LONDON: Revolut, a British fintech start-up, saw slower revenue growth and mounting losses last year as the coronavirus pandemic impacted payment volumes, though an increase in the value of cryptocurrencies provided a significant boost.
Revolut’s revenue in 2020 was £222.1 million ($310.5 million), up 34% from the previous year’s revenue of £166 million. However, the company reported that adjusted revenues, a metric it uses to account for the revaluation of intangible assets such as cryptocurrency, were £261 million, up 57 percent year on year.
Last year’s revenue growth was much slower than in 2019, when the company reported a nearly threefold increase in sales. According to Sky News, Revolut was last privately valued at $5.5 billion and is reportedly seeking a valuation of more than $10 billion in its next fundraising round.
The rise in the value of cryptocurrencies, which Revolut supports through its trading features, resulted in a £38.7 million profit for the company. However, due to a change in reporting, this was not reflected on Revolut’s income statement, according to Mikko Salovaara, Revolut’s chief financial officer.
Bitcoin, the world’s largest digital coin, nearly quadrupled in value over the last year, reaching an all-time high close to $65,000 in April 2021, but it has since fallen significantly and was last trading at around $33,000.
Revolut reported a total annual loss of £167.8 million ($231.8 million), up from £106.7 million in 2019. However, it reported adjusted operating losses of £122 million, which include crypto revaluation income but exclude share-based payments, an increase from the previous fiscal year’s loss of £98.4 million.
Meanwhile, Revolut reported that gross profit, which excludes onboarding costs, more than tripled year on year to £123 million. The company’s gross profit margin increased to 49 percent in 2020, up from 25 percent the previous year. Revolut claims that by the fourth quarter of 2020, its gross margin will have surpassed 60%, resulting in an adjusted operating profit in November and December.
“It’s a numerical translation of the very good performance that we’ve seen in the year 2020, and it’s ultimately a validation of the business model and strategy that we’ve set out,” Salovaara explained.
Revolut, which provides app-based checking accounts and trading services, still earns the majority of its money from interchange fees, which are deducted from a merchant’s bank account each time a customer uses their card. However, as a result of the coronavirus pandemic, the company sought to reduce its reliance on interchange.
According to CEO Nik Storonsky, Covid-19 forced Revolut to cut costs and “repurpose” staff for more profitable endeavours such as cryptocurrency, stock trading, and business accounts.
“Every single P&L [profit and loss] line is actually above Covid, some two, three, four, or five times above Covid,” Storonsky said, adding that the pandemic was “initially a painful experience” but was ultimately “very positive for us because it allowed us to focus on the right product lines.”
According to its annual report, card and interchange income accounted for approximately 36% of Revolut’s 2020 revenues, while foreign exchange income accounted for 31% and paid subscriptions accounted for 29%.
The retail investing frenzy that began in 2021, driving up the prices of stocks such as GameStop and AMC, was likely beneficial to Revolut as well. Revenue increased by 130 percent year on year in the first quarter of 2021, according to the company, while gross profit more than quadrupled. Revolut now has a total of 15.5 million customers.
Revolut has been aggressively expanding into international markets such as the United States and Asia. Earlier this year, the company applied for a banking licence in the United States. The company is also making significant investments closer to home. It already has an EU banking licence, but in January it applied for a British banking licence in order to expand lending activity.