It has added $18 billion to its market cap in four months. The funding round was led by GIC, a Hosting the call will be Max Levchin, Founder and Chief Executive Officer, and Michael Linford, Chief Financial Officer. WebAffirm Holdings, Inc. (AFRM) NasdaqGS - NasdaqGS Real Time Price. 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. This expense ratio has declined over time even though it has grown at more than 60% year on year. 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. 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. 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. I believe, therefore, that the growth opportunity for Affirm will be substantial and of long duration. 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. 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. On that basis, FOUR has an EV/S of 14X+ based on my most current estimate and calculation. Mr. Hochfeld has published more than 500 articles on Seeking Alpha, all dealing with companies in the information technology space. 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. The offering from Affirm is in the nature of a virtuous circle in which borrowers, funding sources and Affirm all benefit by the specific nature of the companys offerings and technology. SAN FRANCISCO September 17, 2020 By offering Affirm, our 6,000 merchant partners can 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. He also operated the Hepplewhite Fund, a hedge fund that specialized in technology investments. Its a competitive market, so I'm sure there will be competitive pressure, Levchin told Forbes today. Affirm Adds Interest-Free Biweekly Payment Product. 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. One of the concepts here is that credit based on a specific asset such as an exercise bike or an airline ticket has a better chance of being repaid than extending credit without any concern about the nature of the purchases. Our solutions use the latest in machine learning, artificial intelligence, cloud-based technologies, and other modern tools to create differentiated and scalable products. 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. My belief is that Affirm is likely to be a large and successful company with a high growth rate and above average profitability. Affirm has been one of the creators of a new class of e-commerce-POS credit. Lightspeed Venture Partners: 9,370,230 shares of Class A common stock and Class B common stock each. 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. And I do not expect the shares to be cheap. Zilch operates as a financial service provider. 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. 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. As part of the series G financing, this debt was converted into 4.4 million Series G shares. 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. Affirm's deal structure is available for 7 funding rounds, including their IPO from January 13, 2021. Active Merchants - The Company defines an active merchant as a merchant which engages in at least one transaction on its platform during the 12 months prior to the measurement date. Much of the time I have written about IPOs during 2020, my ability to provide useful advice has been severely circumscribed by the huge 1st day gains that have been experienced by most of the offerings. Affirms most recent valuation is not known. I am clearly not qualified to evaluate the Affirm algorithms that it has developed to determine credit for its borrowers. Affirm affirm series g valuation affirm series g valuation 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. Sony Pictures Affirm Originals has struck a deal with author Karen Kingsbury to adapt her 2005 novel A Thousand Tomorrows as a TV series. Edit Post-Money Valuation Data by PrivCo Section. We are also able to access and leverage SKU-level data, which we believe gives us a proprietary data advantage.. Affirm 9.86 -0.30 (-2.95%) At close: 04:00PM EDT. 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." Mr. Hochfeld has enjoyed a long career in the tech world, working for IBM, Memorex/Telex, Raytheon Data Systems, and BMC Software. Unlike payment options that have late fees, compounding interest and unexpected costs, Affirm shows customers up front exactly what theyll pay with no hidden fees and no surprises. 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 Affirm, a more flexible and transparent alternative to credit cards, today announced a $500 million series G round of funding. By the end of September, the amount of the portfolio in deferral had fallen to 0.1% of the outstanding loan balance. Header placeholder lorem ipsum dolor sit amet, consectetur adipiscing elit. I imagine that many readers, as well as this author had never heard of Affirm. Most of the commerce that the company enables is transacted on a mobile basis. [email protected] Overall, the fee revenue as a percentage of GMV increased from 4.2% to 6.3%. site you are consenting to these choices. Servicing revenue rose by almost 100% in the latest quarter. 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. Its profitability optics obscure its path to profitability. 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. I think the valuation of Affirm will be positively influenced by its management team and the entrepreneurial record of Mr. Levchin. 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. CBI websites generally use certain cookies to enable better interactions with. 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. 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. Currency in USD. The new strategy for the IPO is supposed to capture more of the companys value for selling shareholders, employees and VCs and it seems likely that it will work to do so. Ana Braskamp 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. Analyst Briefing Submitters are 7x more likely to receive a qualified connection. Mr. Levchin has assembled what appears to be a very capable executive team with a great deal of specific experience in the credit and fintech spaces. SAN FRANCISCO--(BUSINESS WIRE)--Sep. 9, 2021-- Affirm Holdings, Inc. (NASDAQ:AFRM) (Affirm or the "Company), the payment network that empowers consumers and helps merchants drive growth, today reported financial results for its fourth quarter and fiscal year ended June 30, 2021. In 2001, Mr. Hochfeld formed his own independent research company, Hochfeld Independent Research Group, which provided research services to major institutions including Fidelity, Columbia Asset, SAC Capital, and many other prominent institutions and hedge funds. Affirm acquired 4 companies. 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. That is simply not a problem for this company-in the last quarter that it reported, total revenues grew by 98%-and revenues related to commerce actually grew by 150%. Could the shares trade a substantial premium to that kind of valuation? Its sales and marketing effort is nascent. It has reduced its cash burn to a negligible level and continued to show a path to profitability. Afterpay, the five-year-old Australian company valued at $24 billion, has 13 million registered U.S. customers. 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. The company reported a positive contribution margin last quarter. 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. Thing again! Affirm plans to list on the Nasdaq under the ticker AFRM. Apple Savings, Financial Health And Bankings Future, Apple, Goldman Sachs And BAM Fintechs Take A Bite Out Of Traditional Banking. We are revolutionizing the financial industry to be more accountable and accessible while growing a network that is beneficial for consumers and merchants. Affirm is a company that has been a pioneer in the POS-Credit space. Affirm salaries: How much does Affirm pay? | Indeed.com Affirm nets huge $500M Series G, bringing total funding Follow. As with Affirms existing monthly payment options, consumers will never be charged late or hidden fees when using this new product. Affirm financials. The event will be webcast from Affirms investor relations website at https://investors.affirm.com/ and a replay will be available following the event. 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. 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. Affirm was founded and is still lead by Max Levchin. Affirm is a significant competitive advantage for Walmart. 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. For merchants, adding Affirm is simple and can take as little as one hour. Worth noting is that Shopify is a 5% shareholder. Currently, the proportion of loans with a 0% APR has reached 46% and that is up from 31% in the prior year. . 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. Levchins 11% stake in the company is now worth $2.7 billion, making him fintechs newest billionaire. Affirm Stock Price, Funding, Valuation, Revenue & Financial Mr. Levchin was one of the several co-founders of PayPal (PYPL) and is credited with creating its initial set of security applications. In the latest reported quarter, about 57% if the companys revenues came from the commerce fees paid by merchants and consumers. As mentioned earlier, while 0% APR loans do carry a small level of amortization, they are recorded as an expense on the income statement as part of the loss on purchase commitments to Cross River. Tala provides digital financial services through its mobile application. : Undisclosed, but listed as a 5 percent stockholder. Web+44 (0) 203 637 7085 | how many locomotives does kansas city southern have? The company services some of the loans that it generates. These forward-looking statements reflect the Company's views with respect to future events as of the date hereof and are based on assumptions and subject to risks and uncertainties. It was founded in 2018 and is based in London, United Kingdom. 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. Affirms most recent valuation is not known. (a) Amounts include stock-based compensation as follows: Total stock-based compensation in operating expenses, CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS. In addition, the Company uses these non-GAAP financial measures in conjunction with financial measures prepared in accordance with GAAP for planning purposes, including the preparation of its annual operating budget, and for evaluating the effectiveness of its business strategy. 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. 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 Affirm says it has more than 6,500 merchant partners including Tonal, Dyson, Gucci, and Expedia. 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. It is standard these days for fintech firms to assert that they have competitive advantages based on their unique credit scoring technology. How many investments has this organization made over time? This company experiences notable seasonality typical of consumer retail buying patterns. Affirm 2023 Crunchbase Inc. All Rights Reserved. Apparently that is not going to be a problem of the same magnitude experienced by prospective investors in recent IPOs. In 2012, Mr. Hochfeld was convicted of misappropriating funds from a hedge fund he operated. Historically this company has seen substantial revenue contribution from merchant partners in the travel, hospitality and entertainment industries. Affirm has 1 portfolio exit. There arent many companys with that kind of growth in GMV and those that have enjoyed that kind of growth rate-think of Shopify (SHOP) as an example sell at enormous EV/S ratios-above 40X, actually. The company, while not yet profitable, has a positive contribution margin and has been improving its expense ratios sequentially. Claim your profile to get in front of buyers, investors, and analysts. I think the strategy might be able to work, but of course I cannot be sure. 9.89 +0.03 (+0.30%) After To supplement the Company's condensed consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States ("GAAP"), the Company presents the following non-GAAP financial measures: transaction costs, transaction costs as a percentage of GMV, revenue less transaction costs, revenue less transaction costs as a percentage of GMV, adjusted operating (loss) income, adjusted operating margin, total platform portfolio, equity capital required, and equity capital required as a percentage of total platform portfolio. 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 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. Sign up for a free trial to see Affirm's valuations in January 2021 Affirm was spun out of one of his ventures in 2012. Having experienced the .com crash live and in living color, I have to suggest that I really do not see an 80% fall in the QQQ index or even in the CLOU index that marked the end of the bubble at the turn of this century. Affirm 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. The real question isnt whether there will be competitionits more along the lines of, are we delivering the kind of value that no one else can., This is a BETA experience. Most investors these days look at companies such as Square and Shift4 and value them as they might enterprise software businesses with very high growth rates. Which types of acquisition does this organization make most frequently. Thats up nearly 93 percent from the same period in 2019. While the company is not yet profitable , its long term business model appears very attractive and the path to profitability appears clearly defined.