We prioritize building our own technology and investing in engineering talent, as we believe these are enduring competitive advantages that are difficult to replicate.. Total revenue less transaction costs was $431.4 million, compared to $160.9 millionin fiscal year 2020, driven by strong revenue growth, and offset by a $90.4 FedNow Real-Time Payments Are Here. Some of the credit offers include a 0% APR option as well as credit terms of varying lengths. For merchants, adding Affirm is simple and can take as little as one hour. Their latest acquisition was Returnly on April 21, 2021. 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.. Peloton is rather substantial purchase for most consumers and exercise bikes specifically, and exercise equipment in general have never developed a specific financing channel despite the rather significant average cost of a purchase. Analysts Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. Max Levchins consumer payment-and-debt startup was founded in 2012. It seems like a straight forward concept but it upends the way credit has been advanced through cards for many years now. Based on the valuations of many other tech IPOs, I would be surprised if Affirm would be selling shares at a post IPO valuation of less than $10 billion. Another company that offers POS credit is Greensky (GSKY). . Probably most analysts will look at the increase in GMV of 71% as a reasonable proxy for growth expectations. Affirm, the fintech startup known for providing installment loans to shoppers, publicly filed its S-1 with the United States Securities and Exchange Commission on Wednesday. The company is also introducing an interest-free biweekly payment product for transactions as low as $50. Mr. Hochfeld has published more than 500 articles on Seeking Alpha, all dealing with companies in the information technology space. 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. Chargebee, a subscription billing and revenue management platform, is valued $1.4 billion following a $125 million Series G. Affirm seeks to go beyond buy now 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 Thats up nearly 93 percent from the same period in 2019. But the company has developed an Affirm app which it markets directly to consumers-this is likely to be a key competitive tool over time. In any event, the deferral program was used by just 63k borrowers deferring payments on less than $20 million of loan principle. We delivered another set of excellent results to close out our fiscal year with GMV and revenue growth continuing to accelerate, said Michael Linford, CFO of Affirm. What Should Banks Do Now? At what valuation should Affirm sell? (650)398-2715, Internet Explorer presents a security risk. Affirm has raised over $1.3 billion from investors to date. In the Risk Factors section of its S-1, the company notes that Peloton was its top merchant partner, representing 28 percent of Affirms total revenue for the fiscal year ended June 30, 2020 and 30 percent of its total revenue for the three months that ended on Sept. 30, 2020. Affirm plans to list on the Nasdaq under the ticker AFRM. Affirm's new interest-free, biweekly payment option for transactions as low as $50 (Photo: Business Wire). It is my belief that Affirm will be a company in which many investors in the tech space will choose to invest. our sites and services. 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. 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. Many of the borrowers who had deferred payments returned to current status. It is standard these days for fintech firms to assert that they have competitive advantages based on their unique credit scoring technology. Prior to taking the helm of Affirm, Levchin was most known for co-founding PayPal with Peter Thiel in 2000. Cautionary Note About Forward-Looking Statements. The Company believes that allowance for credit losses as a percentage of loans held for investment is a useful performance indicator to both the Company and investors of the future estimated credit losses on the Company's outstanding loans held for investment. 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. Risks, uncertainties and assumptions include factors relating to: the Company's need to attract additional merchants and consumers and retain and grow its relationships with existing merchants and consumers; its need to maintain a consistently high level of consumer satisfaction and trust in its brand; the concentration of a large percentage of its revenue with a single merchant partner; its ability to sustain its revenue growth rate or the growth rate of its related key operating metrics; the highly competitive nature of its industry; the terms of its agreement with one of its originating bank partners; its existing funding arrangements that may not be renewed or replaced or its existing funding sources that may be unwilling or unable to provide funding to it on terms acceptable to it, or at all; its ability to effectively underwrite loans facilitated through its platform and accurately price credit risk; the performance of loans facilitated through its platform; changes in market interest rates; its securitizations, warehouse credit facilities and forward flow agreements; the impact on its business of general economic conditions, the financial performance of its merchants, and fluctuations in the U.S. consumer credit market; its ability to grow effectively through acquisitions or other strategic investments or alliances; and other risks that are described in its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2021 and in its other filings with the U.S. Securities and Exchange Commission. Market 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. As with Affirms existing monthly payment options, consumers will never be charged late or hidden fees when using this new product. Affirm reports its numbers consistent with those of a consumer finance company and some of its revenue and expense captions are quite different than those familiar to followers of enterprise software companies. But my belief is that this is one of the better of the current crop of IPOs and if valuation is within hailing distance of comparables, this is a name that should be part of any high-growth tech portfolio. Prior to taking the helm of Affirm, Levchin was most known for co-founding, The San Francisco-based company raised about $1.5 billion in funding from investors including. (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. Yet it faces widening competition. Khosla Ventures: 6,947,972 shares of Class A common stock and Class B common stock each. It could, quite conceivably, however achieve growth in the 75% range. Please. California residents: Affirm Loan Services, LLC is licensed by the Department of Financial Protection and Innovation. It also provides security solutions for credit and fraud risks for e-stores. Affirm financials. 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. Others might suggest that these businesses are really gussied up financial institutions that should be evaluated on those standards. Founded in 2012, Affirm lets people buy everything from shirts to car tires and pay them off in regular installments. The kinds of companies with excessive valuation are far different today than was the case 20 years ago, companies are not doing barter transactions for the most part, or selling shelfware, digital transformation is a real game changer and the ROI for many software solutions is high and has risen. It actually cut its marketing spend in the wake of the impacts of the pandemic. (in thousands, except share and per share amounts), Securitization notes receivable and residual certificates (at fair value), Liabilities, Redeemable Convertible Preferred Stock and Stockholders Deficit, Redeemable convertible preferred stock, $0.00001 par value, 30,000,000 and 124,453,009 shares authorized as of June 30, 2021 and June 30, 2020, respectively; zero and 122,115,971 shares issued and outstanding as of June 30, 2021 and June 30, 2020, respectively; liquidation preference of $0 and $809,032 as of June 30, 2021 and June 30, 2020, respectively, Common stock, $0.00001 par value, no shares authorized, issued and outstanding at June 30, 2021; 232,000,000 shares authorized, 47,684,427 shares issued and outstanding as of June 30, 2020, Class A common stock, par value $0.00001 per share: 3,030,000,000 shares authorized, 181,131,728 shares issued and outstanding as of June 30, 2021; no shares authorized, issued and outstanding as of June 30, 2020, Class B common stock, par value $0.00001 per share: 88,226,376 shares authorized, issued and outstanding as of June 30, 2021; no shares authorized, no shares issued and outstanding as of June 30, 2020, Accumulated other comprehensive gain (loss), Total Liabilities, Redeemable Convertible Preferred Stock and Stockholders Deficit, CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS, Excess return to preferred stockholders on repurchase, Net (Loss) Income Attributable to Common Stockholders. Fly Now Pay Later seeks to help global travel businesses increase their sales by allowing customers a flexible payment option at checkout. I wrote this article myself, and it expresses my own opinions. Apple Savings, Financial Health And Bankings Future, Apple, Goldman Sachs And BAM Fintechs Take A Bite Out Of Traditional Banking. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. 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. The company has more than 6500 merchants who are integrated on the Affirm platform. But Find the right companies, identify the right contacts, and connect with decision-makers with an all-in-one prospecting solution. 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. The concept is to limit any first day pop, and to secure a better overall return for selling shareholders, while limiting the returns achieved by those lucky enough to get allocations on an IPO. I expect that the recently announced partnerships with SHOP and AYDN will further accelerate the acquisition of merchant partners for Affirm. How many readers believed that Square Cash would achieve the growth trajectory it has. 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. Affirm is now accepted as a payment method for consumers using the Ayden platform. Affirm, a more flexible and transparent alternative to credit cards, today announced a $500 million series G round of funding. 9.86 -0.30 (-2.95%) At close: 04:00PM EDT. That computes to an enterprise value of $3.75 billion. Typically, most consumers have bought these kind of bikes on their cards-but not everyone can make a $2000 purchase on their card. It offers a 'buy now, pay later service that allows users to pay for a purchase in the course of six weeks without any fees or interest. The curated list of the most valuable private companies in the world |. 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. 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. Not all readers will be familiar with all fintech companies. Sign up for a free trial to see Affirm's valuations in January 2021 and more. The Company believes that active merchants is a useful performance indicator to both the Company and investors because it measures the reach of the Company's network. Affirm is a significant competitive advantage for Walmart. Interestingly, a large portion of Affirms revenue comes from a single merchant partner: Peloton. I have no business relationship with any company whose stock is mentioned in this article. Currently, the company has $4.2 billion of committed funding capacity from a diverse set of capital partners. That said, most of Affirms loans are funded by an institution called Cross River Bank, which is located across the river from NYC in Fort Lee, NJ. The company services some of the loans that it generates. 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. It can be almost impossible to estimate the growth rate for a company providing a new service to consumers. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. 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. 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. consumer payment-and-debt startup was founded in 2012. 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. Until recently, Affirm has spent a relatively inconsequential amount on sales and marketing. The company reported net revenue of a bit greater than $3 billion last quarter. Is this happening to you frequently? I have linked here to a survey that might be useful to some investors. Affirm went public in January at $49 a share, and its stock price has since jumped by over 150% to $133.70 on Wednesday. Affirm prides itself on showing consumers how much interest theyll pay upfront and having no late fees. 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. The company has also been getting its losses under control, with net losses falling from nearly $120.5 million in fiscal year 2019 to around $112.6 million during fiscal year 2020. However, these non-GAAP financial measures are presented for supplemental informational purposes only, and these non-GAAP financial measures have limitations as analytical tools. Affirm is yet another payment platform that has been designed for the digital era. He also operated the Hepplewhite Fund, a hedge fund that specialized in technology investments. The statistics that have been seen for these kind of partnerships are exceptionally compelling and should allow Affirm to continue to acquire merchant partners at a substantial rate. The companys market cap has swelled past $35 billion. I look at companies such as Square and Shift4 as technology companies that facilitate loans and payments. Many readers and analysts will be struck by customer concentration. : 11,003,701 shares of Class A common stock and Class B common stock each. Looking at Square in terms of an analytical construct is more difficult-partly because Square has 2 very different businesses, and partly because the company has been obliged to change how it reports revenue for one of those businesses. against. 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. This financing was based on the sale of 21.8 million shares of Series G preferred shares. Zilch operates as a financial service provider. It offers services such as direct payments, pay-after-delivery options, and installment plans. It most recently raised a $500 million Series G round led by Durable and GIC in September. It was formerly known as InVenture. But I have briefly reviewed two names that I consider to be reasonable analogs to the kinds of strategies and opportunities I see Affirm pursuing. Angel - Uber), Number of Investors: Total number of Investors in a Funding Round, Money Raised: Amount of money raised in Funding Round, Lead Investors: Name of the investor who led the investment in the funding round, The date when the Organization went public, Investor Name: Name of the investor who participated in the Investment, Lead Investor: This field indicates whether an investor led/organized the investment, Funding Round: Name of the funding round where the Investment is made, Partners: Name of the individual who led a funding round for his/her firm, Announced Date: Date when the Investment is announced, Organization Name: Name of the organization that received the investment, Acquiree Name: Name of the acquired organization, Announced Date: Date the acquisition was announced, Transaction Name: Auto-generated name of transaction (e.g. 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. It is not going to be cheap-the kind of growth this company is experiencing is not going to come at a discount. What is quite unique about what Affirm does, is that there is a specific connection between the asset and the loan. Its profitability optics obscure its path to profitability. The company focuses on contribution margins which are basically a marginal profit calculation that excludes a number of opex items including technology and general and administrative expense that are not volume related. PayRight practices responsible lending and performs extensive identification and credit checks to ensure a customer's repayment capability. So, therefore, I think it will be valued at some comparable level to companies such as SQ and FOUR. In the Risk Factors section of its S-1, the company notes that Peloton was its top merchant partner, representing 28 percent of Affirms total revenue for the fiscal year ended June 30, 2020 and 30 percent of its total revenue for the three months that ended on Sept. 30, 2020. To ensure the most secure and best overall experience on our website we recommend the latest versions of, Internet Explorer is no longer supported. large and successful company with a high growth rate and above average profitability. An undefined amount of this increase related to the value of the warrants granted to Shopify as part of the overall agreement with that company. The Company is intentionally prioritizing increased investments in both its product and engineering teams, while also increasing its brand and direct response marketing efforts. I cant say I know most of the merchants who offer the Affirm service, but I do know Dyson, Callaway, Delta Airlines and Expedia. Merchants are paid upfront and in full on the same day and include a diverse mix of broad-reaching products and services such as direct sales businesses, home improvement, education, photography, dental, and health and beauty. You can read more about your cookie choices at our privacy policyhere. The CB Insights tech market intelligence platform analyzes millions of data points on vendors, products, partnerships, and patents to help your team find their next technology solution. Predictions were rife coming into 2023 that we would see a flood of M&A deals for venture-backed startups as funding and IPOs dried up. Edit Post-Money Valuation Data by PrivCo Section.