For platforms with an embedded credit book (buy-now-pay-later, merchant lending, consumer credit cards), operating cash flow grossly overstates true cash generation because credit portfolio growth is funded through working capital changes. The credit book growth flows through as OCF in GAAP reporting, making the platform appear far more cash-generative than it is. Analysts must explicitly strip out net credit book growth (and associated funding costs) to arrive at an adjusted FCF that reflects the underlying operating business.
When analyzing any platform with an embedded credit business (MELI, SoFi, Shopify Capital, Block/Square, Affirm, Nubank, Klarna, Amazon Lending): always find or compute adjusted FCF that nets out credit book growth from OCF. A platform booking 40%+ OCF margins while running a fast-growing credit book is likely misrepresenting its true cash generation. The quality check: does adjusted FCF (ex-credit-book-growth) grow proportionally to revenue over time? If yes, the core business is cash-generative. If not, the platform is funding credit growth with operating cash that would otherwise exit the business. Model the credit book separately with a growth rate assumption and stress-test its funding cost against OCF in a slower-growth scenario.