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To affirm, a consumer finance company founded by Max Levchin, member of the PayPal mafia, filed to become public this afternoon.

The company’s financial results show that To affirm, which distributes personalized loans on a phased basis to consumers at the point of sale, has an attractive combination of rapidly growing income and lean losses.

Growth and the path to profitability have been a winning duo in 2020, as a number of unicorns with similar parameters have seen high prices in their debut and attractive early trading. Affirm joins DoorDash and Airbnb in pursuit of a release before the end of 2020.

Let’s take a look at its bottom line and what made those numbers possible.

Affirm financial data

Affirm has recorded impressive historic revenue growth. In its 2019 fiscal year, Affirm recorded revenues of $ 264.4 million. Fast forward a year and Affirm managed revenue of $ 509.5 million in fiscal 2020, up 93% from the previous year. Affirm’s fiscal year begins July 1, a trend that allows the consumer finance company to fully capture the U.S. holiday season in its numbers.

The losses of the San Francisco-based company have also declined over time. In its 2019 fiscal year, Affirm lost $ 120.5 million on a fully loaded basis (GAAP). This loss fell slightly to $ 112.6 million in fiscal 2020.

More recently, during its first quarter ending September 30, 2020, Affirm has maintained its pattern of increasing revenue and decreasing losses. In that three-month period, Affirms revenue totaled $ 174.0 million, up 98% from the quarter last year. This rate of expansion is faster than that managed by the company during its last full fiscal year.

Accelerating income growth with slimming losses is catnip for investors; Affirm likely benefited from a positive wind in 2020 thanks to e-commerce boosting the COVID-19 pandemic, and thus gave the unicorn more buying in the area of ​​consumer spending.

Again, comparing the company’s most recent quarter to its equivalent a year ago, Affirms’ net losses fell to just $ 15.3 million from $ 30.8 million.

Reports quarterly financial statements on page 107 of sound S-1 If you’d like to follow along, give us a more granular understanding of how the fintech company is performing amid the global pandemic. After a huge fourth quarter of calendar year 2019, increasing revenue to $ 130.0 million from $ 87.9 million in the previous quarter, Affirm managed to continue to grow in the first, second and third calendar quarters. of 2020. During these periods, the consumer fintech unicorn had revenues of $ 138.2 million, $ 153.3 million, and $ 174 million, as we saw earlier.

Best of all, the company made a profit of $ 34.8 million in the quarter ending June 30, 2020. This one-time profit, along with its small losses in its most recent period, makes Affirm a company that will do no harm for the future. net income, provided it can continue to grow as efficiently as recently.

The COVID-19 angle

The pandemic has had more of an impact on Affirm than its raw income figures can detail. Fortunately, his S-1 file contains more notes on how the business has adapted and prospered during that Black Swan year.

Certain sectors have provided the company with fertile ground for its credit service. Affirm said it has seen an increase in income for traders focused on home fitness equipment, office products and home furnishings during the pandemic. For example, its primary merchant partner, Peloton, accounted for approximately 28% of its total revenue for fiscal 2020 and 30% of its total revenue for the three months ending September 30, 2020.

Peloton is a success in 2020, seeing its share price increase sharply while its growth accelerated thanks to a rise in digital fitness.

Investors, although they are probably content to encourage rapid growth, can take a look at the company’s reliance on such a large percentage of its revenue from a single client; especially one that benefits from its own pandemic outbreak. If its main merchant partner loses momentum, Affirm will quickly feel the repercussions.

Either way, the Affirms model resonates with customers. We can see it in its gross merchandise volume or in the total dollar amount of all the transactions it processes.

GMV at startup has grown significantly year over year, as you’d probably expect given its rapid revenue growth. On page 22 of its S-1, Affirm indicates that in its fiscal year 2019, GMV reached $ 2.62 billion, which rose to $ 4.64 billion in 2020.

Similar to the company’s revenue growth, its GMV hasn’t grown quite 100% on an annual basis. What made this growth possible? Reach new customers. As of September 30, 2020, Affirm had more than 3.88 million active customers, which the company defines as a consumer who engages in at least one transaction on our platform in the 12 months preceding the measurement date. This figure is up from 2.38 million as of September 30, 2019.

The growth is nice on its own, but Affirm clients also become more active over time, producing a modest cumulative effect. In its final quarters, active clients executed an average of 2.2 transactions, compared to 2.0 in the third quarter of 2019.

Affirm has also fueled a sea of ​​private capital. For Affirm, having access to cash is not quite the same as a strictly software company, as it deals with debt, which likely gives the company a slightly higher predilection for cash than other startups of similar size.

Luckily for Affirm, it has been richly funded throughout its life as a private company. The fintech unicorn raised funds well over $ 1 billion before its Initial Public Offering, including a $ 500 million Series G in September 2020, a $ 300 million Series F in April 2019, and a $ 200 million Series E in December 2017. Affirm has also raised over $ 400 million in rounds previous equity and a $ 100 million line of credit at the end of 2016.

What to do with the deposit? Our first read is that Affirm is coming out of the private markets as a healthier company than the average unicorn. Of course, it has a history of operating losses and has yet to prove its ability to generate sustainable profits, but the acceleration of its revenue growth is promising, as are its declining losses.

Not tomorrow, with a fresh look.

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