Max Levchin, Founder and CEO at Affirm (NASDAQ: AFRM), has shared an update with their employees and that he also wants to share the message publicly. In a move to reduce costs in a flagging market, Affirm will be slashing its workforce.
Affirm reported earnings yesterday, which missed on both the top and bottom line. While revenues increased to $399.56 million from same quarter year prior of $361 million, it did not meet analyst expectations. The BNPL provider also generated an EPS loss of $1.10, underperforming expectations and almost double year over year.
Shares tanked in early trading today, down over 20% as of this writing at around $12.69/share.
At one point, Affirm was trading at over $160/share. Its 52 week high is over $83/share.
At the same time, Affirm stated that it was “sunsetting several initiatives, such as Affirm Crypto, thus exiting the digital asset sector.
Additional details are included in Affirm‘s Shareholder Letter and Form 8-K “relating to Affirm’s second fiscal quarter earnings announcement.”
Max Levchin notes that this is the hardest email he has had to write to their company since founding it “almost 11 years ago.”
Levchin confirmed:
“We are reducing the size of our team by 19% and will be parting ways with many talented colleagues and friends. To the entire company, but especially the folks leaving us today: I am deeply sorry to be taking this step; the responsibility for it and for the decisions leading up to it is entirely mine.”
He added that every Affirmer was invited to join a meeting.
He also mentioned that for those impacted, you will “join a meeting hosted by your function’s XLT member, which will be followed by a 1:1 conversation with an Affirm leader or someone from the People team.”
For those not impacted, you will “receive an invite to meet with your department leader.”
He continued:
“Growing rapidly over the last few years, and especially through the pandemic, we consciously hired ahead of the revenue required to support the size of the team. This was a deliberate decision: the product opportunities in front of Affirm were too compelling to ignore, and the revenue growth we posted gave us confidence in this strategy.”
He pointed out that “everything changed in mid-2022.”
Over the last three quarters, the Fed “increased its benchmark rate at an unprecedented pace.”
This has already “dampened consumer spending and increased Affirm’s cost of borrowing dramatically.” The root cause of where Afffirm is today is “that I acted too slowly as these macroeconomic changes unfolded,” he claims.
He further noted:
“Practically, this means that we have built a much larger team than we can reasonably expect to support. Therefore, we have to act to reduce our operating expenses by resetting the size of our teams to where they were between 6 and 12 months ago. It really hurts, but it is the right thing to do for Affirm and all of our stakeholders.”
He added:
“Affirm provides access to purchasing power for millions of people, in a uniquely moral and financially responsible way, and the vast majority of our growth opportunities remain completely untapped: we are a mere 0.25% of the giant US retail sales market. Our goals remain very ambitious: remain firmly in control of risk, grow both volume and revenue, and engage our consumers to continue increasing repeat usage, both online and offline.”
He concluded:
“We will adapt to the new environment we find ourselves in: we will pace our headcount growth behind that of our revenue, as we drive towards our profitability goal this fiscal year. In this period of economic turbulence, Affirm will stay focused on our core business and delay projects with less certain timelines.”
For those that are leaving, the firm wants “to do all that they can to support you.”
For more details, check here.