US$17 million loss was planned, says Nubank CFO

Contxto – In the spirit of transparency, fintech Nubank recently published its financial results for the first half of 2020 in a blog post. And right off the bat, lemme tell ya, it announced a net loss for R$95 million (~US$17 million) from January to June of 2020.

But don’t hit that panic button just yet. There’s a method to this startup’s madness.

Fintech Nubank by the numbers

In the announcement, the startup reported it has R$19.9 billion in cash (~US$3.5 billion) and had more than doubled its customer base to 26 million. 

And while its US$17 million loss shows that it isn’t profitable, it’s not entirely bad news. The fintech said that this slip is “32 percent better” when compared to the R$139 million (~US$25.2 million) it lost in that same period in 2019.

The unicorn also announced that transaction volumes rose 54 percent when compared to the first half of last year.

Last but not least, in regards to its credit-related products the startup experienced a default rate of 5.8 percent which is reportedly below market average in Brazil. Likewise as a result of the Covid-19 outbreak, Nubank increased provisions for bad loans by 16 percent.

All according to plan?

In the blog post, CFO Marcelo Kopel insisted that despite how things may appear, the loss was a calculated move.

“The loss is a decision, and therefore expected as part of the current growth strategy. We chose to invest in the company, people and the development of new technologies to continue delivering the best experience to our customers. This model is well known and used by technology companies,” said the Executive.

In other words, there is no need to sound the alarm. It’s growing aggressively and is willing to burn cash for the endgame.

Whether its endgame is an eventual M&A or an IPO is anyone’s guess. But I’d put my money on the latter.

Nubank does its thing

Rightly so, the fact that the unicorn is gaining more users, increasing transaction volumes, and rolling out so many services is taxing its income. But this strategy is just to consolidate its foothold in the fintech scene as more companies emerge.

Moreover, if the rumors are true (we have yet to know for certain), Nubank is in it for the long run and may have raised funds recently to keep going/growing.

Related articles: Tech and startups from Brazil!

-ML