BNPL: Affirm Beats but Shares Fall in After Hours

Buy now – pay later (BNPL) provider Affirm (NASDAQ: AFRM) posted fiscal Q4 earnings today, ending June 30th, topping analyst expectations but falling short in guidance. Shares were up during regular hours on a strong day for the market but Affirm tanked in after-hours, losing over 13% or more than $4 a share.

During the quarter, Gross Merchandise Volume (GMV) increased by 77%, and total revenue jumped by 39% or to $364.1 million year over year.

Active Merchants increased from 29,000 to 235,000 and Active Consumers grew by 96% or to 14.0 million.

Affirm CEO and founder Max Levchin, commented on the report:

“We grew GMV by 77% and set a new record for consumer re-engagement with 85% of transactions coming from repeat users, all while prudently managing risk. We remain focused on scaling our network, maintaining attractive unit economics, capturing greater share, and helping our partners grow. While the growth of online commerce is falling back to pre-COVID levels, the secular trend toward adopting honest financial products is gaining momentum. Not only does this make our mission more important but it also plays directly into Affirm’s strengths. With our breadth of product offerings, risk management expertise and superior technology, we stand ready to meet the moment by making money more efficient for all of our network’s participants.”

GMV for Q4 was $4.4 billion and for fiscal year 2022 was $15.5 billion, an increase of 87%. Total transactions grew to 12.0 million for the quarter, an increase of 139%.

Transactions per active consumer increased 31% to 3.0 as of June 30, 2022, and 85% of total transactions during the fourth quarter were from repeat Affirm consumers.

Operating loss came in at $277.2 million compared to $114.3 million in Q4 of fiscal 2021, which includes $108.0 million of expense related to warrants granted to Amazon in November 2021 and an increase in stock-based compensation expense of $10.7 million to $110.9 million.

Net loss was $186.4 million compared to $123.4 million in the fourth quarter of fiscal 2021.

For the full year, total revenue was $1.3 billion, a 55% increase and net loss was $707.4 million compared to $441.0 million in fiscal year 2021.

Michael Linford, CFO of Affirm, said they believe they are well positioned to continue scaling their network “while maintaining attractive unit economics.” Linford added:

“In light of the uncertain macroeconomic backdrop, we are approaching our next fiscal year prudently while maintaining our focus on driving responsible growth and continuing to invest in strengthening our leadership position. We continue to expect to achieve a sustained profitability run rate, on an adjusted operating income basis, by the end of fiscal 2023.”

Charlotte Principato, Morning Consult’s financial services analyst, commented on Affirm’s results:

“Consumers remain committed to Affirm and BNPL more broadly, even if investors aren’t. Affirm’s brand has steadily grown since last year, and their user base has stayed consistent. Their biggest challenge won’t be a weak economy, but other competitors in the space, such as Apple and PayPal.”

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