👋 Hi, it’s CJ Gustafson and welcome to Mostly Metrics, my weekly newsletter where I unpack how the world’s best CFOs and business experts use metrics to make better decisions.
I’ve done many financial statement breakdowns in my career. I’ve gone DEEP into the 10K’s and S-1’s from some of the top tech companies. But perhaps it was all in preparation for the most fascinating analysis of my career—a private company out of the UK called OnlyFans.
Below is a deep dive into the financials and business model of a social media behemoth. And not to bury the lead here - but sex sells - to the tune of over $1 billion dollars in revenue per year.
OnlyFans 2023 Financial Analysis: A Breakdown of Revenue, Growth, and Challenges
Executive Summary
OnlyFans had a record-breaking year in 2023, eclipsing $1.3 billion in revenue—a 20% year-over-year increase—and generating an eye-watering $658 million in profit before tax, which was up 25% from the previous year.
They did this with fewer than 50 employees 🤯.
Gross Merchandise Value (GMV), representing the total payments made by users, grew from $5.6 billion to $6.6 billion, reflecting an 18% increase.
This growth was driven by an expanding user base and a significant rise in non-subscription revenue, which now makes up the largest share of income. Despite the impressive numbers, OnlyFans still faces challenges, including its heavy reliance on NSFW content, increasing competition, and potential risks related to payment processing infrastructure.
Company Overview
Fenix International Limited, the parent company of OnlyFans, operates the platform that has become synonymous with creator-driven, adult content. The business model is straightforward: OnlyFans provides a space for creators to directly monetize through subscriptions and one-time payments, taking a 20% commission on all creator earnings, including subscription fees, tips, and pay-per-view content.
OnlyFans’ mission is to be the safest social media platform, empowering creators to own their full potential. However, the company's NSFW branding limits its ability to pursue mainstream opportunities like brand partnerships and content collaborations outside the adult industry.
Financial Highlights
Gross Merchandise Value (GMV): $6.6 billion, an 18% increase from 2022.
Revenue: $1.3 billion, up 20% from $1.09 billion in 2022.
Profit Before Tax: $658 million, up 25% year-over-year.
Dividend Payments: $472 million, an increase from $338 million, paid to Leonid Radvinsky, the primary owner.
Cash: Increased to $678 million, up from $563M in 2022.
Valuation: My estimate and analysis based on comps below
Revenue Breakdown and Analysis
Revenue by Class of Business (in millions of dollars):
2023:
Subscription-based revenue (recognized ratably over time): $540.9 million (41%)
Non-subscription-based revenue (recognized at point-in-time): $765.8 million (59%)
Total Revenue: $1,306.7 million
2022:
Subscription-based revenue: $522.1 million (48%)
Non-subscription-based revenue: $567.7 million (52%)
Total Revenue: $1,089.8 million
Key Observations:
Non-subscription-based revenue saw substantial growth, increasing by $198.1 million (or 34.9%) from $567.7 million to $765.8 million. This contributed significantly to the overall 20% increase in total revenue year-over-year.
Subscription-based revenue grew more modestly, from $522.1 million to $540.9 million, representing an increase of $18.8 million (or 3.6%). The relatively slower growth in subscription revenue suggests that users are favoring one-time transactions (e.g., tips and pay-per-view) over traditional subscriptions.
Subscriptions are monthly and are all of less than one year in duration
Most Fans don’t subscribe for more than a year; retention is not the same as a B2B business, or traditional B2C social networks. People may get a partner, switch to a new favorite creator, temporarily join just to see something they heard about, or churn due to economic circumstances. Therefore, subscriptions are less sticky (in my opinion)
Revenue by Geographical Location
Revenue by geographical location (in millions of dollars):
2023:
USA: $863.3 million (up from $732.7 million in 2022)
UK and Europe: $229.4 million (up from $159.8 million in 2022)
Rest of World: $214.0 million (up from $197.3 million in 2022)
Key Insights:
The USA remains the dominant market, accounting for 66% of total revenue. Revenue from the USA increased by $130.6 million (or 18%).
UK and Europe showed the highest percentage growth, with revenue increasing by 43.6% from $159.8 million to $229.4 million, highlighting growing adoption in these regions.
The Rest of World grew by 8.4%, from $197.3 million to $214.0 million. This suggests potential, but slower growth compared to other regions.
Operating Efficiency Analysis: Year-over-Year Changes
Gross Profit and Cost of Sales:
Cost of Sales increased from $412.5 million to $488.0 million, representing an 18.3% increase. Despite this, gross profit rose from $677.3 million to $818.7 million—a growth of 20.9%, indicating efficient management of costs, and perhaps better payment processing fees at scale.
Their gross margin also improved slightly, suggesting that the company benefited from a favorable revenue mix, particularly the increased share of non-subscription revenue, which carries higher margins.
Operating Profit and Administrative Expenses:
Administrative expenses increased from $144.1 million to $169.5 million (a 17.6% increase). Still, operating profit rose by $116 million (or 21.8%) to $649.2 million in 2023. The lower rate of increase in administrative expenses compared to revenue growth demonstrates improved operational efficiency.
Take Rate Efficiency:
Their take rate of 20% remained consistent, highlighting their ability to maintain a favorable revenue share, even amid rising competition.
As other platforms enter the market, and the most powerful creators gain bargaining leverage, you’d expect this to experience downward pressure
Profits
The company generates an eye watering +50% profit margins at SCALE
The majority of the profits were paid out in the form of a dividend to the top shareholder
User and Creator Growth
Creator Accounts grew by 29%, from 3.18 million to 4.12 million, driven by the platform's reputation for offering significant income opportunities to top creators. Many of the power creators tout their earnings on social media platforms, encouraging others to join, creating a network effect.
Fan Accounts increased by 28%, reaching 305.1 million. Fan growth is keeping pace with Creator growth, representing healthy liquidity on both sides.
However, income distribution on the platform remains highly skewed—the top 1% of creators reportedly earn one-third of all platform earnings, while the top 10% reportedly take home 75%. This disparity presents challenges in supporting mid-tier and new creators.
Productivity and Efficiency Metrics
Revenue per Employee:
With 42 employees (down from 52 last year), and revenue at $1.3 billion, the revenue per employee is approximately $30.95 million, demonstrating impressive productivity gains.
This is THE HIGHEST revenue per employee for a company I’ve ever seen
It’s about 30x higher than some of the most efficient publicly traded tech companies, who top out at $1m per employee
Profit per Employee:
Profit before tax per employee is $15.67 million, emphasizing the scalability of the platform's operational model.
This is THE HIGHEST profit per employee for a company I’ve ever seen
GMV vs. Revenue Analysis
While GMV grew by 18%, revenue increased by 20%, suggesting improvements in operational efficiency. This positive trend can be attributed to:
A larger share of high-margin non-subscription revenue.
Better management of refunds and chargebacks, thereby improving net revenue.
Shifts in user behavior, with fans expanding wallet share to pay for both one-time purchases alongside traditional subscriptions.
Cryptocurrency and Intangible Assets
OnlyFans also holds cryptocurrency assets, classified as intangible assets and initially recognized at cost, with subsequent measurement at fair value. Given crypto's volatility, the company has seen impairment losses reflected in the profit and loss statements. However, the potential for direct crypto payments represents an opportunity to attract users and creators who prefer digital assets, despite the associated risks.
Miscellaneous
Their auditor is Gravita Audi II Limited. Not a Big Four.
Their official business name is Fenix International Limited
Their year end is November 2023
Valuation and Market Positioning
OnlyFans has not disclosed an official valuation.
Based on publicly available comps, I estimate their valuation to be north of $8 billion dollars.
To get them on equal footing from a timeline perspective with the other comps, I assumed they grew 15% in their FY24 (or 5% slower than the 20% they grew in fiscal year ended November 2023). And then I assumed they will grow 12% (or 3% slower y/y than the previous 15% estimate) for the next twelve months.
While you could knock their valuation with a discount for marketability, both in the sense that they are privately held, and that they operate in a traditionally taboo space, they also deserve credit for their massive profitability at scale.
It’s important to note that it has no external shareholders and has not raised outside capital.
Key Risk Factors and Mitigation
Adoption of Subscription Models by Competitors: Competitors offering similar services could impact the take rate. Enhancing creator tools and offering favorable revenue-sharing terms will be essential to retain top creators.
Brand Expansion Challenges: Expanding beyond NSFW content to target mainstream users is difficult due to OnlyFans’ existing brand identity. Investment in brand repositioning and targeted marketing will be crucial.
Payment Infrastructure Risks: As a platform dependent on global payment systems, any disruption in payment processing could severely impact operations. OnlyFans should diversify its financial partners and explore redundancy measures to ensure a smooth flow of funds between fans and creators.
Actual or Perceived Breaches: They have a treasure trove of user messaging and purchasing data. It would be really bad if they were breached, resulting in an Ashley Madison type scandal. Also interesting they added “perceived” as just the rumor of being breached could deter fans from joining.
Final Thoughts
OnlyFans remains a powerhouse in the creator economy, boasting an impressive $1.3 billion in revenue, half of which is pure profit. With productivity metrics like $30.95 million in revenue per employee and $15.67 million in profit per employee, OnlyFans exemplifies the beautify of a marketplace / social network at scale. These efficiency metrics are unheard of.
However, its reliance on NSFW content limits its ability to expand to mainstream audiences, and it faces increasing competition. The next few years will be critical as the company navigates regulatory complexities, attempts to broaden its content categories, and maintains robust financial infrastructure. Despite the challenges, OnlyFans has carved out a niche that continues to deliver significant value to its creators and shareholders (ok, one really wealthy shareholder).
Sex may sell, but in the case of OnlyFans, it's the strategy, financial management, and efficiency that are ensuring long-term profitability.
Snapshots of the actual financials are included below:
