I’d like to pose a bit of an unconventional company for consideration (i.e., non-SaaS, non-US based). I’ll start with a high-level overview, and we can dive deeper depending on the interest received.
Background
Nubank is a digital bank based out of Brazil. It was founded by Colombian-born David Velez, a Stanford-educated former venture capitalist who was frustrated with the highly-monopolistic retail banking landscape in Brazil. Nubank IPO’d in December 2021 at a market cap of ~$50B. Some of its investors include Berkshire Hathaway, Sequoia Capital, and Founders Fund.
Its key differentiation has been democratizing easy access to financial services via their “NuConta” account, which allows consumers to quickly open an account, away from the red tape that used to be typical for basic retail banking activities. More recently, they have expanded their product line to insurance, investing, and credit. They have also increased their presence beyond Brazil, notably to Colombia and Mexico.
Latest Financial Results
- Revenue growth of 172% YoY, reaching $1.3B FXN (neutralizing exchange rates)
- Gross margin of 33% (decline from 47% YoY as they enter the credit business)
- Net profit of $7.8M (up from -$34M loss this time last year)
- Net interest margins increased 11% YoY
- Delinquency rates of 4.2% (up from 2.3% last year)
Latest Operational Results
- Customer growth of 46% YoY, reaching 70M
- Deposits increased 73% FXN YoY to $14B
- Purchase volume growth of 75% YoY to $21B
- 25% loan-to-deposit ratio
- DAU/MAU (Daily Active Users as a proportion of Monthly Active Users): 51.9%, up from 47.9% in Q3’21
Product Development
Nubank recently launched Open Finance (Sept’22), which is a series of APIs that connect with a user’s other financial services provides in order to aggregate them in Nubank. Nubank indicated that >3M users provided consent to use Open Finance. Not only will this lead to higher user engagement, but Nubank will be able to tailor cross-selling. In addition to Open Finance, Nubank is launching many other products, including personal loans, retail investing (fixed income, crypto, etc.)
Global Expansion
Nubank is continuing its rapid expansion into Mexico and Colombia after a successful trial period in 2021-22. While one-third of Brazil’s adult population is now a Nubank customer, Nubank has only reached 2.2% and 0.5% of the Mexican and Colombian market, respectively.
In Mexico, Nubank recently received approval from Mexico’s Banking & Securities Commission to accept customer deposits, issue debit card, and personal loans. Meanwhile Nubank secured a loan from the International Finance Corporation (World Bank’s financial institution) to continue expanding in Colombia, where it has already issued >400k credit cards in less than a year.
Conclusion
There are lots of additional data points on their latest earnings presentation, and this is certainly a difficult company to follow. But with continued revenue, geographic, and product line expansion as it starts flirting with profitability, it seems a worthwhile consideration fitting many of the requirements of this board. Looking forward to anyone’s thoughts, and to Nubank’s Q4 earnings release on Tuesday!
-RMTZP
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