Fintech results on the rebound
#052: Earnings season offers buoyant news from regional darlings.
Hola technopolists,
We’re rounding out earnings season with new data from LatAm’s darlings, and the results are rebounding enough to make pessimists reconsider their prickly outlooks.
Fintech doesn’t just seem to be hot – more importantly, especially to investors, it seems to be resilient. Nubank, Oxxo Spin, and Creditas are still reporting growth, oblivious to the threats of recession and credit crunches.
What’s Hot
🏦 Nubank cracked 80mn users around Latin America, adding nearly 5mn users in the last quarter according to a company press release. The Brazilian operation grew 32% on the year, reaching 75mn clients on the back of strong business account adoption amongst SMEs (+66% YoY). Traction in Mexico contributed significantly, counting over 3.2mn users on the back of strong credit card uptake. Nu Mexico took the opportunity to announce a new ‘guaranteed’ credit card for applicants with a limited or nonexistent credit history. The company is set to issue its full Q1 earnings in the coming weeks. (Press)
🏪 FEMSA, the Mexican retail conglomerate, posted bumper Q1 earnings with revenue surging 22% YoY to $10bn driven by strong sales across all key businesses. The sale of its stake in Heineken was a major factor behind the $2.8bn boost to net profit compared to the year prior, while sales from the Oxxo convenience store chain “widely outpac[ed] the industry” according to execs. Spin, Oxxo’s fintech unit, grew with sustained vigour, adding 1.1mn users and growing transaction volume in the quarter. Spin’s user base crested 6.4mn by April, roughly double the size of Nubank’s base and rapidly catching up to Mexico’s big banks. (Reuters)
💸 Brazilian lending unicorn Creditas significantly improved its finances in Q1 as it attempts to reach profitability in 2023. Revenues grew 42% YoY to $100mn on the back of a continuous effort to re-price the interest rates on its loan portfolio. The strong revenue growth continued despite a pullback in new loan origination, which decreased -35% YoY in response to growing recessionary and credit crunch fears. Most impressively, net losses fell 60% compared to the year prior, making it no longer Brazil’s weak link. It seems like many of the company’s 2022 predictions are true, with stabilising Brazilian interest rates and reduced overheads powering a return to normalcy after a bruising 2022. (Bloomberg)
What’s Not
🌐 Brazilian food delivery giant iFood is merging operations with its former parent, the holding company Movile, in response to challenging market dynamics. According to sources, Movile is dismissing 50-60 of its 70 remaining employees in a restructuring triggered by the “capital tightening cycle stemming from macroeconomic conditions”. The student seems to have become the master: Movile became the sole owner of iFood in August 2022 after acquiring 66% of its equity from Just Eat, but struggled to maintain its relevance and financial viability while making successive rounds of layoffs. Movile is 94% owned by South African holding company Prosus, which will maintain majority control over iFood. (Startups Brazil)
🛍️ BTG Pactual forecasts that Shein will lose its competitive cost advantage by moving toward Brazilian manufacturing. A new study conducted by the investment bank calculates that Shein’s products are 35%+ cheaper than competitors on average when comparing like-for-like products. Today, Shein and its customers benefit from a tax-free exemption on imports up to $50, but analysis by the investment bank estimates that the cost increases from Brazilian manufacturing will erase the company’s price advantage and heavily impact sales for its price-conscious customers. The announcement comes in response to Shein’s recent decision to move from 20% to 80% local manufacturing in the next 4 years. (Neofeed)
Stat of the Week
With Nubank and FEMSA’s Oxxo both in the news this week, there’s no better opportunity to compare market penetration amongst Mexico’s premier fintechs.
Mexico has been a critical growth geography for the Brazil-based neobank, contributing well over half of its foreign user base. A recent report by McKinsey highlights the importance of foreign growth for Brazilian startups: on average, 23% of revenue is derived from abroad.
How successful has Nubank been in Mexico?
So what? Roxinho’s growth in Mexico is impressive, already displacing blue-chip traditional banks in the leaderboard.
Credit cards are the tip of Nubank’s market entry spear. The neobank launched credit cards as its first product in Mexico back in 2022, exploiting the country’s looser regulatory burden to target its low financial inclusion, but is looking to expand into savings soon.
The Rundown
Brazil at Silicon Valley took place last week, uniting LatAm’s leading voices between Stanford and Berkeley to discuss the outlook of Brazil’s startup ecosystem. Items with the ‘BSV’ tag refer back to the conference.
🇧🇷 BSV: Executives from LatAm’s top funds comment on Brazil’s startup ecosystem at the Brazil at Silicon Valley conference →
📥 BSV Report: McKinsey’s LatAm Digital Startup Study →
🗣️ BSV: Legendary investor Vinod Khosla says 90% of VCs don’t add any value, and 70% actively detract it by looking at the wrong metrics →
🇦🇷 Mercado Libre tops LinkedIn’s list of top Argentine employers for the second year running →
📦 Opinion: MercadoLibre is now a big fish in a medium-sized pond →
💹 Covalto (fmr. Credijusto) quietly delays its IPO until 2024 →
⛓️ Brazil’s central bank showcased its existing blockchain experiments and opened applications to its Digital Real pilot at LIFT day →
🇬🇧 Ebury, the UK-based fintech owned by Santander, is making a renewed push into Brazil’s world of cross-border SME payments →
Deals (April 25 - May 1, 2023)
M&A
🇧🇷 QI Tech, a banking-as-a-service provider, acquired 🇧🇷 Builders Bank, a banking app development company, for an undisclosed amount.
🇧🇷 Arado (fmr. Clicampo), an agribusiness marketplace, acquired 🇧🇷 Pin.go, a fresh produce delivery company, for an undisclosed amount.
🇲🇽 Belvo, an open finance platform, acquired 🇧🇷 Skilopay, a PIX-based payment solution, for an undisclosed amount.
Fundraises
🇲🇽 Clara, a corporate expense management platform, raised a $60mn round led by GGV Capital with participation from Acrew Capital, Citius, Citi Ventures, Endeavor Catalyst, Ethos, Commerce Ventures, Goanna Capital, Bayhouse Capital, Fluent Ventures, LAGO Innovation Fund, Monashees, Coatue, Picus Capital, DST Global Partners, Alter Global, General Catalyst, and angels.
🇧🇷 Cilia, an automotive software infrastructure startup, raised a $22mn round led by Cloud9 with participation from Mercado Libre.
🇪🇸 Top Doctors, a telehealth platform with operations around Spanish-speaking LatAm, raised a $8.8mn round led by Mars Growth Capital and Liquidity Group.
🇧🇷 Arado (fmr. Clicampo), an agribusiness marketplace, raised a $12mn Series A led by Acre Venture Partners with participation from Sygenta Group Ventures (Globo), Valor Capital, MAYA Capital, and SP Ventures.
🇸🇻 Cubo, a mobile payments provider, raised a $3.5mn seed from IDB Lab, Amador Holdings, Soma Capital, Latin Leap, Seedstars, and others.
🇧🇷 EmpreX, a consumer microlender, raised a $2.1mn round from angel investors.
🇨🇱 Nutrix, a diabetes monitoring and nutrition platform, raised a $1.8mn round led by Chile Ventures with participation from Simpact.
🇧🇷 FinanZero, an online credit marketplace, raised a $1.5mn round from a consortium of undisclosed Swedish investors.
🇲🇽 Ben & Frank, a direct-to-consumer eyeglasses retailer, raised an undisclosed amount from L Catterton.
Debt
🇲🇽 Fairplay, a revenue-based lender for ecommerce retailers, raised a $100mn credit facility from Community Investment Management.
Simon Rodrigues is a consultant, writer, and speaker specialising in strategic storytelling for early-stage startups. Find more information about his services here.