🧨 Nu Passes 142 Million Customers. Figure Hits a 58% EBITDA Margin. Paysafe Cuts Its Full Year Revenue Guide.

0:00Welcome, everyone, to today's Deep Dive. We are so glad to have you with us. Yeah, thanks for joining us. We've got a really great stack of sources for you today. We really do. We are going to be breaking down the Q3 earnings reports from three major fintech players. So that is new, figure technology solutions, and Paysafe. Right, but we aren't just here to read balance sheets, do you? Exactly. The core mission of this deep dive is to look at all these massive numbers and answer one critical question, which is, what did the growth actually cost? Because growth is never free, right? Yeah. You are always trading something to get it.

0:33Yep. And looking at the source material, I just love the governing analogy they used to set the stage here. Oh, yeah. The Thursday night football comparison. Right. So this recent slate of earnings reports, it played out exactly like a slate of Thursday night football games. I mean, it really did. You basically have three distinct teams here all running completely different offensive schemes. Exactly. So you've got one team that's just lighting up the scoreboard, you know, taking huge downfield risks. That's new. Then you have a second team, and they are running this highly efficient, really fast, no-huddle offense.

1:06That would be figure. Right. Just going for pure speed and volume. And then finally, you have a team that came out of the locker room looking okay, but then they just went freezing cold in the second half. Yeah, exposing some really severe structural weaknesses, and that is pay-safe. So by the end of this deep dive, you are going to see exactly how these three completely different strategies for scaling a business result in three very different hidden bills coming due. Let's start with the team putting up massive points. Yes, let's talk about Nu. Right, or NuBank as a lot of people know them. They operate primarily in Brazil, Mexico, and Colombia.

1:40And to really grasp what explosive dominant growth looks like on paper, you just have to look at their Q3 data. Okay, let's unpack this because the numbers are just insane. They really are. They posted a record net income of$1.1 billion. A billion. With a B? Right. And that is a 31 % year-over-year increase in constant currency. And that's generated on$6.3 billion of gross revenue, which is up 37 % itself. Wow. But for me, the stat that just jumps off the page is the customer base. They hit a massive 142.6 million customers. Yeah, that is a wild number. I mean, Nu now reaches 65 % of all Brazilian adults.

2:21Capturing nearly two-thirds of a nation's adult population in roughly 10 years, I mean, that isn't just good marketing. No, it's a total structural anomaly. Right. How does a single company achieve that kind of density without just, you know, burning through billions in customer acquisition costs? Well, the context of how they started is key. They were founded back in 2013 by David Veles in Sao Paulo, and they essentially exploited a very concentrated, highly inefficient banking oligopoly in Brazil. So they just stepped in and undercut the legacy players. Exactly. They offered fee-free credit cards through this really frictionless, purely digital interface.

2:58So because they didn't have to build physical branches, their cost to serve was just incredibly low. Oh, that makes sense. So it just went viral. Right. It created this massive word-of-mouth acquisition loop. And these users aren't just sitting dormant. New has an 86.3 % monthly activity rate. That's huge. It is. People are essentially using New as their primary financial operating system, and they are expanding rapidly, too. Mexico just hit 16.6 million customers. Wow. And in Colombia, they have 3 million credit card holders, which actually makes New the top card issuer there. Okay, so the scoreboard is undeniably lit up.

3:35They are crushing it. But we have to pivot to the cost of this growth. The hidden bill. Right. Because expanding unsecured credit this fast, especially in emerging markets, it's like handing out unlimited free samples at an all you can eat buffet. Yeah. Eventually, someone is going to take way more than they can actually handle. Exactly. News overall loan book hit forty one point six billion dollars, which is up thirty three percent. But the really scary part, their unsecured personal loans skyrocketed 39 % to$11 billion. Yeah, that is a massive jump in unsecured debt. It's like writing unhedged options contracts.

4:11The revenue looks amazing up front until the market turns and you realize you have all this downside exposure. What's fascinating here is how the data in the report actually supports that exact risk profile. The friction in New's model is definitely starting to show. You mean with the non-performing loans? Exactly. Their 90 plus day non-performing loan ratio, the NPL, it crept up to 7.3%, up from 6.9 % just a quarter ago. OK. A 40 basis point jump in a single quarter on an$11 billion portfolio? I mean, that requires massive provisioning. Right. Which eats directly into their future earnings. But that is the tradeoff they are making.

4:50They are betting that their proprietary algorithms can price that risk better than the old banks. But 7.3 % suggests maybe the algorithms are scraping the bottom of the barrel to keep up that 39 % growth rate. Yeah, it's a concern. And on top of that, the U.S. and global rollouts are going to cost them up to 100 basis points on their efficiency ratio through 2027. Even though I think their 2026 guidance improved slightly, right, to like 19 to 19.5 %? It did, but setting up entirely new infrastructure across borders is still inherently a drag on their core Brazilian margins. So the takeaway for new is that they are basically playing like peak Steph Curry.

5:29They are shooting perfectly, printing billion-dollar quarters, but the turnovers are slowly creeping up just as they head into the playoffs. Right, a looming Brazilian consumer slowdown. Exactly. The true test is if that credit quality can actually survive 39 % unsecured growth. Which is a perfect segue to our second company because they are doing the exact opposite. Yes, figure technology solutions. The no huddle offense. Right. So where new is taking on credit risk for growth, Figure is sacrificing margins for sheer volume. So Figure is a blockchain native lending marketplace founded in 2018.

6:07And their Q3 numbers show massive scale. They reported net revenue of$287 million. Which is an 84 % jump. Right. And their loan marketplace volume hit$5.8 billion, up 135%. And to understand where that volume is coming from, you really have to look at Figure Connect. That's their platform for third-party originators, right? Exactly. Figure Connect processed$4.3 billion on its own, which is up a massive 276%. Oh, wow. Yeah, and it now makes up 72 % of their standalone volume. They also just absorbed another$677 million in volume from Kiavi, which is a company they acquired on September 1st. Okay, but here is the catch.

6:50And the catch is brutal. The gross take rate completely plummeted. It really did. Right. A year ago, it was at 5.2%. This quarter, it dropped all the way down to 3.9%. And their Q4 guidance is even more aggressive. Yeah. They project volume up to$6.2 to$6.7 billion, but the take rate is projected to be just 3.1 to 3.4%. The figure is essentially running the Costco playbook. You know, sell more units, but take less margin per unit. Yeah, that's exactly what they're doing. But the question for you to consider is, does the Costco model actually work safely when you are dealing with blockchain loans instead of like bulk toilet paper?

7:29It's a fair question. But the math on why this strategy is working right now is pretty interesting. So their gap net income was basically flat at$89 million. So to be fair, last year was skewed by a$31 million one-time tax benefit. Right, exactly. So if you look at their adjusted EBITDA to gauge the actual cash generation, it hit$164 million. That's up 91%. Which gives them a phenomenal 58 % margin. Exactly. Because they use the Providence blockchain rails, they eliminate a ton of traditional intermediary fees. The back-end costs are fundamentally decoupled from their volume growth. So the cost to process an additional loan is basically zero.

8:07Yep. They are so flush with cash that they just added$200 million to their share buyback program, bringing the total to$400 million. Okay, so the figure is successfully letting volume pay the rent. The margin math works, provided the sheer scale of the loans doesn't buckle. Right. If originations freeze, that tiny 3.1 % take rate is going to be a problem. But for now, they are making it work. Which brings us to the third team on our Thursday night football slate, the cold second half. Pay safe. Right. We've seen growth fueled by credit risk with new and growth fueled by price cuts with figure.

8:42Here's where it gets really interesting. Yeah, this is what happens when a company chases volume, but the core engine just runs out of gas. Exactly. So Paysafe is a London-based payments company. They're the ones behind Skrill and PaysafeCard. And their Q3 revenue barely moved. It was up just 1 % to$439.6 million. But the bottom completely fell out. It did. They posted a$247.5 million net loss. And their adjusted EBITDA dropped 17 % to$105.7 million. And we should note, a huge chunk of that net loss, about$203.3 million of it, was driven by a non-cash goodwill impairment. Basically wiping value off the balance sheet from past acquisitions that didn't pan out.

9:26Right. And if you look at the timeline of the quarter, it's pretty revealing. Volume actually grew at a high single-digit rate in July. Oh, really? So they started strong. They did. But it softened significantly through August, September and into October. Digital wallets processed$6.7 billion, which was up only 1%, mostly because crypto and trading softened. Right. The macro environment just wasn't there. Yeah. CEO Bruce Luthers openly admitted the second half was, quote, more challenging than we expected. And as a result, they had to cut their full year revenue guidance down to the 1.761 to 1.771 billion dollar range, down from an initial 1.83 billion ceiling.

10:05Which caused the shares to absolutely tank. They were down more than 30 percent at the open. But OK, there is this glaring contradiction in the stat that we have to talk about. Active users actually rose 14 percent to 8.1 million. Yeah, that is the craziest part of the report. It's empty calorie growth. It's like an influencer buying thousands of new followers, but absolutely none of them are liking or engaging with the posts. If we connect this to the bigger picture, you really see the fatal flaw in Paysafe's quarter. While users grew 14%, the average revenue per active user, the ARPU, it fell 11 % down to just$26.

10:45So they are acquiring worse and worse customers. Exactly. In the ultimate shadow hanging over all this math, Paysafe carries$2.3 billion in net debt. Ouch. Yeah. When every new user is worth 11 % less than the year before, a multibillion-dollar debt load becomes incredibly unforgiving. So what does this all mean for you as you look at these markets? Well, the scoreboard for this earnings season isn't just about revenue. It's about what each point of growth actually costs. Right. News NPLs are creeping up right alongside their 39 % unsecured loan growth. And Figure is willingly giving up their take rate for pure volume.

11:25Well, Paysafe is gathering more users, but watching the revenue per user just shrink under the massive weight of their debt. Which leaves us with a final, I think, really provocative question for you to ponder on your own. Yeah, what happens next? Right. If every fintech company eventually has to choose a poison, so default risk, margin compression, or diluted user value, what happens to the financial system when a broader global recession hits? Right. When the market suddenly stops rewarding growth altogether and demands perfection instead. Exactly. Which of these three strategies cracks first?

11:59It is the ultimate stress test. Thank you all so much for joining us on this deep dive. It's been a fascinating look at the true cost of growth. Yeah, thanks for listening. We will catch you on the next one.