In a remarkable display of market resilience, Affirm Holdings Inc. experienced a significant boost in its share prices, surging over 15% in after-hours trading following a successful report of its fiscal second-quarter results. This surge comes at a time when the broader economic landscape is fraught with uncertainties, particularly affecting the buy now, pay later (BNPL) sector, which has drawn both attention and skepticism from investors and analysts alike.
Affirm reported earnings per share (EPS) of 23 cents, an impressive result that stands in stark contrast to analysts’ expectations of a loss of 15 cents. This outperformance underlines the company’s ability to navigate a challenging economic environment effectively. In terms of revenue, Affirm posted $866 million, surpassing consensus estimates of $807 million. This growth trajectory is further exemplified by the company’s gross merchandise volume (GMV), which hit an impressive $10.1 billion. Fluctuating around analysts’ expectations of $9.64 billion, this marks the first time GMV has exceeded the $10 billion mark, reflecting a vigorous increase of 35% year-over-year.
Such robust revenue and GMV figures indicate that Affirm’s business model is resonating well with consumers, in spite of the increasing interest rates affecting consumer borrowing. The revenue increase of 47% from $591 million a year ago is particularly noteworthy and speaks volumes about Affirm’s market position. Aligned with this growth is the Revenue less Transaction Costs (RLTC), which escalated by 73% to reach $419 million. The RLTC margin of 4.1%, exceeding the anticipated long-term range of 3% to 4%, showcases the improved profitability metrics that Affirm is achieving.
During an interview with CNBC, CFO Rob O’Hare pointed out that while Affirm benefited from a $60 million gain due to a strategic repurchase of its convertible debt at a discount, the heart of its earnings growth can be attributed to robust business fundamentals. This duality of financial mechanisms exhibits a balanced approach to achieving sustainable growth. Looking ahead, Affirm projects revenue for the current quarter to be within the range of $755 million to $785 million, with an average estimate of $772 million from analysts—implying that the company continues to set realistic yet ambitious growth targets.
Affirm’s commitment to profitability on a Generally Accepted Accounting Principles (GAAP) basis by the end of fiscal quarter four in 2025 will be closely monitored by investors. This forward-looking stance not only addresses current market concerns but also lays the groundwork for future stability and growth.
Affirm’s active consumer base has scaled remarkably, with a 23% year-on-year increase bringing the total to 21 million users. This growth is further buoyed by the Affirm Card, which serves as a pivotal tool in driving overall usage. The card boasts 1.7 million active users, reflecting a staggering increase of over 136% since last year. With card volume more than doubling, it is clear that the strategic initiatives to enhance user engagement are yielding positive results.
The partnerships Affirm has forged with major players like Apple, Amazon, and Shopify also contribute significantly to its upward trajectory. A notable collaboration with Apple, allowing U.S. Apple Pay users on iPhones and iPads to apply for loans directly through Affirm, stands as a testament to the firm’s innovative approach to meet consumer needs in real-time. During the fiscal quarter, a rise in interest-free loans underscored an effective strategic maneuver, where merchants and sometimes manufacturers subsidize borrowing costs to stimulate sales. As noted by Libor Michalek, Affirm’s president, merchants often employ such growth-oriented strategies in preparation for high-sales periods.
The latest quarterly results from Affirm Holdings underscore the company’s potential to transcend traditional barriers within the financial technology landscape. The mixed strategy of leveraging high-profile partnerships alongside innovative product offerings has effectively positioned it for increased consumer adoption. While the journey to full profitability remains, Affirm’s focus on sustainable growth metrics—especially through improved RLTC margins and expanding user bases—positions the company favorably amidst fluctuating economic conditions. As Affirm continues to adapt to market demands and consumer behaviors, the focus on strategic partnerships and innovative features will be crucial in driving future success.
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