Consumers seem attracted to this kind of transparent borrowing and funding sources find the high velocity of repayments to be congruent with their own needs. Crunchbase Daily. 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. I am not receiving compensation for it (other than from Seeking Alpha). Gross Merchandise Volume ("GMV") - The Company defines GMV as the total dollar amount of all transactions on the Affirm platform during the applicable period, net of refunds. Is this happening to you frequently? As mentioned credit from Affirm is available at Walmart both within physical stores and on-line. The company derives a significant amount of revenue from the interest it receives on loans held for sale. Sony Pictures Affirm Originals has struck a deal with author Karen Kingsbury to adapt her 2005 novel A Thousand Tomorrows as a TV series. 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. Affirm financials. The company, while not yet profitable, has a positive contribution margin and has been improving its expense ratios sequentially. These amounts have, and will continue to vary based on the level of 0% ALR loans that are sold or purchased. It actually cut its marketing spend in the wake of the impacts of the pandemic. . Affirm narrowed its net loss in fiscal 2020 to $112.6 million, compared with a loss of $120.5 million a year earlier. The investment thesis for this company is based on its creation of a new credit category in which it is the leading player. 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. Greensky has had its share of issues during the pandemic. By the end of September, the amount of the portfolio in deferral had fallen to 0.1% of the outstanding loan balance. Lightspeed Venture Partners invested in Affirm's Series G funding round. 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. Trying to disentangle all of the competing claims about who offers what to whom would be a bootless undertaking. It focuses on merchants in the home improvement and in the healthcare service organizations. The loans held for sale grew by 59% year over year, but the return declined from 21% to 18% as a function in the proportion of 0% APR loans in the Affirm portfolio. Earlier this month Israeli cybersecurity company Cybereason today announced the completion of a $100 million Series G financing round led by SoftBank Corp. At the time the assumption was that because the latest investment The company spends about 24% of its revenues on what it captions as technology and data analytics. How many investments has this organization made over time? The company has negotiated fees that it charges merchants for the commerce transacted across the platform and the fee is higher when the transaction is based on a 0% APR loan. 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. I have chosen to use the sum of transaction based gross profit ($403 million) and subscription and services based revenue ($448 million) to calculate a revenue level that is more or less comparable to the revenues reported by most enterprise software companies. The curated list of the most valuable private companies in the world |. 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. Thing again! Crunchbase News reporter Christine Hall contributed to this article. The Company believes that total revenue as a percentage of GMV is a useful performance indicator to both the Company and investors of the revenue generated on a transaction processed on the Company's platform. These days, tech IPOs seem to reap valuations detached from any analytical reality. of Affirms plans for an IPO, estimated valuation at $5 billion to $10 billion. That has made the home exercise segment, and Peloton specifically, ideal for penetration by the Affirm service. 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 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. No. Built In San Francisco Affirm Raises Half a Billion Dollars in Its Series G Funding Round News Sep 17, 2020 Crowdfund Insider U.S. Fintech Affirm Secures $500 Million Through Series G Funding Round Led By GIC & Durable Capital Partners News Sep 17, 2020 Finextra Research Affirm raises $500m News Sep 17, 2020 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 I have linked here to a Forbes article about Cross River as it was a year ago. WebThe average Affirm salary ranges from approximately $73,000 per year for Operations Manager to $263,000 per year for Senior Director of Operations. Affirm was founded and is still lead by Max Levchin. But I actually believe that Walmart's ability to make credit offers based on Affirm is a significant competitive advantage for Walmart. . 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. Were excited about this vote of confidence from both new and existing investors as we advance our 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. It offers services such as direct payments, pay-after-delivery options, and installment plans. In dealing with Affirm, the analogs I will use are going to be Square (SQ) and Shift4 (FOUR). Affirm says it has more than 6,500 merchant partners including. This financing was based on the sale of 21.8 million shares of Series G preferred shares. By offering Affirm, our 6,000 merchant partners can drive overall sales, grow average order value (AOV), and increase repurchase rates. Unlike credit cards and other pay-over-time options, we show consumers exactly what they will pay up front, never increase that amount, and never charge any late or hidden fees. At this point, the companys virtual card revenues are quite minimal; the company still gets most of its revenue from its merchant network. He also operated the Hepplewhite Fund, a hedge fund that specialized in technology investments. He left that company after it was acquitted by eBay (EBAY) and spent the following years starting various IT companies. 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 San Francisco-based company raised about $1.5 billion in funding from investors including Durable Capital Partners, GIC, Thrive Capital and Spark Capital. It has added $18 billion to its market cap in four months. Affirm plans to list on the Nasdaq under the ticker AFRM. Hedge Fund Research, an independent 3rd party firm that specializes in ranking managers, rated the Hepplewhite Fund as the best performing small-cap fund for the 5 years ending in 2011. 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. As a private company, Affirm last raised money in September, 2020 at roughly one-fifth its current value. Affirm has made 5 investments. 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 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. 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. WebThis opinion is uncorrected and subject to revision before publication in the printed Official Reports. In the last reported quarter, Peloton (PTON) accounted for 30% of total revenues. In the latest reported quarter, about 57% if the companys revenues came from the commerce fees paid by merchants and consumers. The company has been experiencing explosive growth in revenues and it was planning for an IPO before the end of the year. 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. 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. We consider data beyond traditional credit scores, such as transaction history and credit usage, to predict repayment ability, and leverage this with real-time response data. I am not inclined to think that Pay in 4 itself will have any material influence on the growth of Affirm). Header placeholder lorem ipsum dolor sit amet, consectetur adipiscing elit. Market Thats up nearly 93 percent from the same period in 2019. 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. 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. Essentially, the Affirm platform is able to look at factors beyond credit score to determine a risk profile for an individual borrower in a specific transaction and to make credit offers that are particularly appealing to an individual borrower. Not all readers will be familiar with all fintech companies. 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. Adjusted Operating Margin - The Company defines adjusted operating margin as its adjusted operating (loss) income, as defined above, as a percentage of its GAAP total revenue. Affirm will host a conference call and webcast to discuss fourth quarter fiscal year 2021 financial results on Thursday, September 9, 2021, at 5:00 pm ET. Digital consumer lending service Affirm has completed a $300 million Series F led by Josh Kushner's Thrive Capital, with participation from new Affirm's valuation in April 2019 was $2,600 - $2,900M. 2W 10W 9M. Some things have changed since then to be sure, and I imagine the article would look a bit different were it being written in December 2020. 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. Did you think that there were enough channels for consumers to obtain credit? Affirm partners with over 6,000 merchants in the U.S., helping them grow sales and access new consumers. Affirm has 21 investors. I imagine that many readers, as well as this author had never heard of Affirm. The companys service provides consumer credit at the point of sale. At some level, a company like Affirm might be said to compete with PayPal-but in terms of the realities of competition, that is a stretch. 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 I wrote this article myself, and it expresses my own opinions. 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. 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. My last article on C3.AI (AI) which, amongst other topics, focused on its stretched valuation, garnered a comment to the effect that valuation doesnt/shouldnt matter until an enterprise reaches a $50 billion enterprise value. Among the largest stakeholders in Affirm are. View source version on businesswire.com: https://www.businesswire.com/news/home/20210909006033/en/, Affirm Reports Fiscal Year 2021 Fourth Quarter Results. I have linked here to the app for those interested in seeing what is being offered: Download a new way to pay over time | Affirm App. Entering text into the input field will update the search result below. I think the valuation of Affirm will be positively influenced by its management team and the entrepreneurial record of Mr. Levchin. But based on my investigation thus far, this is one of those e-commerce platforms that is likely to achieve long term success and thus is worthy of detailed investigation even with the IPO not firmly scheduled. The strategic progress we achieved in fiscal year 2021 sets us up for long-term growth. 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. I believe that this company has some unique technology, a pretty decent competitive moat and an offering (I mean what they offer consumers) that is well in-tune with the way consumers want to conduct commerce. This allow me to make calculations in term of EV/S that can be compared to other ratios on an apples to apples basis. 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 offers 0% financing for Peloton bikes, and Peloton is its largest customer, making up 30% of its revenue in the quarter ending September 30, 2020. Should readers/investors buy Affirm shares? Mr. Hochfeld has enjoyed a long career in the tech world, working for IBM, Memorex/Telex, Raytheon Data Systems, and BMC Software. I look at companies such as Square and Shift4 as technology companies that facilitate loans and payments. 9.86 -0.30 (-2.95%) At close: 04:00PM EDT. As part of the series G financing, this debt was converted into 4.4 million Series G shares. Which industries has this organization most actively invested in? Following the onset of the COVID-19 pandemic, our revenue from merchant partners in the travel, hospitality, and entertainment industries declined, but we saw a significant increase in revenue from merchant partners offering home fitness equipment, home office products, and home furnishings, though we may see potential downswing in these categories if the trends we have seen thus far in the COVID-19 pandemic reverse, the company wrote. 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. The Company believes that revenue less transaction costs as a percentage of GMV is a useful financial measure to both the Company and investors of the unit economics of transactions processed on the Company's platform. 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. The company has been acquiring merchant partners at what I can only describe as a prodigious rate because it can be such a potent competitive tool. Claim your profile to get in front of buyers, investors, and analysts. The foregoing is an article about a company called Affirm (NASDAQ:AFRM) which is apparently planning an IPO in a few weeks. Net loss per share attributable to common stockholders for Common stock, Class A common stock and Class B common stock: Weighted average common shares outstanding. It also provides security solutions for credit and fraud risks for e-stores. PayRight practices responsible lending and performs extensive identification and credit checks to ensure a customer's repayment capability. 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. Affirm has 1 portfolio exit. What can readily be determined, is that Affirm has both a higher positive rate in terms of extending credit and a lower charge-off rate that was less impacted by the economics of the pandemic than expected. Looked at holistically and ignoring the reversal of bad debt provisions in Q2, the company is seeing favorable opex trends. 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. Figuring out the validity of a particular fintech concept is a debate that I cant settle in some dispositive fashion. The funding round was led by GIC, a returning investor, and Durable Capital Partners LP. This sale left the company with a cash balance of $684 million. I am clearly not qualified to evaluate the Affirm algorithms that it has developed to determine credit for its borrowers. Last quarter, as mentioned the company reported 98% growth in revenues and growth of no less than 150% in commerce revenues, and investors have determined to pay a stiff premium for growth. 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. Shopify: Undisclosed, but listed as a 5 percent stockholder. 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. That said, servicing revenues are still less than the cost of servicing and were just 2.3% of revenues in the September ending quarter. The company has various funding relationships-particularly those with Cross River and significant categories of expense and revenue relate to the sale and purchase of loans either above or below fair market value. So, from my perspective, any EV/S ratio of 20X or less is reasonable. The companys market cap has swelled past $35 billion. I believe, therefore, that the growth opportunity for Affirm will be substantial and of long duration. My belief is that Affirm is likely to be a large and successful company with a high growth rate and above average profitability. 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. With our superior technology, Affirm is strongly positioned to build a more valuable two-sided network for consumers and merchants. What Should Banks Do Now? Klarna offers a range of payment solutions to e-stores. $12.5. Its commerce platform, agreements with originating banks, and The company aims to disrupt the process of financing in-store purchases for customers across the credit spectrum, including the unbanked or underbanked. Which types of acquisition does this organization make most frequently. It can offer some consumers a 0% APR loan which has created lots of word of mouth excitement amongst consumers. consumer payment-and-debt startup was founded in 2012. Adds Interest-Free Biweekly Payment Product. Overall, the fee revenue as a percentage of GMV increased from 4.2% to 6.3%. Obviously, a key growth strategy for this company is to acquire additional merchant partners. Many readers and analysts will be struck by customer concentration. In the June quarter, repayments were essentially at historic levels. Similar to adjusted operating (loss) income, the Company believes that adjusted operating margin 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. Other returning investors include Lightspeed Venture Partners, Wellington Management Company, Baillie Gifford, Spark Capital, Founders Fund, and Fidelity Management & Research Company LLC. Sunbit is a financial technology that enables financing in-store purchases for consumers across the credit spectrum. Revenue less transaction costs and revenue less transaction costs as a percentage of GMV are not intended to be measures of operating profit or loss as they exclude key operating expenses such as technology and data analytics, sales and marketing, and general and administrative expenses; Adjusted operating (loss) income and adjusted operating margin exclude certain recurring, non-cash charges such as depreciation and amortization, although the assets being depreciated and amortized may need to be replaced in the future, and share-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense and an important part of the Company's compensation strategy; and. Because of this experience, the company significantly reversed the provision for credit losses as seen in the S-1. I have to start this article by stating the obvious: the market is very frothy and investors seem to be losing their connections to a realistic valuation paradigm. More consumers and merchants are continuing to choose Affirm because of our ability to offer a variety of ways to pay, thanks to our unrivaled technology. 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. Adjustments to reconcile net (loss) income to net cash used in operating activities: Amortization of premiums and discounts on loans, net, Changes in fair value of assets and liabilities, Amortization of commercial agreement assets, Proceeds from the sale of loans held for sale. Overall, despite the stresses of substantial unemployment during the pandemic, delinquency rates fell by 66% year on year and the proportion of gross charge offs fell by 48%. Thus far, the concept seems to be succeeding. Average Affirm hourly Affirm is a company that has been a pioneer in the POS-Credit space. Its among a number of pay-over-time fintech companies that have cropped up in recent years, with others including Klarna and Afterpay. It was founded in 2018 and is based in London, United Kingdom. : 6,947,972 shares of Class A common stock and Class B common stock each. 2023 Crunchbase Inc. All Rights Reserved. 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. 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. But that $3 billion includes a substantial level of pass-through revenues which had never been considered in arriving at an EV/S ratio for this company until the SEC began preventing this company from reporting adjusted revenues which excluded the pass through component of income from payment processing. Its credit offers are based on low or deferred interest promotional financing solutions. SAN FRANCISCO September 17, 2020 By offering Affirm, our 6,000 merchant partners can So, therefore, I think it will be valued at some comparable level to companies such as SQ and FOUR. Affirm reported a net revenue of $509.5 million for the fiscal year that ended on June 30, 2020. 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. 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.. Affirms most recent valuation is not known. Many of the borrowers who had deferred payments returned to current status. Mr. Hochfeld has published more than 500 articles on Seeking Alpha, all dealing with companies in the information technology space. It would not be worthwhile to try to identify all of the companies that currently offer POS loans. 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. Back in July, The Wall Street As with Affirms existing monthly payment options, consumers will never be charged late or hidden fees when using this new product. I have no business relationship with any company whose stock is mentioned in this article.