Nu Holdings Ltd. — FY 2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a stand-alone fourth-quarter filing. Financial statements are audited and prepared under IFRS as issued by the IASB, in U.S. dollars.
Business context
Nu operates a digital financial-services platform primarily in Brazil, with operations in Mexico and Colombia. It offers cards, accounts, lending, investments, insurance and payments. At year-end it reported 93.9 million customers, including 90.3 million individuals and 3.6 million SME customers; 78.0 million were monthly active. Brazil accounted for 87.8 million customers, Mexico 5.2 million and Colombia more than 800,000.
Financial and operating performance
| Metric | FY 2023 | FY 2022 | Change / context |
|---|---|---|---|
| Revenue | US$8.029bn | US$4.792bn | +67.5%; +62.5% FX-neutral |
| Gross profit | US$3.491bn | US$1.663bn | +109.9%; +103.6% FX-neutral |
| Gross margin | 43.5% | 34.7% in selected metrics | Improved; MD&A elsewhere cites 35.0% for 2022 |
| Operating expenses | US$1.952bn | US$1.972bn | Down 1.0%; 24.3% of revenue versus 41.1% |
| Profit (loss) for the year | US$1.031bn | (US$365m) | Turned profitable |
| Adjusted net income | US$1.197bn | US$204m | Non-IFRS measure |
| Basic / diluted EPS | US$0.2175 / US$0.2121 | (US$0.0780) / (US$0.0780) | IFRS earnings per share |
| Operating cash flow | US$1.266bn | US$756m | Cash generated from operations increased |
| Investing / financing cash flow | (US$177m) / US$425m | (US$127m) / US$654m | Investing outflows mainly included technology and intangible assets |
| Cash and cash equivalents | US$5.923bn | US$4.172bn | Includes highly liquid items; some customer funds and regulatory balances are restricted |
| Deposits | US$23.691bn | US$15.809bn | +50% reported; +38% FX-neutral |
| Borrowings and financing | US$1.136bn | US$586m | Separate lease liabilities were US$37m |
| Total assets / liabilities / equity | US$43.498bn / US$37.092bn / US$6.406bn | US$29.935bn / US$25.044bn / US$4.891bn | Balance sheet expanded |
Interest income and gains on financial instruments were US$6.440bn, or 80.2% of revenue; fee and commission income was US$1.589bn, or 19.8%. Interest income from credit cards rose 148.5% to US$2.522bn and lending interest income rose 77.0% to US$1.650bn. Credit-loss allowance expense increased 62.7% to US$2.285bn. The reported credit loss allowance expense-to-credit-portfolio metric was 12.5%, versus 12.4% in 2022.
Card purchase volume was US$111.1bn, up 37% reported and 33% FX-neutral. Monthly ARPAC was US$9.60 for the year, versus US$7.80 reported in 2022 (US$8.10 FX-neutral); monthly cost to serve per active customer was US$0.80. The Brazil 90-day consumer-finance delinquency rate was 6.1% at year-end.
Material changes versus the prior period
- Nu moved from a US$365m loss in 2022 to US$1.031bn profit in 2023, supported by revenue growth and a sharp increase in gross profit.
- Gross margin recovered from the prior-year level while credit-loss allowance expense increased with portfolio growth. Year-end credit-card receivables were US$14.488bn gross, versus US$9.266bn; loans to customers were US$3.714bn gross, versus US$1.976bn.
- Operating expenses were broadly flat in total. The 2022 comparison included a US$355.6m non-cash expense for termination of the 2021 Contingent Share Award; there was no corresponding expense in 2023. The termination avoided potential dilution, according to the filing.
- Deposits and the interest-earning portfolio grew materially. The latter reached US$8.2bn, up 105% reported and 91% FX-neutral.
- Customer growth slowed to 26% from 38% in 2022, while monthly active customers grew 28% and activity rate rose to 83% from 82%.
Outlook, risks and unusual items
- Outlook: The filing does not provide quantified 2024 revenue, earnings or margin guidance. Management describes continued growth through customer engagement, cross-selling, new products and expansion in Brazil, Mexico and Colombia. Planned priorities include secured lending, expanding Mexico deposits and launching accounts in Colombia. Management states available cash and projected operating cash flows should cover ordinary working-capital and capital-expenditure needs for the next 12 months and beyond.
- Funding and liquidity: Retail deposits are the principal funding source; 94.4% of year-end deposits were payable on demand. Nu reported US$15.2bn in cash, cash equivalents and securities in its risk discussion, alongside US$7.5bn of compulsory and other central-bank deposits. Deposit withdrawals, funding costs and regulatory reserve requirements are key sensitivities.
- Credit and regulation: Brazil’s new cap limits interest and financial charges on revolving and installment credit-card balances to the original debt amount for new financing from January 3, 2024. Prepaid-card interchange caps also affect revenue. The government may discontinue the FGTS birthday-withdrawal program, which supports a secured-loan product. Credit quality, expected-loss estimates and local economic conditions remain material risks.
- Other risks: The filing highlights currency and interest-rate volatility, competition, regulatory change, fraud, cybersecurity and third-party/cloud-provider dependence, model risk and expansion execution. Brazil’s exchange-rate movements affect U.S.-dollar results; management states it does not hedge the foreign-exchange exposure from its investments in Brazil, Mexico and Colombia.
- Contingencies and unusual items: The 2023 provision for lawsuits and administrative proceedings was US$8.1m; possible civil and labor losses were disclosed at approximately US$14.2m and US$12.3m, respectively. The filing reports 24,226 active consumer-protection proceedings with PROCONs and small-claims courts. Nucoin accounting involves significant management judgment because IFRS guidance for the token arrangement is not specific. Customer crypto safeguarding assets and matching liabilities were US$153.3m at year-end and do not affect profit or loss unless safeguarding losses arise.
- Controls and audit: Management and KPMG concluded internal control over financial reporting was effective at December 31, 2023; the financial-statement audit opinion was unqualified. KPMG identified expected credit losses and the investment cash-generating unit’s value-in-use assessment as critical audit matters.
Important facts for investors to verify
- Confirm the reported IFRS profit, cash-flow statement and balance-sheet figures against the audited financial statements; distinguish annual results from fourth-quarter-only data.
- Review credit-card and loan delinquency trends, stage 2 and stage 3 exposures, write-offs, recoveries and the assumptions behind the US$2.608bn combined expected-credit-loss allowance.
- Assess the effect of Brazil’s revolving-credit charge cap and prepaid-card interchange limits on revenue, pricing and margins.
- Reconcile available liquidity with restricted customer funds, central-bank deposits and the high share of demand deposits; examine debt maturities and covenant headroom.
- Evaluate the assumptions supporting adjusted net income and FX-neutral comparisons, which are non-IFRS measures, and the filing’s inconsistent 2022 gross-margin references.
- Consider governance and dilution: Class B shares carry 20 votes each, and David Vélez held 75.9% of voting power at year-end; options and RSUs were also outstanding.