Fintech Headlines: January 30 - February 5, 2023

PayPal announces layoffs, Marqeta acquires Power Finance, SoFi, Bill.com, and Lightspeed Commerce report Q4 2022 results

This Week in the Markets

As expected, the Federal Reserve raised the federal funds rate by 0.25% to 4.50-4.75% on Wednesday. CME FedWatch Tool now estimates an 82.7% probability of another 0.25% increase in March. The markets rallied through Wednesday and Thursday following the Fed’s decision and Chairman Jerome Powell’s commentary. On Friday, the U.S. Labor Department reported that “employment rose by 517,000 in January [ vs. estimated 187,000 ] and the unemployment rate changed little at 3.4% [ vs. estimated increase to 3.6% ].” Major stock indices gave up part of their gains on Friday but still finished the week in the green.

🟢 Shares of Blend (NYSE: BLND 0.00%↑) advanced 27.33% during the week, most likely, driven by the decline in the mortgage rates. Blend services mortgage lenders; thus, is sensitive to the activity in the real estate market. Shares of SoFi (NASDAQ: SOFI 0.00%↑) advanced 25.59% after the company reported its Q4 2022 results, beating analysts’ estimates and providing upbeat guidance (more on that below).

🔴 Shares of Bill.com (NYSE: BILL 0.00%↑) and Lightspeed Commerce (NYSE: LSPD 0.00%↑) declined 21.18% and 9.69% respectively after the companies announced their Q4 2022 results (more on that later). Shares of Inter & Co (NASDAQ: INTR 0.00%↑) declined 8.03% during the week, most likely, due to Stone (NASDAQ: STNE 0.00%↑) liquidating its stake in the company.

Next week the following Fintech companies will report their Q4 2022 results: Robinhood (NASDAQ: HOOD 0.00%↑), Adyen (AMS: ADYEN), and Affirm (NASDAQ: AFRM 0.00%↑) will report on Wednesday, February 8, 2023, and PayPal (NASDAQ: PYPL 0.00%↑) will report on Thursday, February 9, 2023.

✔️ Fed raises rates a quarter point, expects ‘ongoing’ increases
✔️ Fed Slows Its Tightening With Quarter-Point Interest Rate Rise
✔️ Jobs report shows increase of 517,000 in January, crushing estimates
✔️ US Payrolls Surprise With Surge as Jobless Rate Hits 53-Year Low

PayPal Announces Layoffs Ahead of Earnings Release, Plans to Cut 7% of Its Workforce

On Tuesday, PayPal (NASDAQ: PYPL 0.00%↑) announced plans to lay off 2,000 employees, or approximately 7% of its workforce. The company’s chief, Dan Schulman, cited a “challenging macro-economic environment” in the press release. In August 2022, the company’s management committed to reducing expenses by $0.9 billion in 2022 and a further $1.3 billion in 2023, after an activist investor, Elliott Management, disclosed a $2 billion stake in the company. The company also committed to returning most of its free cash flow to investors through share buybacks (the company spent $3.2 billion on repurchasing 29 million shares in the first three quarters of 2022). PayPal will report its Q4 2022 results next week.

PayPal will report Q4 2022 results on February 9, 2023. Time to revisit the company’s Q3 2022 results 👉🏻 “PayPal Q3 2022 Earnings Review: forget growth, it's a margin story now”

✔️ PayPal to lay off 2,000 employees in coming weeks, about 7% of workforce
✔️ PayPal's rocky road ahead warrants more cost cuts, Wall Street says
✔️ PayPal to Cut 2,000 Jobs in Push to Trim Costs

SoFi Reports Q4 2022 Results, Sets Timeline for GAAP Profitability

SoFi (NASDAQ: SOFI 0.00%↑) reported its Q4 and full-year 2022 results on Monday. The company reported $456.7 million in revenue for the quarter, representing a 60% increase compared to Q4 2021. The company also reported a Net Loss of $40.0 million for the quarter, compared to a Net Loss of $111.0 million in Q4 2021, and an Adjusted EBITDA of $70.1 million, compared to an Adjusted EBITDA of $4.6 million in Q4 2021. The company’s management set a target to reach profitability on a non-adjusted GAAP basis in Q4 2023. Improving profitability is an outcome of the growing interest income after the company got a banking charter in early 2022, and started funding most of the loan originations from its balance sheet.

✔️ SoFi Reports Fourth Quarter and Fiscal Year 2022 Results
✔️ SoFi beats earnings estimates, revenue up 58% annually
✔️ SoFi Stock Jumps on Record Profits. No Warning Bells on Late Payments
✔️ SoFi's bank charter drives positive outlook, but layoffs hit tech unit

Marqeta Acquires Power Finance In a Bet On Embedded Finance

Marqeta (NASDAQ: MQ 0.00%↑, an issuer processor serving such companies as Cash App, Square, and Uber, announced its first acquisition as a public company. Marqeta agreed to buy Power Finance, a company offering a cloud-native platform for credit card program management, for $223 million in cash (and an additional $52 performance-based payout over the next 12 months). Marqeta has its own credit card processing capabilities, but the interview with the company’s new chief, Simon Khalaf, suggests that Marqeta is acquiring Power Finance for its embedded finance capabilities that allow integrating credit card offering directly into clients’ applications. The deal was closed shortly after the announcement.

Image source: Marqeta

Marqeta will report its Q4 2022 results on February 28, 2022. Read the review of the company’s Q3 2022 results 👉🏻 “Marqeta Q3 2022 Earnings Review: continued growth, cash cushion, and stock buybacks”

✔️ Marqeta announces plans to acquire Power Finance, Inc.
✔️ Marqeta buys fintech Power Finance in $275M all-cash deal
✔️ Marqeta makes a $275 million bet on embedded finance
✔️ Marqeta Completes Acquisition of Power Finance, Inc.

Lightspeed Reports FY Q3 2022 Results, Writes Offs Value of Ecwid and NuORDER

Lightspeed Commerce (NYSE: LSPD 0.00%↑), a Canadian merchant acquirer, reported its Fiscal Year Q3 2023 results (Calendar Year Q4 2022) on Thursday. The company reported a negative adjusted Adjusted EBITDA of $5.4 million on total revenue of $188.7 million, compared to a negative Adjusted EBITDA of $7.1 million on total revenue of $152.7 million a year ago. The company reported a Net Loss of $824.5 million, as it wrote off $748.7 in the book value of Ecwid and NuORDER, two companies it acquired for a total of $925 million in 2021. The company’s management lowered the revenue guidance for the last quarter of its fiscal year to $183.7 - 193.7 million, but reiterated its commitment to reach profitability on an Adjusted EBITDA basis during the next fiscal year (CY Q2 2023 - Q1 2024).

Want to learn more about Lightspeed Commerce? 👉🏻 “Lightspeed Commerce Profile (NYSE: LSPD): software, payments, and the art of acquisitions”

✔️ Lightspeed Announces Third Quarter 2023 Financial Results
✔️ Lightspeed’s Net Loss Widens as Tech Slump Prompts Writedown
✔️ Lightspeed Commerce Streamlines Operations

Bill.com Reports FY Q2 2023 Results, Guides for a Slowdown in Revenue Growth

Bill.com (NYSE: BILL 0.00%↑) reported its Fiscal Year Q2 2023 (Calendar Year Q4 2023) results on Thursday. The company reported a Non-GAAP Net Income of $49.4 million on total revenue of $260.0 million, compared to a Non-GAAP Net Loss of $0.2 million on total revenue of $156.5 million a year ago. The company's shares declined more than 20% following the earnings release, as the company's management guided for a slowdown in revenue growth and a decline in Non-GAAP Net Income on the back of macroeconomic uncertainty. The company guided for $245 - $248 million in revenue and $26.5 - $29.5 million in Non-GAAP Net Income in FY Q3 2023, and $999 - $1,007 million in revenue and $117.5 - $125.5 million in Non-GAAP Net Income for the full fiscal year 2023.

Interested in learning more about Bill? Read the company’s profile 👉🏻 “Bill.com Profile (NYSE: BILL): automating payments for SMBs”

✔️ BILL Reports Second Quarter Fiscal Year 2023 Financial Results
✔️ Bill.com Stock Sinks After a Big Earnings Beat. Customer Spending Is a Problem
✔️ Bill.com stock drops 20% as weak revenue forecast overshadows earnings beat

In Other News

✔️ CFPB Proposes Rule to Rein in Excessive Credit Card Late Fees
✔️ Biden Administration Proposes Rule to Lower Credit-Card Late Fees
✔️ Banks Brace for More Consumers to Fall Behind on Their Loans
✔️ Stripe In Talks for Possible Funding Round Led by Thrive Capital
✔️ Coinbase wins dismissal of lawsuit claiming it sold tokens illegally
✔️ Affirm’s Exclusivity Period With Amazon Expires
✔️ Upstart Holdings Makes Job Cuts, Citing Macro Challenges
✔️ Toast to Report Full Year 2022 Results on February 16, 2023
✔️ Remitly to Report Full Year 2022 Results on February 22, 2023
✔️ Shift4 to Report Full Year 2022 Results on February 28, 2023
✔️ Payoneer to Report Full Year 2022 Results on February 28, 2023
✔️ JPMorgan plans to launch digital bank in Germany by 2025
✔️ StoneCo Sells Stake in Banco Inter

Cover image: Photo by Clay Banks on Unsplash

Disclosure & Disclaimer: I own shares in several companies that I write about in this newsletter, as I am bullish on the transformation in the financial services industry. However, the information contained in this newsletter is intended for informational purposes only and should not be considered financial advice. You should do your own research or seek professional advice before making any investment decisions.