Chime Financial Inc-A(CHYM) - 2025 Q2 - Quarterly Report

Part I - Financial Information Item 1. Financial Statements Unaudited H1 2025 financials show strong revenue growth, a $910.4 million net loss primarily from IPO stock compensation, and a strengthened balance sheet Condensed Consolidated Balance Sheets The balance sheet reflects a significant increase in cash and a shift to positive stockholders' equity following the IPO and preferred stock conversion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $868,284 | $337,697 | +157.1% | | Total current assets | $1,736,079 | $1,287,036 | +34.9% | | Total assets | $1,902,474 | $1,461,037 | +30.2% | | Liabilities & Equity | | | | | Total liabilities | $474,376 | $501,516 | -5.4% | | Redeemable convertible preferred stock | $0 | $2,890,121 | -100.0% | | Total stockholders' equity (deficit) | $1,428,098 | $(1,930,600) | Positive Swing | - Following the IPO in June 2025, all redeemable convertible preferred stock was converted to common stock, eliminating the $2.89 billion liability from the balance sheet[17][25] - Total stockholders' equity shifted from a deficit of $1.93 billion to a positive equity of $1.43 billion, driven by the IPO proceeds and conversion of preferred stock[17][25] Condensed Consolidated Statements of Operations The statements of operations show substantial revenue growth but a significant net loss in H1 2025, primarily due to a surge in operating expenses Statement of Operations Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $528,149 | $384,214 | +37.5% | $1,046,893 | $776,186 | +34.9% | | Gross Profit | $461,029 | $333,710 | +38.2% | $919,355 | $678,235 | +35.5% | | Total Operating Expenses | $1,391,667 | $343,151 | +305.6% | $1,840,856 | $682,644 | +169.7% | | Net Income (Loss) | $(923,376) | $385 | N/A | $(910,437) | $16,288 | N/A | | Net Income (Loss) per Share | $(7.29) | $0.00 | N/A | $(9.44) | $0.00 | N/A | - The significant net loss in Q2 and H1 2025 was primarily driven by a massive increase in operating expenses, particularly Technology and Development ($621.8M in Q2 2025 vs $75.4M in Q2 2024) and General and Administrative ($279.7M in Q2 2025 vs $41.6M in Q2 2024)[19] Condensed Consolidated Statements of Cash Flows Cash flows indicate a significant increase in cash from financing activities post-IPO, despite a decrease in operating cash flow Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $2,743 | $70,837 | | Net Cash from Investing Activities | $79,126 | $(5,174) | | Net Cash from Financing Activities | $449,930 | $7 | | Net Increase in Cash | $531,799 | $65,670 | | Cash, end of period | $881,799 | $305,415 | - Financing activities provided $449.9 million in cash, primarily from $772.6 million in net IPO proceeds, partially offset by $322.6 million used for taxes paid related to net share settlement of restricted stock units (RSUs)[31] - Cash from operating activities decreased significantly to $2.7 million from $70.8 million YoY, despite a large non-cash stock-based compensation adjustment ($918.8M), due to the net loss and changes in working capital[31] Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the IPO's $770.6 million net proceeds, significant stock-based compensation expense recognition, disaggregated revenue growth, and credit facility expansion - The company closed its IPO on June 13, 2025, receiving net proceeds of approximately $770.6 million after deducting underwriting discounts and offering expenses[37] - Upon the IPO, all redeemable convertible preferred stock was converted into common stock, and a multi-class stock structure (Class A, B, C) was established[38][39] Disaggregated Revenue (in thousands) | Revenue Stream | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Payments revenue | $741,413 | $625,275 | +18.6% | | Platform-related revenue | $305,480 | $150,911 | +102.4% | | Total revenue | $1,046,893 | $776,186 | +34.9% | - In Q2 2025, the company recognized $910.1 million in stock-based compensation expense, a dramatic increase from $6.4 million in Q2 2024. This was triggered by the IPO satisfying the liquidity condition for RSUs and PSUs, leading to the recognition of cumulative expense[110] - On March 31, 2025, the company terminated its prior credit facility and entered into a new, larger $475.0 million senior secured revolving credit facility maturing in 2030[80] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses revenue growth driven by active members and purchase volume, explains the net loss by IPO-related stock compensation, and highlights strong post-IPO liquidity Key Metrics and Non-GAAP Financial Measures Key operating metrics show growth in purchase volume and active members, alongside positive non-GAAP financial measures like Adjusted EBITDA Key Operating Metrics | Metric | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Purchase Volume (in millions) | $32,430 | $27,582 | +17.6% | | Active Members (in millions) | 8.7 | 7.1 | +22.5% | | ARPAM (annualized) | $245 | $218 | +12.4% | Non-GAAP Financial Measures (in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Transaction Profit | $362,782 | $298,710 | $711,963 | $607,197 | | Transaction Margin | 69% | 78% | 68% | 78% | | Adjusted EBITDA | $16,003 | $3,095 | $41,094 | $18,536 | | Adjusted EBITDA Margin | 3% | 1% | 4% | 2% | Results of Operations Results show strong revenue growth, particularly in platform-related revenue, offset by a surge in operating expenses due to IPO-related stock compensation - Total revenue increased 37% YoY in Q2 2025, driven by a 19% increase in payments revenue and a 113% increase in platform-related revenue. The growth in platform-related revenue was primarily due to the full launch of the MyPay product in July 2024[182][187] - Total operating expenses surged 306% YoY in Q2 2025, primarily due to the recognition of stock-based compensation and related payroll tax of $928.1 million following the IPO[137][191] - Transaction and risk losses increased 181% YoY for Q2 2025, largely driven by the MyPay product, which contributed $49.3 million to the increase[192] Liquidity and Capital Resources Liquidity is strong, primarily from $868.3 million in cash and $770.6 million in IPO net proceeds, supplemented by a $475.0 million credit facility - As of June 30, 2025, principal sources of liquidity were $868.3 million in cash and cash equivalents and $225.1 million in marketable securities[198] - The company received net proceeds of approximately $770.6 million from its IPO in June 2025[198] - The company has access to a $475.0 million senior secured revolving credit facility, with $443.6 million in borrowing capacity remaining as of June 30, 2025[80][199] Quantitative and Qualitative Disclosures About Market Risk Primary market risks are interest rate and foreign currency fluctuations, both deemed minimal for current assets and operations, but future variable-rate borrowings pose exposure - The company's primary market risks are interest rate changes and foreign currency fluctuations[218] - Interest rate risk on current cash and marketable securities is considered low due to their short-term nature. A hypothetical 100 basis point change in interest rates would not have a material effect[219] - Foreign currency risk is not material as all revenue is earned in U.S. dollars, and operations in Canada are limited[221] Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that as of the end of the quarter, the company's disclosure controls and procedures were effective at a reasonable assurance level[222] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[223] Part II - Other Information Legal Proceedings The company is not currently subject to legal proceedings that would materially adversely affect its business, though it faces ordinary course legal and regulatory actions - The company is not currently subject to any legal proceedings that it believes would have a material and adverse effect on its business[225] Risk Factors Key risks include attracting members, dependence on bank partners, interchange fee changes, regulatory scrutiny, and concentrated co-founder voting power - The company's business is highly dependent on its ability to attract and retain Active Members and increase the revenue generated from them[228][229] - Relationships with bank partners (The Bancorp Bank, N.A. and Stride Bank, N.A.) are crucial, as Chime is a technology company, not a bank. Loss of these partners could severely impact operations[228][234] - A significant portion of revenue comes from interchange fees, which are subject to changes in rules, practices, and regulations (like the Durbin Amendment) that could adversely affect the business[228][240] - The business is subject to a wide range of complex and evolving laws and regulations, with significant oversight from agencies like the CFPB, which could lead to enforcement actions and fines[231][317] - The multi-class stock structure concentrates significant voting power with the company's Co-Founders, limiting the influence of Class A common stockholders[231][387] Unregistered Sales of Equity Securities and Use of Proceeds Details include the grant of 7.2 million RSUs, exchange of 32.2 million Class A for Class B shares, and use of $770.6 million IPO proceeds for tax obligations - From April 1, 2025, to June 12, 2025, the company granted an aggregate of 7,213,334 RSUs under its 2012 Equity Incentive Plan[414] - The company received net proceeds of approximately $770.6 million from its IPO, which were used to satisfy tax withholding and remittance obligations for equity award settlements[417][419] Other Information No officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the last fiscal quarter - No officers or directors adopted or terminated a Rule 10b5-1 trading plan during the last fiscal quarter[422]