Copyright 2023 CB Information Services, Inc. All rights reserved. the WSJ had suggested that Goldman, Sachs, a rose by any other name would still be as sweet., Affirm has recently signed a 3 year agreement, Ayden, which is a major and rapidly growing global payment platform. Affirm has made 5 investments. Other companies, including companies in the same industry, may calculate these non-GAAP financial measures differently from how the Company calculates them or not at all, which reduces its usefulness as a comparative measure. The prior fiscal year, growth reached 93%. The famous founder here is Max Levchin, an alumni and founder of PayPal PYPL). In the September quarter, the cash burn fell to just $2 million. A replay will be available on the investor relations website following the call. We remain focused on extending our leadership position with our core products, while capitalizing on our vast opportunities to empower more people with the new ones we continue to launch.. SAN FRANCISCO-- ( BUSINESS WIRE )-- Affirm, a more flexible and transparent alternative to credit cards, today announced a $500 million series G round of I have linked here to a survey that might be useful to some investors. I have seen or read of nothing that will disrupt Affirms competitive position-on the contrary, I see Affirm taking the right steps to solidify its early advantages in the space. According to the press release, published by Affirm, the company has raised a $500 million series G round of funding.The funding round was led by GIC, a returning investor, and Durable Capital Partners LP. The Company believes that active consumers is a useful operating metric to both the Company and investors in assessing consumer adoption and engagement and measuring the size of the Company's network. 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.. Trying to disentangle all of the competing claims about who offers what to whom would be a bootless undertaking. AAPL, FB, TWTR), Total amount raised across all funding rounds, Total number of lead investment firms and individual investors, Total number of investment firms and individual investors, Announced Date: Date that the Funding Round was publicly announced, Transaction Name: Auto-generated name of transaction (e.g. 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. PayRight practices responsible lending and performs extensive identification and credit checks to ensure a customer's repayment capability. According to news reports, the IPO has been postponed because of the frothy share price action of the last 3 major IPOs . The funding round was led by GIC, a returning investor, and Durable Capital Partners LP. How many readers believed that Square Cash would achieve the growth trajectory it has. In dealing with Affirm, the analogs I will use are going to be Square (SQ) and Shift4 (FOUR). The company, while not yet profitable, has a positive contribution margin and has been improving its expense ratios sequentially. In addition, if this policy is properly executed, it will eliminate one of the greater risks in investing in newer companies, the dreaded expiration of share sale lock-ups. While customer concentration is a risk, given the size and growth rate of PTON, and the synergistic components of the relationship, I am not particularly concerned about this kind of customer concentration. 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. Affirm The company was founded in 2005 and is based in Stockholm, Sweden. Ana Braskamp Indeed, I would find that kind of valuation an attractive entry point and would be buying shares if they are available at such a valuation. Our solutions use the latest in machine learning, artificial intelligence, cloud-based technologies, and other modern tools to create differentiated and scalable products. AFRM Stock Valuation - Far From Cheap Affirm will finish fiscal 2022 with approximately 300 million shares outstanding, making its current market cap around $45 billion. WebFor example, a $800 purchase could be split into 12 monthly payments of $72.21 at 15% APR, or 4 interest-free payments of $200 every 2 weeks. Equity Capital Required as a Percentage of Total Platform Portfolio - The Company defines equity capital required as a percentage of total platform portfolio as equity capital required, as defined above, as a percentage of total platform portfolio, as defined above. Sign up for a free trial to see Affirm's valuations in January 2021 and more. I am a strong believer in the end-to end platform approach of Shift4, and the ability of management to create an offering that has and will continue to resonate with restaurants and the broader hospitality industry. On a sequential basis, revenues rose by 13.4% last quarter. Affirm is now accepted as a payment method for consumers using the Ayden platform. I expect that the recently announced partnerships with SHOP and AYDN will further accelerate the acquisition of merchant partners for Affirm. Affirm provides more than 5.6 million U.S. and Canadian consumers a better alternative to traditional credit cards, giving them the flexibility to buy now and pay over time at virtually any store. Stay up to date with recent funding rounds, acquisitions, and more with the Affirm Holdings, Inc. operates a platform for digital and mobile-first commerce in the United States, Canada, and internationally. According to the S-1, " As of September 30, 2020, 47% of our employees were in engineering and technology-related roles, reflecting the emphasis we place on technology." site you are consenting to these choices. Affirm's fiscal year 2022 financial outlook also reflects its strategy to drive growth in its network through continued investment in product as well as merchant and consumer acquisition and retention efforts. My belief is that Affirm is likely to be a large and successful company with a high growth rate and above average profitability. While ecommerce exploded in 2020, Affirm grew revenue 98% over the summer compared with the year prior. Affirm, Max Levchin's buy now, pay later credit card alternative, expects to achieve a valuation of just over $9 billion from its forthcoming IPO on Nasdaq. I look at companies such as Square and Shift4 as technology companies that facilitate loans and payments. But from what has been suggested, this will be an IPO in which many readers can actually participate and which may not have a 1st day advance that has made investing in IPOs such a terribly fraught undertaking. I think it is quite straightforward to suggest that a company with both a data advantage and a technology advantage in using the data, and which is led by a team that is very familiar with the limitations of current credit technology is going to be able to create a substantial business. Affirm, a more flexible and transparent alternative to credit cards, today announced a $500 million series G round of funding. Which investors participated in the most funding rounds? My record in trying to handicap the value of IPOs has not been great; as noted, most of them are now selling at levels far beyond what I had anticipated. By offering Affirm, our 6,000 merchant partners can drive overall sales, grow average order value (AOV), and increase repurchase rates. Max Levchins consumer payment-and-debt startup was founded in 2012. The company has been able to build a stream of transactions that comply with the credit policies and underwriting standards of its finance partners and the portfolio has lead to lower than average fraud rates and higher approval rates compared to traditional underwriting models. 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. It has reduced its cash burn to a negligible level and continued to show a path to profitability. (650)398-2715, Internet Explorer presents a security risk. The pandemic has tilted Affirms trajectory steeply upward, as it has for many fintech companies. The company also offers consumers virtual cards which are loaded with an approved loan amount and which are issued by Visa. Tala provides digital financial services through its mobile application. Not this writer. Adds Interest-Free Biweekly Payment Product. 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. Obviously, a key growth strategy for this company is to acquire additional merchant partners. The companys market cap has swelled past $35 billion. Back in July, The Wall Street Journal, which broke the news of Affirms plans for an IPO, estimated valuation at $5 billion to $10 billion. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Overall, the fee revenue as a percentage of GMV increased from 4.2% to 6.3%. Last quarter, a little less than 10% of revenues came from a category called gain on sales of loans. This caption, and it contra, loss on loan purchase commitment is primarily a function of the companys funding costs and its relation with Cross River Bank. The company aims to disrupt the process of financing in-store purchases for customers across the credit spectrum, including the unbanked or underbanked. What is quite unique about what Affirm does, is that there is a specific connection between the asset and the loan. It was founded in 2018 and is based in London, United Kingdom. Digital consumer lending service Affirm has completed a $300 million Series F led by Josh Kushner's Thrive Capital, with participation from new Earlier in the summer, the WSJ had suggested that Goldman, Sachs has offered to underwrite an IPO for the company at a valuation of as much as $10 billion. Servicing revenue rose by almost 100% in the latest quarter. If you have an ad-blocker enabled you may be blocked from proceeding. 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. We can also now better support merchants who offer smaller ticket items and bring their customers a more transparent, flexible way to pay.. Many of the borrowers who had deferred payments returned to current status. Follow. Other returning investors include Lightspeed Venture Partners, Wellington Management Company, Baillie Gifford, Spark Capital, Adjusted operating (loss) income is presented because the Company believes that it is a useful financial measure to both the Company and investors for evaluating its operating performance and that it facilitates period to period comparisons of the Company's results of operations as the items excluded generally are not a function of the Company's operating performance. As the saying goes, a rose by any other name would still be as sweet. My contention is that the growth and margins that Affirm will enjoy have very little in common with the metrics of other lenders or financial institutions. Among the largest stakeholders in Affirm are Khosla Ventures, Lightspeed Venture Partners, Founders Fund, Jasmine Ventures, and Shopify. : Undisclosed, but listed as a 5 percent stockholder. Yet it faces widening competition. 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. Investors are encouraged to review the related GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate the business. 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. During the fourth quarter, we delivered strong unit economics while driving even greater capital efficiency. I have no business relationship with any company whose stock is mentioned in this article. The company has more than 6500 merchants who are integrated on the Affirm platform. The company has been able to price risk with a high level of accuracy and its latest delinquency rate of 1.1% based on a weighted average calculation seems quite attractive. Thing again! CBI websites generally use certain cookies to enable better interactions with. Mr. Hochfeld has published more than 500 articles on Seeking Alpha, all dealing with companies in the information technology space. . Interestingly, a large portion of Affirms revenue comes from a single merchant partner: Peloton. (a) Amounts include stock-based compensation as follows: Total stock-based compensation in operating expenses, CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS. 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. It charges interest in about half of its transactions, making most of its revenue through fees charged to merchants. But Find the right companies, identify the right contacts, and connect with decision-makers with an all-in-one prospecting solution. Probably most analysts will look at the increase in GMV of 71% as a reasonable proxy for growth expectations. The Company believes that total platform portfolio is a useful financial measure to both the Company and investors in assessing the scale of funding requirements for the Company's network. $12.5. Sunbit is a financial technology that enables financing in-store purchases for consumers across the credit spectrum. press@affirm.com As a private company, Affirm last raised money in September, 2020 at roughly one-fifth its current value. Affirm's latest funding round was a IPO for $1,205.4M on January 13, 2021. Pretty much all of them say that they have proprietary algorithms that give them advantages in pricing risk and providing merchants with a tool to drive sales and provide a better experience for consumers. To ensure the most secure and best overall experience on our website, we recommend the latest versions of, Shopifys selection of Affirm as its exclusive partner to power Shop Pay Installments, bringing Affirm to hundreds of thousands of new merchants and their customers later this year, The introduction of Affirm Savings, a high-yield savings account, The launch of numerous merchant partnerships over the last month including. In the latest reported quarter, about 57% if the companys revenues came from the commerce fees paid by merchants and consumers. 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. This financing was based on the sale of 21.8 million shares of Series G preferred shares. Decided on March 30, 2023. The sequential increase in commerce sales last Q4 was spectacular-reaching a triple digit pace. Change in operating assets and liabilities: Purchases and originations of loans held for investment, Proceeds from the sale of loans held for investment, Principal repayments and other loan servicing activity, Acquisition, net of cash and restricted cash acquired, Additions to property, equipment and software, Net Cash Provided by (Used in) Investing Activities, Proceeds from issuance of notes and residual trust certificates by securitization trusts, Principal repayments of notes issued by securitization trusts, Proceeds from issuance of convertible debt, net, Proceeds from issuance of redeemable convertible preferred stock, net, Repurchases and conversion of redeemable convertible preferred stock, Proceeds from initial public offering, net, Proceeds from exercise of common stock options and warrants, Payments of tax withholding for stock-based compensation, Net Cash Provided by (Used in) Financing Activities, Effect of exchange rate changes on cash, cash equivalents and restricted cash, Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash, Cash and cash equivalents and restricted cash, beginning of period, Cash and Cash Equivalents and Restricted Cash, end of period. The Company believes that transaction costs is a useful financial measure to both the Company and investors of those costs, which vary with the volume of transactions processed on the Company's platform. Their latest investment was in NYDIG as part of their Growth Equity - IV on December 12, 2021. Shopify: Undisclosed, but listed as a 5 percent stockholder. Because I try to compare apples to apples, my approach in terms of calculating revenues and free cash flow margin for FOUR, has been and will continue to use gross revenues less network fees. The company services some of the loans that it generates. So far, Affirm has grown primarily through its merchant partners and through word of mouth. At the rate the shares have been appreciating, that wont take a long time regardless of the fact that the company has a current annual revenue run rate of $165 million and hasnt seen much growth lately. As mentioned. Our merchants include brands like Walmart, Peloton, Oscar de la Renta, Audi, and Expedia, and span verticals including home and lifestyle, travel, personal fitness, electronics, apparel and beauty, auto, and more. Affirm acquired 4 companies. 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. I am not receiving compensation for it (other than from Seeking Alpha). Yes, I do imagine there will be a correction of some magnitude and for some time period, but no, I do not see this as an analog to that which was experienced at the turn of the century. Like many other payment processors, Shift4 reports gross revenues which really are not comparable to the revenues reported by other software companies. PayRight provides merchants a buy now, pay later flexible payment option to offer their customers, intended for bigger ticket items that are more considered purchases rather than smaller impulse-driven buys. Revenue Less Transaction Costs as a Percentage of GMV - The Company defines revenue less transaction costs as a percentage of GMV as revenue less transaction costs, as defined above, as a percentage of GMV, as defined above. Currently, the proportion of loans with a 0% APR has reached 46% and that is up from 31% in the prior year. The event will be webcast from Affirms investor relations website at https://investors.affirm.com/ and a replay will be available following the event. 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. By continuing to use this site you are consenting to these choices. 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. It also provides security solutions for credit and fraud risks for e-stores. Given these uncertainties, you should not place undue reliance on these forward-looking statements. 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. Fourth Quarter and Fiscal Year 2021 Operating Highlights: All comparisons are made versus the same period in fiscal year 2020 unless otherwise stated. Lightspeed Venture Partners: 9,370,230 shares of Class A common stock and Class B common stock each. As I mentioned earlier, I have no independent way of assessing the companys assertions about the superiority of its credit grading algorithms. against. Cautionary Note About Forward-Looking Statements. of Affirms plans for an IPO, estimated valuation at $5 billion to $10 billion. Affirm's valuation in April 2019 was $2,600 - $2,900M. It can offer some consumers a 0% APR loan which has created lots of word of mouth excitement amongst consumers. Its offering resonates among younger people who have less access to traditional credit resources-its technology appears to produce better outcomes for its end users, its merchant clients, its funding sources and of course its shareholders. Among the largest stakeholders in Affirm are. It has experienced very substantial growth between the September and December quarters, with less growth in the subsequent March quarter. Total Revenue as a Percentage of GMV - The Company defines total revenue as a percentage of GMV as GAAP total revenue as a percentage of GMV, as defined above. The companys service provides consumer credit at the point of sale. Were excited about this vote of confidence from both new and existing investors as we advance our Starting in the 1990s, Mr. Hochfeld worked as a sell-side analyst and won awards from the Wall Street Journal for his coverage of the software space. He also operated the Hepplewhite Fund, a hedge fund that specialized in technology investments. 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. Fly Now Pay Later seeks to help global travel businesses increase their sales by allowing customers a flexible payment option at checkout.