liabilities, Reconciliation of Non-GAAP Financial Measures. I am not sure just how long it will take for the IPO to be rescheduled and of course I have no idea what the revised terms will look like. Transactions per Active Consumer - Transactions per active consumer is defined as the average number of transactions that an active consumer has conducted on its platform during the 12 months prior to the measurement date. Sign up for a free trial to see Affirm's valuations in January 2021 Header placeholder lorem ipsum dolor sit amet, consectetur adipiscing elit. Affirm financials. Bert Hochfeld graduated with a degree in economics from the University of Pennsylvania and received an MBA from Harvard. The last IPO I reviewed (C3.AI) (AI) had shares that had trebled since the time of the IPO to a valuation that made little sense-at least to me-and besides that, the growth clothes that are the point of most of these IPOs were conspicuous by their absence. Most of the commerce that the company enables is transacted on a mobile basis. The company is also introducing an interest-free biweekly payment product for transactions as low as $50. That is doubtless frustrating to readers and not terribly salutary for this writer. Learn more. During the fourth quarter, we increased the number of merchants on our platform by more than fivefold, more than doubled gross merchandise volume and grew active consumers by 97% year over year., Levchin continued, The secular shift toward flexible and transparent financial products continues to accelerate. During the fourth quarter, we delivered strong unit economics while driving even greater capital efficiency. . It would not be worthwhile to try to identify all of the companies that currently offer POS loans.
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