Affirm: Is this Fintech profitable?
Carrying on from my last post on the revenue side of Buy-now-pay-later giant Affirm’s business model, I want to cover the cost side of the equation for this business.
Now, I know that no one is interested in the cost/expense side of the P&L, especially in Silicon Valley startups funded by VCs! Still, it is instructive for those operating in other regions of the world to dive deep into this. I promise to make it a tad more exciting by adding in a few customer metrics!
Thanks to the good folks at Affirm and their IPO bankers, we now understand more of the Fintech’s costs. Let us start with the Profit walk for Affirm as reported in their IPO filings.
Profit walk?
The walk suggests that it a profitable business, but I would reserve that judgment for a few more paragraphs. What we need is a view of the profit & loss statement of the business to show us what is really happening under the hood.
The percentage split of the costs is as follows in the image below, and you can see that it is still a loss-making business. Net Income is negative.
The losses have reduced over the years, and that is a good sign (Net Income losses have reduced as a percentage of revenue). It has been over eight years since Affirm was founded, and the business has not turned profitable yet. Fintech CEOs will have you note that unicorn fintechs like Affirm are not built in a day and that customer acquisition is expensive). Now let us shift our attention to the P&L statement.
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