Profitability is extremely hard to come by in startupland, but Revolut CEO and cofounder Nik Storonsky says his fintech has achieved it, six years after launching. “We’re cash-generating,” he told Sifted in an interview on Wednesday at Web Summit in Lisbon. “We are profitable now, and we were profitable last year too.”
For now, we have to take him by his word; after filing for two extensions, Revolut will not release its 2021 financial statements until December.
„Firstly, cash generation, or cash flow positive is NOT making profits.” – says Grant Halverson, the CEO of McLean Roche Pty Ltd. „Secondly – How would anyone know what Revolut is doing? Revolut has not release it’s 2021 financial statements after serious audit issues were highlighted and will not release it until December.”
Revolut CEO claims they don’t need to raise new capital – “The only situation in which the bank would raise again would be “for banking capital (or) to expand into certain markets.” “If for some reason we decide to start expanding even faster and apply for more banking licences in more countries, then we will need to raise more capital than we have now.” Nik Storonsky told Sifted.
„This is extremely unlikely given Revolut’s past cash burn.” according to Grant Halverson. He explains that, founded in 2015, Revolut raised US$1.7 billion across in 20 funding rounds, with 52 investors. Major leads Softbank and Tiger in $33 billion 2021 valuation.
„The world has changed – SoftBank and Tiger are unlikely leads or even participating in a round. Instead Revolut raised cash in more expensive secondary markets – August 2021 and March 2022 lead by Credit Suisse, a clear sign they are avoiding VC’s.” Halverson said. He thinks that Revolut risks a Klarna moment.
„Klarna needed $900 million cash in mid-year 2022, they boasted of a possible US$46-55 billion valuation. Without Softbank, Klarna struggled, in the end accepting a humiliating 85% decline $6.7 billion valuation vs $45.6 billion in 2021. Worse, ESOP share values also fell – this is what Revolut is scared about, it packages staff wages with heavy share reward benefits to reduce cash burn.” explains Halverson. His analyses goes deeper.
„Revolut is not worth US$33 billion. NuBank is 3x bigger in customers, 4x in revenue than Revolut, its pre-IPO valuation US$45 billion. NuBank’s US 2022 market cap was as low is $14 billion ($23 billion today) despite Warren Buffet. Dave and MoneyLion similar stocks are both well down. Kakao Bank, the Korean neo bank actually makes a profit, shares are down 76%.
„Revolut doesn’t want to reduce its valuation, a collapse in its ESPO shares would expose the dubious business model.”
Nik Storonsky said that the company was constantly re-evaluating its spending and costs in the current market downturn to focus on cash generation. But the bank is still hiring aggressively. He told Sifted that Revolut had doubled its headcount in 2022 to 5,000 full-time employees, and it’s been hiring 300 people a month. It’s also added a few thousand people in additional support roles like customer support.
Halverson sees that as an excess. And is not the only one. He is also mentioned: no profits, high cash burn and low customer spend.
„Revenues per customer are pathetic at £14.80 per customer! 88% revenue is UK market focused. Major revenue is heavily dependent on card interchange built on travel fees. Revolut continued to expand aggressively during Covid, increasing cash burn, then rushed into totally unregulated Crypto space.„
Halverson concludes: „Plenty to ponder and when the 2021 accounts are finally released, we can all be better informed.”
Banking 4.0 – „how was the experience for you”
„So many people are coming here to Bucharest, people that I see and interact on linkedin and now I get the change to meet them in person. It was like being to the Football World Cup but this was the World Cup on linkedin in payments and open banking.”
Many more interesting quotes in the video below:
